Corpus of articles from the English newspaper 'The Financial Times' from the year 1993. MLCC machine readable version 1995 This TEI conformant electronic version edited by the MLCC project, 7 July 1995. This file (ignoring this header) is 2473835 bytes long, its text includes 365578 words.

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English 7 July 1995 Masja Kempen David Mckelvie processing of original corpus files into tei conformance.
Letter: US punitive damages legally complex, but fair in concept Publication 930212FT Processed by FT 930212 From Mr T G NELSON

Sir, The US system of punitive damages is a complex legal maze and is further convoluted by differences which exist throughout the 50 states. However, the fundamental concept is simple and fair.

The system provides a straightforward procedure wherein an inanimate, but irresponsible, corporation's behaviour can be addressed by punishing it to a degree commensurate with its irresponsibility and proportional to the sufferings produced. Hopefully, such punishment will discourage the reoccurrence of such behaviour.

In addition to the points Robert Rice made in his article, 'The high cost of damaged goods' (February 9), he should also point out other important issues of US product safety and liability law. First, warranty and strict liability are quite distinct from negligence in that corporate behaviour becomes the key question of negligence. Second, throughout the US, punitive damages are on average four to eight times compensatory damages and there are in fact very few large punitive damage settlements and very few where this ratio becomes skewed. Also, punitive damages are not insurable.

Third, many unreasonable punitive damage awards by juries have been immediately reduced by presiding judges or later on appeal.

Perhaps most important is the cultural differences reflected in our laws. One example is the concept of foreseeable (although unintended) use of a product. If you manufacture screwdrivers you should ensure their safe use and function as pry bars. If you don't, you can be held liable for injury for such a foreseeable use.

However, with equal importance to the issues of product liability, negligence, and other legal nuances, European managers contemplating or now doing business in the US should also be aware that many new laws have been enacted specifically to address corporate and managerial behaviour concerning the environment and employee safety. Specific penalties for endangering and injuring employees have resulted in incarceration and substantial fines to corporate managers and officers.

Yes, it is a dangerous world out there.

T G Nelson,

vice president,

Racine Federated Inc,

2200 South Street,

Racine WI 53404, US

US United States of America P9211 Courts CMMT Comment & Analysis P9211 The Financial Times London Page 16 370
Letter: Fallacy of conditions for Emu Publication 930212FT Processed by FT 930212 From Mr ALAN SHIPMAN

Sir, Frequent reference is made to 'Maastricht treaty limits' of 3 per cent of gross domestic product for budget deficits, and 60 per cent of GDP for public debt - which, together with conditions for inflation and interest-rate convergence and exchange-rate stability, are supposed to precede any early move to European monetary union.

Although agreed at Maastricht in 1991, these conditions are not written into the treaty. Article 104c refers to 'reference values' for government deficits and debts. The protocol on convergence criteria sets relative target ranges for inflation and long-term interest rates, but leaves it up to the council to define 'excessive deficits'. This definition need not be finalised until January 1 1994.

With all but two ERM countries currently breaching the limits, some for good reasons, an opportunity remains to revise them upwards. The treaty is being accused of enshrining rigidities it does not contain.

Alan Shipman,

792a Harrow Road,

Kensal Green,

London NW10 5JX

GB United Kingdom, EC P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 16 190
Letter: Right way to achieve settlement on Cyprus Publication 930212FT Processed by FT 930212 From Mr OVUL TEZISLER

Sir, Your editorial, 'Cyprus choice' (February 4) contains in itself a train of thought which is not conducive to a political settlement on the island.

The aim should be to help both sides to come to terms with each other's vital concerns and this should be achieved through freely conducted face-to-face negotiations. The ensuring settlement must be acceptable to both sides.

The settlement should not aim, as is suggested by your leader, at cornering one side or the other.

ovul Tezisler,

president,

Turkish Journalists Association in London,

First Floor, Suite 5-6,

320 Regent Street,

London W1R 5AB

CY Cyprus, Middle East P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 16 132
Letter: No shortage of government support for projects in Leeds Publication 930212FT Processed by FT 930212 From Baroness DENTON OF WAKEFIELD

Sir, As minister with special responsibility for Leeds and Bradford, I was very pleased to see your special feature on Leeds on January 28. However, Stewart Dalby's article leaves the impression that the city is not getting support from central government.

Nothing could be further from the truth. Recently, Tony Baldry, housing minister, announced government support for one of the largest ever housing estate action packages - worth Pounds 63m. The housing improvement plan will link in with training and crime prevention measures.

The government is also channelling resources to housing associations in the city at an annual rate of some Pounds 20m as well as providing the council with spending allocations of some Pounds 25m on its own stock.

As your other articles make clear, the government has so far invested some Pounds 39m in the Leeds Development Corporation, which has levered in three times that amount in private sector support and has generated thousands of jobs. The government has also pledged Pounds 20m to help develop the new museum for the Royal Armouries in Leeds.

Following the Autumn Statement, we announced a Pounds 22m package of road and transport measures, on top of resources for the Leeds/Bradford rail electrification.

A major boost has been given to Leeds hospitals with the Department of Health approving expenditure of Pounds 11m at Chapel Allerton and Pounds 70m for phase 1 of the redevelopment of the Leeds General Infirmary.

The list goes on, but there are limits on your space. It all amounts to very substantial help from the government. Baroness Denton,

Department of Trade and Industry,

Ashdown House,

123 Victoria Street,

London SW1E 6RB

GB United Kingdom, EC P9532 Urban and Community Development CMMT Comment & Analysis P9532 The Financial Times London Page 16 313
The way out for Major Publication 930212FT Processed by FT 930212 By JOE ROGALY

If all else fails, trim your sails. Mr John Major's cabinet is guided by the thought expressed in that little couplet. It is what gets the prime minister through the night. But how to trim? It is easy to commandeer taxpayers' money to pay for wasteful but politically popular hospitals, coal mines or army regiments. It is not so easy when what is at stake is a matter of principle, as with the bill to ratify the Maastricht treaty. Yet as I shall suggest in a moment, there is always something.

Consider. Parliament has been told that it must accept or reject the totality of what was agreed by the 12 European Community governments in December 1991. That includes the bit regarded by the prime minister as his personal triumph - the protocol on social policy. According to that celebrated excuse-note, 11 of the member states - but not Britain - are anxious to adopt the no doubt admirable but costly employment practices laid down in the 1989 'social charter', which gives various rights to employees and imposes numerous obligations on employers. An agreement on this social policy, applicable only to the 11 countries that want to implement it, is appended.

Labour says that it wants the terms of that agreement to apply in Britain, so it has put down an amendment that would write the protocol out. The Liberal Democrats concur. Both parties appear to imagine that what will follow if Labour's amendment is carried will be a brief recall of the 12 EC governments, upon which Mr Major will shrug his shoulders, say 'that is what parliament wants' and sign a new treaty that commits Britain to a Continental-style social policy. There is a certain inconsistency here. Under Mr John Smith's guidance Labour is distancing itself from the more expensive forms of social democracy practised in northern Europe. Labour's leader may one day find the social charter a shade too far to the left for the image that he is trying to project.

The Conservative Euro-sceptics have a different problem. They see the social charter as a characteristic manifestation of the kind of socialism that would be imposed on Britain by a European super-state. Yet they are suggesting that they will vote for the Labour amendment, on the ground that there is no danger of the prime minister renegotiating the treaty to include the social policy. Some believe the consequence would be that the whole enterprise would be scuppered. This interpretation has been endorsed by Mr Douglas Hurd, who has intimated that if the ratification bill is not passed in its original form, social opt-out included, the treaty will be dead.

All of these players are bluffing. Labour and the Liberal Democrats will have trouble keeping their most enthusiastic pro-Europeans in line if it looks as if a vote for the social policy amendment will kill the bill. Mr Smith himself does not want to become known as the man who sank the treaty. The Tory Euro-sceptics in the Commons are ducking and weaving in order to keep their opponents - their fellow Conservatives on the government benches - guessing. Mr Hurd cannot seriously contemplate walking away from the Maastricht treaty.

In short you could say that what we have seen this week has been nothing more than a round of parliamentary games. When the vote on Labour's amendment comes, next month or in April, the number of Conservative rebels will be kept below the 11 needed to defeat the government if all opposition MPs turn up and vote the same way. Alternatively, there may be more rebels but the opposition ranks will not hold firm. There is nothing to worry about.

This is probably true, but nobody can be sure. A good trimmer always has a contingency plan, as Mr Major demonstrated on November 4. That was the night on which he survived by three votes, bought by a promise to put off the third reading of the Maastricht bill until after the Danish referendum. Better a postponed ratification than no treaty, the foreign secretary explained afterwards, blushing slightly. What Mr Hurd meant was, better a positive vote than no European strategy, no economic strategy, no prime minister and no Conservative government.

The same equation will apply if there is a similarly close final vote on the social charter amendment. The prime minister cannot afford to lose. If he did suffer such a calamity he would become Mr John Nothing. His talk of placing Britain at the heart of Europe would sound empty. He would be adrift on the economy, adrift on sterling, adrift on Europe, adrift before the electorate.

It is here that my suggestion comes in. The Euro-sceptics would trade their loyalty for a referendum. It is true that Mr Major cannot decently give them the kind of immediate popular veto over ratification that they are asking for. To do so he would have to eat more words than he has been accustomed to consuming at a single sitting. He might choke. So no referendum now.

A referendum later, much later, might be easier to swallow. Mr Major could say that the contents of the treaty are too complicated to be expressed as a single question, and that anyhow no serious constitutional issue arises from accepting the treaty as it stands. He would be right. The political arrangements settled at Maastricht do not constitute a step towards a European super-state.

The move to economic union is, however, another matter. If Britain does exchange sterling for a single European currency, managed by a single central bank, it will have handed important responsibilities to an outside authority. Maastricht allows Britain to opt in or out of such an arrangement. There is a case for a referendum on that. The vote need not come much before 1996 at the earliest and, the sceptical side of Mr Major may tell himself, it may not happen at all, at least not in the present century. The prime minister would have to say that he could not bind future parliaments, but that his government would recommend a popular vote if the question was whether Britain should enter a single-currency union.

If the proposition was put to him this morning, he would reject it. His natural hope must be that there will never again be as close a vote on a European matter as there was on November 4. But suppose there is, and suppose that the clock stands at a few minutes to midnight?

GB United Kingdom, EC P9721 International Affairs GOVT Government News CMMT Comment & Analysis P9721 The Financial Times London Page 16 1117
Arts: Antwerp at its apogee - Patricia Morison finds many Flemish masterpieces but little information Publication 930212FT Processed by FT 930212 By PATRICIA MORISON

An extraordinarily prolific outpouring of artistic talent is the theme of From Bruegel to Rubens: The Antwerp School of Painting from 1550 to 1650, at the Royal Museum of Fine Arts in Antwerp. Inevitably, we think of those generations in terms of the great foursome, Bruegel, Rubens, Van Dyck and Jordaens. Yet the aim of this exhibition is to shed light on the other talents, their pupils, friends, and competitors.

With 150 paintings by no less than 79 Antwerp masters, it offers an ample tour d'horizon of an artistic centre which at that time enjoyed a reputation which can only be compared with the dominance of Paris in the 19th century. However, the show which should have been the perfect curtain-raiser to Antwerpen '93, the festival marking Antwerp's time as cultural capital of Europe, sells itself short.

Previously the exhibition was in Cologne where, by all reports, it looked a far better thing than it does in the downstairs galleries of the Royal Museum of Fine Arts in Antwerp. Here, paintings are hung on a horrible system of steel braces. Flanders should really look to her greatest treasure. The time must surely be near for a major renovation of a gallery which houses one of the world's most evocative collections of paintings.

Time and cash were perhaps not sufficient to allow redecoration ahead of the Festival. But what about some elementary housekeeping? Grass sprouting from the steps, torn and dirty curtains in gallery windows, a blown light-bulb casting shadow on a picture - those are easy enough defects to put right. A narrow strip of carpet running around the edge of the galleries allows the warders to sing out the moment anyone steps forward. It also has the depressing effect of making visitors patrol it as if it was a cat-walk.

The paintings are hung in a way intended to show the sheer breadth of types of painting for which Antwerp's artists were famed. The true centre of gravity of the show is post-1600, by which time subjects which were novelties to artists 50 years earlier had reached a wonderful pitch of expertise.

The mid-16th century saw Antwerp at the apogee of her wealth and status, and then enter into the long decline after the Spanish closed the Scheldt. Yet this made no difference to Antwerp's fame as an exporter of paintings - and also of artists. It is impossible to avoid speaking about 'factories' and 'production lines' in an epoch in which dealers sent Antwerp middlemen orders for paintings by the hundred.

From Naples and Paris to Peru, demand was unquenchable for the wide skills of the Antwerp workshops. History painting, landscapes, battle-scenes, scenes of peasant life, shipwrecks, still-lives, paintings to record art-collections; the selection of works, many from private collections, ought to convey the right message about the intense specialisation of artists in this period. Unfortunately, the organisers of the exhibition appear to have wanted only to commune with fellow-specialists in Flemish art.

The result is an inexcusable shortage of information about anything lay visitors might want to know. Nothing is said about the career of individual artists, and even their dates do not appear on the labels. There is nothing about the political and social background. If only these things could be easily followed up in the catalogue, it would be different; however, the logic behind this heavy volume is unfathomable.

It is sad to have so many grumbles about the presentation of this rare hors d'oeuvre to Antwerpen '93. And yet, without question it is an achievement to have brought together so many paintings of singular beauty, rarity, and fascination.

Of course, there are many unfamiliar artists to discover. Take Pieter Van Mol, an obscure contemporary of Van Dyck who settled permanently to Paris. His 'Descent from the Cross' from Rheims is a remarkable composition in which Christ's body, painted with painful realism, is held upright in the centre of the canvas by the holy mourners.

Theodor Van Thulden, an important member of Rubens's 'factory', also moved for a while to Paris but later went back to Antwerp. His 'Flanders, Brabant, and Hainault Venerating the Virgin and Child' of 1650, is a magnificently graceful exercise in political flattery. The provinces, represented as well-dressed ladies, render up their prayers. Gold coins tumble down, the benefits of the wise governance of Catholic Spain.

Every visitor will find paintings they particularly warm too - assuming they resist the pressure of the catwalk to pace along by, rather than looking with care. But the question needs always to be remembered, what are we looking at, a master or a team-effort? So often one skilled hand would add the animals to a landscape, another the flowers in a devotional painting. Hieronymus Francken painted the portrait of a lady at the virginals; his less-skilled nephew filled in the dancing company. As ever, argument rages over whether such a scene paints a moral. It could be a merry inn where Joachim Beuckelaer's cooks are preparing a hugely carnivorous dinner. Or is it a brothel?

Among the loans from an impressive number of major collections one of the most familiar masterpieces is Van Dyck's 'Portrait of Isabella Brant' from Washington. From the Hermitage come two wonderfully harmonious paintings by Rubens and Jordaens. The first is Rubens's scene of a group of peasants on the edge of a spinney, who languidly make love and listen to the sound of a flute. The landscape is a sunny one, lit spectacularly by a double rainbow.

The Hermitage's second superb loan is Jordaens's earliest homage to his family. It was painted in 1615, the year he was admitted as a member of the painters' Guild of St Luke, so perhaps that over-worked phrase could be used, a rite de passage. The family group clusters almost oppressively close around the table. On the women's faces we read maternal love and pious resignation, for above their heads play three golden-haired angels, the infants who had not lived. Jordaens himself cuts a debonair figure, playing the lute. However, he is seated so close to the only other adult male, his father, that he is surely making a statement that the Jordaens family assets are safe in his talented hands.

BE Belgium, EC P8412 Museums and Art Galleries CMMT Comment & Analysis P8412 The Financial Times London Page 15 1080
Arts: Giselle - Ballet in Antwerp Publication 930212FT Processed by FT 930212 By CLEMENT CRISP

Five years ago Belgium had three ballet companies. In Brussels, Maurice Bejart reigned with his Ballet du Vingtieme Siecle as dance guru to Europe. French-speaking Wallonie had its own Ballet Royal, and Flanders an equally Royal Koninklijk Ballet. But Bejart went to Lausanne, and in 1988 Mark Morris arrived for a three-year stay in Brussels' Monnaie Opera. In 1990, the death of the Ballet de Wallonie's director brought the end of the company, and today only the Royal Ballet of Flanders remains to uphold the ideals of classical dancing. (In Brussels, Anna Teresa de Keersmaekeer's free dance now occupies the Monnaie stage; elsewhere other Belgian modernists flourish - not least Wim van der Keybus).

Flanders' Royal Ballet is based in Antwerp. It was founded in 1969, and it has been directed for the past six years by Robert Denvers. Denvers has given the company a sure identity based upon 19th century traditionalism, modern full-length works, and shorter creations from Balanchine, Tudor et al.

The troupe's image is of a serious and disciplined ensemble of 55 dancers - Denvers is also a celebrated pedagogue - and performances during the past few years, in serious stagings of La Sylphide, Don Quixote, have been marked by a clear and well-mannered classic style. (The dancers, who come from many countries, seem united by Denvers' teaching, and by his high technical expectations).

Last week-end saw the first performances of the company's new Giselle in Antwerp's Opera House. The staging, produced by Denvers and the Cuban ballerina, Menia Martinez, pleases by its clarity. There is little of that fuss of Victorian quaintness which is supposed to evoke 'Romantic style', and is more like epidemic winsomeness. Nowhere are there those anxieties and caprices that tell of producers' imposing their 'vision' upon the ballet, as in the risible Giselle at the Paris Opera with its witless Breton setting. The Flanders version lets the dance speak (the text is sound, and seems based upon a Kirov model), and is blessed in its simplicities. Roger Bernard's designs - practical, well-made cottages and graves set against pale back-cloths; pretty costumes - are efficient, and designed for touring, since the company travels extensively. The abiding impression is of a Giselle that is clearly placed within the great Russian traditions of the ballet. (My one cavil is that the lines of wilis in Act 2 come between the lovers and the cross on Giselle's grave which must protect them from Myrtha).

The sense of tradition was clear in the interpretations of two young ballerinas whom I saw. Lorena Feijoo is 21 years old, Cuban, and a born Giselle. She is slender, with a gently commanding technique - balances hover; steps poise and hang upon a breath of air - and she brings a total concentration upon the drama. Apprentice Giselles tend to run amok in the mad-scene. Miss Feijoo played it with a control of effects that was never studied, but, like her dancing, seemed the expression of a naturally eloquent and elegant temperament. As the wili Giselle her poses, the turn of her head, a floating delicacy in step, told of a role whose pathos (and whose prodigious demands) she already understood. It was a reading most touching, and most promising.

Her Albrecht was Chris Roelandt, strong and considerate as a partner, and proposing a sympathetic character whose decencies are seen in his good manners and exemplary attention to his ballerina. A second Giselle - of the five whom the Flanders Ballet are to present - was the Bulgarian Nadia Dimitrova. Here was a young artist whose training had, like Feijoo's, already placed her in the best traditions of the role. Her Giselle was lively in temperament as in step. Quick accents, quick feelings, told the story in the first act - perhaps slightly self-consciously so. As the wili, Dimitrova compelled attention by the purity and generosity of her line, and by her evident desire to show phrases of movement as a kind of bel canto. Her Albrecht was the Cuban danseur Julio Arozarena, a vivid performer with a bright edge to his dancing.

The support from the company was alert, attractive, at both performances. The nocturnal dances of the second act were led by two impressive Myrthas: Enrichetta Cavalotti and Lucinda Tallack-Garner (who has a space-devouring jump). The peasant pas de deux, in the broadly flowing Bolshoy version, was brightly cut by Hiroko Sakakibara and Francois Petit. And, how good and how rare to report, the Adam score was a vital component in the drama. It was played (in John Lanchbery's edition) with evident affection by the orchestra of the Flanders Opera under the young conductor Koen Kessels. Mr Kessels understood the music's shape, its dramatic purpose, its Romantic force: he gave a notable display of musicianship.

'Giselle' is sponsored by Kredietbank, GB and VTM Television and tours Belgium during February and March

BE Belgium, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 845
Arts: Don Giovanni - Opera Publication 930212FT Processed by FT 930212 By MAX LOPPERT

Two London music schools, the Royal College of Music and the Royal Academy, have been involved in a merger, which was set in place last September. The London Royal Schools' Vocal Faculty is the result: facilities from the vocal and operatic teaching departments of both bodies are now being shared, and jointly funded, under the stewardship of Robert Tear (Artistic Adviser) and James Lockhart (Director of Opera).

The most immediately visible product of the union will be the opera shows - Don Giovanni just opened at the RAM theatre, The Turn of the Screw at the RCM next month, others to follow - whose alternating casts and production forces draw on the newly shared resources. For instance, this new Mozart production is conducted by Mr Lockhart (based at the RCM) and produced by Graziella Sciutti, a much-loved Mozart, Rossini and Donizetti soprano now active at the RCM in a teaching capacity.

No-one in his or her right mind would seek to disgorge runes and portents from Monday's opening performance. It was, however, full of positive features, which can be taken to indicate the general strengths of the London schools' just now: their ability to attract promising material from across national boundaries, and their luck in having both Mr Lockhart and Miss Sciutti involved in their pedagogical activities. The RAM Opera Orchestra produced impressively solid, vigorous support throughout the evening.

The first cast boasts two singers of outstanding gifts - the Ottavio of Ya-Lin Zhang (a physically stiff but free-throated, Italianate tenor) and the Elvira of Susannah Glanville (a fresh-voiced, mettlesome, strongly expressive soprano). Also on show are a Leporello (Paul McNamara) and an Anna (Susan Strangward) not quite 'finished' but rich in promise, and a strikingly young-looking Giovanni (James Lawrence) whose vocal facility and personality need only the natural benefits of greater experience.

All the singers seem to have benefited from Miss Sciutti's vibrant engagement with the text and her alertness to character detail. This opera's mesh of emotional complexity and plot intricacy is particularly difficult for young people to convey, yet there was little sense of faltering in weaving its dramatic and musical web.

One question-mark hangs over the production, though: the design style, murky, cumbersome and '50s-ish, offers the students no chance to make contact with the more up-to-date modes and manners of opera-staging they will doubtless encounter on leaving college. It is devoutly to be hoped that this forward-looking new concept in operatic education will allow its students to look forward in every possible way.

Last performance tomorrow

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 454
Arts: Night after Night - Theatre Publication 930212FT Processed by FT 930212 By ALASTAIR MACAULAY

Neil Bartlett is a playwright, translator, director and performer, and this sheer diversity makes him one of the more ubiquitous figures in British theatre. The National has presented his translations: Racine's Berenice in 1990 and Marivaux's The Game of Love and Chance (current). Last year, the Lyric, Hammersmith, presented his adaptation of Ruth Rendell's A Judgement in Stone. He also co-directed the latter two: which, like several other shows involving him, were produced by Gloria - a production company set up in 1988 to present work by him and three other artists.

Much of Bartlett's work advances pro-gay sentiments, and all of it expresses a gay sensibility. His latest offering, Night after Night, is the most direct treatment of gayness that I have seen by him. Also the most autobiographical. A one-man show (with accompaniment by Nicolas Bloomfield), it begins with the premise that he, Bartlett, bears a close physical resemblance to his own father. And then he flips back to become his father in 1958, the year of his birth. His father-to-be is taking his mother-to-be to a musical. 'The show is about to begin.'

Bartlett then becomes the theatre manager, the coat-check man, and the barman: who are all - well, confirmed bachelors. So are most of the chorus-boys. Yes, 1950s musicals are wonderfully touching, but isn't it funny how they speak to gay people as directly as to straights? And isn't it ironic that a ritual as heterosexual as a 1950s musical should be framed by so many gay men (front of house, in the chorus, and so on)? And didn't Bartlett pere ever notice this then? But it is 1958, the year in which Bartlett fils will be born.

A reexamination of art and history and family biography is a standard and necessary part of gay liberation. But Night after Night's use of self is thoroughly awkward. It wants to be (a) a tour de force in which Bartlett impresses us by being several different men; (b) a private argument (Didn't you ever see any gayness around that straight illusion, Dad?) shared with us all; and (c) Bartlett's treatment of the theme of homosexual participation in heterosexual art. It wants its audience to cry: (a) 'Bravo, star'; (b) 'Us too, Neil'; and (c) 'Alpha plus, Bartlett.'

You need to be a larger artist than Bartlett to bring all this off. Bartlett can impersonate the gay front-of-house theatre staff with some malicious panache. As his own straight father, however, he is a cypher. Night after Night tickles its audience's fancy, but it reeks too of a tricky mixture of self-indulgence, what-about-me self-pity, and self-advertisement. Bartlett talks of the heterosexual world as if it existed beyond the green baize door, and as if he inhabited the servants' hall downstairs. He imagines being part of it, and yet he cannot imagine its nervous system.

Royal Court, Theatre Upstairs, until February 13

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 516
Arts: Today's Television Publication 930212FT Processed by FT 930212 By PATRICIA MORISON

'When you read a brilliantly elegant and ironic novel by Jane Austen, do you think of colonial slavery?'. Quite a question. If you don't, then it is time you thought a little more deeply, according to Edward Said. In Arena (BBC 2, 9.30), the ubiquitous Palestinian writer and academic presents the thesis of his recent book about the complex overlap of Europe's culture and imperialism.

Robert McBride (C4, 8.00) is an ANC guerrilla who was sentenced to death for bombing a Durban bar and killing three people. He was released last year under the terms of the general amnesty. In this interview he talks about his motives.

The irritations of Gardens without Borders (C4, 9.00), are so great that the series comes close to being a wasted opportunity.

Who on earth cares that next week the party of Britons touring around gardens in France is going to be joined by an Olympic show jumper? Why not a manufacturer of pork pies?

However, tonight's episode does offer a lure in the form of a visit to the garden of Anita Pereire, queen of French gardening.

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 15 214
Technology: On the scent of a bestsmeller - Della Bradshaw discovers why synthetic perfumes are beginning to outperform their natural counterparts Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW

The dream of every perfumer is not fields of purple lavender nor hillsides covered in bright yellow mimosa - not even gardens full of sweet-smelling roses. It is the one synthetic chemical that will give that most elusive of products - the best-selling fragrance.

For although a perfume may boast high notes of jasmine or undertones of musk, these days the vast majority of perfume oils are produced in a chemistry laboratory rather than a field.

'The trend is towards more synthetic components,' points out Terry Goodacre, senior perfumer at Drogoco, one of the dozen fragrance and flavour companies now employed by the top perfume houses to develop new perfumes. He acknowledges that naturally-derived oils 'always have the edge', because each fragrance oil can be made up of thousands of individual chemical components, each in minute proportions.

But recent developments in synthesising oils that replicate natural flower fragrances, and the development of completely new chemical components, are beginning to rival - and even outperform - their natural counterparts.

One big advantage of synthetic oils is that they are less expensive than their natural equivalents. Grasse, in the south of France, for example, provided many of the flowers for the perfume industry until tourism pushed up the price of land along the French coast and made large-scale flower cultivation uneconomical. It takes a tonne of jasmine flowers to produce just a few kilos of perfume oil.

The price, quality and supply of synthetics can also be guaranteed. When frost hit the Californian orange crop in December 1991, for example, the price of natural orange oil soared. And until recently, perfumers have imported much of their oak moss and lavender from the former Yugoslavia and many of the resinous fragrances from Somalia. There are now fears that supplies from both these areas could be jeopardised.

The art of the chemist is twofold. First, scientists have to formulate a chemical oil that is as near as possible to the natural source. Traditionally, that has been done by extracting the oil from the plant and then analysing it. But many of the latest high-priced perfumes have used fragrances derived by a new method known as 'head space analysis'.

In this, rather than analysing the flower oil, scientists concentrate on the odour which emanates from the living flower before it is picked. This can be particularly useful with flowers such as daffodils, from which oil cannot be extracted.

The volatile substances from the flower are vacuumed up over several hours or days. The sweet-smelling air is cooled to condense out the fragrant materials. These are analysed using traditional spectrometry and, if all goes according to plan, replicated.

The difference between the analysis of a flower oil and the results of the vacuum method can be 'quite startling', says Goodacre.

One reason for this is that when oils are extracted from flowers, many of the component chemicals are broken down, affecting the smell.

Analytical techniques used to catalogue the volatile components of a natural oil have now become so sophisticated that they can identify those that appear in minute quantities - just a few parts per million. So chemists can go back to popular flowers - the rose is the obvious case - and synthesise these trace chemicals so that the artificial rose oil smells even more like that from the original flower.

Second, and more excitingly, chemists are discovering new fragrant components. 'All the time we're looking for new smells, we're all striving for this new component,' says Tony Mills, chief perfumer with Bush Boake Allen, the fragrance and flavour company. 'With chemistry, we can come up with a whole new direction.'

Few perfumers even dare to believe that they will concoct the second Chanel No 5 - a constant bestseller since it was introduced in 1923. What they hope for is a fragrance which other perfume houses will be forced to emulate.

Failing that, they aspire to create a novel fragrance by experimenting with existing chemicals in innovative mixes. Typically, each perfume is a blend of 30 to 50 different oils, although a complex blend can contain up to 200 components.

'It's very exciting to build a winning fragrance around an ingredient that has been on the shelf all the time,' says Mills. On the BBA shelves there are up to 1,300 different chemicals.

Once a perfume is created, the novel element can be used in the marketing. The Japanese cosmetics company, Shiseido, for example, heavily promotes its new perfume, Feminite du Bois, on its sultry ingredient, cedarwood.

Industry experts reckon that in spite of the frequency of perfume launches in the past few years, truly innovative fragrances have been few and far between. In the late 1970s, for example, Ralph Lauren introduced Lauren, with its distinctive blackcurrant note. Other perfume houses followed with other fruity fragrances.

Most recently, Aramis launched New West for Her, with its clean melon fragrance which other perfume houses are still trying to emulate.

One reason, believes Astra West, fragrance evaluation manager with BBA, is that once a perfume reaches the market evaluation stage, consumers invariably opt for something comforting rather than something challenging.

'The familiar always wins,' says West. And with that in mind, few brand managers are prepared to stick their necks out in order to back a truly innovative product with the prospect of losing millions of pounds. 'There are very few Estee Lauders left in the world, who say that's the one I want,' adds West.

Creating a new perfume is inevitably a complex process. 'It's a bit like in advertising,' says Goodacre. 'The client comes to us with a brief of what they want and we pitch for the business.'

The brief could be something as general as a marketing strategy - the age of the potential wearer and lifestyle, say. Other briefs would be more complicated, identifying specific elements in the fragrance.

One of the biggest problems is interpreting what the client wants. But a 'language of perfumery' has developed - with 'floral notes', 'green notes' and so on. 'One of the most misinterpreted words I've ever come across is the word 'fresh',' says West, citing the numerous different interpretations of the word.

In spite of all the research involved in creating the vital combination of oils and aromas, as little as 15 per cent of a bottle of perfume is actually oil, says Peter McDougall, an analyst at BZW, the London securities house. The most plentiful component is alcohol - 55 per cent - followed by distilled water. In a bottle of eau de parfum the oil content can be as low as 8 per cent, and in eau de toilette as low as 4 per cent.

And in terms of the cost of production, the ingredients in a bottle of perfume account for only 5 per cent of the total outlay, adds McDougall. The research and development costs a further 5 per cent, and there is the additional cost of the expensive equipment needed for the distillation process.

But for those eager to buy their loved ones a bottle of the latest perfume for Valentine's Day on Sunday, it is sobering to remember that most of its cost is accounted for not by the fragrance but by sales and marketing activities, packaging, distribution, and, of course, the profit margin.

XA World P2844 Toilet Preparations TECH Products P2844 The Financial Times London Page 14 1261
Technology: Coming out in the wash - Worth Watching Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW

A technique similar to that used in the production of bath oil capsules has been developed by chemists in Northern Ireland to produce the latest home laundry convenience product - sachets of laundry liquid.

The developers, SB Chemicals, of Lisburn, Co Antrim, believe the product reduces the amount of unnecessary chemicals used in domestic washing machines.

A measured dose of the anhydrous (waterless) washing liquid is encapsulated in a water-soluble sachet, which is placed on top of the soiled clothes in the washing machine. The film around the sachet is also active in the washing process, acting as a soil suspension agent when it dissolves. SB Chemicals: UK, 0846 673331.

GB United Kingdom, EC P2841 Soap and Other Detergents TECH Processes P2841 The Financial Times London Page 14 145
Technology: Safety in the cot - Worth Watching Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW

A low-cost monitor intended to save the lives of babies at risk from cot death has won first prize in the Toshiba Year of Invention competition for an 18-year-old Scottish schoolboy.

The Breathe Sure monitor should sell for about Pounds 60, compared with several hundreds of pounds for the monitors used in many hospitals. An Edinburgh company of medical equipment suppliers, JMW Systems, is already building prototypes.

The Breathe Sure sensor, which is attached to a cloth belt, picks up the infant's breathing. Each time a breath is detected a green light flashes on the electronic monitor which is hung from the cot or pram. Should breathing stop or become irregular an alarm sounds. JMW Systems: UK, 031 440 3633.

GB United Kingdom, EC P3845 Electromedical Equipment TECH Products P3845 The Financial Times London Page 14 152
Technology: Home and dry - Worth Watching Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW

A heated towel rail which switches itself on before you get into the bath, or shutters that automatically close at sunset are the promises of a home automation system developed by the French consumer industry company Groupe Moulinex.

Scenario uses the domestic electric wiring system to send signals from a control unit, just the size of a telephone, to appliances which are plugged in around the house. Each appliance is wired to an 'intelligent' plug, which acknowledges orders and sends back a message to the central console to confirm that the order has been carried out.

The system can also be activated by telephone. Groupe Moulinex: France, 1 49 20 72 00.

FR France, EC P363 Household Appliances P3699 Electrical Equipment and Supplies, NEC TECH Products P363 P3699 The Financial Times London Page 14 149
Technology: A new resin takes the floor - Worth Watching Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW

Formaldehyde is widely used in the production of vinyl kitchen floors and other flooring and roofing materials - but it's best known as a poison.

Most attempts to find a substitute have failed on grounds of physical performance. But a company in Philadelphia claims to have developed an alternative that matches the performance of formaldehyde binders and resins.

Rohm and Haas say the tensile strength of its water-based acrylic resin permits lower fibreglass weights and therefore cuts costs. Rohm and Haas: US, 215 592 3000; UK, 081 686 8844.

US United States of America P2821 Plastics Materials and Resins TECH Products P2821 The Financial Times London Page 14 126
Technology: Apple Computer's latest bites - Worth Watching Publication 930212FT Processed by FT 930212 By DELLA BRADSHAW and DANIEL GREEN

Apple Computer has introduced a colour-screen version of its big-selling portable computer, the Macintosh Powerbook, more than a year after the launch of the original monochrome machines, writes Daniel Green.

The Powerbook 165c should appeal to those who prepare work for their colour-desktop machines or business presentations while on the move. It can display 256 colours and uses the 68030 chip, the most powerful microprocessor that Apple has yet put in a portable computer.

The Powerbook 165c costs Pounds 2,745. Apple: US, 408 996 1010; UK, Freefone Apple.

US United States of America P3571 Electronic Computers TECH Products P3571 The Financial Times London Page 14 124
Management: Investors export US zeal Publication 930212FT Processed by FT 930212 By NORMA COHEN

US institutional investors, out of whose bottle the genie of corporate governance first crept, are exporting their activism abroad.

According to a study* published yesterday by the Boston-based Institutional Responsibility Research Centre, US shareholders have nearly doubled the number of ballots they are casting at overseas corporate meetings. In 1992, US institutions exercised their vote on 40 per cent of their non-US stock, up from 24 per cent the year before.

UK institutions fare badly by contrast. The National Association of Pension Funds in 1991 found that fewer than 20 per cent of British institutions voted on share resolutions for stocks in their home market, though the NAPF says such apathy may be changing.

American investors are increasingly taking as hostile a stance abroad as in the US, where they have toppled senior management at IBM, American Express and General Motors. Board positions were opposed in 7.8 per cent of cases in 1992, up from 3.5 per cent in 1991, the survey found. 'With more than Dollars 250bn (Pounds 166bn) worth of international stock at stake, US shareholders are saying they can't afford to ignore the hazards of different corporate governance practices abroad,' said Stephen Davis, director of IRRC's Global Shareholder Service.

However, the study finds that non-American corporations are fighting back against institutional activism. Many German corporations appear to be deleting shareholder proposals from proxy materials and ballots sent to US investors, while most US investor votes cast at annual meetings of UK, Australian and Canadian annual meetings are never counted.

*Full results in: Global Voting: Shareholder Decisions 1991-92, available from Investor Responsibility Research Centre, 1755 Massachusetts Ave NW, Washington DC 20036. Price Dollars 75.

US United States of America P99 Nonclassifiable Establishments MGMT Management TECH Research P99 The Financial Times London Page 12 308
People: Bowtell's fast-stream Publication 930212FT Processed by FT 930212

Ann Bowtell has been appointed First Civil Service Commissioner, responsible for selection to the senior civil service and for the fast-stream entry programme. Bowtell, 54, is the first woman to be appointed to the post.

A graduate of Girton College, Cambridge, Bowtell was herself a fast-stream trainee, joining the National Assistance Board in 1960. Her career in the department of health and social security (which replaced the NAB) has been largely in policy, personnel and resource management. She is currently deputy secretary at the department of health, where she is the principal establishment and finance officer.

Bowtell is particularly well-qualified to help the civil service achieve its aim of attracting more women to its top ranks, and retaining them after they start families. A mother of four, she continued to work part-time while her children were young.

She replaces John Holroyd, who was recently appointed Prime Minister's appointments secretary, with responsibility for church appointments and some special academic jobs.

Bowtell will be replaced at the health department by Joe Pilling, 47, the former director-general of the Prison Service. Pilling won respect for his work at the prison service, and had been expected to continue in charge when it achieved executive agency status this year. However, the home secretary selected an outsider, Derek Lewis, former chief executive of Granada Group.

GB United Kingdom, EC P9199 General Government, NEC PEOP Appointments Bowtell, A First Civil Service Commissioner P9199 The Financial Times London Page 12 251
Management: Beat the Budget with solid gold - Tim Dickson on hedging your bets against March 16 Publication 930212FT Processed by FT 930212 By TIM DICKSON

Psst] Fancy being paid in gold bars, diamonds or even cocoa beans? Bizarre as it seems a growing number of UK companies have been turning to commodity-based bonus schemes, which tax experts reckon may be costing the government tens of millions of pounds in 'lost' National Insurance revenue.

The present popularity of the schemes is attributable to two main factors: a growing fear that the chancellor may raise the level of NI contributions in next month's Budget, and suspicion that he could crack down on apparent loopholes at the same time.

National Insurance planning is one of several issues for companies to consider before Lamont gets to his feet on March 16. Corporations do not have the same range of opportunities to beat the Budget as individuals: but a checklist of possible boardroom actions can be compiled.

Accountants and lawyers say NI is a big preoccupation for companies - hardly surprising perhaps given that it is already such a nice little earner for the chancellor.

Raising more income tax would be widely decried as a political U-turn, which is why Lamont may find it more attractive to raise additional revenue through National Insurance. Controversially, he could take a leaf out of the Labour party's last election manifesto and raise or remove the Pounds 21,060 ceiling above which the employees' National Insurance contribution is not paid. But a more plausible option might be to lift the present 10.4 per cent rate which companies pay on most salaries.

Present NI rules exempt staff bonuses paid in the form of marketable commodities rather than money from both employer and employee contributions. MAI, the financial services group, attracted considerable attention before the last election by making payments to some staff in gold bullion.

Diamonds can also be used, while factory workers at the Presbar group were recently reported to be receiving part of their remuneration in cocoa beans. A scheme involving bonus payments in unit trusts was ended in 1991.

Obviously, employees do not take physical delivery: in a typical scheme the commodities are credited to their name and sold for cash within a couple of days of being bought. Value Added Tax on gold can be avoided provided the purchase is routed through an offshore centre like Switzerland.

John Valentine, a tax partner with Grant Thornton, points out that employees also enjoy the benefit of deferring income tax. He nevertheless cautions against setting up a scheme of less than Pounds 100,000. 'The Revenue may choose to challenge individual cases, and unless every single document is word perfect they may fail. It could be a time consuming and expensive process.'

Other accountants say some clients are reluctant to enter into arrangements which could upset their relations with the Inland Revenue.

Valentine emphasises that the scheme only works for bonuses, not for the employee's basic remuneration (where the company has a contractual obligation to pay).

National Insurance is not the sole pre-Budget tax topic for management in-trays.

Take Advance Corporation Tax, for instance. An intense lobbying campaign has been directed at the government over rules which disallow ACT from being credited against tax paid on overseas profits.

The chances of the chancellor succumbing to the pressure look slim - indeed he may even clamp down on some of the tax avoidance schemes which have been put in place.

But as David Reid, tax partner at solicitors Clifford Chance points out: 'If there is to be a change in the ACT rules there could be advantages for multinational companies to delay the receipt of dividend payments into the UK from their overseas subsidiaries until after the Budget.'

Companies will also want to keep a close eye on any moves in the Budget to tax company cars on the basis of their market value. In the meantime, executives with their eye on a new model which costs, say, more than Pounds 19,250 - the current definition of an executive car - may want to wait and see how Lamont changes the current banding system. This way they may be able to buy a bigger car without the additional tax cost incurred at the moment.

Business proprietors who think personal tax rates are set to rise, meanwhile, may want to take advantage of the opportunity to 'dividend strip' before the end of the tax year.

The point here is that dividends, unlike salaries, are free from NI contributions and thanks to the offsetting effect of ACT can be extracted from a company at a tax rate of just 20 per cent. This would increase if the chancellor raised the top rate of personal tax - currently 40 per cent - though there would still be time to take action for this year before April 5.

Tony Allen of Coopers and Lybrand warns companies to beware of exchange differences when disposing of overseas assets. There is some expectation that the government may in the forthcoming Budget remove the current anomaly which means businesses incur capital gains tax on a paper profit. But it would be unwise to count on it.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy MGMT Management GOVT Taxes P9311 The Financial Times London Page 12 887
People: Orderly succession at Shell Publication 930212FT Processed by FT 930212

John Jennings, who has been with the Royal Dutch/Shell group for over 30 years, will take over the chairmanship of the British arm, Shell Transport and Trading, when Sir Peter Holmes retires at the end of June.

The Royal Dutch/Shell Group is the world's second biggest oil company and its management succession tends to be orderly and dictated by a retirement age of 60. Sir Peter, who has been chairman since 1985, was 60 last September and it had been expected that he would hand over the chair to the next most senior of the three British group managing directors.

Jennings, 55, has been a group managing director since July 1987 and has come up on the exploration side of the group. Having graduated in geology from Birmingham University in 1958, he was awarded a Shell research studentship enabling him to obtain his PhD in geology from Edinburgh.

He spent his early career exploring for oil overseas. In 1979 he was appointed managing director of Shell UK exploration and production and in 1985 was made exploration and production co-ordinator for the Shell group based in The Hague.

Sir Peter Holmes, like his predecessor Sir Peter Baxendell, will remain on the board after he retires but his role as chairman of the joint committee of the service companies of the Royal Dutch/Shell Group will be taken by Cor Herkstroter, president of Royal Dutch Petroleum.

Jennings will become vice chairman of the committee but given that he is of a similar age to Herkstroter, the most senior position in the group is likely to continue to be dominated by the Dutch side. Traditionally, the post has rotated between a British and Dutch chairman. But the differences in ages has meant that the Dutch have tended to hold the job longer than their British colleagues. Sir Peter Holmes, for example, was close to retirement when he became chairman of that committee last June.

*****

STOREHOUSE acted quickly yesterday to plug the gaps while it searches for a new chief executive after David Dworkin's decision to leave for Carter Hawley Hale in the US.

Graham Rider, group finance director, was appointed acting managing director of the BhS store chain in addition to his existing responsibilities. Ann Iverson, the former colleague whom Dworkin brought from the US to help him at BhS, and then promoted to chief executive at Mothercare, was appointed to the Storehouse board.

*****

Alan Goodhill yesterday resigned from his position at Morgan Stanley International in London. Goodhill, 44, had been head of European equities for the past three years, and had worked for the firm since 1982.

A Morgan Stanley official says resignation came as 'a surprise', adding that Goodhill planned to 'enjoy some time with his family'. Goodhill himself was not available for comment, having already departed from Morgan Stanley's Docklands headquarters by mid-afternoon in line with the firm's policy.

*****

FENNER, the Hull-based power transmission, industrial conveyer belts and fluid power group, yesterday announced the appointment with immediate effect of Julian Bigden as group managing director.

Bigden, 48, replaces Tom Brown, who has resigned. The move was unexpected, but Peter Barker, Fenner's chairman, said: 'It's pretty tough out there, and I think Tom took the view that he would like to pursue other interests.'

The new md, who remains president of the US company, has been with Fenner for about 20 years, and over the past 10 years has successfully transformed Fenner's US operations into a number of profitable and growing businesses under the umbrella of Fenner Inc.

Shell Transport and Trading Storehouse Morgan Stanley International Fenner US United States of America GB United Kingdom, EC P2911 Petroleum Refining P6719 Holding Companies, NEC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5311 Department Stores P6211 Security Brokers and Dealers P3535 Conveyors and Conveying Equipment P3569 General Industrial Machinery, NEC PEOP Appointments Jennings, J Chairman Designate Shell Transport and Trading P2911 P6719 P5719 P5611 P5621 P5311 P6211 P3535 P3569 The Financial Times London Page 12 683
Management: Rise of the ambassador manager Publication 930212FT Processed by FT 930212 By CHRISTOPHER LORENZ

Country managers used to be the barons, if not the kings, of most multinational companies. But now most of them are being cut down to the size of mere ambassadors.

As their companies strive to accelerate decision-taking, to slash head office costs, and to achieve greater all-round global co-ordination and efficiency, most of their power - sometimes even over sales and distribution - is being transferred either to regional czars, or more often to the heads of worldwide product divisions.

As a result many country managers have either been pensioned off early, or are suffering severe demotivation as they bow to the inevitable relegation of their role.

In a growing number of companies, such as ICI, Britain's largest chemicals combine, 'country management' is being reduced to a part-time representational role, carried out by a senior divisional manager (see this page, Feb 1).

But should the fate of country managers be so inevitable? Is it even sensible?

Or should companies treat them in a less standardised way, adapting their role more carefully to the company's stage of organisational evolution, and to each country's different conditions?

There is nothing either inevitable or sensible about a blanket approach, according to the initial findings of a study being undertaken by John Quelch, a professor at the Harvard Business School.

Companies should think far more carefully about what kind of country manager they need in each national situation, says Quelch. They should also recognise that, even when it is sensible to transfer most power to global divisions, country managers can be motivated by developing new skills. These include encouraging the export and import of good ideas between subsidiaries.

Quelch is now extending his study to 200 country general managers. So far it has been based on interviews with 50 executives in 12 Asian, European and North American multinationals in services, consumer and industrial products.

The executives' responses range from demotivation to surprising expressions of secret content at a narrowing of their responsibilities. - so long as they retain their titles, that is.

In a working paper called The New Country Managers which describes his initial conclusions*, Quelch quotes one executive, presumably of the demotivated variety, saying lugubriously that his type of role will not actually disappear, since 'governments still need one man to go after, to put in jail'.

Quelch's categorisation of country managers is in line with a suggestion in his paper that companies are evolving through several stages towards a relatively standard 'global' type of organisation.

This would be disputed by fellow academics: some Japanese and other companies are moving in the reverse direction, from centralised global to a much more complex and flexible structure which has become known as 'transnational'.

But Quelch's four-stage categorisation is useful all the same:

When a company goes international, it may establish wholly-owned country subsidiaries in its larger, more promising markets, sometimes acquiring local distributors. The company managers needed for these young subsidiaries are 'traders' who focus primarily on sales and distribution.

To achieve local market penetration, the company devolves more functional responsibilities to country managers. They develop and manufacture an ever broader line of locally adapted products. The company becomes a genuine 'multinational' and country managers, evaluated on the profits they deliver, become 'potentates'.

To achieve the benefits of greater integration of its activities on a 'transnational' basis, the company reduces the country manager's decision-making authority over research and development, purchasing and manufacturing. It consolidates these functions in centres of excellence (which may be regional or global). Marketing decision are shifted to the regional level. The country manager remains involved, but has to be a team player, a 'cabinet member'.

In fully 'global' organisations, worldwide divisions (or 'lines-of business') dominate the organisation. The country manager is now an 'ambassador'.

Since most multinationals are at varying stages of development around the world, they need more than one type of country manager - a portfolio with different sets of skills, Quelch argues.

A European consumer goods company, for instance, might appoint 'cabinet members' as country managers in an increasingly integrated Europe, but put 'traders' into Asia, where markets are growing faster and national socio-economic differences are greater. Meanwhile the 'potentates' who run the company's operations in Latin America, where tariff barriers still limit cross-border commerce, might still remain in place.

Country managers should become a mixed breed of high-fliers, in other words, not a cloned race of almost has-beens.

*An edited version of the paper will be published in the next issue of the McKinsey Quarterly, available at the end of this month.

GB United Kingdom, EC P99 Nonclassifiable Establishments MGMT Management P99 The Financial Times London Page 12 785
The Property Market: Death-knell for the speculative venture - Developers must learn from the errors of the 1980s - and from Keynes Publication 930212FT Processed by FT 930212 By RICHARD BARRAS

The recent publication of the second volume of Robert Skidelsky's biography of Keynes, The Economist as Saviour, offers a timely insight into the economic debates of the inter-war depression. These debates take on a new relevance today, as the British economy struggles to emerge from the longest recession of the post-war period. They are particularly pertinent to an assessment of the impact of the 1980s' property boom upon the wider prospects for the British economy in the 1990s.

One of Keynes' great concerns was the tendency for savings to exceed the perceived investment opportunities in a mature economy such as Britain's. Uncertainty about the returns from slow-maturing capital investment projects tends to depress the rate of investment, but also to boost the rate of savings as a defensive measure. A rapid expansion in credit can temporarily overcome the imbalance. This typically leads to a speculative boom in the equities and property markets, as in the late-1980s.

However, when the supply of credit is cut, the boom collapses and creates the risk of a prolonged slump - as happened in the 1930s and could recur in the 1990s.

Keynes identified channels into which savings could be diverted if investment in new domestic capital projects seems too risky. These include hoarding in the form of money deposits, purchase of existing assets and investment overseas. All such forms of saving add to the store of wealth, but not to the stock of capital goods. Consequently they are deflationary because they represent a non-productive diversion of purchasing power away from the demand for goods and services.

To this list we should add the more speculative forms of property development. For even when savings are being invested in new capital formation, the extent to which such investment is contributing to the productive capacity of the economy can vary enormously.

It is a long-standing characteristic of the UK economy that less productive forms of investment tend to find favour over investment in new industrial plant and machinery. In part this reflects the traditional dominance of the City of London over provincial manufacturing interests, a legacy which has encouraged a strong 'rentier' tendency among owners of capital.

This tendency encourages the view that the purchase of existing equities or property is safer than investment in new capital projects. However, Keynes thought that as real interest rates and investment returns fell, in response to a growing surplus of capital, then the result would be the 'euthanasia of the 'rentier'.

Instead the opposite has happened. The demand for capital is stronger than ever: to fund Britain's growing trade and budget deficits and to meet the borrowing requirements of individuals.

Consequently, real interest rates are as high as they have ever been. At the same time the tax regime encourages personal savings in the form of house ownership and pension schemes. We are all rentiers now. Our direct concern is to accumulate wealth which yields an immediate return.

Inevitably the same rentier mentality pervades those financial institutions which invest savings on our behalf. Hence the short-termism of City investors. Hence a commercial property industry which strives to produce what it believes to be 'institutionally acceptable' rather than 'occupationally desirable' buildings. The result is a self-defeating tendency to develop too many high specification buildings without adequate reference to their productive potential.

The 1980s building boom has been an example of this tendency. The trigger was financial deregulation and the motor was the credit expansion generated by deregulation.

However, this credit has not been directed to rebuilding the UK's manufacturing base. Rather, it has been used to fuel an unsustainable growth in consumption and to fund the construction of too many shopping centres and London offices.

All the leading economies with the exception of the US enjoyed an investment boom in the second half of the 1980s. In general this boom was biased towards plant and machinery investment, which expanded by as much as 45 per cent over the five years, compared with only a 16 per cent increase in non-residential building.

Britain was the exception. It showed the highest increase in non-residential building investment of any of the G7 economies and the lowest increase in investment in plant and machinery. As a result it was the only one of the G7 to experience a lower rate of expansion of investment in machinery than in building.

The implications of the contrasting profiles of investment in the UK and Germany are chastening. While the UK has been building marble-lined temples of commerce, the Germans have been pouring money into rebuilding the industrial base of eastern Germany. It is difficult to believe that the Germans' investment will not show the greater payback in the next 10 years.

The UK's missed opportunity is all the more serious because it lessens its ability to take advantage of sterling's recent devaluation to generate an export-led recovery.

However, the 1990s may be the decade of reckoning. The UK economy has been running a substantial trade deficit even in the depths of recession. Manufacturing output has fallen from 30 per cent of GDP in the mid-1970s to just 23 per cent at the beginning of the 1990s. The emergence of some sort of industrial regeneration strategy, however painful, seems inevitable. Less likely, would be a radical switch in incentives from personal savings to corporate investment.

What would such a shift in priorities imply for the property industry? It means increased demand for modern industrial property; greater infrastructure investment; more modestly specified office and retail developments attuned to the needs of occupiers and not the perceived needs of investors; and, across all sectors, less speculative development and more customised buildings for specific occupiers.

Otherwise the property industry will again be made to pay for the national weakness for what Skidelsky calls 'the triumph of making money over making things'.

The author is a partner of Property Market Analysis

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 11 1029
Parliament and Politics: Ready for some tough pounding - Ralph Atkins begins a series, continued on Monday, which looks at options for departments in the firing line / Public Spending Review Publication 930212FT Processed by FT 930212 By RALPH ATKINS

THE normally-unflapp-able Tory MP from a south coast seat was worried as he stood in the Commons' lobby. A flood of letters was bound to come from his many elderly constituents wanting reassurance about the basic state pension. What was he to tell them?

The answer is not simple. The government has started the most fundamental review of public spending for a decade. The unthinkable will be thought in a bid to stem the inexorable rise of public borrowing. Beyond manifesto commitments for this parliament, nothing can be guaranteed.

But to many Conservative MPs, the idea of fighting the next election apparently prepared to dismantle the welfare state is inconceivable.

In its mechanics, the review differs little from the annual public expenditure round. It will deploy the same Treasury officials who monitor each department for the annual public expenditure. At the departments it will be finance divisions, perhaps reinforced with extra personnel, who will respond. There is no Royal Commission, official inquiry, or even task force.

Mr Michael Portillo, chief secretary to the Treasury and the review's architect, has already held bilateral talks at three out of the four departments subject to review first - Mrs Virginia Bottomley, at the health department, Mr Kenneth Clarke, home secretary, and Mr John Patten, education secretary.

He will meet Mr Peter Lilley, social security secretary, soon. Further bilaterals are likely, particularly as summer approaches and the first results are expected.

Rather than taking existing spending programmes and deciding which will rise or fall, each item of spending will be studied to see whether it should be the state's responsibility, if waste can be squeezed or the private sector brought in. Ideas will come from departmental policy divisions and ministers - but also crucially from outsiders.

So far, Mr Portillo has made only a tentative start. He had not expected to make an announcement so soon. Monday's Commons statement was brought forward because of the press speculation about its scope. Cabinet ministers had to be briefed hurriedly over the weekend.

To be truly radical, traditional Whitehall culture needs to be reversed. Spending departments usually defend programmes. The Treasury, if offered an inch, generally looks for a mile. Free-thinking could become constrained by the need to plan tactics.

Mr Lilley and Mr Portillo are politically like-minded, unafraid of turning large parts of the state's responsibilities over to the private sector. But the three others are closer to Mr John Major's social market Conservatism.

None will resist Mr Portillo's overtures and all will welcome the search for efficiency savings or more private sector involvement. But Mr Clarke is a political bruiser who will give ground slowly to the Treasury. Mr Patten and Mrs Bottomley believe in excellence in state schools and hospitals. The Conservative 1992 manifesto tied the government to annual increases in 'the level of real resources committed to the NHS' and to savings through greater efficiency being ploughed back into the service.

Around Westminster, there is no shortage of ideas or strong words on scrutinising public spending but less appreciation of current political realities - that the government has a majority of just 21, is already wrestling with internal strife over coal, Maastricht and short-term economic policy.

Economic recovery could rapidly dissipate any sense of urgency and temper future manifesto pledges. No specific target has been set for cutting expenditure.

So Mr Portillo is right to emphasise that it is a long term review. His hopes are to start a debate - fuelled by fears over excessive borrowing and tax rises - about Conservative priorities in the next century. But tangible results, in terms of agreement on changes, are far off.

Mrs Judith Chaplin, MP for Newbury and John Major's former political secretary, says: 'The whole point of such a review, which is going to take a long time, is that it can look at all aspects of the problem and decide whether money is being spent in the way that most benefits whoever you are trying to help.

'If you do that, then it is perfectly possible to get agreement within the party.'

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government spending P9311 The Financial Times London Page 10 739
Parliament and Politics: Hospital reforms set to proceed Publication 930212FT Processed by FT 930212 By ALISON SMITH

THE government will press ahead with proposals to merge or slim down some of London's hospitals after the cabinet agreed yesterday to the plans put forward by Mrs Virginia Bottomley, the health secretary.

But some changes will be qualified and others deferred to blunt the overall political impact of the decisions.

An announcement is expected next week on the response to the report from Sir Bernard Tomlinson. His report recommends reducing the capital's provision by 2,500 beds to enable more resources to go to London's GP services.

Speaking on BBC Newsnight, Mrs Bottomley highlighted the number of consultants in central London and the need to use specialist services more efficiently. 'We must grasp the nettle,' she said.

The white paper will include firm decisions, such as going ahead with the merger of the Middlesex and University College hospitals and proposals in a review of specialist services, including the future of the Royal Marsden and Royal Brompton hospitals.

St Bartholemew's hospital, which has been the focus of a high-profile campaign against closure, is thought likely to survive, but in a diminished form. The paper will also set out government plans to expand community care, and re-organisation plans on a longer timescale.

Although allowing Bart's to continue and by blurring the future of the specialist hospitals, ministers have avoided some of the most politically difficult decisions arising from Tomlinson the remaining hospitals under threat will still pose a problem.

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P9431 Administration of Public Health Programs RES Facilities GOVT Draft regulations P8062 P9431 The Financial Times London Page 10 282
Parliament and Politics: Health cash charges rejected Publication 930212FT Processed by FT 930212 By IVOR OWEN, Parliamentary Correspondent

COMPLAINTS by local authorities that they have been denied the money needed to properly discharge the new community care responsibilities they assume in April were rejected by Mr Tim Yeo, junior health minister, in the Commons last night.

He clashed with Mr David Hinchliffe, a Labour front bench spokesman, who insisted that senior Conservative councillors - as well as those of other parties - were seriously worried by the 'huge shortfall in funding'.

Mr Yeo emphasised that in the coming financial year directors of social services would have Pounds 565m at their disposal as a result of the 'very generous' provision made by the government.

He dismissed claims by the Labour-controlled Association of Metropolitan Authorities that the government should have allocated a further Pounds 250m as 'totally bogus'.

When Mr Hinchliffe stressed that the Association of County Councils, the Conservative-controlled local authority organisation, estimated the shortfall at Pounds 135m, the minister retorted: 'I think those claims are wholly exaggerated'.

Mr Yeo accused the Association of Metropolitan Authorities of making unfounded statements suggesting that 12,000 elderly and disabled people would be at risk of not receiving services.

Such tactics only succeeded in 'frightening and worrying some of society's most vulnerable people'.

He reaffirmed that apart from the Pounds 565m specifically allocated to local authorities for community care over Pounds 5.5bn would be made available by the government from April for existing personal social services.

Mr Hinchliffe described the government's insistence that the bulk of the money allocated to local authorities for community care should be channelled to the independent sector as a 'backdoor method of closing council homes and reducing choice'.

GB United Kingdom, EC P8322 Individual and Family Social Services P9431 Administration of Public Health Programs P8399 Social Services, NEC GOVT Government spending P8322 P9431 P8399 The Financial Times London Page 10 319
Parliament and Politics: Smith attacks rise in crime Publication 930212FT Processed by FT 930212 By DAVID OWEN

MR JOHN SMITH yesterday urged the government to act over rising crime rates, saying it was 'a deplorable indictment of Conservative government' that crime had more than doubled during the party's years in office, David Owen writes.

At question time, the Labour leader asked the prime minister whether he thought it was 'remotely tolerable' that there were 'something like 25,000 break-ins' every week.

'When are you going to do something about protecting our citizens from that?', Mr Smith asked. Mr John Major argued that the government's record on combating crime was 'comparable with that of other countries in western Europe.' Ever since the second world war, crime had increased under all governments, he said.

'You seem to want to put the blame for each and every thing on the shoulders of the government,' he told Mr Smith.

GB United Kingdom, EC P9229 Public Order and Safety, NEC STATS Statistics GOVT Government News P9229 The Financial Times London Page 10 175
Parliament and Politics: Tory jitters over strategy on Europe Publication 930212FT Processed by FT 930212 By IVO DAWNAY, Political Correspondent

A BATTLE for hearts and minds over the next crucial Maastricht vote was under way in the Commons yesterday amid widespread doubt among backbenchers of all parties as to the wisdom of the government's high-risk strategy.

As officials in the Foreign Office began to prepare briefing notes on the juridical and political implications of a government defeat on the social chapter, the Euro-sceptics were drafting their own counter-propaganda at a rival office in Westminster.

In the Commons, however, speculation is mounting as to what would happen in the event of a government defeat following the unequivocal stance taken by Mr John Major, the prime minister, and Mr Douglas Hurd, the foreign secretary. Several Conservative backbenchers voiced serious disquiet at the decision to make vote on Labour's social chapter amendment the acid test of the prime minister's authority.

With the outcome on a knife-edge, government loyalists backed the tactic. They argued that Mr Hurd's uncompromising warning that defeat could kill the treaty will help shore up the Conservatives' narrow 21 vote majority.

However even among these, few believed that he has any chance of achieving the secondary objective of persuading pro-European Labour and Liberal Democrats to break ranks with their colleagues to save the treaty.

Furthermore, doubts were spreading to the Tory backbenches over the government's assertion that approval of the Labour amendment would leave it a stark choice between accepting the social chapter or sinking the treaty.

A number of Tories who dis-approved of Lord Tebbit's inflammatory speech on Wednesday, nonetheless, believe him correct in saying the amendment would make treaty ratification more difficult with no concomitant obligation on Britain to accept its social protocol.

Sir Nicholas Bonsor, Tory chairman of the defence select committee, said yesterday that he had given an undertaking to ministers that he would not back the social chapter.

But he insisted that he was not certain that this would be the inevitable consequence of voting for the Labour amendment.

'I would not vote for some-thing that would enforce the social chapter, but if it does not do that, I remain entirely undecided,' he said.

Several Tory MPs also questioned whether the government's early unveiling of one of its most powerful sanctions was not a mistake. One even cited Mr Major's celebrated claim that he was the greatest Euro-sceptic in his cabinet to suggest that perhaps the government might be unworried by defeat.

'The prime minister has to show his European partners that he has fought as hard as he could for the treaty,' he observed. 'But if in the end it was defeated, Mr Major would still be able to make that claim while having regained a united party.'

Labour business managers believe that the government's only hope of victory depends on doing a deal with the Ulster unionists.

GB United Kingdom, EC P9721 International Affairs GOVT Draft regulations P9721 The Financial Times London Page 10 500
Parliament and Politics: Smith attacks rise in crime Publication 930212FT Processed by FT 930212 By DAVID OWEN

MR JOHN SMITH yesterday urged the government to act over rising crime rates, saying it was 'a deplorable indictment of Conservative government' that crime had more than doubled during the party's years in office.

During exchanges at Commons question time, the Labour leader asked the prime minister whether he thought it was 'remotely tolerable' that there were 'something like 25,000 break-ins in this country every week.'

'When are you going to do something about protecting our citizens from that?', Mr Smith asked.

Mr John Major retorted by arguing the government's record on combating crime was 'comparable with that of other countries in western Europe.' Ever since the second world war, crime had increased under all governments.

The prime minister said: 'You seem to want to put the blame for each and every thing on the shoulders of the government . . '

Government action on the problem had included the Public Order Act, the Police and Criminal Evidence Act, two Criminal Justice Acts, the Prison Security Act and an Act to ban joyriding, he told Mr Smith, 'each and every one of which was opposed by you and your party'.

GB United Kingdom, EC P9229 Public Order and Safety, NEC STATS Statistics GOVT Government News P9229 The Financial Times London Page 10 228
Parliament and Politics: Rebels warn coal plans face defeat Publication 930212FT Processed by FT 930212 By DAVID OWEN and MICHAEL SMITH

PROSPECTIVE REBEL Tory MPs yesterday responded to the leaking of a draft white paper on coal by warning that the government faces a Commons defeat if it goes ahead with the plans.

Mr Winston Churchill, the Conservative MP for Davyhulme, said the proposals did not go far enough and would prompt a revolt 'big enough to defeat the government on the floor of the House'.

He was supported by Mrs Elizabeth Peacock, the Tory MP for Batley and Spen, who said the plan 'looks like a quick fix for the coal industry. What was written this morning was not acceptable to a lot of people.'

The warnings came after it emerged that the government's draft plan envisaged expanding the market for domestic deep-mined coal by about 12m tonnes a year for five years.

The package has been widely interpreted as implying the rescue of only a dozen or so pits - based on the traditional scale equating 1m tonnes of coal to one pit and 1,000 jobs.

But British Coal said yesterday that productivity improvements over the last year had raised average pit output to about 1.5m tonnes per year. This rendered the old rule of thumb invalid.

The government draft also came under attack from Mr Richard Caborn, Labour chairman of the trade and industry committee, whose report on coal yesterday's proposals largely passed over.

Mr Caborn said the plans would 'do no more than provide a breathing space for a limited number of pits. It may offer the government a quick political fix but it would . . . deny the country a unique opportunity to develop a rational and balanced energy policy.'

But Mr Caborn's decision to call a press conference to 'clarify' last month's committee report, whose recommendations he said were not 'an a la carte menu from which government can pick and choose', was itself criticised by some Tory MPs on the committee.

Mr Keith Hampson, the Conservative MP for Leeds North West, said the matter would certainly be raised at a future committee meeting.

Mr John Butterfill, Tory MP for Bournemouth West, disagreed with Mr Caborn's assertion that the recommendations were a package to take or leave. Mr Caborn's statement had not been discussed with or approved by the committee.

Mr Caborn was accompanied at the press conference by Mr Gerard McCloskey, a specialist energy journalist, who said the report indicated there should be 'a short-term life' for six pits and an extended life for the other 25.

Later, Mr Tim Eggar, energy minister, promised a government response to 'every one' of the committee's recommendations.

The government's draft calls for the market for deep-mined coal to be expanded by adopting a four-pronged approach: blocking imports of orimulsion, a bitumen-based fuel; slowing the planned rundown of coal stocks; cutting output from open-cast mines; and using subsidies to halt growth in coal imports.

One of its chief attractions to the government is that no new legislation would be needed.

GB United Kingdom, EC P12 Coal Mining P9611 Administration of General Economic Programs GOVT Draft regulations RES Facilities P12 P9611 The Financial Times London Page 10 539
Vauxhall to supply Corsas to BSM driving schools Publication 930212FT Processed by FT 930212 By JOHN GRIFFITHS

VAUXHALL has won a five-year contract to supply the driving school group BSM - the British School of Motoring - with its new Corsa small car.

The exclusive supply contract was previously held by Rover group, which delivered up to 5,000 Metros annually to BSM for the past decade.

The deal with Vauxhall has a five-year extension option.

If exercised, Vauxhall would supply 50,000 Corsas over 10 years in a deal worth Pounds 400m at showroom prices.

Typically such large fleet deals involve substantial discounts. Neither BSM or Vauxhall would discuss the discount issue yesterday, describing the deal as a joint marketing arrangement going well beyond the supply relationship BSM previously maintained with Rover.

BSM, which has 2,000 driving instructors franchised at 130 branches, is increasingly interested in tapping the growing market for the advanced instruction of company car users.

Vauxhall has a leading share of the company car market, and should be able to help BSM achieve this aim.

For its part, Vauxhall expects to benefit from the wide exposure the Corsa can expect to receive as the BSM's only 'school' car. The General Motors subsidiary wants to attract young drivers to the model.

Deliveries are to start in July, three months after the Spanish-built Corsa goes on sale in the UK.

The Corsa, which will replace the Nova in the UK and is also to be built at Eisenach in eastern Germany, is expected by GM to become one of Europe's biggest-selling cars.

GM invested more than Pounds 500m in its development and production, and plans to produce more than 500,000 units a year.

Vauxhall Motors British School of Motoring GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies MKTS Market data P3711 The Financial Times London Page 9 309
Lottery could generate jobs Publication 930212FT Processed by FT 930212 By RAYMOND SNODDY

THE PLANNED National Lottery will generate many jobs, according to a report for the National Heritage Department.

About 1,000 jobs will be created in the lottery organisation and hundreds more in the marketing, printing, computing and security industries, according to the report by GAH Consultants, a media consultancy.

Projects funded by lottery revenue will also create thousands more jobs, particularly in the construction industry, the report says.

Lottery revenue will pay for capital projects in the arts, heritage, and sports sectors and projects for the millenium celebrations in 2000.

Overall the report, based on a survey of more than 30 national and state lotteries, concludes that there is potential for a national lottery and the football pools to co-exist.

However, it says that the pools sector could lose 17.5 per cent of its revenue over three years and 1,100 jobs if it does not make changes in management and marketing to meet the competition from the national lottery.

It says pools companies in other countries went out of business when faced with a national lottery, but others had made changes and survived.

A summary of the findings has been made available to the Commons committee looking into the national lottery by the National Heritage Department, but the whole report has been kept confidential because it contains commercial information.

The research shows that a national lottery would appeal throughout the UK, to both sexes and to all socio-economic groups.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 9 271
Sales of trucks and vans falter: Leyland Daf leaders January market figures - Iveco concedes second place Publication 930212FT Processed by FT 930212 By JOHN GRIFFITHS

THE RECOVERY in commercial vehicle sales that began last autumn appears to be running out of steam. On a year-on-year basis, total sales were up only 4.4 per cent in January. That compares with increases of nearly 8 per cent in December and 15.25 per cent in November.

The figures reflect 'the continuing serious state of the commercial vehicle industry which has been all-too-tragically demonstrated by events of the past few days', according to Sir Hal Miller, chief executive of the Society of Motor Manufacturers and Traders, in a reference to the collapse of UK truck market leader Leyland Daf.

The society's statistics show that sales of trucks over 3.5 tonnes were only 0.77 per cent higher last month than in the previous January, while sales of heavy trucks over 15 tonnes were 5.43 per cent lower.

The irony of Leyland Daf's position - in receivership while being UK market leader - was emphasised by its own 28.23 per cent sales rise in January compared with a year ago, giving it a market share of 25.39 per cent.

The receivers warned yesterday they could shut the company if workers at Leyland, Lancashire, strike today. Its rivals are preparing to capture any vacated sales territory.

The Iveco group, which has been Leyland Daf's main rival, has taken out full-page national newspaper advertisements stressing its Pounds 2.5bn European investment programmes. The campaign is clearly intended as a public statement of opposition to any government bail-out of Leyland Daf.

However, the group's move comes as it is being demoted from second place in the market by Mercedes Benz. The German truckmaker achieved record UK sales in January, capturing 21.47 per cent of the market.

The total number of sales in January of 17,418 compared with 16,677 in the same month a year ago. Imports rose sharply to take 38.97 per cent of the market compared with 36.82 per cent in the same month last year.

This increase was almost wholly accounted for by Vauxhall importing nearly 1,500 Astramax vans, production of which moved to Portugal last year.

----------------------------------------------------------------------- UK COMMERCIAL VEHICLE REGISTRATIONS JANUARY 1993 ----------------------------------------------------------------------- Volume Volume Share (%) Share (%) (Units) Change (%) Jan 93 Jan 92 ----------------------------------------------------------------------- Total Market* 17,418 +4.44 100.00 100.00 Imports 6,788 +10.54 38.97 36.82 ----------------------------------------------------------------------- Small vans (up to 1.8 tonnes) Total 6,961 +24.15 100.00 100.00 Imports 2,399 +108.07 34.46 20.56 Ford 3,237 +57.90 46.50 36.56 Vauxhall (GM) 2,582 +25.77 37.09 36.61 Rover (British Aerospace) 314 -36.57 4.51 8.83 Peugeot (incl. Citroen) 316 -31.30 4.54 8.20 Renault 237 0.00 3.40 4.23 ----------------------------------------------------------------------- Medium Vans (1.81 - 3.5 tonnes) Total 6,524 -1.72 100.00 100.00 Imports 2,441 -8.71 37.42 40.28 Ford 3,302 +14.34 50.61 43.51 Leyland Daf (Daf) 694 -32.56 10.64 15.50 Volkswagen 458 -6.72 7.02 7.40 Vauxhall (GM) 412 +18.39 6.32 5.24 Renault*** 364 -6.19 5.58 5.85 Peugeot (incl. Citroen & Talbot) 347 -8.44 5.32 5.71 Mercedes-Benz (Daimler-Benz) 229 -15.50 3.51 4.08 Nissan 192 -6.34 2.94 3.09

----------------------------------------------------------------------- Trucks (over 3.5 tonnes) Total 2,343 +0.77 100.00 100.00 Imports 1,109 +11.12 47.33 42.92 Leyland Daf (Daf) 595 +28.23 25.39 19.96 Mercedes-Benz (Daimler-Benz) 503 +15.90 21.47 18.67 Iveco group** (Fiat) 415 -7.98 17.71 19.40 Volvo*** 260 -14.47 11.10 13.08 MAN 102 +2.00 4.35 4.30 Renault*** 75 -36.44 3.20 5.08 Of which Heavy Trucks (over 15 tonnes) Total 1,236 -5.43 100.00 100.00 Leyland Daf (Daf) 251 +18.40 20.31 16.22 Volvo*** 237 -3.66 19.17 18.82 Scania (Investor) 202 +55.38 16.34 9.95 Mercedes-Benz (Daimler-Benz) 182 -9.90 14.72 15.46 Iveco group** (Fiat) 118 -22.37 9.55 11.63 ERF 91 -44.51 7.36 12.55 ----------------------------------------------------------------------- *includes buses and light four wheel drive utility vehicles. **includes Iveco Ford and Seddon Atkinson. ***Renault and Volvo are linked through minority cross-shareholdings. ----------------------------------------------------------------------- Source: Society of Motor Manufacturers and Traders and industry estimates. -----------------------------------------------------------------------

GB United Kingdom, EC P3713 Truck and Bus Bodies P5511 New and Used Car Dealers STATS Statistics MKTS Sales P3713 P5511 The Financial Times London Page 9 675
Bid for Giroleasing 'was miscalculated' Publication 930212FT Processed by FT 930212 By JOHN GAPPER, Banking Correspondent

THE Post Office almost signed an agreement with Norwich Union to sell Girobank's leasing business for Pounds 19m too little because the insurance company miscalculated its own bid by Pounds 55m, the National Audit Office disclosed yester-day.

In its report on the sale of Girobank to the Alliance & Leicester building society in 1990, the public spending watchdog, said that the separate bid for Giroleasing was only found to have been miscalculated the day before an agreement was signed.

The office said that after making inquiries with Norwich Union about the error it was satisfied 'that this was a genuine mistake'. It said the sale would not have been allowed to proceed if the mistake had been found later.

After discounting the Pounds 55m error, Norwich Union's bid was worth Pounds 323m - or Pounds 19m less than another company had bid. Norwich Union subsequently raised its bid to Pounds 342m.

Although Alliance & Leicester was initially given two months exclusive negotiating rights for the sale, this was eventually extended by a year because of legal and regulatory difficulties.

During the delay, Girobank's investments fell in value, and the final sale price was adjusted to Pounds 112m from Pounds 130m.

The Sale of Girobank plc. Report by the Comptroller and Auditor General. HMSO Pounds 6.10.

Post Office Girobank Alliance and Leicester Building Society Giroleasing Norwich Union GB United Kingdom, EC P602 Commercial Banks P63 Insurance Carriers P603 Savings Institutions COMP Company News CMMT Comment & Analysis P602 P63 P603 The Financial Times London Page 9 271
CBI urges boost for small businesses Publication 930212FT Processed by FT 930212 By CHARLES BATCHELOR

THE CONFEDERATION of British Industry yesterday called for higher first-year capital allowances and more generous corporation tax rules for smaller businesses in its 10-point Budget submission.

The programme would cost between Pounds 500m and Pounds 1bn in a full financial year, but Mr Howard Davies, CBI director-general, argued yesterday that the boost to small businesses would lead to higher tax revenues in the longer term.

The main elements of the CBI's proposals are:

Permission for smaller companies to write off up to Pounds 200,000 of plant and machinery investment, or 40 per cent of capital investments, whichever is the greater, in the first year.

Raising thresholds of corporation tax. The lower threshold, below which companies pay 25 per cent, should increase from Pounds 250,000 to Pounds 400,000 and the higher threshold, below which companies pay 35 per cent, should go up from Pounds 1.25m to Pounds 2m.

Exempting business assets from capital-gains tax after seven years.

Tax relief for export promotion spending or increased government grants to help with exports.

Deferring capital gains tax on the sale of unquoted equities provided the proceeds are reinvested in unquoted companies.

Easing penalties for errors and delays in paying VAT. Punitive surcharges for defaulters should be replaced with penalties closer to commercial rates of interest.

The CBI said it was concerned at the proposed abolition of the Business Expansion Scheme at the end of this year and intends to submit plans for a possible replacement, Mr Davies said.

GB United Kingdom, EC P99 Nonclassifiable Establishments P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P99 P9651 The Financial Times London Page 9 284
British motor sport goes west Publication 930212FT Processed by FT 930212 By JOHN GRIFFITHS

THE UK MOTOR racing industry, including component and accessory suppliers, is to stage its first large commercial and technology exhibition in North America.

It will take place in May at the Indianapolis 500, the US premier motor race, with the backing of the Department of Trade and Industry and Society of Motor Manufacturers and Traders.

The venture was unveiled at the society's London headquarters on the eve of a four-day motor sport show at Earls Court, west London. The exhibition of cars includes the 1956 Osca Maserati.

It is aimed at making north Americans - 500,000 of whom will attend the Indianapolis race - more aware of the dominance of the UK racing car industry even in North America. At least 31 of the 33 cars entered for Indy single-seater racing this year will be British-made, led by Lola Cars of Huntingdon, Cambridgeshire.

'We believe it is time to build upon British supremacy in this area of automotive technology and this exhibition is designed to open up new markets for smaller UK businesses as well as the larger ones', said Mr Roger King, the society's public affairs director.

The venture comes at a time of unprecedented interest in Indy car racing - the North American equivalent of grand prix - because of the planned participation in it during the coming season of British Grand Prix world champion Nigel Mansell.

It may also serve to further the aim of motor sport authorities to bring greater integration to North American and European forms of motor sport.

'Oval' racing as typified by the Indianapolis 500 is now confined almost exclusively to North America.

However, East Northamptonshire council is considering a planning application for a 1.5 mile oval circuit on a former steelmaking site at Corby. And entrepreneur Mr Tom Wheatcroft, owner of the Donington Park circuit in Leicestershire - scheduled to host this year's European Grand Prix - is seeking planning permission for a new multi-million pound motor-sports complex near Rugby, Northamptonshire, capable of hosting Indy races.

The moves comes, however, at a time of increasing divisions among commercial sponsors, teams and motor sport authorities about what constitutes an appropriate future for grand prix itself.

US United States of America P3714 Motor Vehicle Parts and Accessories P7948 Racing, Including Track Operation P7999 Amusement and Recreation, NEC MKTG Marketing P3714 P7948 P7999 The Financial Times London Page 9 407
Manufacturers lift capital spending Publication 930212FT Processed by FT 930212 By PETER MARSH, Economics Staff

CAPITAL spending by manufacturers rallied in the second half of last year, according to government figures yesterday that will increase confidence about growth prospects.

Investment in machinery, which accounts for about four-fifths of all capital spending in the sector, held up particularly well.

It showed a small increase in the second half of last year, compared with the first half and the final six months of 1991.

The provisional seasonally adjusted figures from the Central Statistical Office underline cautious optimism that the UK may be poised for recovery.

Manufacturing accounts for just under a quarter of the economy. Investment by manufacturers on buildings, vehicles and machinery rose by a real, inflation-adjusted 3.1 per cent in the final six months of 1992 compared with the first half. At 1985 prices, the figure went up to Pounds 5.22bn from Pounds 5.06bn.

Spending on machinery rose by 4.4 per cent between the first half and the second half of 1992, from Pounds 4.24bn to Pounds 4.42bn. There was a year-on-year rise in the second half of 2 per cent, from Pounds 4.34bn in the final six months of 1991.

Last year total capital spending in manufacturing was 3.5 per cent down compared with 1991.

In the second half, the figure fell 1.1 per cent in comparison with the final half of 1991. Between 1990 and 1991, capital investment dropped by 9.4 per cent.

In the late 1980s, spending on plant, vehicles and construction by manufacturers grew strongly, an important factor behind economic overheating in the period.

In the fourth quarter of last year, capital spending increased by 0.6 per cent on the previous quarter. It was 2 per cent down on the equivalent period a year earlier.

The CSO said spending in the third quarter of last year increased by 1 per cent on the second quarter, a higher figure than estimated.

UK borrowers announced new capital issues in January of Pounds 2.88bn, of which Pounds 2bn was denominated in sterling, said the Bank of England. Actual gross issues were Pounds 1.52bn, with redemptions accounting for Pounds 427m, leaving net issues at Pounds 1.1bn.

GB United Kingdom, EC P99 Nonclassifiable Establishments RES Capital expenditures CMMT Comment & Analysis P99 The Financial Times London Page 9 386
Rent-free offer Publication 930212FT Processed by FT 930212

IMRY GROUP, the property company owned by Barclays Bank, is attempting to attract a tenant to a refurbished office building in Mayfair, central London, by asking no rent for the first five years of a 25-year lease.

GB United Kingdom, EC P6512 Nonresidential Buildings Operators RES Facilities MKTS Contracts P6512 The Financial Times London Page 8 63
N&P announces BES launch Publication 930212FT Processed by FT 930212

NATIONAL & Provincial Building Society yesterday announced the launch of a Pounds 50m Business Expansion Scheme. It hopes to reduce its stock of repossessed properties by renting them through assured tenancies.

This follows the announcement of a similar plan by Bristol & West which should take 800 repossessions off its balance sheet.

National and Provincial Building Society GB United Kingdom, EC P603 Savings Institutions P6531 Real Estate Agents and Managers TECH Services P603 P6531 The Financial Times London Page 8 90
Mirror journalists in strike vote Publication 930212FT Processed by FT 930212

A MAJORITY of journalists who took part in a strike ballot at Mirror Group Newspapers have voted in favour of striking over issues ranging from the sacking of 100 casual staff to individual dismissals of staff journalists.

Out of 122 votes cast there was a majority of 60 per cent in favour of striking. In a separate vote 79 per cent backed industrial action short of a strike out of a total of 124 votes. A total of 235 ballot papers were distributed.

The NUJ journalists union has given Mirror management a deadline of Tuesday morning to 'start proper negotiations'.

Mirror Group Newspapers GB United Kingdom, EC P2711 Newspapers PEOP Labour P2711 The Financial Times London Page 8 129
MPs to probe legal-aid change Publication 930212FT Processed by FT 930212

THE Commons home affairs committee is to hold an urgent inquiry into the government's proposed cuts in the eligibility for legal aid. It will summon Lord Mackay, the lord chancellor, to a meeting on February 23 to give evidence about the government's plans.

The move follows last week's mass lobby by legal-aid lawyers, and a heated debate in the House of Lords in which Lord Taylor, the Lord Chief Justice, clashed with Lord Mackay.

GB United Kingdom, EC P9222 Legal Counsel and Prosecution P9121 Legislative Bodies GOVT Draft regulations P9222 P9121 The Financial Times London Page 8 107
Pay review bodies report expected Publication 930212FT Processed by FT 930212

RECOMMENDATIONS of the independent pay review bodies are expected to be announced by the prime minister today. The recommendations will not include pay because of the government's ceiling of 1.5 per cent pay increases this year for public sector workers.

The doctors and dentists' pay review body decided not to prepare a report, given its reduced remit.

A special conference of Nalgo, the local government union, yesterday voted to reject the government's pay ceiling and to ballot its members on a one-day strike on March 18.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors PEOP Labour GOVT Government News P9651 The Financial Times London Page 8 118
Fall in number of poll-tax summonses Publication 930212FT Processed by FT 930212

THE NUMBER of summonses issued for non-payment of poll tax in England and Wales in the third quarter of the financial year was 2.3m, down from 3.02m in the same quarter a year ago, the Lord Chancellor's Department said yesterday.

In addition, 1.92m liability orders were made, compared with 2.39m a year before, and 9,526 people attended liability hearings, compared with 18,627 a year earlier.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Taxes GOVT Legal issues P9121 The Financial Times London Page 8 95
Tough targets for job training Publication 930212FT Processed by FT 930212 By LISA WOOD

TOUGH targets for placing long-term unemployed people into jobs or training have been set by the government for its new jobplan workshops, Lisa Wood writes.

The week-long workshops, which will be mandatory for people who have been unemployed for 12 months and longer, will be able to recommend the withdrawal of unemployment benefits for individuals who are unwilling to participate.

Jobplan is part of the government's strategy for tackling the rise in long-term unemployment.

Training and Enterprise Councils, which manage training programmes in England and Wales, fear that the targets will result in the Employment Service, which runs Jobplan, referring unsuitable candidates to the new Training for Work Scheme. From April this will offer training and work experience to the unemployed.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs GOVT Government News P9441 The Financial Times London Page 8 155
Serious economic risks in premature monetary union: Eddie George Speech Publication 930212FT Processed by FT 930212

MR EDDIE George, deputy governor of the Bank of England who becomes governor in July, yesterday made his first policy address since the announcement of his promotion last month. In a speech at the DG Bank in Frankfurt, he said:

'The drama over sterling's exit from the European exchange rate mechanism left many people - both at home and abroad - with the impression that the UK is still both soft on monetary discipline and lukewarm in its commitment to Europe. I aim to persuade you that this impression is quite wrong on both counts.

'Sterling's ERM suspension was the result of exceptional divergence between the domestic policy needs in Germany and the UK. It had nothing to do with the UK being soft on monetary discipline.

'When the break (with the ERM) came last September, people could be forgiven for thinking that it represented a radical change in the objectives of monetary policy. In reality, in this respect, the ERM was an important part of the framework of monetary policy. The substance of policy had throughout been, and remained, to achieve and maintain price stability in the medium and longer term.

'I have no sympathy at all for those supposed pundits who continuously complain that policy is obscure or even non-existent and that we are living from hand-to-mouth.

'And I have no sympathy for those commentators who scrutinise the fine print of every official statement trying to detect the most minute differences of emphasis as between growth and stability from one day to the next.

'I do not know of anyone involved at any level in the process of monetary policy decision-making or its implementation, who does not share the conviction that price stability is a necessary precondition for sustainable growth of output and employment.

'In fact, since we left the ERM, the aim of monetary policy has never in my recollection been more clearly or precisely stated in the UK. The aim is, in the chancellor's words, for 'a rate of inflation in the long term of 2 per cent or less' and, for the remainder of the present parliament, 'to keep underlying inflation within a range of 1 per cent to 4 per cent', and 'to be in the lower part of that range by the end of the parliament'.

'Having a clear objective is not in itself enough, though it is not a bad starting point. Confidence must be earned through deeds rather than words, and I recognise that this will take time.

'In commenting on my own appointment as governor, the chancellor stated that the new governor's central responsibility would be 'to support the government in its determination to bring a lasting reduction in the rate of inflation, the only sound basis on which sustainable growth and secure jobs can be built'. We take both these responsibilities extremely seriously within the Bank.

'Recent progress (in UK inflation) is especially encouraging in that it reflects a very considerable improvement in domestic cost performance. Pay settlements and average earnings are running at their lowest rates for some 25 years; and with productivity - especially manufacturing productivity - improving over the past year faster than in earlier recessions, unit labour costs, for so long the Achilles' heel of the British economy, have scarcely risen at all in manufacturing in recent months. Recent cuts in interest rates have been justified in terms of the government's immediate and longer-term objectives for inflation.

'We took (sterling's recent depreciation) fully into account in reaching our judgment about the appropriate policy stance.

'Depreciation, even if it proves to be temporary, is itself a source of potential inflationary pressure, so that there can be no question of benign neglect in relation to the exchange rate.

'But it is not the sole influence on inflation, and it need not threaten the target for inflation, so long as domestic costs remain firmly under control - as, as I have explained, they currently are.

'And it may well be that sterling's recent fall will tend to reverse itself as cyclical developments narrow the interest rate differential between the UK and its continental partners.

'In this connection - on the basis of all the information currently available to us - the government and the Bank are at one in seeing little justification, and very little room, for further adjustment in our own stance.

'The turbulence within the ERM over the past six months or so points up the real dangers of moving ahead too quickly to a harder ERM, and beyond that, to exchange rate fixity before adequate convergence has been achieved.

'We remain concerned that premature steps to monetary union would involve serious economic risks. It is unlikely that sterling will rejoin the ERM in the short-term until closer and more durable convergence between the domestic policy needs in Germany and the United Kingdom has been re-established.'

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis George, E Deputy Governor Bank of England P9311 The Financial Times London Page 8 854
Clamping down hard on the clampers: Growing demands for the government to curb car parking cowboys Publication 930212FT Processed by FT 930212 By GILLIAN TETT

WHEN Mr Trevor Whitehouse's car was wheel-clamped, he cursed, paid the fine - and started his own wheel-clamping business.

Now the government is under pressure to curb Mr Whitehouse's activities, along with the other 250 or so car-clamping contractors in Britain. New research by the RAC, the motoring body, suggests that up to 250 companies clamp 15,000 cars a week in Britain.

A government consultative paper is overdue, but is likely to appear before a Commons debate next week on a private member's bill to control clamping. The delay may reflect the fact that the government is caught between public outrage over the activities of 'cowboy' clampers, the desire of clamping companies for some form of regulation and the concern of businesses to safeguard their parking spaces.

Car clamping on the streets is licensed and controlled by the police, but on private land the decision on whether to clamp and how large a 'fine' to impose rests entirely with the landowner. Consequently, 'cowboy' car-clamping on private land has triggered a stream of well-publicised complaints over the past three years about aggressive tactics and high fines.

Not only have release fees been as high as Pounds 240, but contractors - who frequently work on a commission basis - have been known to clamp medical vehicles, and even a visiting police car.

The government has to balance this outrage against the fears of parking space owners that their valuable parking spaces are being used by motorists. Many businesses - including law firms and retailers - as well as public buildings such as hospitals, use clamping contractors to safeguard their carparks.

'It's politically difficult and embarrassing for the government, because it cuts across so many grey areas,' says Mr Edmund King, campaigns manager of the RAC. 'At the moment anyone can set themselves up as a wheelclamper - all they need is a couple of clamps, and they charge what they like,' Mr King said.

In Scotland, private clamping is in effect illegal - the Justiciary Appeal Court in Edinburgh ruled last June that clamping a vehicle and then charging for releasing it was equivalent to 'extortion and theft'. There have been calls for the law in England to be brought into line. 'We are begining to think there isn't any option,' says Mr John Spellar, Labour MP and author of the bill.

A complete ban would not be acceptable to businesses that use clamping. 'We need car clamping to protect our revenue. It's a legitimate weapon in the fight against illegal parking,' says British Rail.

One of BR's contractors says sales of parking tickets have increased 30 per cent since clamping was introduced at stations. The Home Office suggested illegal parking be covered by the criminal law of trespass. Mr Spellar suggests that another solution would be to extend the powers of the police and traffic wardens on to private property.

But since these options could be legally complex, the Home Office is understood to favour a third idea; introducing regulations that would allow bona fide institutions to hire wheelclampers, but prevent private landowners from profiteering.

'The complaint is not about wheelclamping per se - it's about the way that some people go about it,' the Home Office said.

Many clamping contractors, nervous about losing lucrative business if a total ban were applied, say they welcome government guidance. 'I would be all for regulation. The law is so vague,' says Mr Tony Philips, owner of the Southern Car Clamping company, who says regulation would drive out the cowboys. His small company, which started three years ago, makes Pounds 60,000 a year on 70 sites. He boasts of the time his company once clamped 27 cars on a street.

The RAC says enforcing controls could be costly and bureaucratic. Furthermore, discriminating against small-scale landowners is no guarantee of good conduct - many of the clamping cases the RAC and AA have pursued in court have involved companies working for hospitals and local authorities.

So far these court cases have proved inconclusive. Most companies settle out of court, or they vanish when faced with charges. Meanwhile, the clamping companies appear to be thriving.

Mr Whitehouse says profits can be made not only from fines but also from renting out warning signs. His Preston-based company, National Clamps, counts the BBC, British Telecom and several large retailers among its clients.

GB United Kingdom, EC P7389 Business Services, NEC P9621 Regulation, Administration of Transportation GOVT Draft regulations P7389 P9621 The Financial Times London Page 8 772
Treasury rules on a tax bill fit for a Queen: John Authers and Scheherazade Daneshkhu examine the taxable status of the royal holdings Publication 930212FT Processed by FT 930212 By JOHN AUTHERS, SCHEHERAZADE DANESHKHU, ANTONY THORNCROFT and ANDREW JACK

AGREEING the Queen's tax bill has not been easy, the Treasury and Buckingham Palace admitted yesterday.

Two decisions had to be made when setting the amount that the Queen will have to pay - how much of her wealth would be liable to tax, and which taxes would be levied on them.

The Queen will only pay tax on her personal income - the palace has gone to some lengths to separate this fund from income received in her capacity as sovereign.

For example, the royal art collection will from April 1 be owned by a charity to be called the Royal Collection Trust.

All income from the civil list, set by parliament and paid by the Treasury, and all grant-in-aid for the royal palaces, paid annually to the Royal Household by the Department of National Heritage, will not be liable to tax.

This division is regarded as fair by Mr Richard Lees-Pulley, partner at accountants Ernst & Young. 'After all, employees get deductions for money expended for business purposes.'

Another source of income, apart from the Queen's personal wealth, is the privy purse, which derives most of its revenue from the Duchy of Lancaster. Its surplus in the year to September 1992 was Pounds 3.6m. Its main purpose is to meet official expenditure not covered by the civil list, but part of it is used for private expenditure.

Finally, there is the Queen's personal portfolio of investments. The palace refused to give any indication of its value, beyond saying that an estimate of Pounds 100m was 'grossly overstated'.

Income and capital gains tax will be paid in the normal way, subject to a deduction to cover the official expenditure made by the privy purse. In both cases this is likely to mean payments at the top rate of 40 per cent.

'I'm surprised that the Queen has put herself into the position of many of our wealthy clients,' said John Andrews of Coopers & Lybrand. 'She has thrown herself into the main tax net.'

However, others argue that since much of the Queen's wealth does not produce income, the amount she will pay may not be substantial, particularly if she avoids realising capital gains.

There are many ways in which she could reduce the amount of income on which she would be taxed. Lees-Pulley suggests going into partnership with Prince Philip to run her farms and borrowing a large amount to inject into the partnership. Interest on the loan would be deductible against general income.

The Queen presumably has no pension and she could make take the tax-efficient step of making pension contributions, subject to an earnings cap.

She will also be able to use the unique inheritance tax exemption given to her as sovereign, in a significant concession made by the Treasury.

This allows her to leave an unlimted amount to her successor - including the private palaces and entire investment portfolio.

But the Queen and all the royal family are liable to council tax and VAT in the usual way.

One accountant from a large City firm said the inheritance tax concession was not startling. Under current rules, business and agricultural property are effectively exempt from inheritance tax. If being sovereign is regarded as a business, the inheritance tax exception is similar to the current rules.

This particular inheritance tax rule however applies only to sovereigns. Thus, if the Prince of Wales were to die without ascending to the throne, his estate would be liable to full inheritance tax. If he does become king, he will be able to make bequests to the next sovereign free of inheritance tax.

The reasoning behind this concession shows the difficulty in separating the monarch's official and private lives.

According to a report by the royal trustees, the inheritance tax concession was allowed because, 'the monarchy as an institution needs sufficient private resources to enable it to continue to perform its traditional role in national life, and to have a degree of financial independence from the government of the day.'

Antony Thorncroft writes: the Royal Collection Trust, which is to be set up to conserve and exhibit the Queens's pictures, will take possession of the finest family art collection in the world. It contains 7,000 oil paintings, 30,000 drawings and watercolours, and 1,000 miniatures.

Most of the great names among the Old Masters are in the collection, which was mainly assembled by King George III, King George IV and Queen Victoria.

The Queen has been generous with loans from the collection, and part of it is always on view at the Queen's Gallery at Buckingham Palace.

* * *

THE Queen's income tax return will almost certainly be scrutinised by Inland Revenue officials housed in a drab post-war building in south Wales, Andrew Jack writes.

Until last week, when it was acknowledged in a Commons written answer, the Revenue had refused to admit the existence of the Public Departments building at Tyglas Road in Llanishen, a suburb of Cardiff.

About a dozen so-called Public Departments are based in different parts of the complex, which deal with the taxes of civil servants, members of the armed forces and other public employees.

A VIP unit in Public Department 1 deals with the tax affairs of politicians, members of the security services and other prominent officials, including members of the royal family who pay tax. Revenue officials and members of the Royal Household refused to give details about how much tax the Queen and the Prince of Wales might pay, arguing that they will be entitled to the same privacy as other taxpayers.

But the memorandum of understanding for royal taxation released yesterday shows that they will be subject to interest on any late payments of tax - as well as refunds if they overpay.

Final details of what financial information the Queen sends to the Revenue have yet to be determined.

The compilation of the figures will be conducted by the finance and property services division of the Royal Household. This is headed by Mr Michael Peat, a partner with KPMG Peat Marwick, who was made auditor of the privy purse in 1990, a post held by his family for four generations.

Royal Collection Trust (UK) GB United Kingdom, EC P91 Executive, Legislative and General Government P6732 Educational, Religious, etc Trusts PEOP Personnel News GOVT Taxes COMP Company News Queen Elizabeth II Head of State UK P91 P6732 The Financial Times London Page 8 1111
High-security tax office to examine Queen's tax returns Publication 930212FT Processed by FT 930212 By ANDREW JACK

THE Queen's income tax return will almost certainly be scrutinised by Inland Revenue officials housed in a drab post-war building in South Wales, Andrew Jack writes.

Until last week, when it emerged in a Commons written answer, the Revenue had refused to admit the existence of the Public Departments building at Tyglas Road in Llanishen, a suburb of Cardiff.

About a dozen so-called Public Departments are based in different parts of the complex, which deal with the taxes of civil servants, members of the armed forces and other public employees.

The centre is heavily guarded, with time-locks, double sets of doors, and opaque windows. Staff are heavily screened for security.

Even tighter internal security measures surround a VIP unit within Public Department 1 in the building, which deals with the tax affairs of politicians, members of the security services and other prominent officials, including those members of the Royal Family who pay tax. Revenue officials and members of the Royal Household refused to give details about how much tax the Queen and the Prince of Wales might pay, arguing that they will be entitled to the same privacy as other taxpayers.

But the memorandum of understanding for royal taxation released yesterday shows that they will be subject to interest on any late payments of tax - as well as refunds if they overpaid.

Final details of what financial information the Queen sends to the Revenue have yet to be determined.

The compilation of the figures will be conducted by the finance and property services division of the Royal Household, which is headed by Mr Michael Peat. A junior tax accountant has been hired by the Palace to help prepare the numbers.

Mr Peat, who was made auditor of the privy purse in 1990, will supervise the process. a post held by his family for four generations.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes Queen Elizabeth II Head of State UK P9311 The Financial Times London Page 8 349
Ravenscraig plant buyer named Publication 930212FT Processed by FT 930212

THE INDONESIAN company negotiating to buy plant and equipment from British Steel's closed Ravenscraig steelworks in Lanarkshire was named yesterday as PT Gunawan Dianjaya, a family-run steel producer.

According to the Glagow Herald newspaper a team of experts from Gunawan visited Ravenscraig recently, and a report is being studied at the company's headquarters in Surabaya, eastern Indonesia. British Steel yesterday confirmed it was holding talks with Gunawan but stressed that any agreement could be months away.

British Steel PT Gunawan Dianjaya GB United Kingdom, EC ID Indonesia, Asia P3312 Blast Furnaces and Steel Mills COMP Company News P3312 The Financial Times London Page 8 114
Revenue unveils redesigned forms Publication 930212FT Processed by FT 930212 By ANDREW JACK

MORE THAN 8m taxpayers, with the Queen possibly among them, will receive a re-designed income tax form in time for the end of the tax year in April.

The form is being circulated by the Inland Revenue to professional tax advisers and companies which prepare tax software.

The aim of the redesigned form is to make it much simpler to read and complete, and to reduce the cost of dealing with incorrectly completed returns.

Printed over 12 pages in blue and light orange on white paper, the new tax return follows a structured format with instructions down the left-hand margin and space for numerical totals down the right-hand side to lead the taxpayer logically through the form.

There are eight variations on the basic personal income tax form, with special versions for some taxpayers such as the clergy, underwriters at the Lloyd's of London insurance market, members of the armed forces and British residents overseas.

In all of the new forms the language has been simplified, the volume of notes has been increased, and the questions follow a consistent sequence.

However, the new design has not been achieved without controversy. There have been internal debates within the Revenue about the format, and some accountants have complained that they were not given sufficient time to comment.

And at least one software company has expressed concern at how easy it will be for taxpayers to understand the instructions.

The new tax return document is part of a wider redesign of about 800 Revenue documents and forms.

The Revenue hopes to introduce up to another 40 types of form by the start of the new tax year.

The redesign project is being supervised by Wolff Olins, the design and corporate identity consultancy.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy MGMT Management GOVT Taxes P9311 The Financial Times London Page 8 322
World Trade News: South Korean investors switching to S E Asia Publication 930212FT Processed by FT 930212 By JOHN BURTON SEOUL

SOUTH-EAST Asia displaced North America last year as the prime area for South Korean direct investment abroad, as trade patterns changed, John Burton writes from Seoul.

Korean investment in South-East Asia grew 29 per cent to Dollars 555.7m (Pounds 368m), which accounted for 44 per cent of Dollars 1.26bn that Korean companies invested overseas last year, the finance ministry said.

Investors were attracted by the area's expanding markets and its production costs, which are lower than in Korea.

Meanwhile, Korean investment in North America, its biggest export market, fell 16 per cent to Dollars 391.6m as its share of Korea's trade shrank slightly.

The biggest jump in investment was in China, Vietnam and former communist countries, with which Korea has established diplomatic relations in recent years.

XO Asia KR South Korea, Asia XJ West Europe HU Hungary, East Europe RU Russia, East Europe CS Czechoslovakia, East Europe P9611 Administration of General Economic Programs MKTS Market data RES Capital expenditures P9611 The Financial Times London Page 7 186
World Trade News: Indonesians in UK steel talks Publication 930212FT Processed by FT 930212 By ANDREW BAXTER

THE Indonesian company negotiating to buy plant and equipment from British Steel's closed Ravenscraig steelworks in Lanarkshire was yesterday named as PT Gunawan Dianjaya, a family-run steel producer, Andrew Baxter writes.

According to the Herald newspaper in Glasgow, experts from Gunawan visited Ravenscraig recently, and a report is being studied at the company's headquarters in Surabaya.

British Steel PT Gunawan Dianjaya GB United Kingdom, EC ID Indonesia, Asia P3312 Blast Furnaces and Steel Mills COMP Company News P3312 The Financial Times London Page 7 101
World Trade News: US slaps 70% tariff on 'dumped' UK steel rails Publication 930212FT Processed by FT 930212 By NANCY DUNNE WASHINGTON

THE US Commerce Department yesterday levied duties of almost 70 per cent on steel rail found to have been 'dumped' by British Steel and other UK companies into the US market.

However, before the duties are made permanent, the International Trade Commission must determine that dumping - selling at less than either the cost of production or the product's cost in a third market - has injured US companies. The injury test is more difficult to prove than dumping.

The steel rail complaint was filed by a division of Bethlehem Steel and CF&I Steel.

US imports of steel rail from the UK totalled Dollars 16.2m (Pounds 10.7m) in 1991.

British Steel US United States of America GB United Kingdom, EC P3312 Blast Furnaces and Steel Mills P9721 International Affairs GOVT Taxes MKTS Foreign trade P3312 P9721 The Financial Times London Page 7 164
World Trade News: Brittan brings trade policy charges Publication 930212FT Processed by FT 930212 By ANDREW HILL BRUSSELS

SIR Leon Brittan, the EC trade commissioner, yesterday opened legal proceedings against three of the Community's most liberal traders - Britain, the Netherlands and Germany - for undermining a common trade policy.

The announcement was condemned by British and German officials in Brussels as 'astonishing' and 'ridiculous', and attacked as a thinly veiled attempt to push through controversial Commission proposals to accelerate EC anti-dumping procedure.

Sir Leon believes the countries have broken EC law by taking unilateral action to abolish or extend national quotas on goods from 'state trading countries' - China, Vietnam and North Korea. Existing quotas expired when the single market began on January 1, and Sir Leon claims member states should have asked for Brussels' permission to extend or abolish them. The products affected include shoes, gloves, toys and crockery.

Formal letters of complaint will now be sent and if the Commission is not satisfied with the replies it could eventually take the countries to the European Court of Justice.

The harmonisation of quotas is linked to anti-dumping proposals which Britain, Germany and the Netherlands claim will give Brussels too much control over the EC's arsenal of trade weapons. The Commission says it cannot separate the quota problem from its proposals on trade weapons, because southern member states such as France will not agree to harmonise or abolish import restrictions unless anti-dumping procedure is speeded.

'If you talk to importers around the Community, they are in complete confusion about who they answer to and what they are meant to do,' said Sir Leon's spokesman yesterday. 'The risk is that by renationalising quotas they are undermining the single market: one country which might like to maintain limits on imports cannot because another has (unilaterally) opened its borders.'

But British diplomats yesterday blamed the Commission for not coming up with an alternative interim strategy. 'We think (the Commission) is wrong legally and wrong politically,' said one.

Both Britain and the Netherlands have extended last year's quotas until the end of March, while Germany has gone for full liberalisation, abolishing its remaining restrictions. Denmark, Italy and Greece have all sought Commission authorisation for interim measures.

GB United Kingdom, EC NL Netherlands, EC DE Germany, EC P9641 Regulation of Agricultural Marketing P9721 International Affairs GOVT Legal issues P9641 P9721 The Financial Times London Page 7 401
World Trade News: Investment pours back into Latin America: It may be a mixed blessing Publication 930212FT Processed by FT 930212 By DAVID DODWELL

LATIN AMERICAN countries crippled by the burden of debt repayment throughout the 1980s have seen a reversal in the past two years as private investors have poured funds into the region. From net outflows of more than Dollars 13bn (Pounds 8.6bn) in 1990, they recorded net inflows of almost Dollars 26bn last year.

While Mexico's modest net inflow of Dollars 3.8bn in 1990 has soared to Dollars 15.3bn, Argentina has seen a net outflow of Dollars 4.9bn transformed into an inflow of more than Dollars 5bn. Venezuela, which haemorrhaged Dollars 4.2bn in 1990, saw net inflows of Dollars 344m last year. Even the region's biggest debtor, Brazil, has seen an outflow of Dollars 7.4bn in 1990 turn into an inflow of Dollars 1.4bn last year.

This striking turnaround, described by World Bank and United Nations economists at this week's conference of the London-based Overseas Development Institute on economic prospects for developing countries, provided an important signpost for the 1990s: it is set to be 'the decade of equity investment' in developing countries. Those which hope to improve their plight must capture equity flows - whether in the form of foreign direct investment, bond issues, or portfolio equity investment - or flounder.

While the change of the past two years has helped the liberalising states finance a surge in imports, World Bank officials argue it is a mixed blessing: private investment, particularly portfolio investment, is notoriously volatile. Also, as the countries of the industrial north rise from recession, the present tidal flow of funds could swiftly reverse as US, European or Japanese companies seek finance.

But its potential benefits are great: it brings new technologies, management knowhow, and training for workers, boosts export capacity and provides access to export markets. Portfolio investment can lower the cost local companies face in raising capital.

Whether the improvement of the past two years can be sustained remains uncertain, particularly in Latin America, where economists say the inflows may be a 'windfall' consequence of recent economic liberalisation.

According to Mr Zigo Vodusek, economist at the Inter-American Development Bank, they have been critical in enabling countries in the region to pay interest on debts totalling Dollars 450bn. As debt service accounts for 20 per cent of export earnings, countries face a balance of payments problem that is likely to grow until exports rally, or imports fall.

Mexico, for example, ran a deficit on visible trade in 1992 of Dollars 19bn. Since net investment inflows totalled Dollars 23bn last year, breaching such a trade gap was manageable. But even a small decline would create immense balance of payments pressure.

Because traditional sources of finance from aid agencies or commercial banks are expected to stagnate as banks struggle with new capital adequacy rules and aid fatigue deepens among national governments, efforts to stimulate private investment flows are likely to be critical.

According to Mr Kwang Jun, a senior World Bank financial economist, private funds can provide a rich seam for developing countries. Institutional funds available for portfolio investment in the US alone amount to Dollars 5,000bn-Dollars 6,000bn. At the same time, developing countries have far to go in exploiting stock market funding. Mr Jun notes that developing countries account for 13 per cent of world GNP, but just 6 per cent of world stock market capitalisation.

Foreign direct investment currently accounts for just 2-4 per cent of gross domestic investment in the developing world. But in Malaysia, where foreign investment has been strongly encouraged, the figure is 20 per cent. Mr Jun notes that raising the average to just 10 per cent could mobilise around Dollars 50bn a year.

Bonds may provide another rich source of funds. Well below Dollars 6bn a year between 1986 and 1990, they soared to Dollars 15bn in 1992, according to Mr Cristian Ossa at the UN Department of Economic and Social Development. He predicts bond issues will grow by 10 per cent a year in the near future.

Economists are more confident over Asia's prospects. Most investment flows are now generated within the region, with one-time consumers of investment like Hong Kong, South Korea, Taiwan and Singapore now joining Japan to become important net investors across the region.

Gloom is strongest in sub-Saharan Africa, where aid flows account for 11 per cent of the region's GNP and almost 100 per cent of foreign cash flows. The region's capacity to attract private funds is seen as limited, reinforcing other pessimistic forecasts for prospects in the 1990s.

XC Latin America P96 Administration of Economic Programs ECON Balance of payments P96 The Financial Times London Page 7 785
World Trade News: S Korean investors switching to S E Asia Publication 930212FT Processed by FT 930212 By JOHN BURTON SEOUL

SOUTH-EAST Asia displaced North America last year as the prime area for South Korean direct investment abroad, mirroring changes in trade patterns, John Burton writes from Seoul.

Korean investment in South-East Asia grew by 29 per cent to Dollars 555.7m (Pounds 368m), which accounted for 44 per cent of Dollars 1.26bn that Korean companies invested overseas last year, according to the finance ministry.

It was the first time in 11 years that South-East Asia was the favourite region for Korean investors, who were attracted by the area's expanding markets and its production costs, which are lower than in Korea.

Meanwhile, Korean investment in North America, its biggest export market, fell 16 per cent to Dollars 391.6m as its share of Korea's trade shrank slightly.

However, the biggest jump in investment growth occurred among the current and former communist countries, with which Korea has established diplomatic relations in recent years. Investment in these countries climbed by 174 per cent to Dollars 174.4m, from Dollars 63.7m in 1991.

The sizeable increase was due to rapidly expanding investments in China, following the establishment of diplomatic ties last August. China investments rose to Dollars 141m (Dollars 42.5m in 1991) and it attracted the largest number of new investments - 171 projects out of 500 by Korean companies last year.

In addition, investment in Hong Kong rose to Dollars 43.9m from Dollars 13m.

But investments in the former Soviet Union dropped to Dollars 4.2m from Dollars 17.8m the previous year,in spite of a visit by Russian President Boris Yeltsin to Seoul last autumn to solicit support for his country.

Korean companies instead preferred to invest in China and Vietnam, which received Dollars 16.8m.

Western Europe was another area for sharp growth in Korean investment, with a 56 per cent rise to Dollars 144.3m.

The former Czechoslovakia and Hungary were the main beneficiaries of Korean investment in eastern Europe, with amounts of Dollars 6.1m and Dollars 4.2m respectively. Investments in Latin America fell by 13 per cent to Dollars 36m.

XO Asia KR South Korea, Asia XJ West Europe HU Hungary, East Europe RU Russia, East Europe CS Czechoslovakia, East Europe P9611 Administration of General Economic Programs MKTS Market data RES Capital expenditures P9611 The Financial Times London Page 7 394
World Trade News: Black Sea beckons Greek Cypriots Publication 930212FT Processed by FT 930212 By KERIN HOPE NICOSIA

A PLAN for Cyprus to help develop the Krasnodar region of Russia, on the Black Sea, is an unprecedented challenge for the growing number of Greek Cypriot companies working in former Soviet-bloc countries.

A joint Russian-Cypriot development agency should be operating by summer in Krasnodar, capital of a territory with 4.8m people. The area includes Novorossysk, largest Russian port on the Black Sea, and the tourist centre of Sochi.

Mr George Vassiliou, the Cyprus president, who speaks Russian and is backed by the island's strong Communist party, suggested the project to former Soviet President Mikhail Gorbachev more than five years ago.

Mr Vassiliou, once a marketing and management consultant, believes an agreement signed last October with President Boris Yeltsin can provide a secure framework for long-term trade and foreign investment.

'The most frustrating thing for a foreign businessman in Moscow is the maze of bureaucracy, itself not certain what it can do,' he says. 'Under this arrangement, Cyprus will support the local government in Krasnodar with approval from the centre. It will be possible to avoid Moscow.'

Greek Cypriot consultants will set up a legal framework for foreign investment in Krasnodar, organise training for local officials and make economic and feasibility studies for development projects. The agency will have a branch office in Cyprus, financed by the Cypriot government.

Greek Cypriot companies already have a lot of trading experience in eastern Europe. Since the collapse of the Soviet Union, Greek Cypriot lawyers and accountants have been helping Russian clients set up offshore companies on Cyprus.

Greek Cypriot travel companies are already showing interest in developing tourism in Krasnodar. But Mr Vassiliou's larger purpose is for Cyprus to become a gateway for west European and US investors in south Russia.

Next month, the Cyprus Telecommunications Authority (CYTA), the state telecoms monopoly, will open a satellite phone link with Moscow as the first stage in improving communications with Krasnodar.

Under CYTA's agreement with the Space Research Institute in Moscow and Astra, a state-owned company that has taken over a former military telecommunications satellite, 60 international lines will be added to the Russian network, to be routed through an earth station on Cyprus.

'This may not sound like a big step forward until you consider that the whole of the former Soviet Union may have had fewer than 1,000 international lines - compared with 2,000 on Cyprus,' says Mr Adam Kritiotis, CYTA assistant general manager.

Russia's communications ministry has decided Cyprus is to be one of two big 'teleports' linking it with the rest of the world. By the time the development agency is set up, Krasnodar will be one of a dozen Russian cities whose international connections pass through the Astra satellite and the Cyprus earth stattion.

In the next three years, CYTA plans to reinforce the satellite link with Russia through a Dollars 25m project to lay a submarine cable to Krasnodar across the Black Sea from Bulgaria. The connection with Cyprus would be made through an existing fibre-optic cable network across Bulgaria and a submarine cable from Greece.

CY Cyprus, Middle East RU Russia, East Europe P9532 Urban and Community Development P9611 Administration of General Economic Programs GOVT International affairs P9532 P9611 The Financial Times London Page 7 555
Los Angeles braces for strike by teachers Publication 930212FT Processed by FT 930212 By GEORGE GRAHAM LOS ANGELES

BESET by violence, low academic achievements and fierce budget cuts, Los Angeles schools now face a possible teachers' strike, unless last-minute mediation produces a settlement.

Teachers have voted to strike in two weeks time, after the school board had responded to the worst financial crisis in its history by slashing nearly Dollars 200m (Pounds 140m) from salaries.

The impending stoppage is one more challenge for the embattled Los Angeles schools. They are called on to provide social services ranging well beyond education, and carry the burden of a place in the front line in the city's racial conflicts. This burden has worsened since six days of rioting last year left 42 people dead and some 700 businesses burned or looted.

These tensions are now high again, as the city prepares for a second trial, in a federal court this time, of the policemen accused of beating the black motorist Mr Rodney King. It was their surprise acquittal, in a state court, which set off the riots. Attention is also focused on the trial of youths accused of having beaten Mr Reginald Denny, a truck driver, during the riots.

The unified school district, spreading far beyond the city of Los Angeles, is one of the largest and most diverse in the US, with many of its 645,000 students living below the poverty line and a high proportion from recent immigrant families whose English is weak.

Politicians from the San Fernando valley, north-west of Los Angeles city, are now backing a plan to break up the school system to create smaller districts more responsive to local needs.

A rival initiative, the Los Angeles Educational Alliance for Restructuring Now, countered this week with a proposal for massive decentralisation of the school district's powers. Also, state schools throughout California could be shaken up by a statewide proposition, to be put to a ballot next year, to give parents vouchers they could use to pay for education in state or private schools of their choice.

US United States of America P82 Educational Services P9411 Administration of Educational Programs PEOP Labour P82 P9411 The Financial Times London Page 6 370
SEC's chief to step down early Publication 930212FT Processed by FT 930212 By PATRICK HARVERSON NEW YORK

MR Richard Breeden is to step down as chairman of the Securities and Exchange Commission in the next two months, he said yesterday, ending a busy and sometimes controversial three-year reign as the most powerful securities regulator in the US.

Mr Breeden is leaving before his term's expiry in June. His resignation was expected in the wake of the Democratic victory in the presidential election last November.

A lawyer with strong Republican ties, he was appointed by President George Bush in 1989. He had been on the White House staff and a key member of the team that arranged the bail-out of the collapsed US savings and loan industry.

A new chairman is likely to be appointed by President Bill Clinton in the next few weeks.

The front-runners for the job are believed to be Ms Consuela Washington, now securities counsel to the powerful House of Representatives energy and commerce committee, and Mr James Cheek, a Tennessee securities lawyer backed by Vice-President Al Gore.

Mr Breeden said yesterday there was no particular reason for his early departure. 'It was simply time to go,' he said.

During his tenure as chairman, he broadened the agency's enforcement agenda, sought to rid the securities industry of needless regulation, and promoted improvements in corporate governance.

He also reformed the fast-growing mutual fund industry, eased restrictions on capital-raising by small companies and earned a reputation as a tough enforcer of the rules governing financial markets.

Mr Breeden also launched the Market 2000 study of equities trading, the first big study of US markets in 20 years. It is due out this summer.

Mr Breeden did not escape criticism, particularly over his role in what was seen as a politicisation of the normally independent SEC chairmanship.

He always denied he had aligned the agency's policy too closely with the White House line.

He also clashed on various occasions with other US and international regulatory agencies.

US United States of America P9651 Regulation of Miscellaneous Commercial Sectors PEOP Appointments Breeden, R Chairman Securities and Exchange Commission (US) P9651 The Financial Times London Page 6 364
Clinton takes message straight to the people Publication 930212FT Processed by FT 930212 By JUREK MARTIN

IF Mr Bill Clinton wanted to demonstrate that there are more ways of communicating a message than via the Washington press corps, then his first televised presidential 'town meeting' in Detroit on Wednesday night was, on balance, a success.

The president made little hard news as such, beyond confirming such known trends in his thinking as the likelihood of higher corporate and personal income taxes for the more profitable and affluent.

Sacrifice, he argued, had to be shared fairly. The fact that he had inherited a federal budget deficit Dollars 50bn (Pounds 35bn) higher than he had been led to believe meant that sacrifice, in higher taxes and spending cuts, was unavoidable.

But he again displayed his singular talent, much in evidence throughout the election campaign last year and in the economic session at Little Rock in December, for ex-plaining complex policy issues in easily understandable terms.

The best example of this came when he was asked by a teenager suffering from systemic lupus, a chronic ailment, how people with similar conditions could be assured of acquiring the sort of long-term health insurance cover that was being denied her.

Mr Clinton sympathetically answered that the key was the size of the insurance pool. If small, like the 60 or so people in the TV studio, then it only took one or two people with long-term illnesses to bankrupt the pool.

But, if the community pool was big enough, 'the risk of your care is spread across large numbers of people and insurance companies make money the way grocery stores do - a little bit of money on a lot of people instead of a lot of money on a few people.'

Other presidents have used this folksy approach to good effect - notably Franklin Roosevelt in his radio 'fireside chats' of the Depression era and Ronald Reagan in his regular Saturday morning broadcasts, also on radio.

Mr Clinton is continuing the Reagan custom, as did President George Bush, though to much less effect.

Intended to focus mostly on economic and related social policy issues - and involving studio audiences in Detroit, Seattle, Atlanta and Miami - the town meeting covered much other ground, including the admission of homosexuals to the US military and the latest US initiative in Bosnia. However, the only question on the controversy of Mr Clinton's failure to find an attorney-general came from one of the media interlocutors.

The media reviews yesterday morning were mixed-to-favourable. The Washington Post said Mr Clinton had been put on the defensive by sharp general questioning about his breaking of campaign promises ranging from middle-class tax cuts to policy on Haiti.

But the New York Times found that he seemed at ease in the familiar format and successfully got his key messages across. The Wall Street Journal said: 'With his strong presence, he appeared to be resuscitating his fortunes after a period of heavy criticism.'

The Washington press corps is becoming agitated in that Mr Clinton has yet to give a formal presidential press conference, though his staff insist, with some justification, that there have been plenty of opportunities to question him. It is a fair bet, however, that the town meeting format will be used again and again.

US United States of America P91 Executive, Legislative and General Government PEOP Personnel News Clinton, B President (US) P91 The Financial Times London Page 6 578
Spending growth rate slows: Trend is still consistent with solid US recovery Publication 930212FT Processed by FT 930212 By MICHAEL PROWSE WASHINGTON

THE RATE of growth of US consumer spending slowed last month but remained consistent with a solid economic recovery, figures from the Commerce Department indicated yesterday.

After seasonal adjustment, retail sales grew 0.3 per cent last month and by 6.6 per cent in the year to January. Analysts had expected an increase of about 0.5 per cent.

The increase was led by a 1.1 per cent monthly rise in sales of motor vehicles and access-ories. Excluding vehicles, retail sales were up only 0.1 per cent.

However, few analysts expected the pre-Christmas surge in consumer spending to be sustained. Yesterday's figures appeared consistent with projections of real growth of consumer spending at an annual rate of perhaps 2.5 per cent in the current quarter, down from 4.3 per cent in the fourth quarter of last year.

Officials also announced substantial, but largely offsetting, revisions to previous months' figures. December figures were revised down to show an increase of 0.8 per cent over November rather than an increase of 1.2 per cent reported earlier. However, November sales were revised up to show a fall of 0.1 per cent rather than a fall of 0.5 per cent.

The net effect was to leave sales in the three months to January 7.2 per cent higher than in the same period last year. The figures do not allow for price inflation of about 3 per cent over the period.

Separate figures yesterday showed a 12,000 decline to 340,000 in claims for state unemployment insurance in the week ending January 30, consistent with a gradual improvement in employment prospects.

US United States of America P8811 Private Households ECON National income P8811 The Financial Times London Page 6 302
Cheque tax protest in Brazil: Business and unions united against proposal Publication 930212FT Processed by FT 930212 By CHRISTINA LAMB RIO DE JANEIRO

THE powerful business community and trade unions of Sao Paulo state, Brazil's industrial hub, yesterday began a campaign against a new tax that is central to the government's fiscal reform.

The government hopes to raise the equivalent of Pounds 4.6bn through the controversial 0.25 per cent tax on cheques, recently approved by the House of Representatives and due to be voted on next Thursday by the Senate.

The honeymoon that President Itamar Franco has enjoyed since he took office in December ended yesterday when some 50 leading business and union organisations, with the mayor of Sao Paulo city, participated in a rally to call for a nationwide protest movement. Demanding that the government sort out its finances and crack down on evasion, rather than increase taxes, the protestors called on the Senate to vote against the cheque tax and warned that it could result in price increases of as much as 50 per cent.

Mr Carlos Eduardo Moreira, head of the Sao Paulo industries federation, said: 'The new tax will not help anybody. It's time we did away with these blood-sucking measures by Braslia that bring no benefits for society,'

The Sao Paulo rebellion is likely to have a considerable impact on the Senate and comes as a blow for Mr Franco. The new tax is the main plank of government strategy to plug a Dollars 13bn hole in the budget this year and is seen as vital for a new Brazilian accord with the International Monetary Fund.

Mr Franco said yesterday: 'I respect the right of anyone to demonstrate against anything, including the tax. But I hope these businessmen will also respect the right of society to protest against the high cost of living caused by their outrageous prices.'

BR Brazil, South America P99 Nonclassifiable Establishments P8631 Labor Organizations P9611 Administration of General Economic Programs GOVT Taxes GOVT Draft regulations P99 P8631 P9611 The Financial Times London Page 6 342
Teacher strike may add to Los Angeles school woes Publication 930212FT Processed by FT 930212 By GEORGE GRAHAM LOS ANGELES

BESET by violence, low academic achievements and fierce budget cuts, the Los Angeles school system now faces a possible teachers' strike, unless last-minute mediation produces a settlement.

Teachers have voted to strike in two weeks time, after the school board had responded to the worst financial crisis in its history by slashing nearly Dollars 200m (Pounds 140m) from salaries.

The impending stoppage is one more challenge for the embattled Los Angeles schools. They are called on to provide social services ranging well beyond education, and carry the burden of a place in the front line in the city's racial conflicts. This burden has worsened since six days of rioting last year left 42 people dead and some 700 businesses burned or looted.

These tensions are now high again, as the city prepares for a second trial, in a federal court this time, of the policemen accused of beating the black motorist Mr Rodney King. It was their surprise acquittal, in a state court, which set off the riots. Attention is also focused on the trial of youths accused of having beaten Mr Reginald Denny, a truck driver, during the riots.

The unified school district, spreading far beyond the city of Los Angeles, is one of the largest and most diverse in the US, with many of its 645,000 students living below the poverty line and a high proportion from recent immigrant families whose English is weak.

Politicians from the San Fernando valley, north-west of Los Angeles city, are now backing a plan to break up the school system to create smaller districts more responsive to local needs.

A rival initiative, the Los Angeles Educational Alliance for Restructuring Now, countered this week with a proposal for massive decentralisation of the school district's powers. The Learn proposal would give individual schools control over their own budgets, as well as over the selection of teachers and of teaching methods.

Also, state schools throughout California could be shaken up by a statewide proposition, to be put to a ballot next year, to give parents vouchers that they could use to pay for their children's education in state or private schools of their choice.

US United States of America P82 Educational Services P9411 Administration of Educational Programs PEOP Labour P82 P9411 The Financial Times London Page 6 401
American Palestinian released by Israel Publication 930212FT Processed by FT 930212 By HUGH CARNEGY and MICHAEL LITTLEJOHNS JERUSALEM, NEW YORK

ISRAEL yesterday released without charge an American Palestinian after complaints from Washington over his arrest with two other US citizens, whom the authorities originally accused of being agents of the Hamas Islamic fundamentalist movement in the occupied territories.

Mr Mohamed Hajjaj, a US citizen resident in the West Bank, was set free more than two weeks after he was detained, as police decided there was no evidence against him to back an indictment.

The US twice protested to the Israeli authorities over the treatment of Mr Hajjaj and two other US citizens from Chicago, Mr Mohamed Salah and Mr Mohamed Jarad. They were arrested amid allegations by Israel that much of the organisation of Hamas had been switched from the West Bank and Gaza Strip to the US. The allegations were made as Israel faced widespread international condemnation over its expulsion of 400 alleged Hamas activists to Lebanon.

The US was concerned that the three men had been publicly accused by Israel of involvement in Hamas, including ferrying funds to its activists and helping it reorganise following the deportations, without any formal charges being laid against them. It also complained over the conditions of their detention. Mr Salah and Mr Jarad are still under arrest but have not been charged.

Mr Boutros Boutros-Ghali, the UN secretary-general, yesterday discussed the Palestine deportees question with Mr Shimon Peres, the Israeli prime minister, and urged further measures to expedite their return, writes Michael Littlejohns in New York. However, Mr Peres told reporters later that the meeting had not constituted a negotiation. He dismissed the prospect of sanctions against Israel by the UN security council, which the Arab states are demanding.

IL Israel, Middle East P9229 Public Order and Safety, NEC P9721 International Affairs PEOP Personnel News GOVT Legal issues Ghalia, B B Secretary General United Nations P9229 P9721 The Financial Times London Page 4 331
French President Mitterrand in Cambodia Publication 930212FT Processed by FT 930212 By VICTOR MALLET PHNOM PENH

President Francois Mitterrand of France with the Cambodian head of state, Prince Norodom Sihanouk, in Phnom Penh yesterday. Mr Mitterrand was the first French leader to visit France's former colony since Charles de Gaulle came in 1966, writes Victor Mallet in Phnom Penh. Mr Mitterrand appealed to Cambodia's rival political factions to abide by a peace agreement signed in Paris in 1991 and warned them not to disrupt or challenge the results of the UN-sponsored elections in May. The peace accords have been undermined by continued fighting between Khmer Rouge guerrillas and the Vietnamese-installed government, and by the refusal of the Khmer Rouge to participate in the elections or allow UN forces into its territory.

KH Kampuchea, Asia P9111 Executive Offices GOVT International affairs Mitterand, F President France Prince Norodom Sihanouk, Head of State Cambodia P9111 The Financial Times London Page 4 158
China debates how to control boom: Beijing sees high growth rates and investment as mixed blessings Publication 930212FT Processed by FT 930212 By TONY WALKER

CHINA'S announcement this week that it was cracking down on the spread of economic development zones is perhaps the clearest sign yet that the leadership has resolved to restrain some of the country's wilder entrepreneurial impulses.

But judging by the continuing debate in the Chinese press about the dangers of economic overheating - scarcely a day passes without reference to the problem - the leadership is far from a consensus on measures to cope with China's booming economy, which registered double-digit growth last year.

Discussions on the subject among China's leaders appear to have been lively, with reformists such as Zhu Rongji, the vice-premier in charge of the economy, being accused by conservatives of possessing of a 'Great Leap Forward mentality'.

This refers to China's disastrous attempt in the late 1950s to modernise its economy overnight. In a speech reported this week, Zhu answered critics - and at same time sought to reassure foreign investors who remain the key to China's modernisation drive - by saying that the government was not about to change course.

Among conservatives such as Li Peng, the prime minister, there is a feeling, according to western economists, that the Chinese economy may have moved beyond Beijing's ability to control it, without drastic measures that may themselves bring chaos.

The growing independence of powerful economic regions, such as Guangdong province in the south, is not the least of the constraints on the central government's ability to curb activity.

The government's decision to freeze economic development zones, which enjoy special privileges such as tax breaks, came in response to growing criticism that it had lost control of licensing arrangements; and furthermore that thousands of hectares of invaluable agricultural land were being commandeered by those involved.

According to the English-language Business Weekly these zones had grown from 117 officially approved at the end of 1991 to some 2,000 - and possibly many more - by the end of 1992. 'The State Council (cabinet) has announced it will recommend imposing tighter controls over new economic development zones in order to curb what has become a blind capital construction craze, ' the paper said.

Burgeoning demand for building materials prompted a surge in prices last year. Steel prices rose by some 15 per cent and cement by 14 per cent, fuelled by the nationwide construction boom that saw imports of iron and steel rise to 6m tonnes - double the figure for 1991.

Debate within the leadership about the mixed blessings of high growth rates is almost certainly being sharpened by preparations for the forthcoming National People's Congress, or parliamentary session, due in March, at which economic targets will be unveiled for the coming year; not that planned growth targets have counted for much in the past year or so. China's real GNP grew by about 12 per cent in 1992, exceeding both the planned 6 per cent and the 9 per cent average of the past 13 years.

Industrial output grew by nearly 20 per cent. Chinese leaders, including both the cautious Li and Zhu, the reformer, have been talking of the need for 'macro' steps to cool the economy, but neither has been very specific about measures that might be adopted.

Towards the end of last year, it seemed that China was heading towards more severe credit curbs - a first round of restrictions were issued last July - but more recent signals from China's central bank governor indicated that Beijing was not planning to embark on a tight monetary policy, for the time being.

'The projected bank loans for this year are more than those of last year, so by no means will we implement a tight monetary policy,' said Li Baoyuan, head of the People's Bank.

Li added that credit growth planned for this year was 'proper and can back the economy to continue developing in a rapid and sound manner'.

That may be so, but figures for 1992 reveal the real dimensions of the challenge facing the central authorities in their efforts to pace the economy in the face of an astonishing surge in new investment.

Fixed asset investment grew by about 30 per cent, bank lending increased by around double the planned figure, money in circulation doubled, and the broader measure of money supply (M2) charged ahead by 28 per cent. Infrastructure deficiencies in the power and transport sector may in the end prove the most effective break on frenzied development.

In the meantime, western economists are fairly sanguine about China's ability to cope in the short-term with its extraordinary growth cycle while resisting a resurgence of inflation.

The national living costs price index rose a relatively modest 6. 2 per cent last year, although the rate was much higher, perhaps around 15 per cent, in the larger coastal cities such as Guangzhou, Tianjin and Shanghai, which have been the main centres of economic activity.

However, 'they are in waters no-one has ever swum in before', said one economist. 'The International Monetary Fund doesn't know what China should do. China has gone further in reforming a centrally planned economy than anyone has before, and this has taken enormous economic and political courage.'

CN China, Asia P96 Administration of Economic Programs GOVT Government News ECON Economic Indicators P96 The Financial Times London Page 4 903
Indian rupee plunges amid talk of reform Publication 930212FT Processed by FT 930212 By STEFAN WAGSTYL and R C MURTHY NEW DELHI, BOMBAY

THE Indian rupee yesterday fell to an all-time low on the foreign exchange markets amid growing speculation that the government will announce this month further liberalisation of the currency.

Bankers believe Mr Manmohan Singh, finance minister, will publish sweeping new measures in his budget speech, due to be presented to parliament on February 27.

The Reserve Bank of India, the central bank, has done nothing to curb speculation, which has grown in the last 10 days. Mr R Janakiraman, deputy governor, yesterday declined to comment on the rupee's value.

However, dealers judged as significant the entry into the foreign exchange markets of state-owned oil companies, which had obtained foreign currency at preferential rates directly from the reserve bank.

The Indian currency has fallen 6 per cent against the US dollar this month and it closed yesterday in Bombay at Rs33.44 to the dollar, its lowest ever.

Mr S Ananthakrishnan, executive director of the foreign exchange dealers' association of India, said exporters had pulled out of the market in anticipation of being able to change their foreign currency at better rates in future, while importers were rushing to cover their requirements. The rupee was falling so rapidly the market was 'illiquid', said Mr Ananthakrishnan.

The rupee exchange rate was fixed until 1991 when the government of Mr P V Narasimha Rao, prime minister, introduced partial flotation in wide-ranging economic reforms. Exporters and others bringing foreign exchange into the country were permitted to exchange 60 per cent of their remittances at free market rates and the remaining 40 per cent at a fixed (low) rate of Rs26.20 to the dollar.

Bankers in Bombay believe the government could now either abolish the fixed rate altogether or cut the 40 per cent requirement to 20 per cent or so. This would act as an extra incentive to exports, which the government would like to boost so as to aid economic growth.

The problem is that, until now, the foreign currency bought at cheap rates by the reserve bank has been used by state-owned companies for the purchase of key imports, including arms and fertilisers, as well as oil.

This has enabled the government to subsidise energy and fertiliser prices. A move to free the rupee further would therefore either force the government to cut subsidies or try to raise other funds from its meagre resources.

Finance ministry officials decline to comment on the budget's contents, but it is widely expected in Delhi that there will be cuts in subsidies. The budget is also expected to contain substantial reductions in import tariffs, with the maximum normal rate of import duty coming down from 110 per cent, perhaps to 70 per cent.

IN India, Asia P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges CMMT Comment & Analysis P9311 P6231 The Financial Times London Page 4 494
Australia hears of 1m reasons not to vote Labor: Keating's hawkish campaign takes a knock from latest unemployment figures Publication 930212FT Processed by FT 930212 By EMILIA TAGAZA

WHEN Australians were told by the official statistics bureau yesterday that more than a million of them were unemployed last month, prime minister Paul Keating found it difficult to sustain the hawkish tone with which he launched his election campaign this week.

Seasonally adjusted, the January unemployment rate actually fell to 10.9 per cent from December's 11.3 per cent. It was also the first time it had fallen below 11 per cent since September last year.

However, the shock figure of 1,001,800 blurred the vaguely rosy picture. And it was certainly no plus for Mr Keating in a campaign being run on economic management and employment issues.

It was the highest figure since the great depression of the 1930s, and its bitter aftertaste will linger throughout 1993, when the jobless rate is widely expected to stay in double digits.

The jobs figure started the rollercoaster trail of the ruling Labor party's election campaign. At kick-off on Monday the party rode high on a favourable response to the business incentive package launched by Mr Keating. The vote-buying package would have helped to steal some votes from small and medium businesses who have previously supported the policies of the conservative Liberal-National coalition.

He has dangled a substantial tax cut for companies: from 39 per cent to 33 per cent. He also offered a one-off 10 per cent investment allowance for businesses buying plant and equipment.

The package would also have locked in some swinging voters among the middle-class baby boomers. It promised a 30 per cent cash rebate for work-related child care plus 150,000 new child-care places.

But the lustre of the package is slowly fading as the costs it would involve emerge. Overall government spending will rise by ADollars 2.2bn (Pounds 980m) over three years, further worsening the budget deficit.

Already Mr Keating has acknowledged that the 1992-93 budget deficit will reach ADollars 15.9bn, up from the original estimate of ADollars 13.4bn. Gross domestic product growth expectations for 1992-93 have also been cut from 3 per cent to 2.5 per cent.

The business community has also pointedly claimed that Mr Keating's package missed the important issue of industrial relations. The leading employer groups, the Business Council of Australia, and the Australian Chamber of Commerce and Industry, both said investment stimulation would require not only tax cuts but quick changes to the country's labour relations system.

From the start Labor was on the defensive. When Mr Keating called the surprisingly early election for March 13, the party was still licking its wounds from its defeat in the state election in Western Australia. At the same time the party was embarrassed when a high-ranking federal parliamentary official, who is also a close 'mate' of Mr Keating, resigned over a controversial ADollars 65,000 accident compensation payment.

However, Mr Keating is well known for his uncanny ability to turn political adversity into advantage at the most unexpected moment.

The conservative opposition coalition needs only six more seats to win power in its own right, five if the lone sitting independent MP is re-elected. At the moment the 147 seats are divided among Labor (77), conservatives (68), one independent and one vacant but previously occupied by an independent.

Five days into the five-week campaign, the conservatives are hammering the theme '10 years of economic hardship under Labor is enough'. Now they say there are a million reasons not to vote Labor.

But the conservative leader, Mr John Hewson, has yet to match Mr Keating's policy promises. Mr Hewson has already said he would not match such an 'unfunded' package which left a gaping hole in the budget.

The conservatives are proposing a goods and services tax and cuts to business taxes, such as payroll, wholesale and fuel taxes.

Introduced early last year, they have been well received by business. Even more welcomed is Mr Hewson's industrial relations package, which would reduce union power by allowing employers and employees to negotiate directly over working conditions.

In an attempt to recover some of the working-class vote, Mr Hewson late last year sweetened his proposals by exempting food from the goods and services tax. He is expected to offer more sweeteners soon.

Campaign scores may change dramatically after an American-style television debate between the two leaders on Sunday. Mr Keating can be expected to unleash the power of his parliamentary debating skills.

A big advantage for Labor is the voters' natural fear of change. In Western Australia's state election last week a discredited Labor state government, widely expected to be humbled, was dealt a muted blow by an electorate uncertain about the conservatives' radical industrial relations and tax policies.

AU Australia P9611 Administration of General Economic Programs STATS Statistics ECON Employment & unemployment GOVT Government News Keating, P Prime Minister Australia P9611 The Financial Times London Page 4 827
Delhi bans rally by BJP to avoid clashes Publication 930212FT Processed by FT 930212 By STEFAN WAGSTYL

THE Indian government, which is struggling to restore political calm after the recent inter-religious violence, yesterday banned a planned mass rally by the right-wing Hindu Bharatiya Janata Party.

The BJP, whose supporters sparked the unrest after they stormed the Ayodhya mosque, replied by pledging to go ahead with the gathering on February 25. The party claims the rally could attract 1m people.

The government's decision and the BJP's defiant response could raise political tensions and undermine ministers' efforts to get over the Ayodhya crisis.

Mr S B Chavan, home minister, said the BJP's demand for a rally was 'dangerous' and 'provocative' at a time of inter-religious tensions. The party's failure to prevent the destruction of the Ayodhya mosque 'inspired little confidence that the rally would be peaceful'. The BJP retorted by condemning the government's 'fascist tendencies'. It said party leaders would meet today to plan ways to continue with the rally. Party leaders may go on hunger strike to gather public sympathy.

Later yesterday Mr Chavan extended the ban to all political rallies in the capital for a few months.

The BJP's aim is to force the government to hold elections in the four northern states where BJP governments were sacked, after the mosque was stormed on December 6, and central rule was imposed.

IN India, Asia P8651 Political Organizations P8661 Religious Organizations GOVT Legal issues P8651 P8661 The Financial Times London Page 4 250
Malaysian sultans agree curb on rights Publication 930212FT Processed by FT 930212 By AP KUALA LUMPUR

MALAYSIA'S hereditary sultans yesterday agreed to constitutional amendments that will sharply curtail their legal immunity, AP reports from Kuala Lumpur.

Their decision ended a month-long confrontation and helped avert a potential constitutional crisis, the deputy prime minister, Mr Ghafar Baba, announced.

The deputy prime minister said that the rulers, who wield limited constitutional powers, reversed an earlier rejection of the amendments and accepted the legislation with some modifications.

Government officials said their acceptance means in effect that they could now be prosecuted in court for assault, not paying debts and other offences.

The dispute between the government and the rulers had prompted a daily barrage of commentary and articles in Malaysian newspapers.

Some of the articles revealed publicly for the first time the peccadillos of the royal households.

The government also retaliated by systematically stripping members of the royal families of privileges they enjoyed but which were not specifically provided for in state legislation.

Uncertainty about the duration and political ramifications of the conflict had dampened the sentiments of domestic investors in recent weeks, keeping turnover at the Kuala Lumpur Stock Exchange relatively subdued.

MY Malaysia, Asia P91 Executive, Legislative and General Government GOVT Regulations PEOP Personnel News P91 The Financial Times London Page 4 220
Consultancy to assist in restructuring and privatising Chinese state-owned industries under discussion Publication 930212FT Processed by FT 930212 By ALEXANDER NICOLL

A consultancy which would assist in restructuring and privatising Chinese state-owned industries is under discussion by the International Finance Corporation, the World Bank arm specialising in private sector finance, writes Alexander Nicoll. Sir William Ryrie, the IFC's executive vice-president, said in London yesterday that it had been asked to study the idea by Zhu Rongji, the vice-premier who oversees China's economic reform programme. China's bloated and inefficient state-owned industries are a serious obstacle to its drive for a market economy. The consultancy would examine all issues connected with revitalising the industries, including management, pricing policies and accounting. The IFC is discussing the concept with western accounting and consulting firms.

International Finance Corp CN China, Asia P9611 Administration of General Economic Programs GOVT International affairs P9611 The Financial Times London Page 4 152
Hong Kong fears interference by Beijing Publication 930212FT Processed by FT 930212 By SIMON HOLBERTON HONG KONG

PLANS by the agency of the Chinese government responsible for Hong Kong affairs to participate in a locally based investment company have raised fears in the colony about undue political interference in the operations of Hong Kong's economy and financial markets.

Beijing's Hong Kong and Macao Affairs Office (HKMAO) is the leader of a group of mainland Chinese government bodies which may take up to 40 per cent of the New China Group. The principal activities of this company are stock brokerage, corporate finance and investment in mainland business ventures.

The company was formed late last year by a group of Hong Kong investors led by Mr Tsui Tsin Tong, a businessman with long-standing mainland connections. Other investors include Mr Li Ka Shing, one of the colony's wealthiest men, Mr Cheng Yu Tung, chairman of New World, a property developer, Mr Stanley Ho, Macao's gambling tycoon, and Singapore's Trade Development Board.

Chinese state and provincial companies have had a presence in Hong Kong since the beginning of the 1980s, and their collective investment in the colony is well in excess of USDollars 15bn (Pounds 9.9bn), but HKMAO's involvement in New China is the first time an overtly political entity has sought a business presence in Hong Kong.

'I think it is disgraceful,' said a Chinese merchant banker. 'This is a political body which is responsible for Hong Kong affairs. The current Hong Kong government has always kept out of business, except for regulation. This is a dramatic change in the way things have been done; we feel that we no longer have a level playing field.'

HKMAO is directly responsible for the negotiations governing Hong Kong's transfer to China in 1997. Merchant bankers believe that HKMAO may be able, or be seen, to trade on price sensitive information. Merchant bankers have lobbied the Securities and Futures Commission, Hong Kong's financial watchdog, but it appears powerless to do anything.

New China Group CN China, Asia P6211 Security Brokers and Dealers P9721 International Affairs COMP Company News P6211 P9721 The Financial Times London Page 4 360
Serb Leader Karadzic leaves Bosnian peace talks in US Publication 930212FT Processed by FT 930212 By REUTER

BOSNIAN Serb leader Radovan Karadzic said last night he was leaving the US and the latest Bosnian peace talks at the United Nations because Bosnia's Moslem president has refused to attend the talks, Reuter reports. He said he would return once all three parties - Serbs, Moslems and Croats - sat down together to negotiate.

His announcement comes after Moslem forces launched an offensive to break the 10-month Serbian siege of the Bosnian capital, Sarajevo. UN troops took to shelters but four French UN peacekeepers and two journalists were injured. The airport was caught in crossfire and UN humanitarian aid flights were suspended.

BA Bosnia-Hercegovina, East Europe P9111 Executive Offices PEOP Personnel News GOVT International affairs P9111 The Financial Times London Page 3 139
Czech steel maker calls for help Publication 930212FT Processed by FT 930212 By PATRICK BLUM PRAGUE

A SECOND big Czech company in less than a week has called for urgent financial help from the government to overcome a financial crisis.

Poldi United Steelworks, which has already been forced to shut two large plants and has reduced its workforce by half to about 10,000 during the past two years, says it urgently needs 2bn crowns (Pounds 47.6m) to begin to pay back debts totalling 5.1bn crowns.

Mr Karel Snabl, Poldi financial manager, wants a loan of 1bn crowns from the government and says the company could raise another 1bn crowns through the sale of property.

The crisis broke when the state-owned electricity utility reduced power supplies to the company, which, it says, owes it 260m crowns.

Poldi itself is owed 2.8bn crowns by over 200 customers, including some of the Czech republic's largest companies.

CS Czechoslovakia, East Europe P331 Blast Furnace and Basic Steel Products FIN Company Finance P331 The Financial Times London Page 3 173
Yeltsin takes firm line in Moscow power struggle Publication 930212FT Processed by FT 930212 By LEYLA BOULTON and DMITRY VOLKOV MOSCOW

RUSSIAN President Boris Yeltsin last night met his arch rival, Mr Ruslan Khasbulatov, chairman of the Russian parliament, in the first round of bargaining towards a truce in their power struggle.

Mr Yeltsin suggested that he would press on with preparations for a referendum on whether the president or parliament rules the country, just in case the parliamentary speaker failed to keep his side of any bargain.

The stand-off over the referendum, which is opposed by Mr Khasbalatov, will continue during two further meetings next week.

Mr Yeltsin may drop the referendum proposal if Mr Khasbulatov agrees to stop trying to cut back Mr Yeltsin's powers until they are defined by a new constitution.

'There are two options, either a referendum or a new agreement between (the executive and the legislature) with strict guarantees,' he told a cabinet meeting. 'To drop one or the other would be a big political mistake.'

While they met, a Mr Vladimir Shumeiko, the first deputy prime minister, called for a 'moratorium on inflationary actions' by the government, parliament and central bank. The cabinet yesterday adopted an anti-inflationary package, vowing to restrict money supply growth to 10 per cent a month and inflation to 400 per cent a year.

He did not say whether it had the support of the central bank, which has presided over very fast money supply growth over the past year.

Although Mr Yeltsin cited the ailing economy as the best reason for a deal with Mr Khasbulatov, he has been driven into a corner over the poll by both the parliament and the autonomous republics within the Russian Federation.

For a start, he cannot guarantee that a referendum would ask the question he wants - do you support the president or the parliament? This is because a compromise at the Congress of People's Deputies last December did not specify what the poll would be about, and allowed both parliament and president to submit alternative lists of questions to the electorate.

Parliament's constitutional committee has come up with a list of 11 obscure questions on the details of a new constitution, while Mr Khasbulatov has also proposed a 12th question on whether the electorate wants fresh presidential and parliamentary elections.

A poll could also undermine the unity of the Russian Federation if leaders of Tatarstan, Yakutia, and other semi-independent republics go through with their threat to boycott the referendum. Some observers fear this could accelerate a break-up of the federation.

RU Russia, East Europe P9121 Legislative Bodies P9111 Executive Offices GOVT Government News Yeltsin, B President Russia Khasbulatov, R Chairman of Russia Parliament P9121 P9111 The Financial Times London Page 3 461
US muscle for the mediators: American backing is a shot in the arm for the Vance-Owen peace process Publication 930212FT Processed by FT 930212 By ROBERT MAUTHNER

THE US endorsement of a negotiated rather than a military solution in Bosnia might be seen by some as too timid an approach, but it has been greeted with relief in the United Nations and by the international mediators.

Some of President Bill Clinton's election campaign ideas on the Bosnian crisis, such as air strikes and the lifting of the arms embargo to help the Moslems, have always been considered by the international mediators, Mr Cyrus Vance and Lord Owen, as likely to exacerbate the conflict rather than end it.

The emphasis placed by Mr Warren Christopher, US secretary of state, on co-operation with Washington's traditional allies and Russia in the search for a peace settlement, is seen as putting new life into the stalled international negotiations. The US may continue to have doubts about the mediators' plan for dividing Bosnia into 10 semi-autonomous provinces, but it has clearly expressed its support for the Vance-Owen 'peace process'.

Full US participation in the process - through a competent and respected envoy such as Mr Reginald Bartholomew and, not least, Mr Clinton's promise that the US would join international measures to implement and enforce an agreement endorsed by all the parties - provides the negotiators with the kind of muscle they had conspicuously lacked.

Before an agreement can be enforced, however, it has to be reached. The US administration, which has emphasised that it will not impose an agreement on the warring parties, may have to shed more illusions when it comes face to face with their slippery representatives.

The reason why Mr Vance and Lord Owen wanted the UN security council to 'impose' a solution was because all their immense efforts to reach a diplomatic settlement in Geneva had run into the sand. They felt that only a united security council, with the full backing of the US and Russia in particular, would have sufficient clout to force the warring parties to sign on the dotted line.

Such a procedure would not necessarily have entailed the use of force, but it would probably have involved the threat of force.

Mr Bartholomew will find that the US will have to indulge in the kind of arm-twisting undertaken by the mediators when they invited Mr Slobodan Milosevic, the Serbian president, to Geneva in January. The strong-arm tactics employed then by Mr Milosevic, to 'persuade' Mr Radovan Karadzic, the leader of the Bosnian Serbs, to accept the mediators' constitutional principles for Bosnia, may well have to be resorted to again.

If Mr Bartholomew's first stop since his appointment is Moscow, that is precisely because the US administration is fully aware that Russian, combined with Serbian, pressure could again shift Mr Karadzic from his entrenched positions.

What is less clear is how much pressure the US is prepared to put on the Bosnian Moslems, singled out by Mr Vance and Lord Owen as the chief obstacle to progress during the New York round of negotiations, but whose interests the US has vowed to defend.

That special concern for the Bosnian Moslems is understandable, given the suffering they have endured at the hands of the Bosnian Serbs. But, from a negotiating point of view, the lack of the same degree of impartiality as Mr Vance and Lord Owen have shown throughout the long weeks of haggling between the warring parties, may put the US representative at a disadvantage as a mediator and could even undermine the whole process.

The US administration has also made much of the fact that it is not producing its own map for the future ethnic division of Bosnia, mainly because it considers the Vance-Owen map as partially 'rewarding' the Bosnian Serbs for their policy of ethnic cleansing and because it does not believe that it can be effectively implemented.

Since, however, the main dispute in the negotiations is about territory, the US, too, will have to think in terms of maps sooner or later. The assumption at the moment is that it will take the Vance-Owen map, which has already been amended to take into account some of the Moslem demands, as the basis for further negotiations.

Any attempt to abandon entirely the concept of a state divided into semi-autonomous regions would be unacceptable to the Serbs, who have been demanding an even greater degree of decentralisation, which would give them virtual independence.

For a Bosnia peace settlement now to be reached, the three mediators will have to maintain a united front and avoid giving the impression that they favour one or the other party.

United Nations BA Bosnia-Hercegovina, East Europe P9711 National Security GOVT International affairs P9711 The Financial Times London Page 3 800
EBRD calls for scrapping of the rouble currency zone Publication 930212FT Processed by FT 930212 By PETER NORMAN, Economics Editor

THE European Bank for Reconstruction and Development yesterday called on the former Soviet republics to abandon the rouble currency zone.

Introducing the bank's first annual economic review, Mr Jacques Attali, EBRD president, said establishing separate national currencies or smaller currency zones could improve the prospects for production and trade among the republics.

The bank, set up two years ago to help former communist states develop into democratic and market-oriented states,said the rouble zone was already crumbling. Ukraine and the Baltic states have left the zone, while Belarus and Azerbaijan have issued coupons for most domestic cash transactions. The review argued strongly that the remaining members should not try to keep the zone together.

The EBRD said the rouble zone had been undermined by inadequate control of credit and cash creation which had brought its members to the brink of hyperinflation. The absence of co-operation between members of the zone had also generated 'enormous pressure to restrict exports and capital outflows, leading to near anarchy in trading arrangements.'

By contrast, the introduction of separate national currencies could improve the prospects of production and trade. The EBRD suggested that some republics, once outside the zone, would opt for more prudent fiscal and monetary policies.

The EBRD's call reflects deep concern at the bank about the deterioration of economic conditions in Russia and other republics. It estimates that real gross domestic product declined by about 20 per cent in Russia last year while inflation averaged 1,450 per cent. Elsewhere, output declined by between 14 per cent (in Uzbekistan and Kazakhstan) and 40 per cent (in Armenia), with inflation ranging between 700 per cent in Latvia and Uzbekistan and 1,600 per cent in the Ukraine.

The bank forecast that output in the republics would decline further this year - although possibly at a slower rate - with the disintegration of old economic links continuing to harm performance.

The bank is more upbeat about conditions in eastern and central Europe. Output in the region declined last year by about 5 per cent with inflation averaging 60 per cent.

The EBRD said the countries of central Europe 'seem poised for moderate economic growth in 1993' and singled out Hungary and Poland as likely to experience increases in gross domestic product.

Mr Attali said exports to the European Community from Hungary, Poland and the Czech republic and Slovakia were rising strongly. In the final quarter of last year, industrial production in Poland was 3 per cent higher than in the previous three months and up 1.7 per cent and 1 per cent in Hungary and the former Czechoslovakia.

He called for more open trade policies and lower interest rates in western Europe to help eastern and central Europe overcome their economic problems.

European Bank for Reconstruction and Development XV Commonwealth of Independent States P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Gross domestic product ECON Inflation ECON Industrial production TECH Technology P9311 P9611 The Financial Times London Page 3 517
Europe's car sales tumble in January Publication 930212FT Processed by FT 930212 By KEVIN DONE, Motor Industry Correspondent

NEW CAR sales in western European plunged by 23 per cent last month compared with a year earlier, according to industry estimates.

Four of the five leading volume markets were affected, led by a 53 per cent drop in Spain. Germany, Europe's biggest, dropped by an estimated 28 per cent to 238,000. France fell by 37 per cent to 113,000, and Italy by 14 per cent to 202,000. The one exception was Britain, where new car registrations rose 7.3 per cent, albeit from a very depressed level.

Otherwise, sales were higher in only three of the smaller markets: Norway, Portugal and Ireland.

The scale of the fall will add to growing tensions between the European Community and Japan over the level of Japanese car shipments this year. Officials from the European Commission and the Japanese Ministry of International Trade and Industry failed last week to agree a forecast for the development of the EC car market in 1993.

The forecast is supposed to form the basis for Japan to 'monitor' its exports to the EC under the terms of the 1991 understanding intended to restrain Japanese exports during a seven-year transition period before the EC new car market is opened completely to Japanese competition from the end of 1999.

Earlier this week Mr Jorg Wenzel, head of the private office of Mr Martin Bangemann, EC industry commissioner, urged Japan to cut car exports to the EC this year to reflect the slump in the market, or risk provoking a crisis in relations. The German car manufacturing and supply industry alone was expected to lose up to 40,000 jobs this year.

Japanese registrations in January fell year-on-year by around 18 per cent compared with the overall fall of 23 per cent, which boosted their total west European share sales to 11.5 per cent from 10.7 per cent a year ago. Carmakers fear a drop of 9-10 per cent in new car sales in west Europe this year. The sharp January fall appears to reflect the special factors, which inflated demand artificially in December and pulled sales forward from January.

----------------------------------------------------------------------- WEST EUROPEAN NEW CAR REGISTRATIONS January 1993 ----------------------------------------------------------------------- Volume Volume Share (%) Share (%) (Units) Change (%) Jan 93 Jan 92 ----------------------------------------------------------------------- TOTAL MARKET 968,000 -23.1 100.0 100.0 MANUFACTURERS: Volkswagen* (incl. 160,000 -24.1 16.5 16.7 Audi, SEAT & Skoda) Fiat (incl. Lancia, 130,000 -16.3 13.4 12.3 Alfa Romeo, Ferrari Innocenti, Maserati) General Motors 120,000 -24.0 12.4 12.5 (Opel/Vauxhall, US***** & Saab) - Opel/Vauxhall 115,000 -24.1 11.9 12.0 - Saab** 3,000 -23.3 0.4 0.4 Peugeot (incl. 118,000 -26.9 12.2 12.8

Citroen) Ford (Europe, 113,000 -25.9 11.7 12.2 US***** & Jaguar) - Ford Europe 112,000 -26.0 11.6 12.1 - Jaguar 1,000 +1.4 0.1 0.1 Renault**** 102,000 -21.6 10.5 10.3 BMW 32,000 -24.1 3.4 3.4 Nissan 32,000 -18.7 3.3 3.2 Rover*** 30,000 +8.4 3.1 2.2 Mercedes-Benz 27,000 -37.0 2.8 3.4 Toyota 23,000 -8.4 2.4 2.0 Mazda 17,000 -23.6 1.7 1.7 Volvo**** 15,000 -32.2 1.5 1.7 Honda*** 11,000 -25.6 1.1 1.2 Mitsubishi 10,000 -17.5 1.0 1.0 Total Japanese 111,000 -17.8 11.5 10.7

MARKETS: Germany 238,000 -27.6 24.6 26.1 Italy 202,000 -13.9 20.9 18.7 United Kingdom 165,000 +7.3 17.0 12.2 France 113,000 -36.8 11.7 14.2 Spain 40,000 -52.8 4.2 6.8 ----------------------------------------------------------------------- *VW holds 31 per cent and management control of Skoda. **GM holds 50 per cent and management control of Saab Automobile. ***Honda holds a 20 per cent stake in Rover vehicle operations. ****Renault and Volvo are linked through minority cross-shareholdings. *****Cars imported from US and sold in western Europe. ----------------------------------------------------------------------- Source: industry estimates -----------------------------------------------------------------------

XJ West Europe QR European Economic Community (EC) JP Japan, Asia P3711 Motor Vehicles and Car Bodies P5511 New and Used Car Dealers MKTS Sales STATS Statistics MKTS Foreign trade P3711 P5511 The Financial Times London Page 2 644
German steelworkers protest at further job losses Publication 930212FT Processed by FT 930212 By QUENTIN PEEL BONN

STEELWORKERS in east and west Germany took to the streets in protest yesterday, as details of further job losses emerged from the country's leading steelmakers.

Hoesch Stahl confirmed that one entire steel plant would have to be closed down, with a loss of between 2,000 and 3,000 jobs, in order to reduce its monthly capacity from 700,000 to between 550,000 and 570,000 tonnes.

A company spokesman said a decision would be taken by the joint board of the newly merged Krupp-Hoesch combine, before the end of February, whether the closure would be at Dortmund, the company's headquarters, or at its sister plant in Duisburg-Rheinhausen, in the heart of the Ruhr industrial area.

Some 1,500 workers yesterday demonstrated outside the gates of the Krupp steel plant at Hagen, near Dortmund, over the planned job cuts - which were specifically excluded last year when Krupp launched its merger bid with Hoesch.

In eastern Bavaria, some 2,000 steel workers occupied the railway station at Sulzbach-Rosenberg, protesting at the loss of jobs at the ailing Maxhutte steel plant.

In east Germany, some 3,500 workers at the Eko steel plant at Eisenhuttenstadt are planning protests for today, while workers in the Saarland have announced a mass demonstration for March 10.

The announcement by Hoesch that it will close a plant is the most dramatic development in the German steel industry to date, although IG Metall, the steel and engineering workers' union, estimates that 25,000 in the industry will be threatened by capacity cuts.

Mr Viktor Braun, company spokesman, said that the merger with Krupp had not been supposed to cause any job losses, but 'the situation in the market has worsened dramatically since then. It is now worse than at any time since the 1970s.'

Preussag AG - the steel, trading, energy and metals group - said yesterday that it would not be able to reduce any capacity, under the EC steel plan proposed in Brussels this week, without causing a reduction in company earnings.

Mr Ernst Pieper, chief executive, said the EC plan would not impose output quotas for individual companies, but leave it to industry to divide the cuts. He said steel production had fallen by 20 per cent in the first quarter of the 1992-93 financial year.

Hoesch Stahl DE Germany, EC P331 Blast Furnace and Basic Steel Products PEOP Labour RES Facilities P331 The Financial Times London Page 2 415
Amato sets Italian central bank free Publication 930212FT Processed by FT 930212 By ROBERT GRAHAM ROME

THE FINAL piece of legislation designed to make the Bank of Italy an independent central bank has been approved by Mr Giuliano Amato's government. The move will end the Treasury's ability to use the bank to fund the budget deficit and is in line with the European Community's objectives for monetary union. The legislation also allows the central bank to decide the obligatory reserve requirements of the banking system.

The Treasury's account with the Bank of Italy had been intended to finance day-to-day public spending needs. But, as Italy's public sector deficit grew to more than 10 per cent of gross domestic product, the facility was increasingly abused as a form of permanent short-term finance.

At the end of last year, the Treasury still owed L80,780bn (Pounds 36bn) to the bank. This debt will now be converted into state paper and handed over to the Bank of Italy. The Treasury will pay 1 per cent interest, the same as it was paying on the overdraft.

Bank of Italy IT Italy, EC P601 Central Reserve Depositories GOVT Draft regulations P601 The Financial Times London Page 2 201
CO2 emissions to exceed target Publication 930212FT Processed by FT 930212 By BRONWEN MADDOX, Environment Correspondent

THE European Community is likely to miss international targets for stabilising carbon dioxide emissions by a margin of at least 4 per cent, according to member countries' national plans submitted to the Commission.

A report circulating in the Commission shows the 12 EC members likely to emit at least 2.878bn tonnes of CO in the year 2000, compared to about 2.775bn tonnes in 1990. The EC is committed by its own policy and international agreements, to stabilise CO emissions, believed to be implicated in global warming, at 1990 levels by 2000.

The Commission has been urging member countries to produce projections of their emissions. According to the briefing paper, distributed in the environment directorate, some have given targets for curbing emissions while others have used forecasts based on national energy plans.

According to the paper, Germany, the largest emitter, has the most ambitious plan - to cut emissions in 2005 to 75 per cent of 1987 levels. Denmark is aiming to cut 20 per cent of 1988 emissions by 2005, and the Netherlands and Belgium to cut about 5 per cent of 1990 levels by 2000. The UK, the second largest emitter, is aiming to stabilise levels, as are France and Italy.

However, Greece and Spain expect a rise of at least 25 per cent this decade. Portugal has the highest projected rises, of 29 and 39 per cent, depending on economic growth.

Mr Andrew Warren, director of the Association for the Conservation of Energy, said yesterday: 'These figures show that more has to be done even if countries stick to their national targets.'

The difference in projections between richer and poorer EC members has caused tension over proposals for carbon and energy taxes, which poorer countries feel should be aimed at the heaviest polluters.

QR European Economic Community (EC) P9511 Air, Water, and Solid Waste Management P9721 International Affairs RES Pollution TECH Standards P9511 P9721 The Financial Times London Page 2 337
Craxi leaves party but music had already stopped Publication 930212FT Processed by FT 930212 By ROBERT GRAHAM

IN AN ironic turn of the wheel of fortune Mr Bettino Craxi last night agreed to step down from the leadership of the Socialist party at a hotel within 500m of where in 1976 he was first elected to the post.

He took over a divided party and cleverly exploited its pivotal position in Italian politics as an ally of the Christian Democrats throughout the 1980s. But he now leaves a party rudderless, despised by the electorate and internally demoralised by the cumulative blows of the year-old Milan corruption scandal.

Mr Craxi himself has become the chief political victim of this scandal. He has now received six warrants from magistrates warning him he is under investigation for close to 50 instances of corruption and illicit party funding from contract kick-backs. He was first urged to resign from the party and make way for new blood after the Socialists' poor showing in the April 4 general elections last year.

Fellow political veterans like Mr Giulio Andreotti, the Christian Democrat and six times prime minister, and Mr Arnaldo Forlani, the Christian Democrat party secretary, saw the writing on the wall and stepped aside. However, Mr Craxi obstinately clung to power and as the corruption scandal broke, he saw this as a deliberate attempt to undermine him and his family. His brother-in-law, Mr Paolo Pillitieri, a former Milan mayor, was one of those charged with corruption early on in the investigation.

By refusing to resign, he increasingly split the party and identified it in public eyes as the political grouping least capable of renewal. Thus in hanging on so long, refusing to resign when receiving in December his first warrant of investigation, he has merely brought increased discredit on the party. His protests of innocence have gone unheard.

This behaviour and abrupt decline in his reputation has obscured his earlier achievements. When he took over the party he saw the need to move to the centre ground, distancing the party from the Marxist side of socialism. He changed the party's symbol to a red carnation from the hammer and sickle. He realised he could use the party's 12 per cent vote as a key to helping the Christian Democrats stay in power.

With his strong personality (he was often accused of being a bully), he managed to convince the Christian Democrats to allow him to become prime minister in 1983. He was the first Socialist prime minister and the first from Milan. He presided over a stable government lasting 1,058 days, the longest in post-war history and a considerable achievement compared to the average that lasted a fifth of this time. His other main achievement will be regarded as initiating a process to cut indexed wages - the scala mobile.

But Mr Craxi will also be remembered for consolidating and expanding the control of the ruling parties over the state apparatus. He permitted and encouraged a systematic division of the spoils of office, placing his men in key positions throughout the state apparatus. This meant that the benefits of the economic boom of the 1980s were squandered, public spending was allowed to grow unchecked and corruption thrived. It was precisely this system, which began under his premiership and which continued until the end of the last Andreotti government in April 1992, that lies behind his downfall.

Socialist Party (Italy) IT Italy, EC P8651 Political Organizations PEOP Appointments Craxi, B Leader Socialist Party (Italy) P8651 The Financial Times London Page 2 595
Delors attacks 'wildcat' devaluations: EC's floating currencies accused of threatening the future of the ERM Publication 930212FT Processed by FT 930212 By LIONEL BARBER BRUSSELS

MR JACQUES DELORS, European Commission President, yesterday launched an attack on 'wildcat' devaluations which were undermining confidence in the European exchange rate mechanism.

Without naming the UK, Mr Delors said he believed that a system of relatively fixed exchange rates - like the ERM - offered greater advantages than floating exchange rates. Currencies which left the discipline of the ERM and floated freely raised 'serious questions' about the future of the European monetary system.

At a news conference in Brussels, Mr Delors stressed that there was nothing wrong with realignments within the ERM, if there were fundamental economic divergences between members. But it was important that adjustments were carried out within the ERM in the presence of EC finance ministers, rather than 'a wildcat act done at the drop of a hat'.

The European Commission president's comments underline lingering resentment in Brussels over Britain's unilateral withdrawal of sterling from the ERM during last September's currency crisis, and concern over the unsettling effect of a floating pound on other currencies in the ERM.

However, Mr Delors declined to back charges in Bonn and Paris that Anglo-Saxon financial institutions were engaged in a plot to undermine the ERM and prevent the creation of a single European currency to rival the dollar.

'I have no information, but that does not mean to say others have no information. I cannot confirm or deny.' Chancellor Helmut Kohl of Germany accused unnamed forces last week of seeking to 'torpedo' the EC's drive for a monetary union by the end of the century by speculating against individual currencies.

Mr Raymond Barre, former French finance minister, said last week that certain people in economic and financial circles were determined to prevent the creation of European economic and monetary union and 'blow up' the EMS.

Mr Delors said he had studied closely the recent turbulence in the currency markets. His conclusion was that the ERM needed to be strengthened, and the second stage of Emu leading to fixed exchange rates for currencies meeting strict economic convergence criteria should be prepared very carefully. Mr Delors again ruled out the option of a small group of strong currencies led by France and Germany moving on a 'fast-track' to Emu outside the Maastricht treaty. EC members agreed that the process including all 12 countries moving together, he said.

QR European Economic Community (EC) FR France, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs GOVT Government News P9311 P9721 The Financial Times London Page 2 438
France's PM urges faster move to Emu Publication 930212FT Processed by FT 930212 By WILLIAM DAWKINS PARIS

MR Pierre Beregovoy, French prime minister, yesterday called for faster progress to European monetary union.

This was essential to ensure that the maximum number of European countries could subscribe to the union, though he recognised that accelerating the process was probably not possible for the time being.

Mr Beregovoy's remarks - at a conference on Europe: the Way Forward, held by the Financial Times and the French newspaper Les Echos - were contrasted with the cautious step-by-step approach to monetary union advocated by Mr Hans Tietmeyer, vice-president of the Bundesbank, who recommended that the timetable laid down in the Maastricht treaty should be strictly followed.

Mr Tietmeyer warned that any attempts to speed up European monetary union would be 'dangerous'. It would be safer to wait until a first assessment of the impact of the single European market and until the economic convergence criteria detailed in the Maastricht treaty had been durably achieved, Mr Tietmeyer said.

The timetable in the treaty - in three stages up to January 1999 at the latest - was right, he said. The currency turmoil last autumn had underlined the risk of following 'an illusory policy'.

The convergence criteria must be 'observed very closely' while the European Community must make a political effort to head off the burdens created by the end of governmental freedom to adjust individual exchange rates.

Mr Tietmeyer said the present exchange rate parities in the EMS were sustainable and no upsets were expected this year. Imbalances in currency patterns accumulated over years had been sorted out in the realignments started with the currency crisis last September, so that the 'EMS has survived and will survive on the basis of current exchange rate parities', he said.

The Bundesbank vice-president paid tribute to the consensus among French political leaders on the need to defend the franc and said he could only encourage them to continue.

'The fundamental facts of the French economy are OK and, compared to my own country, are better. The franc had saved itself, not just thanks to the Bundesbank's support.'

His remarks are likely to comfort those in French political circles who expect that the French and German central banks will have to beat off a renewed assault on the franc about the time of French parliamentary elections next month. Mr Tietmeyer saw no point in forming a separate fixed-rate inner core of two or three strong currencies, the subject of recent speculation in Paris and Brussels.

That 'would not be in line with the treaty', the spirit of which is that a basis for monetary union must be laid for all EC members. 'Of course, it is likely that, in the beginning, only some countries would be able to go,' he added.

Mr Beregovoy also warned that the importance of social policies must not be forgotten in the creation of the European single market. 'Europe should not be only about competition and technocracy, it should also be about solidarity,' he said, recalling Hoover's recent decision to close a vaccuum cleaner plant near Dijon and shift to lower-cost production in Scotland.

The Hoover affair, which has been drawn into the French election campaign, was also seized on by Mr Francois Perigot, president of the Patronat, the French employers' organisation, who pointed out that French social charges were so high that the US group could hardly be blamed for its move. He warned that attempts to interfere with foreign investors' freedom to act could harm France's chances of attracting more foreign investment.

France should continue its hard franc policy - 'a floating franc would be catastrophic,' said Mr Perigot.

The EC had yet to reach the right balance between a firm application of competition policy and the need to support important industries, said Mr Dominique Strauss-Kahn, French minister for industry and foreign trade.

No major economy could maintain its position without a strong industrial base, the minister said.

FR France, EC QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs CMMT Comment & Analysis P9311 P9721 The Financial Times London Page 2 694
Dealers scare the D-Mark's Belgian shadow: What has brought one of the ERM's hard-core currencies under pressure in the markets Publication 930212FT Processed by FT 930212 By ANDREW HILL and SARA WEBB

DURING the repeated attacks on the European exchange rate mechanism in recent months, at least the system's 'hard core' seemed reasonably safe from assault.

This week, however, it was the turn of the Belgian franc - which along with the Dutch guilder has remained closest to the D-Mark in the last few years - to feel the heat of currency strife.

Remarkably, the Belgian franc has sometimes been seen as a surrogate for the D-Mark. In 1990 Belgium decided to tie its currency to the D-Mark at much narrower fluctuation bands than the 2.25 per cent margin generally ruling in the ERM.

This has enabled the Belgian state to borrow at interest rates close to those on German government bonds - despite overall Belgian public sector debt which, at more than 130 per cent of gross national product, is the highest in the EC.

This week, however, confidence in the Belgian franc was undermined as doubts about the country's political stability sparked concern among international investors about its public finances.

One reason for the volatility was the Belgian National Bank's haste in following last week's cut in the Bundesbank's discount and Lombard rates. When the Bundesbank reduced its interest rates on February 4, the Belgian central bank lowered its special advances rate - used in money market operations - from 8.40 per cent to 8.30 per cent.

On Wednesday, the Belgian central bank was forced to reverse the effort to cheapen credit. After a sharp rise in short-term interest rates and government bond yields at the beginning of the week, the central bank increased its end-of-day rate from 8.80 per cent to 9.30 per cent.

The difference between yields on 10-year Belgian government bonds and those on ten-year German government bonds narrowed from 1.24 percentage points on August 31 1992 to 0.40 of a point on January 8 this year. But during the last few days the gap has widened to as much as 0.90 of a point.

'International investors simply decided the time had come to take profits, as they couldn't see the yield spread narrowing any further,' says one bond dealer.

The political worries relate to the constitutional reforms narrowly approved by Belgium's parliament last Saturday. Belgian deputies approved the fundamental part of a far-reaching reform programme which will turn Belgium into a federal state and devolve further powers to its regions.

Belgian economic analysts believe that foreign worries that this could weaken the authority of central government are overdone. They point out the success of Belgium's fragile centre-left coalition in winning a two-thirds majority in parliament over the issue.

However, international investors took a different view. Bond dealers in London admit that hardly any foreign market operators have a detailed understanding of the nature of the constitutional reforms. But the general uncertainty has forced them to re-examine their Belgian government bond holdings.

In particular, their attention was drawn to the link between slack Belgian growth and its rising public deficit, which last year reached BFr485bn, (Pounds 9.8bn), 6.9 per cent of GNP.

This is a particular handicap because of the stipulation in the Maastricht treaty that EC members should reduce their deficit to 3 per cent of GNP as a condition for joining economic and monetary union.

The Belgian government is trying to freeze public spending in real terms, increase revenues through fiscal measures and modest privatisation, and stabilise the generous social security budget.

Belgian economists seem puzzled by the new con-cerns about this old economic phenomenon, and blame non-Belgian bond and currency traders.

'Of course the government debt is very large,' said Mr Lieven Noppe of Kredietbank yesterday, 'but it's been that way for almost 10 years and despite that the franc has managed to become a strong currency and interest rate differentials (with Germany) have narrowed.'

Yesterday, Belgian analysts and the central bank seemed confident that the attack had been seen off, with the franc returning to near-parity with the D-Mark. But the Belgian government's policy of linking the franc to the D-Mark has been sorely tested.

Mr Alfons Verplaetse, the central bank governor, said last week that the bank would be prepared to allow the franc to fall as much as 0.30 per cent below its ERM central rate again the D-Mark.

Mr Verplaetse underlined on Wednesday that he would take all possible measures to support the franc. Aided by this pledge and the interest rate increase, the currency steadied yesterday. But investors' confidence about the Belgian franc's stability may take longer to return.

BE Belgium, EC P9311 Finance, Taxation, and Monetary Policy ECON Economic Indicators MKTS Market data CMMT Comment & Analysis P9311 The Financial Times London Page 2 807
Road network sell-off proposed: Trunk route users could pay tolls - New agency would control system Publication 930212FT Processed by FT 930212 By RICHARD TOMKINS, Transport Correspondent

THE GOVERNMENT plans to hive off Britain's 6,600-mile national road network to an agency called Highways Command as a prelude to possible privatisation.

Tolls could be introduced on trunk roads as well as motorways to offset the Pounds 2bn-a-year bill for road building and repairs.

Confirmation of the plan came with the publication of the Transport Department's annual report yesterday, which lists Highways Command with some smaller departmental activities as a candidate for agency status.

The new body would take responsibility for all Britain's trunk roads and motorways. Although these account for only 4 per cent of the country's total road length, with the rest owned by local authorities, they carry 32 per cent of all traffic and 56 per cent of goods traffic.

At present all trunk roads and motorways are toll-free. However the government has said that a green paper to be published this spring will propose charges on these routes to help meet the cost of the road programme.

The strong cashflow from tolls would for the first time raise the possibility of privatising the network, either through an outright sale or through a form of franchising. Officials stress that the plans are at an early stage and no timescale has been set.

News of the proposals comes days after the approval by the German ruling coalition of plans to privatise its 7,000-mile autobahn network .

The plans have provoked a furore among German motorists because they would be accompanied by the introduction of user fees which would be put towards the cost of restructuring the heavily-indebted railways.

Although there are some privately-built toll roads in Europe, particularly in France, no country has yet moved towards the privatisation of all or part of its national road network.

Britain has recently taken hesitant steps towards encouraging the private sector to design and build toll motorways, but so far these have made little progress. Only one project, the Birmingham Northern Relief Road, has yet been agreed and still has to go through the planning process.

Britain's road network will be the last significant part of the national transport infrastructure to remain in state hands when the planned privatisation of the railways is complete.

Critics of British transport policy have frequently suggested that the Department of Transport is biased towards roads because this is the only form of transport for which it retains executive responsibility.

With roads hived off to a separate executive agency, the Transport Department's only remaining responsibility would be for the strategic planning of the national road network.

There are already more than 80 executive agencies providing government services such as the payment of benefits and vehicle licensing. Each is headed by a chief executive who is given considerable freedom to manage the agency within a framework of objectives set by the sponsoring department.

GB United Kingdom, EC P4785 Inspection and Fixed Facilities P9621 Regulation, Administration of Transportation GOVT Government News P4785 P9621 The Financial Times London Page 1 518
Clinton tax plan targets high executive pay Publication 930212FT Processed by FT 930212

President Bill Clinton told business leaders at the White House yesterday that he intends to propose not only increasing taxes on US corporations but also penalising more extravagant executive salaries. It was time, he declared, for 'you to do your part'. The night before Mr Clinton had flown to Detroit on Air Force One (picture above) for his first televised presidential 'town meeting', where he argued that sacrifice had to be shared fairly. The president has often spoken of the need for shared sacrifice to cut the federal budget deficit. He pointed yesterday to 'the enormously increased rate of executive compensation'.

Report, Page 18; Message straight to the people, Page 6

US United States of America P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 1 143
Bank chief warns against further cuts in rates Publication 930212FT Processed by FT 930212 By PETER MARSH FRANKFURT

A WARNING against further cuts in interest rates came yesterday from Mr Eddie George, deputy governor of the Bank of England who becomes governor in July.

He also fired a shot in a war of words with the City by criticising 'supposed pundits' from financial markets who complained that UK monetary policies lacked credibility.

In his first policy address since his promotion last month, Mr George set out a wide-ranging view of how he intends to guide monetary policy with a 'total commitment' to price stability.

He poured scorn on suggestions that the Bank was at odds with ministers over the correct way to lift the UK from recession and said that inflation was under control.

Mr George also said a premature move to a single European currency and central bank would involve 'serious economic risks' ahead of greater convergence of economic conditions across the continent.

He said, in response to questions, it would be 'at least nine to 15 months' before sterling rejoined the European exchange rate mechanism.

However, Mr George's robust speech in Frankfurt failed to lift the pound, which after recent heavy selling remained weak last night. It also prompted rejoinders from some City commentators who said his comments did little to quell scepticism about how much the Treasury and Downing Street listened to the Bank before setting interest rates.

Last night the pound closed in London against the D-Mark down 1 pfennig at DM2.3525, close to its all-time low. Sterling also lost ground against the dollar, closing down nearly 1 cent at Dollars 1.4185. In New York, it closed at DM2.3520 and Dollars 1.4175.

Mr George's speech was designed to counter speculation about rifts in policymaking, principally involving Mr John Major, the prime minister, and Mr Norman Lamont, the chancellor. Many in the markets believe Mr Major wants to cut rates quickly to spur demand, with Mr Lamont and the Bank urging caution because this could trigger inflation.

Mr George said the value of the pound would not be neglected. Since sterling's departure from the ERM last September it has lost 15 per cent of its value.

The 4-percentage point cut in interest rates since September to 6 per cent was 'fully justified' by the need to boost demand but keep inflation low, he said.

Mr Hans Tietmeyer, vice-president of the Bundesbank, said people should not expect too much in the way of money-market interest rate cuts at present. He said last week's Bundesbank cuts in the Lombard and discount rates did not sound the all-clear for stability in Germany.

Speech, Page 8

Joe Rogaly, Page 16

Temptation that must be resisted, Page 17

Lex, Page 18

Currencies, Page 29

London stocks, Page 38

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis George, E Deputy Governor Bank of England P9311 The Financial Times London Page 1 494
World News In Brief: Polar explorers airlifted out Publication 930212FT Processed by FT 930212

Exhausted explorers Sir Ranulph Fiennes and Dr Michael Stroud ended their attempt to make the first unsupported crossing of the Antarctic from ice shelf to ice shelf when they were airlifted out. Both were suffering from frostbite and exhaustion.

AQ Antarctica P7999 Amusement and Recreation, NEC PEOP Personnel News P7999 The Financial Times London Page 1 69
Stock & Currency Markets Publication 930212FT Processed by FT 930212

------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------ FT-SE 100: 2,834.3 (+17.9) Yield 4.32 FT-SE Eurotrack 100 1,126.71 (+5.21) FT-A All-Share 1,381.00 (+0.5%) FT-A World Index 142.36 (+0.3%) Nikkei closed New York: Dow Jones Ind Ave 3,422.69 (+10.27) S&P Composite 447.66 (+1.43) ------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------ Federal Funds: 3% (2 13/16%) 3-mo Treas Bills: Yld 2.972% (2.983%) Long Bond 105 7/32 (104 15/32) Yield 7.191% (7.25%) ------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------ 3-mo Interbank 6 3/16% (6 1/4%) Liffe long gilt future: Mar 100 15/16 (Mar 101 13/16) ------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------

Brent 15-day (Apr) Dollars 18.45 (18.40) ------------------------------------------------------------ Gold ------------------------------------------------------------ New York Comex (Feb) Dollars 332.2 (333.4) London Dollars 331.75 (330.15) ------------------------------------------------------------ STERLING ------------------------------------------------------------ New York: Dollars 1.4175 (1.42365) London: Dollars 1.4185 (1.4275) DM 2.3525 (2.3625) FFr 7.95 (7.995) SFr 2.1775 (2.19) Y 170.5 (172.5) Pounds Index 76.0 (76.4) ------------------------------------------------------------ DOLLAR ------------------------------------------------------------

New York: DM 1.6575 (1.6605) FFr 5.607 (5.6146) SFr 1.5355 (1.5385) Y 121.2 (121.235) London: DM 1.658 (1.655) FFr 5.605 (5.6) SFr 1.5355 (1.534) Y 120.25 (120.9) Dollars Index 66.9 (67.0) Tokyo open Y 120.75 ------------------------------------------------------------

XA World P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 219
Queen will pay taxes on personal income Publication 930212FT Processed by FT 930212 By ALISON SMITH and JOHN AUTHERS

THE QUEEN and the Prince of Wales are to pay tax on their personal income 'in the same way as every other taxpayer', Mr John Major announced yesterday.

For the first time, the sovereign will also be liable for capital gains tax and inheritance tax, with the important exception that inheritance tax will not apply to the transfer of assets from the Queen to her successor.

The prime minister emphasised the move was at the Queen's initiative. It was announced in principle in November after public unease over the cost and behaviour of the royal family.

Lord Airlie, Lord Chamberlain and head of the Queen's household, said the move would place a 'considerable additional burden' on the Queen's finances.

He said the Queen had acted to ensure the monarchy developed with the times, particularly during a period of recession. The recent emphasis on royal wealth had tended to obscure the Queen's contribution to national life, and this - not the embarrassing publicity surrounding the Queen's children - had prompted the change.

Commenting on estimates of her private funds ranging from Pounds 100m to billions of pounds, Lord Airlie said: 'Her majesty has authorised me to say that even the lowest of these estimates is grossly overstated.'

The prospect of a continental European-style monarchy appears to have receded. Lord Airlie said the additional costs could 'be met without compromising the standards and style which are expected of the Queen'. Tory MPs urged that the change should not amount to a 'cut-price' sovereign.

The new arrangements, set out in a memorandum between the Queen and the government, follow months of talks between the Treasury, the Inland Revenue and the Royal Household.

In his Commons statement, Mr Major said the exact tax figures would be kept secret, but tax would be levied initially at 25 per cent and later at 40 per cent on the income the Queen used for private purposes.

The arrangements on inheritance tax disturbed some MPs. But Mr Major said they were needed to protect the monarchy from the risk of the sovereign's assets being 'salami-sliced' through successive generations.

Tax bill fit for a Queen, Page 8

Observer, Page 17

GB United Kingdom, EC P91 Executive, Legislative and General Government PEOP Personnel News GOVT Taxes P91 The Financial Times London Page 1 401
Leyland Daf strike would force closure, say receivers Publication 930212FT Processed by FT 930212 By KEVIN DONE and ROBERT TAYLOR

THE RECEIVERS for Leyland Daf warned the company's 5,500 UK employees yesterday that any industrial action to try to halt redundancies would force the closure of the entire company.

Workers at the Leyland Daf plants in Lancashire, Glasgow, Oxfordshire and Birmingham were balloted yesterday on possible strike action in a last-ditch move by the unions to try to strengthen their ability to negotiate better redundancy terms.

Mr Murdoch McKillop, one of the joint administrative receivers, warned in a letter to all employees that the alternatives facing the company were 'either to save cost by actioning the redundancies or to close the whole business down'.

The receivers said the workforce would be cut 'in the near future' by 30 per cent across the company, implying the imminent loss of about 1,650 jobs.

Mr McKillop warned that 'if there is strike action then all 5,500 jobs with Leyland Daf will most likely be lost, with a knock-on effect to suppliers'.

Leyland Daf is the UK subsidiary of Daf, the beleaguered Anglo-Dutch commercial vehicle maker, which collapsed into receivership last week with total debts of more than Fl 3bn (Pounds 1.1bn) and after running up losses of more than Fl 800m in the past three years.

The company has a total workforce of 12,650, and the Dutch administrators for Daf in the Netherlands warned earlier this week that more than half of the 6,500 jobs in the Netherlands and in Belgium would have to be cut.

Workers at all the Leyland Daf plants agreed by substantial majorities at mass meetings yesterday morning to hold immediate secret ballots to win support for possible strike action against the company in a move to try to strengthen the bargaining hand of the workforce in achieving better redundancy terms.

The results of the ballots will be announced this afternoon.

The workforce is not expected to take strike action, but the unions have been advised that once any workers have been made redundant they cannot lawfully strike or pressurise the company in other ways.

Union leaders were aware after their talks with the receivers on Wednesday that redundancies were imminent, and decided to take co-ordinated action in a pre-emptive move to try to improve the redundancy terms of workers now facing dismissal in the first wave of job cuts.

Mr Karel van Miert, the European commissioner for competition policy, said yesterday the EC would investigate any government subsidies offered to bail out Daf. He said the EC had approved state aid for the motor industry in the past as long as the cash was matched by cuts in capacity.

He told the European parliament that his staff was monitoring plans to salvage the core Daf truck operations in a new company, New Daf.

He also raised the possibility of giving aid from the EC Social Fund to help alleviate the social consequences of Daf's collapse. 'The Commission can intervene by means of the European Social Fund with measures designed to help employment stability and to develop new employment possibilities,' he said.

Union leaders pointed to the contrast between the cash compensation redundant Daf workers will receive in the Netherlands and the amounts UK workers can expect now that the company is in receivership.

Europe's car sales tumble in January Page 2

Sales of UK trucks and vans falter Page 9

Letter Page 16

GM improves Page 19

GB United Kingdom, EC NL Netherlands, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories P9611 Administration of General Economic Programs COMP Company News PEOP Labour GOVT International affairs P3711 P3713 P3714 P9611 The Financial Times London Page 1 626
Delors criticises devaluations Publication 930212FT Processed by FT 930212

MR Jacques Delors, European Commission president, yesterday attacked 'wildcat' devaluations, which he said were undermining confidence in the European exchange rate mechanism. Currencies which left the ERM raised 'serious questions' about the future of the European monetary system.

Report, Page 2

QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy GOVT International affairs P9311 The Financial Times London Page 1 70
World News in Brief Indonesians may buy Ravenscraig Publication 930212FT Processed by FT 930212

An Indonesian company is frontrunner to buy Scotland's Ravenscraig steelworks, according to British Steel, which said PT Gunawan Dianjaya would ship the equipment to the Far East.

GB United Kingdom, EC P331 Blast Furnace and Basic Steel Products RES Facilities P331 The Financial Times London Page 1 60
Foreign Exchanges: The flight into yen continues Publication 930212FT Processed by FT 930212 By JAMES BLITZ

THE YEN came close to testing its all-time high against the US dollar yesterday on speculation that finance ministers from Japan and the US would discuss reducing the huge Japanese trade surplus this weekend, writes James Blitz.

For the third day running, the yen gained new ground against most other currencies in heavy trading. It closed at Y72.46 per D-Mark from a previous Y73.00 on what one dealer described as the most turbulent day in his dealing room this year.

Its performance against the dollar was even stronger, helped by lacklustre US retail sales figures. The dollar closed in London at Y120.2, down from Y120.9. At one stage it was as weak as Y119.5, near to the historic low of Y119.0 set last year. It picked up in New York to end at Y121.2

The yen also continued its extraordinary performance against sterling, ending at Y170.5 to the pound, up Y2, its third consecutive day of registering an all-time high. For British importers of Japanese goods, the exchange rate of Y234.25 recorded the day after the UK general election last year must seem a world away.

The flurry of yen buying began after Mr Thomas Foley, the speaker of the House of Representatives, said he thought that President Bill Clinton might favour policies aimed at strengthening the Japanese currency.

US Treasury officials later played down the possibility that an accord on reducing the Japanese trade deficit might be reached when Mr Lloyd Bentsen, the US treasury secretary, meets the Japanese finance minister this weekend.

Mr Steven Hannah, a director of IBJ International in London, said the current flight into the yen was similar to one which took place last year, when words from politicians failed to be backed up by actions. 'There is still a risk that interest rates in Japan can fall further,' he said, believing that the current rally would be hard to sustain.

However, Mr Jeremy Hawkins, vice-president of Bank of America in London, said the market could test the yen's record high against the dollar again. 'With the difficulties over the Gatt talks and the US embargo on steel imports, trade issues are taking up an increasing amount of the market's attention,' he added.

Trading inside the European exchange rate mechanism remained quiet and the French franc finished at FFr3.379 against the D-Mark from a previous FFr3.383. However, omens of tension continued to be seen in the background.

In Frankfurt, Mr Hans Tietmeyer, the Bundesbank vice-president, spoke in favour of 'limiting to greater extent recourse to foreign currency market intervention'.

In Paris, the Director of the French Bankers' Association said banks are now losing FFr300m a month with base rates at 10 per cent and the cost of money at 12 per cent. He added that French base rates may have to rise.

JP Japan, Asia US United States of America GB United Kingdom, EC FR France, EC QR European Economic Community (EC) P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 29 519
Commodities and Agriculture: Moment of truth arrives for Opec - Oil traders are waiting to see if producer backing for a substantial output cut is more than just brave talk Publication 930212FT Processed by FT 930212 By DEBORAH HARGREAVES

WHEN MINISTERS from the Organisation of Petroleum Exporting Countries meet tomorrow in Vienna, they will be faced with tough decisions on cutting oil output if they are to fulfil expectations of traders in the oil market. The traders are looking for a cut of at least 1m barrels a day in production and will push prices down in a spiral of disappointment if that is not agreed.

But ministers may be encouraged in their discussions by the similarities between the market situation now and during the same period last year. Then, in a similar pattern to this year, oil prices slumped in the first quarter, forcing the producers' club to cut back its output ceiling by 1m b/d.

Discord at last year's meeting caused much criticism of the deal, but demand held up later in the quarter and prices firmed.

Opec cannot afford to be too complacent, however, as market expectations of a substantial cut in output are high. Mr Joe Stanislaw, managing director of Cambridge Energy Research Associates said this week that prices could fall by as much as Dollars 2 a barrel if Opec members failed to institute a production cut of 1m b/d.

The market is looking to Opec to rein in output to about 23.5m b/d, a cut of just over 1m b/d from the present ceiling of 24.58m b/d. But since members are producing some 25m b/d, they will have to cut actual output further.

Mr Stanislaw said: 'the market no longer has any confidence in Opec to come up with an agreement that they will abide by. . . if they don't deliver (the 1m b/d cut), the market will give no credence to what they say'.

Prices tumbled in the first quarter as market traders saw that Opec nations were not sticking by their November accord to cut output. But prices have been stronger in recent weeks following an initiative by Opec president, Mr Alirio Parra, who is Venezuela's minister of energy and mining, to persuade his colleagues to agree a cut.

Mr Parra's tour of Opec capitals produced a strong show of political will for a production cut; but this must now be followed through with a tight accord.

Mr Geoff Pyne, oil analyst at UBS Phillips and Drew, the London brokers, believes the political will among members is good, but the arithmetic remains tricky. He is more optimistic about oil demand and believes the market can absorb just over 24m b/d in the second quarter as US consumption picks up.

He expects US demand to improve by almost 2 per cent this year as recovery gets under way, but world demand will still be slow to pick up, rising by no more than 1 per cent for the year.

Mr Youssef bin Omeir bin Youssef, United Arab Emirates' oil minister expressed Opec's high hopes of a price recovery yesterday when he said a 1m b/d cut in output for the second quarter would be enough to raise oil prices by at least Dollars 1 a barrel.

The hopes of market traders and member nations are high: Opec now faces the tough bargaining that must accompany any cut in production.

QN Organisation of Petroleum Exporting Countries P1311 Crude Petroleum and Natural Gas MKTS Production CMMT Comment & Analysis P1311 The Financial Times London Page 28 591
World Commodities Prices: Fruit & Vegetables Publication 930212FT Processed by FT 930212

Cape seedless grapes at Pounds 1.50-1.60 a lb (Pounds 1.60-1.80) and seeded varieties at Pounds 1.75-1.95 a lb (Pounds 2.00-2.50) are plentiful this week reports FFVIB. Lemons at 15-25p each (15-25p) and Naval oranges at 10-30p each (10-30p), depending on size, remain superb fruit buys. Button mushrooms at 60-80p a 1/2 lb (60-80p) and breakfast mushrooms at 60-70p a 1/2 lb are this week's best veg buys. Another good buy is Savoy cabbage at 25-35p a lb (25-35p). Tomatoes at 50-65p a lb (60-70p), Round lettuce at 25-30p each (25-30p) and celery at 50-65p a head (50-65p) round off this week's best buys.

GB United Kingdom, EC P016 Vegetables and Melons P017 Fruits and Tree Nuts COSTS Product prices MKTS Market data P016 P017 The Financial Times London Page 28 141
Commodities and Agriculture: Chromium price fall hits Albanian revival plan Publication 930212FT Processed by FT 930212 By KENNETH GOODING, Mining Correspondent

ALBANIA'S ATTEMPTS to attract foreign investment into its chromium industry, which until 1990 accounted for about 5 per cent of world production, are being frustrated by a collapse in the metal's price.

A dozen companies, including some from Germany, Italy, Japan, and South Africa, have shown interest in joint venture proposals to revitalise the industry, according to the European Bank for Reconstruction and Development, which is advising the country.

But, when the deadline for bids passed at the end of January, some asked for more time in view of the uncertainties caused by the price dropping by half in the past year because of a surge in exports from Kazakhstan.

Samancor of South Africa, the world's biggest chromium producer, which held talks over two years with Albania, no longer seems interested because of present market conditions, which have forced it to consider cuts in its production and workforce, according to Mr Mario Gobbo, a member of the European Bank's merchant banking team. Also Ilva, the Italian steel group, has asked for more time because of its own financial problems.

Mr Gobbo said Albania was still open to new approaches. He hoped to see more from Japan and some from Taiwan.

Albania's government was pressing for a decision by the end of this month but the European Bank is recommending that a deadline at the end of April would be more realistic.

Albania, a country not quite as big as Belgium, has a population of about 3.5m. Some 13,000 are employed in the chromium industry - at chromite mines scattered across the country and the two smelters, at Elbasan and Bureli. Independent observers estimate the industry could operate with one-third of its present workforce if modern equipment and methods were employed. However, labour costs are low, equivalent to Dollars 30 a month for each miner.

The smelters, each capable of producing 35,000 tonnes of chromium a year, are of an old North Korean design with exceptionally poor working conditions and they cause tremendous pollution.

Albania envisages a joint venture in which it would contribute assets while a foreign partner put up capital, particularly to modernise the smelters.

AL Albania, East Europe P3339 Primary Nonferrous Metals, NEC P1061 Ferroalloy Ores, Ex Vanadium COSTS Product prices GOVT Government News P3339 P1061 The Financial Times London Page 28 404
Commodities and Agriculture: Mixed outlook for Australian exports Publication 930212FT Processed by FT 930212 By EMILIA TAGAZA MELBOURNE

AUSTRALIA'S COMMODITY exports face mixed prospects in the next five years, with mineral and energy resources providing the main boost to the sagging economy.

The official forecasting agency, the Australian Bureau of Agricultural and Resource Economics, says the minerals sector will see a reasonable improvement in prices in the medium term while prices of agricultural commodities will stay relatively flat, then start to drift down again after 1995.

Mr Brian Fisher, executive director of Abare, told an annual forecasting conference last week that Australia's commodity exports in 1992-93 would rise 8 per cent to ADollars 47.4bn, thanks mainly to the weaker Australian dollar.

Minerals would hold their ground in the 1990s, he said, with several major new projects planned or being put into operation this year. These included the world class Yandi and Marandoo iron ore mines, Mt Keith and Yackabindie nickel mines, and Century and McArthur River lead and zinc mines.

Mr Jerry Ellis, executive general manager of BHP Minerals, said that during the last two years, the mineral and energy sector grew 4.2 per cent annually, compared with the average growth of 0.9 per cent of the Australian economy.

Abare expects gold production to fall slightly to 238 tonnes in 1992-93, followed by similar declines in the following two years. However, output should grow strongly to 255 tonnes in 1995. Expenditure in gold exploration in the next three years is expected to remain at the current level of just over ADollars 300m.

Abare also forecasts strong growth in Australian coal exports despite falling prices.

Exports of black coal are forecast to reach 188m tonnes in 2004 from the current rate of 126m tonnes a year, while Thermal coal exports are expected to double in that period to 124m tonnes a year. Asian demand for thermal coal is expected to double from about 96m tonnes in 1996-97 to about 187m tonnes by 2004. Japanese thermal coal imports are also forecast to rise strongly, from 49m tonnes to about 86m tonnes in 2004.

Wheat also has a good outlook despite weaker prices. A few days after Australia was forced to import wheat for the first time in more than 40 years, Abare predicted a 20 per cent increase in planting, expecting to result in a significant increase on this year's harvest of 15.3m tonnes. It said there were several factors causing world demand for wheat to outstrip production.

On the downtrend is wool, of which Australia has an oversupply despite falling production. Abare forecasts that 1992-93 shorn wool production will fall to 837,000 tonnes in 1992-93 from 875,000 tonnes last year.

But Mr Mac Drysdale, chairman of the Australian Wool Corporation, told the Abare conference that if wool was a manufactured product the factory would now be closed.

'We have 3.98m bales in the official stockpile. We have a growing unofficial stockpile where growers are holding wool back in stores on farms. We have a semi-processed stockpile and at the same time we have relatively high production figures in Australia,' Mr Drysdale said.

AU Australia P9611 Administration of General Economic Programs P10 Metal Mining P12 Coal Mining P011 Cash Grains P0214 Sheep and Goats COSTS Commodity prices MKTS Production P9611 P10 P12 P011 P0214 The Financial Times London Page 28 557
Commodities and Agriculture: Brazilian partners sign Dollars 765m copper mine deal Publication 930212FT Processed by FT 930212 By BILL HINCHBERGER SAO PAULO

BRAZIL'S SALOBO mining site should be producing 150,000 tonnes of copper and eight tonnes of gold a year beginning in 1998, according to projections by Companhia Vale do Rio Doce, one of the partners in a joint venture accord to exploit the site that was signed yesterday.

CVRD, Brazil's state-controlled mining concern, and holder of Salobo's mineral rights, will team up with Morro Velho, a leading Brazilian gold mining company that is half-owned by Anglo American. The two companies will control equal shares of the Salobo venture.

The copper deposit is estimated at 1.2bn tonnes of ore. It is located in the Carajas region, in the state of Para, in the Amazon. Development costs are estimated at Dollars 765m. Initial engineering studies will begin immediately and should be completed in 18 months. Overall investment requirements are relatively modest because the site can rely on much of the infrastructure already in place for CVRD's nearby iron ore operations.

The scheme will include an on-site plant to transform the mineral into metal - because of its special composition, the Salobo copper concentrate would have a limited market.

Morro Velho's capacity and willingness to tackle an integrated project weighed heavily in CVRD's decision to choose the company from a list of potential partners, said Mr Helio Blak, CVRD superintendent for development.

Companhia Vale do Rio Doce Morro Velho BR Brazil, South America P1021 Copper Ores P1041 Gold Ores MKTS Production COMP Joint venture RES Facilities P1021 P1041 The Financial Times London Page 28 272
Commodities and Agriculture: Setback for salmon producers' quota plan Publication 930212FT Processed by FT 930212 By JAMES BUXTON, Scottish Correspondent

ATTEMPTS BY Scottish salmon producers to reduce price fluctuations by creating producer organisations to control output suffered a setback yesterday when Sir Hector Monro, Scottish fisheries minister, gave only limited support to the idea.

The Scottish salmon producers, who are now recovering after three bad years in which prices were driven down by vast overproduction of salmon, mainly by Norway, want to set up a number of producer organisations that would restrain production by limiting the number of smolts (young salmon) which could be put in the sea through quota restrictions on individual farmers.

The Scottish Salmon Growers Association said yesterday that Norway, Ireland and Faroe were also keen to set up associations.

Although recommendations on each country's production would be voluntary to avoid the accusation of being an international cartel, the smolt quotas set by individual producer organisations would be mandatory and would cover both members and non-members.

For this reason the producers need the UK government to endorse the scheme for the approval of the European Commission, and bring in legislation or statutory instruments to make the organisations' decisions mandatory.

However Sir Hector said that while he supported the creation of voluntary producer organisations, the government did not want to see compulsory bodies.

GB United Kingdom, EC P0273 Animal Aquaculture P8611 Business Associations MKTS Production MGMT Management P0273 P8611 The Financial Times London Page 28 246
World Commodities Prices: Market Report Publication 930212FT Processed by FT 930212 By REUTER

New York arabica COFFEE was broadly higher at midday after rallying on what traders said was heavy trade short covering in the spot March contract. London's robusta COFFEE closed with sharp gains of Dollars 38 to Dollars 49 a tonne as the market remained very volatile. There was little consensus about the market's next move after the recent large price swings. On the LME most markets were steady in a pretty featureless day. Physical offtake of COPPER in Europe is extremely slow, which is restricting interest and outweighing the positive implications of improved US economic data. Also, shipments of CIS copper remain high. ZINC has lost upward momentum with no further production cuts emerging, and dealers believe the market could revert to the dull range seen for most of January between Dollars 1,060 and Dollars 1,080 a tonne. Three-month NICKEL was unable to hold above Dollars 6,100 a tonne. But overall technicals are more constructive after recent investment fund interest, dealers said.

Compiled from Reuters

GB United Kingdom, EC P0179 Fruits and Tree Nuts, NEC P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices MKTS Market data P0179 P3339 P6231 The Financial Times London Page 28 212
Commodities and Agriculture: Wider market for venison Publication 930212FT Processed by FT 930212 By JAMES BUXTON

WILD VENISON, hitherto confined largely to the tables of the upper classes, has begun appearing on the shelves of British supermarkets.

The Safeway supermarket group, which launched it last month, is invoking the cause of nature conservation in its support. It has introduced a range of venison products made from red deer stalked and shot in the Scottish Highlands, claiming to be the first supermarket chain to market wild venison.

It says it wants to broaden the diet of the British public and also help reduce the population of red deer, which have become a serious problem in parts of the Highlands.

The Scottish red deer population has expanded rapidly in recent years because of warmer winters and insufficient culling by landowners. In places deer are preventing the regeneration of pine forests and invading farmland.

Conservationists have been urging landowners to step up their annual deer cull in over-populated areas. But the incentive to cull has been reduced in the past three years by the collapse of venison prices.

Safeway Stores GB United Kingdom, EC P5411 Grocery Stores P0971 Hunting, Trapping, Game Propagation TECH Products MKTG Marketing P5411 P0971 The Financial Times London Page 28 211
Commodities and Agriculture: EC ministers in fresh attempt to end banana row Publication 930212FT Processed by FT 930212 By DAVID GARDNER BRUSSELS

EUROPEAN COMMUNITY farm ministers will tonight make another attempt to reach final agreement on the new banana regime they endorsed in principle last December.

After a meeting which began on Tuesday and ran into Thursday morning, the ministers failed to sign off on measures which would set a quota for cheap Latin American banana imports of 2m tonnes, with an Ecu850 per tonne tariff on imports above that level.

In December, Germany and Denmark - which at present occupies the EC presidency - opposed the new regime, but the Netherlands and Belgium have since raised objections.

In an acrimonious meeting this week, UK agriculture minister Mr John Gummer accused the Dutch and Belgians of reneging on their commitments, while EC farm commissioner Mr Rene Steichen was prepared to keep ministers in Brussels until the March 1 deadline for legal endorsement.

Germany will certainly vote against the new regime anyway. But to meet the objections of its allies, the commission said it would:

Agree upward adjustments of the quota, in line with market demand, on a regular basis;

Give assurances that traditional importers of Latin American bananas would not be prejudiced by the new licensing system in the proposals;

And regard any significant price rise as an indication of a shortage which would require a review of the import regime.

QR European Economic Community (EC) P0179 Fruits and Tree Nuts, NEC P9641 Regulation of Agricultural Marketing GOVT International affairs P0179 P9641 The Financial Times London Page 28 267
Commodities and Agriculture: Palladium hits 32-month high on Japanese buying Publication 930212FT Processed by FT 930212 By KENNETH GOODING, Mining Correspondent

THE PRICE of palladium, a metal used mainly in consumer electrical goods and as a dental alloy for filling teeth, yesterday reached Dollars 119 a troy ounce - its highest level for 32 months.

Two reasons were suggested by traders and analysts: concern about supplies from Russia, which accounts for about half the world's palladium output; and speculative activity on the Tokyo Commodity Exchange, which launched a palladium futures contract in August last year.

Traders suggested that the price could reach Dollars 120 an ounce this week, and possibly Dollars 125 an ounce by the time Tocom's February palladium futures contract expired on February 24. They predicted, however, that it would then quickly drop back.

Traders said the price 'spike' was being caused by speculators who had sold palladium they did not own in the hope of buying it later at a lower price scrambling to obtain metal to cover their obligations.

Ms Rhona O'Connell, analyst at Williams de Broe, part of Banque Bruxelles Lambert, said that, apart from the Tocom activity, market sentiment was being influenced by the fact that contract negotiations between Russia and Japanese palladium users had been delayed two months. This suggested something was wrong in Russia where supplies had fallen by 15 per cent last year and were likely to fall again in 1993. Also the interest rate on leased palladium had risen to more than 10 per cent, which indicated supplies were tight.

Last November Johnson Matthey, the world's biggest platinum marketing group, estimated 1992 palladium demand would rise by 2.9 per cent to 3.86m ounces while supply would fall by 4.1 per cent to 3.75m, giving a supply shortfall of 110,000 ounces.

However, Mr Neil Carson, JM's marketing director, platinum, pointed out yesterday that this followed two years of oversupply. 'There is no real shortage of palladium, there is plenty about.' JM believed there were no supply hitches in Russia but exports were being held up by bureaucrats who did not understand the workings of the precious metals markets.

XA World P1099 Metal Ores, NEC COSTS Commodity prices P1099 The Financial Times London Page 28 372
Government Bonds: Successful auction spurs US prices Publication 930212FT Processed by FT 930212 By PATRICK HARVERSON and SARA WEBB NEW YORK, LONDON

US Treasury prices rose sharply across the board yesterday following an unexpectedly successful auction of 30-year securities.

In late trading the benchmark 30-year government bond was up 13/16 at 105 13/32 , yielding 7.176 per cent, a substantial turnround from earlier in the day when the 30-year issue had been 3/16 lower. Prices at the short end of the market also received a substantial boost from the auction, with the two-year note up 3/16 at 100 1/8 to yield 4.166 per cent.

After Wednesday's unexpectedly poor 10-year auction, dealers and investors began the day in a cautious mood, wary of getting caught by a disappointing 30-year sale. Consequently, prices at the long end of the market were lower until midday as participants held off until after the sale.

The auction, however, subsequently proved to be a big success, with the bid-to-cover ratio (the measure of demand) on the 30-year issue coming in strongly at 2.63:1, the highest since November 1987. The new securities were eventually tendered at an average yield of 7.22 per cent, which was also the highest yield at which the securities were awarded to bidders.

UK government bonds fell up to half a point yesterday on sterling weakness, inflation worries and fears that further interest rate cuts may be delayed.

Long-dated gilts fell half a point, while short-dated paper lost a quarter point yesterday. Dealers said market sentiment was not helped by comments from Mr Eddie George, deputy governor of the Bank of England, who warned against further cuts in interest rates.

The March gilt futures contract settled 9/16 down at 100 15/16 on volume of 43,328 lots.

ITALIAN government bonds experienced another volatile day as rumours circulated in the market that Prime Minister Giuliano Amato was under investigation on corruption charges.

The bond market started on a strong note, gaining about three-quarters of a point, but then tumbled as the rumours circulated, although they were later denied. Mr Claudio Martelli, the justice minister, was forced to resign on Wednesday when it emerged that he was under investigation.

On Liffe, the March BTP contract ended 20 basis points down at 95.60.

ELSEWHERE in Europe, German government bonds edged higher after trading in a narrow range. The Liffe bund futures contract opened at 93.31 and traded between 93.28-93.48 before ending at around 93.42. Spanish government bonds ended little changed, but dealers said attention would be focused on today's repurchase tender to see whether there was an easing in interest rates.

JAPANESE government bonds rose in London trading as the yen strengthened against the US dollar.

Although the Tokyo market was closed for National Foundation Day, bond prices climbed in London trading with the yield on the benchmark No 145 JGB moving from 4.235 per cent to end at around 4.215 per cent.

JP Japan, Asia US United States of America GB United Kingdom, EC IT Italy, EC ES Spain, EC DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 27 523
International Capital Markets: New Citibank loans index Publication 930212FT Processed by FT 930212 By TRACY CORRIGAN

CITIBANK has designed a US corporate loan index to provide an effective means of performance measurement, in a market which is becoming more actively traded.

In the past few years, banks have become more active in their management of loan assets, sometimes as a result of efforts to offload distressed debt or to control credit risk.

The Citibank Loan Index comprises 1,000 floating-rate revolver and term loans to over 600 companies, representing commitments of around Dollars 400bn.

US United States of America P602 Commercial Banks TECH Products TECH Services P602 The Financial Times London Page 27 111
International Capital Markets: Citibank designs index for US corporate loans Publication 930212FT Processed by FT 930212 By TRACY CORRIGAN

CITIBANK has designed a US corporate loan index to provide an effective means of performance measurement, in a market which is becoming more actively traded.

Around Dollars 350bn is raised through the US corporate loan market every year, while turnover in the secondary market currently totals around Dollars 14bn per year. Trading volume is estimated to be growing at an annual rate of 15 per cent, according to Mr Rod Ballek, managing director of portfolio management at Citibank, who helped design the index.

However, unlike other types of corporate debt, such as commercial paper and bonds, corporate loans have not been seen as part of a fund manager's investment portfolio until recently.

In the last few years, banks have become more active in their management of loan assets, sometimes as a result of efforts to offload distressed debt or to control credit risk.

The Citibank Loan Index comprises 1,000 floating-rate revolver and term loans to over 600 companies, representing commitments of around Dollars 400bn.

US United States of America P602 Commercial Banks TECH Products TECH Services P602 The Financial Times London Page 27 201
International Capital Markets: SFA to think again on futures fund trading advisers Publication 930212FT Processed by FT 930212 By TRACY CORRIGAN

THE treatment of futures fund trading advisers is to be re-considered by the executive committee of the Securities and Futures Authority after the UK regulator's capital committee failed to reach agreement on the issue last week.

Earlier this week, three representatives of the futures fund industry met SFA officials to put their case for a change in what they argue are onerous requirements for small trading advisers, whose business is being driven offshore as a result.

While the SFA made it clear that their original request for a separate classification of futures fund trading advisers (commonly known as CTAs or commodity trading advisers) will not be met, the SFA is considering relaxing its capital rules for trading advisers.

Currently, trading advisers are treated in the same way as arranging brokers who have some discretion over funds but do not handle clients' assets. Consequently, they face more onerous requirements than advisory firms.

However, the SFA's executive committee will consider whether to change the current requirement of Pounds 10,000 in liquid assets to a net asset test. Essentially, this would allow futures fund advisers to include money of their own invested in their funds to count towards capital, according to SFA officials.

If such a change is made, the SFA may also demand greater disclosure of past records of trading advisers.

The amount of money in futures funds and managed accounts around the world is estimated at around Dollars 20bn, according to Tass Management, a specialist tracking firm. However, the bulk of the market is in the US, with only some Dollars 2bn managed in Europe.

Those familiar with the industry are concerned that the futures fund business will develop in offshore centres rather than in the UK, if regulatory requirements prove too onerous.

Mr Peter Moon, of Royston Investments, one of the three industry representatives who saw the SFA this week, said he was extremely disappointed by the meeting. 'This is such a small step and one they seem to be taking reluctantly,' he said. 'They are not really looking at the issue of how to expand this industry.'

GB United Kingdom, EC P6282 Investment Advice TECH Standards MKTS Market data P6282 The Financial Times London Page 27 387
International Bonds: Ireland's DM1.5bn paper attracts retail investors Publication 930212FT Processed by FT 930212 By RICHARD WATERS

THE Republic of Ireland became the latest EC member state to borrow in D-Marks yesterday, adding to its foreign exchange reserves after the unsuccessful rear-guard action to shore up the punt last month.

The republic's DM1.5bn issue of 10-year bonds, increased from an initial DM1bn, was widely seen as a success when set against the Kingdom of Spain's DM4bn, 10-year issue last week.

Although an AA3/AA- credit, compared with the AA2/AA of Spain, Ireland's bonds were launched with a yield 24 basis points above the benchmark government bond, marginally tighter than the 25 basis point spread on the Spanish bonds. Spain's issue had already tightened from a 31 basis point yield spread at the time of launch a week earlier.

Deutsche Bank, which led the issue and took two thirds of the bonds on to its own books, said demand had been strong from both German and Swiss retail investors, while other banks involved in the deal also reported good demand from Germany. Late in the day, Deutsche was bidding 100.15 for the bonds, above the reoffered price of 100.06.

While a queue of sovereign and supranational issuers continued to be rumoured in D-Marks, among them Belgium, Denmark and the European Community, the autonomous Spanish region of Andalucia was the only borrower to declare definite plans to come to the market next week. The region, which has not been to the international market before, plans to issue DM300m of five-year bonds at a yield spread of 75-80 basis points. Andalucia carries an AA3 rating from Moody's, and expects to return to the market later in the year to help fund its Pta130bn borrowing programme.

The EC, meanwhile, turned to the Ecu bond market yesterday for the first part of its exercise to fund its recently agreed loan to Italy. Following Finland's Ecu500m issue on Monday, this was only the second big Eurobond issue since the turmoil in the European exchange rate mechanism took hold last summer.

The EC's issue, which sold out quickly, thanks mainly to the quality of the name, was widely seen as a better test of sentiment in the Ecu bond market than Finland's offer. Its success led to suggestions that other borrowers will use the currency in the coming weeks, although its long-term future was still open to question.

The yield on Ecu bonds yesterday was around the same level as the theoretical yield on the basket of currencies that make up the Ecu, a recovery from the depths of the market last autumn, when the yield was some 40 basis points above the theoretical level.

The EC's three-year bonds were brought with a yield of 7.785 per cent, four basis points above the UK's three-year Ecu notes auctioned last week, and held their level in later trading.

Ford Motor Credit Company launched a Dollars 1bn global issue through Goldman Sachs, though the bonds were said to have met demand almost exclusively from the US. Early price talk, indicating a yield spread of 78-80 basis points over five-year Treasuries when the bonds are priced today, was said to have attracted almost no interest in the international market.

'Not many people are interested in a single-A US car company,' commented one banker, who said he had taken no orders at all outside the US. Good demand from inside the US, though, led the indicated yield spread down to 75-77 basis points later in the day.

Meanwhile, continuing expectations of early cuts in UK interest rates brought a further Pounds 100m of reverse floating-rate notes, which pay a higher yield as interest rates fall.

The three-year issue, which takes the total in the past two weeks to Pounds 700m, was launched by Samuel Montagu through a special purpose vehicle, Thames Investments. The paper was backed by Pounds 100m of three-year gilts with a coupon of 13 1/4 per cent: coupon payments from these gilts will be used to pay interest on the floating-rate notes.

The structure, which relied on the bank's ability to buy a tranche of high-coupon gilts in the market at a low price, due to the intrinsic lack of demand for such paper, enabled Samuel Montagu to offer terms which were slightly better than those typically seen so far: a return based on 12 3/4 per cent minus six-month Libor, rather than 12 3/8 per cent, and an initial minimum coupon of 7 1/8 per cent, rather than 7 per cent.

The Republic of Colombia is preparing to return to the international market for the first time since the debt crisis in the early 1980s.

However, Colombia has never defaulted on commercial bank debt, although it has stretched the maturity of some loans.

Bankers Trust has won the mandate to arrange a Dollars 100m-Dollars 150m offering of five-year Eurobonds, with an option for distribution in the US private placement market.

The deal is expected to be launched in late March or early April.

XA World P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 27 853
International Company News: National Semi tries to pull out of a death spiral - The US semiconductor company is taking steps to end its decline and make a come-back Publication 930212FT Processed by FT 930212 By ALAN CANE

National Semiconductor is fighting its way out of a death spiral, according to Mr Gil Amelio, president and chief executive.

Under the buccaneering leadership of Mr Amelio's predecessor, Mr Charles Sporck, National Semi was the epitome of the rough, tough US semiconductor company. Its strategy was simple: to drive down costs and prices and push up market share.

But since the mid-1980s, it has been in decline. It had expanded ambitiously in areas of semiconductor production which became suddenly unfashionable. It has been eclipsed in memory chips by the Japanese and in microprocessors by its compatriots Intel and Motorola. Last year, National Semi lost Dollars 117m before tax from continuing operations on sales of just over Dollars 1.7bn, its fourth year in the red at both the operating and pre-tax level.

Under Mr Amelio, who took over in early 1991, staff numbers have been trimmed, old and unprofitable plants closed and investment redirected towards fast-growing areas of the market, especially networking products and communications. But Mr Amelio has no illusions about the size of the task remaining. He says: 'Because for so many years we were frankly defocused, frankly unprofitable, it will take time to change perceptions. Over a period of time, I think we will build a new kind of reputation, but I am not so naive as to think I can do it in 18 months.'

Wall Street is taking a sympathetic if scarcely euphoric view of his efforts. The slide in the company's share price, which saw it fall from a high of over Dollars 20 in 1987 to a low of less than Dollars 4 in mid-1990, seems to have halted. It is now hovering around the Dollars 12 mark.

Mr Amelio, 49, is a semiconductor industry veteran who began his career in Bell Laboratories and has since served as general manager of Fairchild Camera's microprocessor division and president of Rockwell Communications Systems.

His manufacturing background proved valuable in diagnosing National Semiconductor's sickness - too many plants making the wrong kind of semiconductors. He explains that in the 1970s, the company's heyday, semiconductors were building blocks, sold in billions to be incorporated into bigger systems. Manufacturers could sell all they could make:

In the 1980s, however, the market changed irrevocably. According to Mr Amelio, National failed to appreciate the transformation. Chips became so complex they resembled complete sub-systems rather than components. The new trick was to build a relationship with the customer so that the use to which the semiconductor was to be put was fully appreciated and the customer's requirements understood.

National did none of those things, and its market share began to slip. 'Unchecked,' Mr Amelio observes of the spiral, 'you crash and burn.' His plan to avoid that involves three measures:

First, he is restructuring the manufacturing base. Three factories have already been sold or closed, and only seven will remain of the 11 currently operating. Those seven, Mr Amelio estimates, will have enough capacity to support a Dollars 5bn turnover company.

Second, it is abandoning its role as a broad-based supplier in favour of concentration on three areas: communication products, analogue devices and microprocessors for personal computer peripherals.

Third, control of the company is being split along product and market lines; separate groups have been established for commodity products and higher value sub-systems.

The restructuring charge for plant and people in 1991 was Dollars 150m. The headcount by the end of the year will be under 24,000, a fall of more than 8,000 in two years. Productivity is rising accordingly. Taking productivity as sales divided by total labour costs, Mr Amelio reckons the best semiconductor houses such as Intel achieve over 3.0. National is presently at 2.7, the aim being to reach 3.0 some time next year.

Spending on research and development is down, however, to Dollars 192m last year, about 11 per cent of sales, from Dollars 225m four years ago. Mr Amelio claims this is the right amount, pointing out he has shifted research and development priorities drastically.

Investment in networking has risen from 9 per cent of the total to 17 per cent. In analogue devices it has gone from 19 per cent to 26 per cent. R&D on commodity products, by contrast, has been cut from 21 per cent to just 5 per cent.

The question remains if National can make an effective come-back without spending the large sums in plant and research its larger competitors are committing. Intel, for example, is spending at a rate of almost Dollars 1bn a year on plant and equipment. National's capital spending last year came to Dollars 189m.

Mr Amelio's optimism is unquenchable, however. 'The explosive growth in the 1980s was in personal computers. In the 1990s it will be in communications. We are going to do our damndest to be at the head of that parade.'

National Semiconductor US United States of America P3674 Semiconductors and Related Devices COMP Company News PEOP Personnel News Amelio, G President and Chief Executive National Semiconductor Corp P3674 The Financial Times London Page 26 879
International Company News: Rand Merchant Bank rises Publication 930212FT Processed by FT 930212 By PHILIP GAWITH JOHANNESBURG

RAND Merchant Bank, the financial services group recently involved in a merger with the assurer Momentum Life, reported increased earnings for the six months to end-December. It plans to increase its dividend.

Net income after tax and contingency reserve transfers rose to R21.5m (Dollars 6.9m) from R13m. Earnings per share rose by 27 per cent to 30 cents. The dividend is increasing to 10.5 cents from 8.5 cents a share. Minus Momentum Life, the increase in earnings per share would have been 23 per cent.

Momentum Life increased premium income by 48 per cent to R420.2m, but this mostly reflected a number of large transactions in single premium income which are unlikely to be repeated. All divisions of Rand Merchant Bank performed satisfactorily.

Rand Merchant Bank ZA South Africa, Africa P6211 Security Brokers and Dealers P6311 Life Insurance FIN Interim results P6211 P6311 The Financial Times London Page 26 166
International Company News: IBM's mainframes enter the microprocessor age - Big Blue is developing two new lines which will be more price competitive Publication 930212FT Processed by FT 930212 By LOUISE KEHOE

International Business Machines plans to bring its traditional mainframe computers into the microprocessor age, significantly reducing their cost and making them more price competitive with 'client-server' networks of desktop computers.

The latest generation of 'micro-mainframes' represents a central element of IBM's strategy to stem the erosion of its traditional mainframe computer market, which is seen by many as the primary cause of the company's financial woes. For 1992 IBM reported net losses of Dollars 4.9bn.

As it struggles to regain the confidence of customers and investors, IBM this week revealed it is developing two new lines of mainframe-power computers built using multiple microprocessor chips similar to those that power desktop computers. IBM's 'classic' mainframe computers will also be re-engineered to use microprocessor chips.

'Our aim is to take a lot of the cost out of the systems, by replacing expensive processing units used in today's mainframe computers with integrated circuit chips,' said Mr Nicholas Donofrio, general manager of IBM's Enterprise Systems division.

One of the new lines will be based on reduced instruction set computing (Risc) microprocessor chips that are currently used in IBM's RS/6000 workstations.

By using several of these chips working in parallel, IBM plans to create mainframe-class computers.

The first of these 'power parallel' computers will be delivered within the next few months, Mr Donofrio said. It will be aimed at technical and scientific applications. However, in about 12 months, IBM will offer similar computers designed for commercial applications, he said.

By gradually increasing the number of microprocessors in these computers, IBM will build a broad product line of computers. Like the company's workstation products, these will run the popular Unix operating system.

The second product line will be based on a microprocessor version of IBM's current S/390 mainframe processor, also using parallel processing techniques. Aimed at IBM's current mainframe customers it will be designed to run existing mainframe applications programs.

In addition, IBM is planning microprocessor-based versions of its 'classic' mainframe designs.

'During the second half of the 1990s, we plan to have an entire mainframe family based on microprocessor technology,' Mr Donofrio said. The planned systems will significantly reduce the cost of mainframe computing, he said.

In the meantime, IBM is attempting to dispel the impression that its traditional mainframe computers are a dying breed by stressing the role that mainframe computers can play in new client-server networks as 'superservers'.

This is hardly a new message. IBM has been trying to redefine the role of the mainframe more favourably for over two years.

However, the company is now planning 'an intense campaign, bringing in real users and software developers' to talk about client-server applications of mainframe computers, Mr Donofrio said.

Also getting new emphasis are the 'open systems' features of IBM mainframes. IBM will bring its proprietary software into line with existing and emerging standards, the company promises, to make it possible to link IBM mainframes to networks of computers from other manufacturers.

The most concrete demonstration of IBM's determination to keep its mainframe sales alive is that customers world-wide will now be able to set the price they are prepared to pay for the latest versions of IBM's mainframes, including the models and upgrades announced this week.

IBM has thrown out the price list that has previously established the starting point for negotiation of selling prices for its mainframes. The move brings IBM's US pricing policy into line with the approach it has taken in the UK for the past three years.

Competitors see the new approach as recognition of existing market conditions in which 'it is probably several years since anybody paid IBM's list price, every prospective customer knows that', according to Hitachi Data Systems, one of IBM's competitors in the mainframe market.

IBM hints it is going to become more aggressive in mainframe pricing. 'We are not going to lose market share,' says Mr Donofrio.

However, the move could backfire. With no list prices, customers will have to get competing bids to ensure that they are getting a fair price, Hitachi suggests.

International Business Machines Corp US United States of America P3571 Electronic Computers TECH Products COSTS Product prices P3571 The Financial Times London Page 26 726
International Company News: Woolworth says it will keep German operations Publication 930212FT Processed by FT 930212 By AP-DJ NEW YORK

WOOLWORTH, the US retailing group, does not plan to sell its general merchandise or specialty store operations in Germany, AP-DJ reports from New York.

The company had announced in November that it was exploring the possible disposal of some or all of its German operations.

Woolworth operates more than 500 stores in Germany through its subsidiaries, including 330 Woolworth general merchandise stores and 190 specialty stores.

The company said its German operations would continue to operate under its present management.

The company also operates 144 Foot Locker athletic footwear and apparel stores in eight countries in Europe.

Woolworth said it still planned to be operating at least 1,000 Foot Locker stores throughout Europe by the year 2000.

Woolworth Corp DE Germany, EC US United States of America P5331 Variety Stores P56 Apparel and Accessory Stores COMP Company News PEOP Appointments Lavin, W Chairman and Chief Executive designate P5331 P56 The Financial Times London Page 25 176
International Company News: Woolworth to keep German operations Publication 930212FT Processed by FT 930212 By AP-DJ NEW YORK

WOOLWORTH, the US retailing group, does not plan to sell its general merchandise or specialty store operations in Germany, AP-DJ reports from New York.

The company had announced in November that it was exploring the possible disposal of some or all of its German operations.

Woolworth operates more than 500 stores in Germany through its subsidiaries, including 330 Woolworth general merchandise stores and 190 specialty stores.

The company said its German operations would continue to operate under its present management.

The company also operates 144 Foot Locker athletic footwear and apparel stores in eight countries in Europe. Woolworth said it still planned to be operating at least 1,000 Foot Locker stores throughout Europe by the year 2000.

Woolworth has also named Mr William Lavin as chairman and chief executive to replace Mr Harold Sells when he retires, at the age of 65, in July.

Mr Lavin, who is 48, has served as chief financial officer of the US retailer since 1991. He joined Woolworth in 1981.

An announcement about Mr Sells' successor has been widely expected since September, when a Securities and Exchange Commission filing showed that Mr Sells had sold Dollars 3.4m of stock in the company.

Woolworth Corp DE Germany, EC US United States of America P5331 Variety Stores P56 Apparel and Accessory Stores COMP Company News PEOP Appointments Lavin, W Chairman and Chief Executive designate P5331 P56 The Financial Times London Page 25 255
International Company News: AT&T in damages claim Publication 930212FT Processed by FT 930212 By MARTIN DICKSON

THE battle for market share in America's long-distance communications business has taken a new legal twist with American Telephone & Telegraph, the largest long-distance group, asking a federal court to award it damages against three rivals: MCI Communications, Sprint and WilTel.

It complained they had undercut AT&T's rates by providing 'secret' contracts to business customers.

The action stems from an appeal court ruling in Washington DC last November that all long-distance carriers must publish their prices in accordance with the Communications Act of 1934.

AT&T said its damages claim covered 'many millions of dollars.'

MCI said AT&T had been stung by a 'a continuing string of losses to MCI among its largest customers,' and it dismissed as 'absurd' the assertion that secret deals had denied customers the benefits of competition.

American Telephone and Telegraph US United States of America P481 Telephone Communications COSTS Service prices GOVT Legal issues P481 The Financial Times London Page 25 171
International Company News: Ford follows GM with introduction of credit cards Publication 930212FT Processed by FT 930212 By MARTIN DICKSON NEW YORK

FORD Motor, in partnership with Citibank, yesterday followed rival General Motors and launched consumer credit cards offering customers substantial discounts on the purchase of Ford vehicles.

The move will intensify competition in the US credit-card market, where traditional bank issuers are being challenged by new entrants such as GM and American Telephone & Telegraph, offering rebates on goods and services.

Ford's introduction of Visa and MasterCards comes six months after the launch of the GM MasterCard - the most successful US credit-card introduction ever, attracting more than 4.5m cardholders. Ford said yesterday it aimed to top GM, but gave no forecasts.

For Ford, and GM before it, the cards are an attempt to build brand loyalty through a new form of customer rebate. GM's share of the US car market dipped from 35.9 per cent in 1991 to 34.9 per cent last year, while Ford's rose 1.7 per cent to 21.8 per cent.

For Citibank, the leading issuer of credit cards in the US, the Ford tie-up could mean a sizeable increase in its card-holder base at a time when its account growth has been slowing. 'This is an effort to grow the business,' said Mr James Bailey, who heads north American consumer banking.

The bank already has similar partnerships with other major US corporations, notably one with American Airlines which allows cardholders to earn points towards free travel.

Ford's card allows customers to earn rebates, equal to 5 per cent of their purchases, of up to Dollars 700 a year for five years, and then get a rebate of Dollars 3,500 on the purchase of a vehicle.

Ford claimed its card was superior to GM's in that it offered a Dollars 3,500 rebate over five years, rather than seven; a lower rate of interest on outstanding balances; and the advantages of a link-up with Citibank, which offers card-holders fringe benefits. GM's card is administered by Household Credit Services, the ninth largest US card issuer.

Ford's card charges a Dollars 20 annual fee, while GM's has none. However, the fee will be waived for the first year and payment thereafter will qualify holders for an annual, additional Dollars 50 rebate when they buy a Ford vehicle.

Ford Motor Citibank US United States of America P3711 Motor Vehicles and Car Bodies P602 Commercial Banks COMP Strategic links TECH Services P3711 P602 The Financial Times London Page 25 418
International Company News: Net income at CBS up 254% in final period Publication 930212FT Processed by FT 930212 By KAREN ZAGOR NEW YORK

CBS, which owns one of the three US television networks, has reported a 254 per cent surge in fourth-quarter net income, reflecting the network's rise to the top of the prime-time television ratings and a better advertising environment.

The group posted fourth-quarter net income of Dollars 33.3m, or Dollars 2.14 a share, against Dollars 9.4m, or 61 cents, a year earlier. Sales rose 3 per cent to Dollars 968.3m, from Dollars 937.4m.

For the whole of 1992, CBS earned Dollars 81m, or Dollars 5.23, compared with a loss of Dollars 85.8m, or Dollars 5.32 in 1991.

Income from continuing operations stood at Dollars 162.5m, or Dollars 10.51, against a deficit of Dollars 98.7m, or Dollars 6.11 a year ago. Sales rose 15 per cent in the year to Dollars 2.5bn from Dollars 3.04bn.

Mr Laurence Tisch, group chairman and chief executive, said the television network returned to a modest level of profitability in 1992, helped by improved results in entertainment, news and sports programming. He said the company was also 'applying our resources in wiser, more cost-effective ways.'

The strong growth in the network's prime-time ratings, which Mr Tisch said was the biggest single-season gain by any network since 1976-77 allowed the group to increase advertisement unit pricing and lifted revenues.

'We presently believe that CBS's 1993 operating earnings may surpass 1992's level as a result of further gains in earnings at the television network,' he said.

CBS Inc US United States of America P7812 Motion Picture and Video Production FIN Annual report P7812 The Financial Times London Page 25 283
International Company News: Southern belle puts on fresh make-up - The chairman of Delta explains the recent dramatic changes at the airline to Paul Betts Publication 930212FT Processed by FT 930212 By PAUL BETTS

NEVER in the highly cyclical history of civil aviation have times been quite so bad, said Mr Ronald Allen, chairman of Delta Air Lines, the third biggest US carrier.

'We can't wait for the economy to turn around: we must re-engineer our airline and reduce our costs,' he added during a brief visit to London.

The last few months have seen dramatic changes at the Atlanta-based airline, long regarded as the 'Southern belle' of the US industry because of its conservative and profitable track record.

Delta is still 'a good, strong airline', said Mr Allen, but 'we are not immune to the kind of pressures that are facing this industry'.

The carrier has incurred only four annual losses in its history: in 1947, 1983 and in its last two fiscal years ended June 1991 and June 1992. But its recent losses have been even bigger than those of its two big US rivals: American Airlines and United Airlines. After a net loss of Dollars 324.4m in the year to June 1991, Delta's deficit rose to a record Dollars 506.3m for the year to June 1992. In its current year, it has so far lost Dollars 233m.

Mr Allen's response has been to launch what he calls a 'profit improvement plan' to save Dollars 375m by the end of this June and as much as Dollars 750m by the end of June 1995. This includes a consolidation of existing activities; rescheduling and reallocation of flights; deferring deliveries of more than Dollars 6bn worth of new aircraft ordered by the airline, which already counts a fleet of some 560 airliners; and a 5 per cent pay cut for its 75,000 employees.

The company also cut its quarterly dividend last December and has shed 5,000 jobs during the past 12 months through early retirements, freezing recruitment and reducing the number of temporary workers.

'Although we reduced the dividend from 30 cents a share to a nickel (5 cents), we are one of the few carriers still paying a dividend,' Mr Allen emphasised, adding that he was encouraged to see the cost reductions starting to feed into the airline's financial performance. 'The results of the December quarter were disappointing but better than last year and almost all the improvement was due to cost reduction,' he explained.

Delta's problems have been compounded by an unfortunate sequence of events. It started when the now-defunct Eastern Airlines, operating under US Chapter 11 bankruptcy rules, decided to rebuild three years ago a hub at Atlanta, Delta's home base.

'We found ourselves competing against a bankrupt airline which was cutting fares in an effort to generate cash flow,' Mr Allen said. When Iraq invaded Kuwait the following year, Delta, like the rest of the industry, went into a tailspin. 'Our fuel bill alone doubled,' Mr Allen said.

Recession and the impact of the Gulf crisis pushed more US carriers into Chapter 11. 'At the peak of the crisis, almost 30 per cent of US traffic was controlled by bankrupt airlines which were not paying their bills: that situation still persists today with about 20 per cent of the our market controlled by bankrupt airlines,' Mr Allen explained.

In the middle of all this came Delta's decision to acquire Pan American's European routes for Dollars 506m. Although the timing was unfortunate, Mr Allen claimed he had no regrets about the purchase. 'It was a very important deal for us strategically and tactically: it was a once in a lifetime opportunity,' he said.

To compete on the important transatlantic market, Delta needed to strengthen its presence in New York and the north-east of the US. Mr Allen said his airline needed to increase its presence in this market in order to avoid losing business on both transatlantic and domestic US routes.

But absorbing the Pan Am assets proved more difficult than expected. 'You have to accept some difficulties when you are buying assets from a bankrupt company,' Mr Allen acknowledged. One example was the old Pan Am terminal at New York's JFK airport. 'The problem was that the roof leaked. We had to fix that first before we could upgrade the interior, but by this summer our JFK terminal should be a pretty good show case,' he said.

Although the Pan Am route acquisition made Delta the biggest airline serving the north Atlantic market, it has struggled to establish a strong identity in the European market. For this reason it has just appointed a new vice-president for Europe - Mr Michael Medlicott, former chief executive of the British Tourist Authority.

Delta is also banking on its trilateral alliance with Swissair and Singapore Airlines to strengthen its global operations both in the European and the Asia-Pacific markets. But Mr Allen stressed that his airline's cross-equity holdings in Swissair and Singapore Airlines differed from the recent spate of alliances with other US carriers.

'Most of the current alliances formed with US airlines are bail-outs of financially troubled US carriers which are looking for money,' Mr Allen said.

Delta, together with American and United, has led the campaign against British Airways' equity investment in USAir, the sixth largest US carrier. The big three US carriers successfully lobbied the Bush administration last winter to block BA's original proposal to acquire a 44 per cent stake in USAir for Dollars 750m.

They are now renewing their efforts with the Clinton administration to torpedo BA's revised deal with USAir, initially involving a Dollars 300m investment by BA for a 19.9 per cent stake in the Pittsburg-based carrier.

'The latest BA deal is only a warmed-up version of the original one and their intent is the same,' Mr Allen claimed. Together with the other two big US carriers, Delta has asked the administration to declare a moratorium on all foreign investment in US airlines until the US government clearly defines a new international aviation policy.

'The new administration has a wonderful opportunity to redefine the rules for everyone: we favour open skies and we want to compete in an open market place,' Mr Allen said.

In other words, the US should only allow BA to establish a strong foothold into the US market through its partnership with USAir if, in return, the other US carriers are given greater access into the UK market, and especially into London's Heathrow airport.

Delta Air Lines US United States of America P4512 Air Transportation, Scheduled COMP Company profile PEOP Personnel News Allen, R Chairman Delta Airlines P4512 The Financial Times London Page 25 1116
International Company News: VF Corp plans Polish plant Publication 930212FT Processed by FT 930212 By CHRISTOPHER BOBINSKI WARSAW

VF Corporation, the US apparel group which owns the Wrangler and Lee jeans brands, plans to invest Dollars 6m in a production facility in Lodz, Poland's recession-hit textile centre.

The operation, the group's first venture of this kind in a former Soviet-bloc country, aims to build on a 16-year Wrangler presence in Poland's hard-currency stores and high brand awareness. The factory is to employ 200 people.

Levi Strauss, another jeans producer, has a factory in Plock, 112km north of Warsaw, which employs 280 people.

VF Corp PL Poland, East Europe P2325 Men's and Boys' Trousers and Slacks P2339 Women's and Misses' Outerwear, NEC P2361 Girls' and Children's Dresses, Blouses RES Capital expenditures RES Facilities P2325 P2339 P2361 The Financial Times London Page 25 141
International Company News: Compagnie Bancaire may cut back operations abroad Publication 930212FT Processed by FT 930212 By ALICE RAWSTHORN and SARA WEBB PARIS, LONDON

COMPAGNIE Bancaire, the specialised financial business owned by Paribas, the French banking group, has warned that it may have to rationalise its international operations following a steep fall in net profits to FFr369m (Dollars 66m) last year, from FFr579m in 1991.

The company, which has large interests in property finance in the UK, has been badly affected by the crisis in the UK property sector. Its UK interests plunged further into the red last year with a net loss of FFr811m, against FFr88m the previous year.

Compagnie Bancaire fared better in France, where net profits for 1992 rose by 11 per cent to FFr1.34bn, mainly due to a strong performance from its credit and life insurance businesses.

Mr Michel Francois-Henrot, chief executive, said Compagnie Bancaire planned to scrutinise all its foreign activities and would sell or close all those that did not perform. Banque Paribas, the French bank, has had its long-term credit rating placed under review for possible downgrade by Moody's, the international rating agency, adds Sara Webb in London.

Moody's said the review affects about Dollars 690m of long-term debt. Banque Paribas' long-term debt is currently rated Aa2, while its short-term certificates of deposit - which are not under review - are rated Prime-1.

Compagnie Bancaire Banque Paribas FR France, EC P602 Commercial Banks COMP Company News FIN Annual report FIN Company Finance P602 The Financial Times London Page 24 256
International Company News: Preussag advances to DM425m Publication 930212FT Processed by FT 930212 By DAVID WALLER FRANKFURT

PRE-TAX profits at Preussag, the German steel, trading, energy and metals group, rose by DM15m to DM425m (Dollars 257m) in the year to the end of September. This was despite a 4 per cent drop in turnover from DM29.7bn to DM28.5bn.

Mr Ernst Pieper, chief executive, said that, in the first quarter of the current year, pre-tax profits were less than the DM130m in the comparable period of the previous year.

He said that the current year would be difficult for the group in the light of the general economic downturn. But he was confident that the group would 'come through' relatively well because of its mixture of businesses. Some analysts' predictions of a 10 per cent drop in profits for the year were speculation, he added.

'Catastrophic' conditions in the steel industry and a difficult metals market would be balanced by a strong performance from other parts of the group, including energy, transport, ship-building and plant construction, Mr Pieper said.

As a measure of his confidence, he pointed to a 4 per cent increase in the order intake to DM6.2bn in the period from October to December 1992. Sales dropped 5 per cent to DM6bn, mainly because of falling steel and base metals prices.

As previously announced, the dividend for 1991-92 is to be held at DM10 per share, the same level as in the previous year.

Mr Pieper, 64, appointed chief executive of Preussag in 1990 following the company's acquisition of the Salzgitter steel and engineering group from the west German government, will step down as chief executive at the beginning of next year. His successor is to be Mr Michael Frenzel, 45, who was appointed deputy chief executive in March last year.

MAN, the engineering and truck group, said yesterday that orders improved by 25 per cent in the second quarter of the current financial year, compared to the first quarter, when they dropped sharply.

In the six months to December, total order intake was 14 per cent down at DM7.4bn. Sales for the six months were DM8.2bn, the same level as in the first half of the previous year.

Preussag MAN DE Germany, EC P1542 Nonresidential Construction, NEC P2833 Medicinals and Botanicals P2851 Paints and Allied Products P2899 Chemical Preparations, NEC P4911 Electric Services P3312 Blast Furnaces and Steel Mills P3511 Turbines and Turbine Generator Sets P3555 Printing Trades Machinery P3559 Special Industry Machinery, NEC P3566 Speed Changers, Drives, and Gears FIN Annual report MKTS Contracts P1542 P2833 P2851 P2899 P4911 P3312 P3511 P3555 P3559 P3566 The Financial Times London Page 24 443
International Company News: CS Holding takes 19.2% stake in Swiss Volksbank Publication 930212FT Processed by FT 930212 By IAN RODGER ZURICH

CS HOLDING, the parent company of Credit Suisse, has acquired 19.2 per cent of the equity of Swiss Volksbank, for which CS made a SFr1.6bn (Dollars 1.04bn) agreed takeover bid.

CS said in its offer circular yesterday the shares were acquired after its bid was announced on January 6. The acceptance period began yesterday and ends on March 15.

The basis of the offer is three CS registered shares for every 10 Volksbank registered shares. It is conditional on Volksbank winning approval at an EGM on March 11 to convert itself from a co-operative into a joint stock company and then converting each of its co-operative shares into 10 registered shares.

The offer will then be conditional on receiving acceptances from holders of at least 70 per cent of the Volksbank shares by March 15.

If the offer is successful, CS said it would seek to delist Volksbank securities from Swiss stock exchanges.

CS Holding Swiss Volksbank CH Switzerland, West Europe P6712 Bank Holding Companies P602 Commercial Banks COMP Shareholding P6712 P602 The Financial Times London Page 24 199
International Company News: GM Europe net profit declines 30% to Dollars 1.2bn Publication 930212FT Processed by FT 930212 By KEVIN DONE, Motor Industry Correspondent

THE net profit of the European operations of General Motors, the world's largest vehicle maker, fell last year by 30.4 per cent to Dollars 1.228bn from Dollars 1.76bn in 1991 and a record Dollars 1.92bn in 1990.

Despite the decline, GM Europe - Opel in continental Europe and Vauxhall in the UK - remained one of the most profitable of the big six volume car makers in 1992. Its performance in Europe was in sharp contrast to its rival Ford, which disclosed earlier this week a record Dollars 1.3bn loss on its European automotive operations, including Jaguar.

GM's European profits provided a partial cushion for the continuing heavy losses suffered by the group's North American automotive operations. The net profit of Dollars 1.2bn in Europe was also achieved after taking account of GM's 50 per cent share of the continuing losses of Saab Automobile, where the US group has management control. The Swedish carmaker is expected to announce later this month a loss of more than SKr2bn (Dollars 270m) for 1992.

GM also suffered continuing losses in Europe last year at Group Lotus, the UK specialist sports car maker and automotive engineering consultancy, and it incurred losses through the restructuring of the European subsidiary of GM Hughes Electronics.

Within its core Opel/Vauxhall car and light commercial vehicle operations GM added significantly to its fixed costs in 1992 with the opening of several new plants, including a DM1bn (Dollars 625m) car assembly plant at Eisenach in eastern Germany and a Pounds 190m (Dollars 266m) V6 engine plant at Ellesmere Port in the UK.

The 1992 financial performance was also burdened by part of the start-up costs for the new generation Opel/Vauxhall Corsa small car at GM's plant at Zaragoza, Spain, as well as by a deterioration in the mix of its product sales with a shift to a larger share of small cars in southern Europe and lower sales in Germany.

The group's Opel/Vauxhall operations achieved a record sales volume of 1.61m cars in west Europe last year, up from 1.55m in 1991, with a best-ever market share of 12 per cent, an increase from 11.6 per cent in 1991. Car production rose by 5.7 per cent to 1,700,053 from 1,607,629 a year earlier.

GM's turnover in Europe rose by 13.7 per cent to Dollars 28.8bn from Dollars 25.4bn a year earlier.

General Motors Europe XG Europe P3711 Motor Vehicles and Car Bodies FIN Annual report P3711 The Financial Times London Page 24 436
International Company News: Poor tanker market sinks Bergesen's earnings Publication 930212FT Processed by FT 930212 By KAREN FOSSLI OSLO

BERGESEN, Norway's biggest shipping group, yesterday revealed a sharp decline in 1992 net profit to NKr25m (Dollars 3.5m) from NKr716m the previous year, caused by significant weakness in the world crude oil tanker market and a write-down of the group's share portfolio.

Group operating revenue sank to NKr2.64bn last year, from NKr3.12bn in 1991. Operating profit plunged to NKr203m, from NKr857m. This was due to a NKr639m fall to NKr173m in operating profit from shipping operations.

The company has proposed an unchanged dividend payment of NKr1 per share.

Bergesen's tanker division fell to an operating loss of NKr218m, from a NKr464m profit in 1991.

It was pushed into the red by a steep decline in day rates, which were almost halved to Dollars 16,200 from Dollars 30,300 in 1991.

Bergesen's weak performance was exacerbated by a NKr143m write-down on the group's share portfolio and a NKr117m unrealised loss on foreign currency.

Mr Morten Bergesen, chief executive, explained that, although 25 of the world's tankers had been scrapped last year, 26 newly-built units had entered the market.

He forecast the scrapping of more old tankers this year, but he warned that balance in the tanker market may not be restored for another two years.

Lower profits could also be expected in 1993 from liquid petroleum gas (LPG) carrier operations, he added.

Bergesen's fleet suffered a sharp decline in value in 1992, measured in dollars, with tankers falling by 40 per cent, LPG carriers by 20 per cent and dry bulk carriers by 28 per cent.

The group experienced a NKr184m net financial loss in 1992, compared with financial income of NKr40m a year earlier.

Bergesen DY NO Norway, West Europe P4412 Deep Sea Foreign Transportation of Freight P4491 Marine Cargo Handling P4499 Water Transportation Services, NEC P6331 Fire, Marine, and Casualty Insurance FIN Annual report P4412 P4491 P4499 P6331 The Financial Times London Page 24 333
International Company News: Banesto quells Spanish banking's ridicule - A forthcoming rights issuse which could net Pta53bn Publication 930212FT Processed by FT 930212 By PETER BRUCE and TOM BURNS

FOR YEARS now it has been fashionable among the chattering core of Madrid's financial community to muse loudly and often, on the imminent demise of both Banesto, Spain's third largest bank, and its mercurial chairman, Mr Mario Conde.

That will probably change with Wednesday's announcement that JP Morgan, the US investment bank, is throwing its weight behind a rights issue being prepared by Banesto by assembling a group of subscribers who could end up holding 10 per cent of the bank. Yesterday the gallery was silent.

The arrangement is a sweet one for Banesto. The issue will raise, if it is taken up, Pta53bn (Dollars 452m) in one of the biggest ever capital increases in Spain.

Normally, this news would have been greeted as just another effort by Banesto to claw money from its shareholders. But JP Morgan's presence is a startling vote of confidence in the bank. Not least because it has chosen Banesto as the first investment for the Dollars 1bn Corsair investment fund it closed last week after signing up 46 blue chip US institutional and individual subscribers.

The US bank researched Banesto for seven months before committing itself to leading a group of investors who will guarantee to spend Dollars 200m on the rights issue. Mr Conde is himself a member of the group and could more than double his personal stake in Banesto from 2 per cent to 4.5 per cent.

The psychology of this is everything. When Mr Conde helped rescue Banesto from takeover in 1987, it was an entangled mess of rival family industrial and banking interests, living off a cosy interest rate arrangement between Spain's banks and regular asset disposals every time banking profits dipped.

In undoing that and separating Banesto's banking and industrial businesses, Mr Conde made enemies and gathered critics. Many of his grand plans failed - in late 1990 he was forced to call off a flotation of the Banesto industrial group after the Gulf crisis took the wind out of the markets.

That could have raised more than Pta75bn at the time. Since then, he has been forced to sell industrial assets off piecemeal. His attention has been diverted from core banking and many analysts have wondered whether, as an industrialist by training, he is fit to run a bank.

But JP Morgan has found something it likes. On fundamentals, Banesto is not Spain's best bank. It just meets the country's capital adequacy ratios; last year it recorded the sharpest bad debt growth among big banks; and it reported a 23 per cent fall in profits. Moreover, it is struggling to meet Bank of Spain demands that it reduce its exposure in industry to 40 per cent of equity and, later, to 20 per cent.

At the moment, Banesto's exposure in industry is some 52 per cent of equity and it was always going to have to correct this by either withdrawing from industry or increasing capital. It is now doing both. Banesto officials say the group will continue to shed industrial assets - a policy JP Morgan will probably have insisted on for its Corsair investors.

And, on closer scrutiny, Banesto's bad debts turn out to be covered better than is the case at any big Spanish bank, apart from Banco Santander. Moreover, the group's profits fall disguised a healthy profit rise in the core banking business. And even critics acknowledge that Banesto has the best electronic information systems of any Spanish bank. As cost control becomes a serious factor in Spanish bank profitability, Mr Conde's planning might begin to pay its way.

A Pta53bn flood of new cash would go a long way towards solving the capital squeeze that dogs Banesto year after year. But, in order to place himself and the bank well within the Bank of Spain's capital requirements on industrial holdings, Mr Conde still has to see through the sale of a regional banking affiliate, Banco de Madrid, to Deutsche Bank. Banesto is said to be asking about Pta60bn for the bank. The Deutsche Bank has reportedly offered Pta40bn.

So there is still some way to go. The Germans, who need to grow their Spanish operation away from Catalonia, could still be tempted by other targets. But the point now is that, assuming the rights issue goes well, Mr Conde can stop running to his appointments. With the JP Morgan deal, things may be coming right and even the sceptics are impressed.

'We are all looking for the catch,' said Mr Frederick Artessani, of brokers Benito y Monjardin, 'but we can't seem to find one.'

Banco Espanol de Credito ES Spain, EC P602 Commercial Banks FIN Share issues P602 The Financial Times London Page 24 811
International Company News: Regulator probes debt links in Bronfman group Publication 930212FT Processed by FT 930212 By BERNARD SIMON TORONTO

CANADA'S financial services regulator has asked banks, trust companies and insurers to provide full details of their exposure to the vast industrial and financial empire controlled by Toronto's Bronfman family.

The request, made earlier this week, comes amid uncertainty in financial markets about the ability of companies in the intertwined Bronfman group to withstand recent problems at Bramalea, a property developer, and Royal Trust, Canada's second biggest trust company.

The Office of the Superintendent of Financial Institutions described the request as 'a monitoring activity which should not be construed to shock'. The information, which must be provided by today, will be confidential.

Mr Bob Harding, president of Hees International Bancorp, the group's merchant banking arm, said yesterday that the superintendent's request 'is not something that's troublesome to us. We're financed through independent public companies'.

According to analysts, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank have the heaviest exposure to Bronfman companies.

The group has not disclosed the extent of its borrowings or off-balance sheet financing. However, banks have stressed that the bulk of their outstanding loans are to publicly-listed operating companies, such as Noranda, the resources group, John Labatt, the brewer and Bramalea and Trizec, the two real estate developers.

Some banks have announced write-downs on their loans to Bramalea, which filed for bankruptcy protection last December with debts of CDollars 5bn (USDollars 3.9bn). Royal Trust is seeking an infusion of equity. However, outsiders concern centres on the Bronfmans' inner holding companies, such as Hees International Bankcorp, Edper Enterprises and Pagurian. In response to market nervousness, these companies have wound down virtually all their commercial paper programmes.

Noranda moved earlier this week to insulate itself from concerns about the strength of the rest of the Bronfman group by raising almost CDollars 1bn from the sale by instalments of its 49 per cent stake in MacMillan Bloedel, the Vancouver-based forestry company.

Royal Trustco Bramalea CA Canada P9651 Regulation of Miscellaneous Commercial Sectors P6719 Holding Companies, NEC P65 Real Estate P61 Nondepository Institutions COMP Company News P9651 P6719 P65 P61 The Financial Times London Page 22 365
International Company News: Havas reveals surprise 24% drop Publication 930212FT Processed by FT 930212 By ALICE RAWSTHORN

HAVAS, one of France's most powerful media and leisure groups, yesterday revealed a surprise fall in net profits of 24 per cent to FFr820m (Dollars 150m) last year from FFr1.03bn in 1991.

Havas, which owns a number of prominent French businesses including the Eurocom advertising group and a chain of regional newspapers, managed to lift sales by almost 6 per cent last year with turnover rising to FFr28bn from 26.4bn in 1991.

Mr Pierre Dauzier, Havas's chairman, told shareholders in December that the group would produce static profits in 1992.

Difficult economic conditions have affected Havas's travel interests as well as its advertising activities, which were destabilised by restructuring after a series of acquisitions and by the impact of le loi Sapin, the government's new legislation on media buying.

In spite of the decline in its 1992 profits Havas has decided to maintain its dividend at FFr12 a share.

It has agreed terms to extend the contracts between its Information et Publicite subsidiary and Compagnie Luxembourgeoise de Teleffusion, the broadcasting group in which it is indirectly a substantial shareholder, for a further five years.

Havas FR France, EC P7313 Radio, Television, Publisher Representatives FIN Annual report P7313 The Financial Times London Page 22 220
International Company News: Union Bancaire Prive improves Publication 930212FT Processed by FT 930212 By IAN RODGER ZURICH

UNION Bancaire Prive, one of Switzerland's largest private banks, said net profit in 1992 rose 16 per cent to SFr108m (Dollars 73.9m), writes Ian Rodger in Zurich.

The bank said assets grew 20 per cent to SFr10.8bn and shareholders' equity was over SFr757m at year end.

Union Bancaire Prive CH Switzerland, West Europe P602 Commercial Banks FIN Annual report P602 The Financial Times London Page 22 83
International Company News: Unitas pre-tax loss deepens to FM2.7bn Publication 930212FT Processed by FT 930212 By CHRISTOPHER BROWN-HUMES STOCKHOLM

UNITAS, Finland's second-largest banking group, yesterday disclosed a FM2.7bn (Dollars 499.3m) pre-tax loss for 1992 and warned that it would record a heavy deficit this year.

A tripling of credit losses to FM3.3bn from FM1.1bn was the main reason for the deterioration on the FM128m loss in 1991. The group's net income from financing operations shrank 17 per cent to FM1.89bn due to an increase in non-performing loans.

At the year end, the group's non-performing loan portfolio stood at FM8.3bn, or 6.14 per cent of total loans outstanding, compared with FM5.7bn in 1991. There will be no dividend.

Unitas, which is the holding company for the Union Bank of Finland, drew some comfort from the fact that its loss was slightly lower than predicted at the eight-month stage, as it benefited from a drop in interest rates and a rise in equity prices over the last four months. It cut operating expenses during the year by FM185m, or 7 per cent.

In spite of the overall loss the group's capital adequacy ratio stood at 11.1 per cent at the year end, compared with 10.3 per cent a year earlier. This reflected the impact of the group's August convertible bond issue and a FM1.7bn government preference capital injection.

Unitas said its position should be strong enough for it to be able to get through 1993 without support from the government guarantee fund.

However, it was looking at the possibility of raising new capital, possibly by launching a US preference share issue, and said it may seek a government guarantee for this.

The group said its 1993 result would be 'heavily negative' because of the continuing Finnish recession. But there were some optimistic signs and the group was hoping its result would not deteriorate any further.

'The drop in interest rates will improve operating conditions and the unwinding of risks and losses relating to certain equity holdings last year will have a similar impact,' said Mr Vesa Vainio, Unitas chief executive. He added that the group could expect to benefit from cost-cutting.

Unitas FI Finland, West Europe P6011 Federal Reserve Banks P6719 Holding Companies, NEC FIN Annual report P6011 P6719 The Financial Times London Page 22 383
International Company News: Kone earnings lifted by elevator operations Publication 930212FT Processed by FT 930212 By CHRISTOPHER BROWN-HUMES

KONE saw profits after financial items rise 7 per cent to FM478.9m (Dollars 89m) in 1992, thanks to a recession-resistant performance from its core elevator activities.

Sales expanded 12 per cent to FM11.3bn, reflecting acquisitions and the weakening of the Finnish markka. Dividends are unchanged at FM9 per A share and FM10 per B share. Earnings per share rose to FM51.45 from FM43.88.

The group said demand for elevators and cranes continued to decline in Europe, its main market, and North America's share of overall business was down. But maintenance business grew worldwide and new equipment sales benefited from strong growth in Asia Pacific.

Kone's elevators business lifted sales to FM8.3bn from FM7.1bn, with maintenance business, which is more recession proof than new business, accounting for as much as 60 per cent of the total.

Kone said it had decided to de-list its shares from the Stockholm stock exchange because of low volume.

Kone Corp FI Finland, West Europe P3534 Elevators and Moving Stairways P3535 Conveyors and Conveying Equipment P3536 Hoists, Cranes and Monorails P357 Computer and Office Equipment P3911 Jewelry, Precious Metal FIN Annual report P3534 P3535 P3536 P357 P3911 The Financial Times London Page 22 215
International Company News: Pleiad sells office complex in Brussels Publication 930212FT Processed by FT 930212 By CHRISTOPHER BROWN-HUMES

PLEIAD Real Estate is selling a newly-built complex in central Brussels for SKr3bn (Dollars 415m) in what it claims is one of Europe's largest single property transactions. The buyer is the Belgian telephone company Belgacom, which will be able to gather its various operations under one roof.

The complex, known as Tours Pleiad, is situated at the Gare du Nord and comprises 110,000 sq metres of office space in two 29-story buildings and one 7-storey pavilion.

Mr Per Mellander, Pleiad chief executive, said: 'We're delighted at having been able to close this large deal, given today's tight real-estate market in Europe.'

He said the complex's central location, with good transport links, and its 'high Scandinavian quality' had been crucial factors in clinching the sale.

Pleiad was set up in 1989 by five investors, comprising the motor vehicle group Volvo and four Swedish pension and insurance groups. Its property and development project portfolio totals SKr7bn.

Pleiad Real Estate Belgacom BE Belgium, EC SE Sweden, West Europe P65 Real Estate P481 Telephone Communications RES Facilities COMP Company News P65 P481 The Financial Times London Page 22 202
London Stock Exchange: Welcome for BP figures Publication 930212FT Processed by FT 930212 By CHRISTOPHER PRICE, JOEL KIBAZO, PETER JOHN and STEVE THOMPSON

FOURTH-quarter results at the top end of market expectations, an impressive post-results meeting between British Petroleum management and oil sector analysts, and a fresh wave of US buying drove BP shares up to their best level for 12 months.

The stock, after 20m shares traded, closed 11 1/2 , or 4.3 per cent, higher at 277 1/2 p, easily outpacing a generally buoyant oil sector, itself up 2 per cent, and the wider market, where the FT-SE 100 finished 0.6 per cent ahead.

Specialists said Mr David Simon, who took over the role of chief executive last summer, delivered a very impressive performance, telling analysts that BP was meeting its recovery plan targets and that there were no plans for a rights issue until the group had reached its target of profits of Pounds 500m a quarter. Although much of yesterday's buying was again US-sourced, UK institutions were also said to have been picking up the stock to reduce their underweight positions.

Some analysts, however, remain cautious about BP's rehabilitation. Mr Keith Morris at Carr Kitcat & Aitken said 'BP is a recovery story for 1994, not 1993', while long-time bear Mr John Toalster at Strauss Turnbull, pointing out that gearing remained around 100 per cent, said: 'There is a surfeit of enthusiasm over experience; they are far too expensive.'

Rank gloomy

A gloomy outlook from Rank Organisation during separate presentations to two broking houses did little to help the shares, which fell back in thin trading. Rank management was said to be giving no chance of recovery in the leisure sector in 1993, with an upturn not seen until the final quarter of 1994. The remarks were considered pessimistic even by Rank's cautious reputation in the market and the shares fell 17 to 689p.

However, hints that Rank would consider eventually exiting from its joint venture with Xerox brought some cheer, as did brighter trading news on the US, according to analysts.

Trafalgar cash call

Shares in Trafalgar House, the construction, property and shipping group, fell sharply as the market reacted to the long-awaited rights issue, a cut in the dividend and a warning of further property write-downs.

The market had anticipated the one-for-two rights issue to raise Pounds 204.5m, but the warning on further property writedowns took many by surprise. Trafalgar also announced a cut in the dividend from 6p to 3.25p. Dealers rushed to sell the stock and by the close, turnover had risen to 48m, boosted by programme trading, and the shares fell 12 to 76 1/2 p.

Mr Leslie Kent at agency broker Carr Kitcat said: 'The company has a huge credibility problem but there remains much potential in the group. It is up to management to restore that credibility and potential but that will take a long time.'

Reuters rebounds

News and information group Reuters recovered 28 to 1344p as analysts' interpretations of the company's full-year results reached clients. The buy argument is exemplified by SG Warburg, which published an overview at the end of last week. The UK investment bank argues that at 1390p Reuters was on a 1993 price/earnings relative of 145 to 150 and a price relative target of 110, which would push them to 1430p. That target looked more achievable on Tuesday, before the price tumbled 66p.

Yesterday, NatWest Securities advised clients to avoid buying until the stock hit 1250p. Nikko advised selling: the Japanese house said earnings per share growth will be held back by lower interest rates and hedging last year.

Suggestions that Lloyds Bank's preliminary figures may be accompanied by a full-scale bid for another of the UK banks continued to drive TSB and Standard Chartered shares sharply higher.

TSB attracted exceptionally heavy activity, with 10m shares traded in the cash market and the equivalent of 5.1m shares dealt in the stock options. But there was scepticism about the likelihood of a Lloyds bid, with TSB shares underperforming the sector and the market and closing only a penny higher at 172p.

Standard Chartered, where Lloyds retains a 4.7 per cent shareholding after its unsuccessful bid in the mid-1980s, closed 14 higher at 645p, after 650p. Lloyds, expected to reveal a 10 per cent increase in the dividend total, rose sharply to end 13 stronger at 528p.

Royal Insurance appreciated 15 to 288p on 5.8m traded, with the market increasingly of the view that a rights issue is unlikely in the short term. Commercial Union closed at 600p ex-rights, with the nil-paid ending the session at 90p premium.

The pharmaceuticals sector showed strong gains yesterday, reflecting 'bottom-fishing' in the US. Goldman Sachs was on the bid and Glaxo, the hardest hit in recent weeks, was the biggest gainer in percentage terms in the FT-SE 100 Index. The shares jumped 31 to 696p on heavy turnover of 10m.

Meanwhile, SmithKline Beecham improved 20 to 466p in the 'A's and 17 to 409p in the Units. Wellcome raced through the 900p level to close 20 better at 913p.

Rothmans International 'B' rose 13 to 599p after the company said it has begun talks to set up a regional holding company in the Far East.

First-quarter figures at the top of the range of analysts' estimates helped industrial gases group BOC rise 7 to 746p. Hoare Govett's chemicals analyst Mr Martin Evans has maintained his full-year forecast of Pounds 380m and continues to see the shares as undervalued.

BT settled 3 1/2 firmer at 411 1/2 p after the third-quarter figures. Mr Jim Ross, telecoms analyst at Hoare Govett, said the slow steady upturn in inland call volumes was 'a good backdrop for the flotation of BT later this year; the shares have further to go'.

A strong buy recommendation from Goldman Sachs left BPB 7 higher at 216p. Mr Mike Betts, building analyst at Goldman, said BPB's profits should grow rapidly, due to increases in plasterboard prices, both those already announced and those expected in the future.

Dull retail stocks were enlivened by the debut of Motor World Group, which saw 5.8m shares placed at 210p and was quickly marked up to close 65 ahead at 275p. Dealers said the group had excited interest from private clients following a series of presentations.

Burton Group eased 1 1/2 to 69 1/2 p as agency broker Cazenove was said to have crossed lines of 4m and 1m shares at 70p. Turnover reached 21m. Alexon, where bid stories were again heard, added 3 at 85p.

Very heavy turnover in Asda was seen as investors speculated on the value of the nil-paid shares. They closed steady at 5p, while the ordinary edged a halfpenny forward to 58 1/2 p in turnover of 47m. VAT and competition worries again dampened enthusiasm for the leading food retailers.

Although not a fund-raising event, hotel group Forte's Pounds 200m debenture issue was thought good for sentiment and the shares added 4 at 190p.

Paper company Arjo Wiggins Appleton bounced 6 1/2 to 168 1/2 p after 40 per cent stakeholder Saint-Louis, of France, said the group had provisional 1992 turnover of Pounds 2.57bn, compared with Pounds 2.49bn in 1991.

British Steel had a busy session boosted by a recommendation from SG Warburg and volume rose to 15m as the shares hardened 2 to 78p. Warburg was, however, reported to be negative on IMI and the stock declined 12 to 268p.

Personal care and footwear group Peter Black dipped 3 to 170p as it was announced that two shareholders had sold stock and now owned less than 3 per cent of the equity.

NEW HIGHS AND LOWS FOR 1992/93

NEW HIGHS (163).

BRITISH FUNDS (9) Funding 3 1/2 pc 1999-2004, Tr. 2 1/2 pc I-L 2001, Tr. 2 1/2 pc I-L 2003, Tr. 2pc I-L 2006, Tr. 2 1/2 pc I-L 2009, Tr. 2 1/2 pc I-L 2011, Tr. 2 1/2 pc I-L 2013, Tr. 2 1/2 pc I-L 2016, Tr. 2 1/2 pc I-L 2020, AMERICANS (9) Ameritech, Bell Atlantic, Bellsouth, Eaton, FPL, NYNEX, Time Warner, US West, Whirlpool, CANADIANS (6) BCE, Bk. of Montreal, Can. Pacific, Hudson's Bay, Imperial Oil, Royal Bk. of Can., BANKS (5) Asahi, Deutsche, Mitsubishi, Natl. Aust., Sumitomo, BLDG MATLS (3) Anglian, Lafarge, St. Gobain, BUSINESS SERVS (1) Johnson Cleaners, CHEMS (6) Akzo, BASF, Bayer, Evode, Laporte, Yule Catto, CONTG & CONSTRCN (4) Bellway, Bryant, Eve, Sheriff, ELECTRICALS (8) ASEA B, Denmans, Dewhurst A, Jones Stroud, Mitsubishi, Pifco, Do. A, Sony, ELECTRICITY (3) Eastern, Northern, Seeboard, ELECTRONICS (7) Admiral, Forward, Gresham Telecomputing, Hoskyns, Learmonth & B, Micro Focus, Siemans, ENG GEN (2) Clyde Blowers, Molins, FOOD MANUF (1) Clifford, HEALTH & HSEHOLD (3) Bespak, Mayborn, Paterson Zochonis, INSCE COMPOSITE (1) Amer. Intl., INSCE LIFE (2) Torchmark, Utd. Friendly B, INV TRUSTS (43) Abtrust New Dawn B Warrants, Abtrust New Thai, Beta Global Em. Mkts., Do. Cap., Castle Cairn China & Eastern, City Merchants High Yield, Drayton Asia, Do. Warrants, Drayton Far East, EFM Japan, Do. Warrants, Euro. Smaller Warrants, Fidelity Euro. Values Warrants, Fleming Continental, Fleming Far Eastern, Fleming O'seas., Foreign & Colonial Pacific, Do. Warrants, Foreign & Colonial Eurotrust, Gartmore Emerging Pacific, Gartmore European, Govett Oriental, Henderson Highland, Kleinwort O'seas., M & G Recovery Zero Div. Pf., Malacca Fd., Malaysian Emerging Co's, Murray Intl. B, New Frontiers Dev., Pacific Assets, Do. Warrants, Paribas French, RIT Capital, Do. 2 1/2 pc Cv. 2000, Scot. Asian, Second Market, TR Euro. Growth, TR Far East Inc., TR Pacific, Templeton Emerging Mkts. Warrants, Thornton Asian Emrg, Mkts., USDC, MEDIA (5) GWR, News Corp., Scot. TV, Taylor Nelson, Watmoughs, MERCHANT BANKS (2) Schroders, Do. N/V, MTL & MTL FORMING (1) Ferraris, MISC (4) Bluebird Toys, Danka Bus. Systems, Laser-Scan, Portmeirion Potts., MOTORS (3) Bletchley Motor, Gen. Motors Units, Lookers 8pc Pf., OIL & GAS (5) Chevron, Mobil, Royal Dutch, Shell Trans. 7pc Pf., Total B, OTHER FINCL (6) AAF, BWD, Cattle's, Natl. Home Loans 7 1/2 pc Pf., St. James's Place Cap., Tyndall Aust., OTHER INDLS (4) Amber Indl., BH Prop., McKechnie, Pacific Dunlop, PACKG, PAPER & PRINTG (3) Carnaud Metalbox, Filofax, Somic, PROP (1) Daejan, STORES (3) Clinton Cards, Essex Furniture, Liberty, TEXTS (3) Alexandra Workwear, Allied Texts., Brit. Mohair, TRANSPORT (1) GATX, WATER (5) Cheam A, Do. B, Severn Trent, Welsh, Wessex, MINES (4) GM Kalgoorlie, Kidston Gold, Sons Gwalia, Vizcaya.

NEW LOWS (8).

CONGLOMERATES (1) Jourdan (T), ELECTRONICS (1) Standard Platform, FOOD MANUF (2) Dalepak Foods, Sheldon Jones, HOTELS & LEIS (1) Courtyard Leis., MEDIA (1) Allied Radio, MISC (1) Hornby, PROP (1) Bolton.

Other market statistics, Page 27

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 38 1788
London Stock Exchange: Blue chips drive the market forward Publication 930212FT Processed by FT 930212 By TERRY BYLAND, UK Stock Market Editor

THE UK stock market yest-erday regained some of the confidence so badly bruised over the two previous trading days and share prices closed very firmly after a well-traded session. The latest fund-raising moves, a well-heralded Pounds 204m rights issue from Trafalgar House and Pounds 200m in debentures from Forte, were taken calmly and there was relief that British Petroleum, reporting satisfactory trading news, made no call on shareholders.

Traders pointed out that the two-week equity trading account ends tonight with share profits still in place; further demand for stock to meet selling commitments taken on Tuesday and Wednesday could help the market this morning.

Heavy buying from across the Atlantic for the pharmaceutical stocks which have been badly hit in recent sessions provided the driving force behind the blue chip sectors. A large buy programme by a UK house was identified.

Oil shares, too, made good progress following the BP statement; although UK funds remain cautious towards BP shares, they are wary of selling while US investors show increasing confidence in the stock.

An early gain of 13 points on the Footsie proved more than the market would allow, and the advance was trimmed briefly as the rights issue from Trafalgar was absorbed. The stock index futures sector provided a lacklustre guide in early deals.

However, the market began to move forward as the drug stocks responded to demand for the sector in New York overnight. The Footsie was quickly ahead by more than 24 points at 2,840.7. The market remained firm for the rest of the day. But in spite of a firm start to the new Wall Street session, when the Dow Average added 22 points in early trading, London closed just below the day's best levels.

The final reading showed the FT-SE 100 Index at 2,834.3 for a gain of 17.9 on the day. Investors were waiting cautiously for reports of the speech in Germany by Mr Eddie George, governor-designate of the Bank of England. But his warning that there is little room for further adjustment on domestic interest rates came after the London equity market had closed for the day.

The focus on the blue chip pharmaceuticals, where Glaxo stood out strongly, took some interest away from the second liners. The FT-SE Mid 250 Index firmed only 4.6 to 3,006.5. However, dealing in second-line issues made up about 63 per cent of the day's total Seaq business of 889.4m shares. Retail, or customer, business has remained high this week and on Wednesday returned a value figure of Pounds 1.27bn.

The strength of the pharmaceutical and oil issues also outweighed, in index terms, the continued setback in several domestically orientated sectors. Food retailers continued to signal concern over suggestions of adverse tax developments ahead in next month's Budget speech from the UK chancellor of the exchequer.

The market's chief preoccupation, however, remained the heavy flow of company news now looming over investors. The game of 'spot the rights issue' has been joined by the game of 'spot the bid story', and the market was buzzing last night with hints that a large corporate dev-elopment will shortly be announced in the banking and financial sector.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 38 569
London Stock Exchange: Equity Futures and Options Trading Publication 930212FT Processed by FT 930212 By JOEL KIBAZO

STOCK index futures had a volatile session in which fears of further rights issues alternated with bid speculation in the banking sector, writes Joel Kibazo.

An initial retreat in the March contract on the FT-SE after opening at 2,835 was brought about by news of the Trafalgar House rights issue. That was quickly shrugged off and March reversed direction, pulled forward by the cash market. But it ran into another bout of selling at mid-morning as bid talk and speculation of further rights issues again went round the market.

However, buying from a leading US house sent March into positive territory again and this time it touched the day's high of 2,842. Then, weakness in sterling led to further selling that was encouraged by the early poor performance on Wall Street.

March finished at 2,834, up 7 from the previous close and around 3 points above the underlying cash market, after turnover of 8,480 contracts.

In traded options, most of the day's activity centred on the stock options. Bid specu-lation in TSB continued and it was the most actively dealt option with a total of 5,159 lots.

It was followed by Cadbury-Schweppes with 1,159 lots transacted and Glaxo with 1,405. Trafalgar House, on announcing its rights issue yesterday, was also busy. Total option market turnover came to 29,205 contracts.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 38 256
World Stock Markets: Tel Aviv trips over central bank signals Publication 930212FT Processed by FT 930212 By HUGH CARNEGY JERUSALEM

TEL AVIV equities, on a spectacular rising curve for more than a year, tumbled by more than 4 per cent yesterday after signals from the Bank of Israel that it wants to cool the market, writes Hugh Carnegy in Jerusalem.

It was the second downward lurch this week, following a 2 per cent slide on Tuesday after Mr Jacob Frenkel, the governor of the central bank, referred to the market as a 'financial bubble'.

After recovering on Wednesday, the market went sharply back into reverse yesterday on further reports that the Bank of Israel was seeking to curb bank lending to mutual funds for stock purchases, a major source of liquid-ity during the recent bull market. The main index of the 100 most traded companies dropped 4.16 per cent to 206.08 in turnover of Shk250m (Dollars 90m).

Last year, the market raced ahead by almost 100 per cent in shekel terms and by around 75 per cent in dollar terms. The 100 index ended 1992 at 195.98.

Many analysts have been warning that the market, with an average prospective price-earnings ratio of around 23, is due for a correction.

IL Israel, Middle East P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 227
World Stock Markets (America): Dow reflects strong gains on jobs data Publication 930212FT Processed by FT 930212 By PATRICK HARVERSON NEW YORK

Wall Street

US EQUITY markets put in a solid performance yesterday, aided by strong demand for cyclical stocks, although all the major indices ended below the day's highs because of late selling, writes Patrick Harverson in New York.

The Dow Jones Industrial Average was finally 10.27 up at 3,422.69, after standing almost 30 points ahead at one stage. The Standard & Poor's 500 was a net 1.43 firmer at 447.66, while the Nasdaq composite gained just 0.86 on balance at 695.88. Trading volume on the New York SE was 257m shares.

Advances in overseas equity markets set the tone for a strong New York opening, but it was not until mid-morning that demand really began to pick up. Sentiment was boosted by good news from the jobs area, where weekly unemployment insurance claims fell 12,000 in the last week of January (although this was partially offset by weak retail sales data), and by a strong rally in the bond market, which responded to an unexpectedly successful afternoon auction of new 30-year bonds.

Corporate earnings continued to affect prices. General Motors was the day's main story, with the stock moving forward Dollars 1 1/4 to Dollars 40 1/2 in a volume of 11.3m shares after the car manufacturer reported a Dollars 23.5bn loss for 1992. This was primarily the result of extra-ordinary charges related to government mandated changes in accounting standards.

The other two big car issues were also firmer: Chrysler put on Dollars 5/8 at Dollars 40 7/8 in busy trading after Salomon Brothers, the securities house, raised its earnings estimates for 1993, 1994 and 1995. Ford, which announced that it was to launch a credit card for customers in conjunction with Citibank, climbed Dollars 1 to Dollars 50 3/4 .

IBM declined Dollars 1 to Dollars 51 1/8 in volume of 3.1m shares after announcing plans to increase the number of jobs it proposes to cut in North America.

Sears Roebuck moved ahead Dollars 1 5/8 to Dollars 51 5/8 as it unveiled a five-year Dollars 4bn programme to upgrade its stores and announced details of a plan to complete an initial public offering of stock in its Dean Witter securities brokerage and credit card subsidiary.

Cummins Engine advanced Dollars 3 to Dollars 84 1/2 on reporting strong fourth-quarter earnings as the company continues to recover from a string of losses.

Canada

TORONTO closed steady after heavy trading, but managed to extend its streak to nine straight sessions of gains.

The TSE 300 index edged ahead just 0.2 to 3,443.2, although overall rises outnumbered declines by 348 to 282. Volume came to 52.8m shares valued at CDollars 491.3m.

The gold shares group, which had advanced sharply in the previous two sessions on the rising bullion price, suffered a setback of 1.7 per cent as spot gold in New York shed USDollars 1 to USDollars 331.45 an ounce.

CA Canada US United States of America P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 521
World Stock Markets (Asia Pacific): Campaign promises encourage Australia to hit six-month high Publication 930212FT Processed by FT 930212

TOKYO WAS closed for a national holiday but other Pacific Rim markets were generally firmer.

AUSTRALIA climbed to a six-month high, drawing encouragement from employment data and campaign promises from both of the main political parties to help the corporate sector.

Strong demand from domestic and overseas investors propelled the All Ordinaries index above the 1,600 level, but late profit-taking pulled prices off their highs. The index closed 8.5 higher at 1,599.1 in turnover of ADollars 342.1m.

More than 9.4m Pioneer shares were traded following the resignation of the chief executive officer. The stock added a cent at ADollars 2.32, with investors taking the view that it has been an underperformer recently.

HONG KONG remained positive, with investors encouraged by the successful flotation of Denway, which saw its HKDollars 402m share offer oversubscribed by some 700 times. The Hang Seng index ended 21.45 ahead at 5,857.00 but turnover was low at HKDollars 1.9bn.

Some analysts commented that slightly better than expected December trade figures also helped sentiment. In pre-listing trade, Denway was quoted at HKDollars 3.50, up from HKDollars 3.00. HSBC Holdings rose 50 cents to HKDollars 61.50.

BANGKOK gave up some of an early advance but the SET index still managed to edge 1.08 ahead to 991.21. Some analysts expect the index to breakthrough the 1,000 level today. Turnover was Bt12bn.

Bank shares were in demand. Bangkok Bank put on Bt2 at Bt135. Thai Farmers Bank rose Bt28 to Bt928, Krung Thai Bank Bt4 to Bt404 and Bank of Ayudhya Bt1 to Bt79.

MANILA adopted a positive tone and the composite index climbed 23.94 to 1,403.61, with mining issues leading the rise on the back of improved gold prices.

Among blue chips, Philippine National Bank moved ahead 12 pesos to 245 pesos and Manila Electric added 25 pesos at 220 pesos on rumours of a rights issue.

SEOUL benefited from demand for financial issues and some other large-capitalisation stocks, and the composite index firmed 4.35 to 681.60. Turnover was Won654bn, up from Wednesday's Won597bn.

KUALA LUMPUR picked up as the government and the country's hereditary rulers broke their deadlock over constitutional amendments. The composite index, 5.01 lower at midday, picked up to end 3.28 easier on balance at 635.34 in turnover of some MDollars 633m.

SINGAPORE was weaker, while Rothmans Industries shares were suspended from trading ahead of a company announcement. Rothmans Plc in London said that it had begun talks with its divisions in Malaysia and Singapore which could lead to a regional holding company.

The Straits Times Industrial index shed 4.43 to 1,621.47 in volume of 140.5m shares, against 134.3m on Wednesday.

TAIWAN remained firm following Wednesday's announcement that Governor Lien Chan was to be nominated as the next premier, so easing political worries. The weighted index rose 43.33, or 1.2 per cent, to 3,621.43 in turnover of TDollars 18.3bn, after the previous day's TDollars 32.7bn.

NEW ZEALAND was helped by strength in Fletcher Challenge, which advanced 6 cents to NZDollars 2.58. The NZSE-40 index gained 10.88 at 1,577.66.

BOMBAY eased back on profit-taking: the BSE index closed 26.29 down at 2,785.83.

AU Australia HK Hong Kong, Asia TH Thailand, Asia PH Philippines, Asia KR South Korea, Asia MY Malaysia, Asia SG Singapore, Asia TW Taiwan, Asia NZ New Zealand IN India, Asia P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 579
World Stock Markets: South Africa Publication 930212FT Processed by FT 930212

GOLD shares remained firm on overseas interest and the index advanced another 27 to 1,017, with Vaal Reefs gaining R10 at R190 and Southvaal up R3.50 to R52.50. The industrial index fell 42 to 4,603 while the overall index rose 10 to 3,551.

ZA South Africa, Africa P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 72
World Stock Markets (Europe): Roller-coaster ride in Italian equities Publication 930212FT Processed by FT 930212 By Our Markets Staff

POLITICAL trepidation in Italy, and French interest in the recently-embattled Euro-equity stocks were the main features in bourses yesterday, writes Our Markets Staff.

MILAN calmed itself at the start of the new trading day with domestic institutions and overseas investors apparently ready to put Wednesday's traumas behind them.

But prices again turned down as the market was convulsed by rumours that Prime Minister Giuliano Amato was under investigation in the political corruption scandal that forced Mr Claudio Martelli to resign as justice minister.

A firm denial of the story by the Milan magistrate who heads the investigation enabled prices to pick up from their lows, but it did not overcome renewed nervousness in the market and the Comit index fell again, closing 8.63 lower at 487.52.

The roller-coaster ride taken by the Fiat share price tracked the day's political events. The shares picked up to an early high of L4,625 before easing back to fix L10 firmer at L4,591. In after-hours trading, the price dipped to a low of L4,460 at the height of the Amato rumours before pulling back up to L4,520.

State groups facing privatisation were also hit by the spectre of political instability that could put the government's programme in jeopardy. Credito Italiano fell L200 or 6 1/2 per cent to fix at L2,853.

PARIS recovered the 1,900 level with interest centred on Euro Disney and Eurotunnel, the latter having shown strong volume all week. The CAC-40 index closed up 12.20 at 1,905.27, after a day's high of 1,920.07, in good turnover of FFr3.5bn.

Euro Disney attracted investors in spite of comments from the group that it expects a 'substantial loss' for fiscal 1992/93. However, some analysts said that many institutions were now looking further ahead and saw the group benefiting from lower European interest rates. The shares rose FFr1.40 to FFr76.00, but off the day's high of FFr77.90.

Eurotunnel gained FFr1.25 to FFr38.15 in good volume.

Bancaire came off early lows after reporting a 57 per cent decline in 1992 net attributable profit to finish up FFr12.50 at FFr462.70 as investors turned their attention to the current year.

The financial sector was generally firmer on expectations of privatisations, should there be a change of government next month. Societe Generale gained FFr14 to FFr630, Paribas rose FFr8.30 to FFr406.50 and Suez advanced FFr2.30 to FFr286.90.

FRANKFURT edged up to its highest close since last July 21, the DAX ending 1.24 better at 1,651.05. Of the 30 DAX shares, 15 were higher by Thursday's closing, while 14 were lower and one was unchanged.

Turnover was DM6.5bn down from Wednesday's DM8.2bn. The DAX got its impetus largely from carmakers, engineers, and steels, all of which have seen downbeat comment from analysts in recent days.

As BMW rose DM4 to DM514.50, and Volkswagen DM2.40 to DM294.90, James Capel was sending out a morning letter which commented on the collapse in European January car registrations: while the sector has outperformed since end-December, it said, trading conditions in the automotive industry are deteriorating faster that any time during the current recession.

Engineers included a DM8.50 gain to DM779 for Linde while steels saw Thyssen DM3.20 better at DM180.20.

According to Mr John Longhurst of James Capel, all empirical evidence suggests that although the fall in foreign demand for capital goods is showing signs of stabilising at a lower level, domestic demand - where margins are high - continues to deteriorate, and rapidly.

MADRID returned to the upgrade on growing expectations of an interest rate cut, the general index closing 3.28 higher at 237.54. Turnover was around Pta28bn and gains included Pta35 to Pta1,355 for Telefonica and, among the debt-burdened electrical utilities, Endesa Pta205 higher at Pta4,220.

Banesto reversed on consideration of its rights issue terms, losing Pta120 at Pta2,315.

ZURICH struggled to find direction before some late buying took the SMI index 7.1 higher to 2,127.9.

AMSTERDAM improved as investors again bought Royal Dutch and Akzo. The oil group, up Fl 1.30 at Fl 156.80, has been helped by speculation ahead of Saturday's meeting of Opec. Akzo rose another Fl 3.10 to Fl 149.50 on a number of buy recommendations.

ISTANBUL was active in the electricity sector and the 75-share index closed above the 5,000 level, up 190 at 5,133.

----------------------------------------------------------------------- FT-SE ACTUARIES SHARE INDICES ----------------------------------------------------------------------- February 11 THE EUROPEAN SERIES ----------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1124.78 1123.88 1121.94 1122.80 FT-SE Eurotrack 200 1176.43 1175.99 1174.03 1176.27 ----------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close -----------------------------------------------------------------------

FT-SE Eurotrack 100 1123.57 1124.13 1127.67 1126.71 FT-SE Eurotrack 200 1176.77 1175.21 1178.66 1175.45 ----------------------------------------------------------------------- Feb 10 Feb 9 Feb 8 Feb 5 Feb 4 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1121.50 1124.14 1131.12 1129.52 1113.35 FT-SE Eurotrack 200 1171.08 1177.40 1190.15 1189.21 1183.60 ----------------------------------------------------------------------- Base value 1000 (26/10/90) ----------------------------------------------------------------------- High/day: 100 - 1127.67; 200 - 1178.78 Low/day: 100 - 1121.15 200 - 1173.63. -----------------------------------------------------------------------

IT Italy, EC FR France, EC DE Germany, EC ES Spain, EC CH Switzerland, West Europe NL Netherlands, EC TR Turkey, Middle East P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 868
World Stock Market: Strong January on Santiago market reform - Leslie Crawford details reaction to the widening of institutional investment options Publication 930212FT Processed by FT 930212 By LESLIE CRAWFORD

Santiago's stock exchange soared in January, on the wings of proposed capital market reforms which promise to broaden the investment options of Chile's private pension funds and insurance companies.

These institutions are the biggest participants in the market. The IPSA index of the 40 most traded shares rose by 11.7 per cent, in one month almost doubling the modest price gains registered in the whole of 1992.

Trading was also unusually heavy in second-tier stocks, as retail investors reacted to the news that pension funds would soon be authorised to invest in more than 100 new companies. At present, the equity portfolios of pension funds are restricted to 40 blue chips.

As speculators snapped up shares in these little-traded companies, the general share price index, or IGPA, rose by 16.6 per cent. In the last week of January, average daily market turnover more than doubled to Dollars 28.2m. On one day, turnover on the stock exchange floor and the electronic bourse notched up a record Dollars 45.5m.

In spite of some profit-taking at the end of January, most analysts expected the stock exchange, or Bolsa, to remain steady during February. Earlier this week the IPSA, returned to 100 each December 31, had eased to 111.06, from 111.7 on January 29.

The proposed capital markets reforms were leaked throughout the month, before being unveiled finally by Mr Alejandro Foxley, the finance minister, on January 23.

The reforms will allow private pension funds (AFPs) and insurance companies, which manage Dollars 15bn worth of funds, to broaden and diversify their equity portfolios. They will also be allowed to invest in new financial instruments such as convertible bonds, revenue bonds, foreign exchange, interest rate and equity index futures. AFPs will be free to acquire shares and corporate bonds abroad. At present, their foreign investment is restricted to AAA-rated bank debt and gilt-edged securities.

AFPs welcomed the proposed reforms as an opportunity to diversify their portfolios and reduce risk. Their equity investments are currently heavily concentrated in the privatised electricity and telecommunications sectors. This over-exposure was making both the authorities and pension fund managers feel uncomfortable.

Although the new law is not expected to enter the statute books until June, Mr Mario Lobo, an investment banker with Celfin Consultants, says the announcement was 'the psychological boost the market needed to consolidate other good news'. This includes some excellent corporate results following a year in which the Chilean economy grew by 9.7 per cent - one of its best ever performances.

Endesa SA, the privatised utility, said 1992 had been the best year in its history, with profits up 30 per cent to Dollars 260m. Endesa is now planning to raise in excess of Dollars 50m on the international bond markets to finance acquisitions in Argentina and Peru, and to build a Dollars 450m hydro-electric dam in southern Chile.

Vineyard stocks are also bubbly after wine and champagne exporters increased their foreign shipments by 41.7 per cent last year to Dollars 119.2m. The winemakers Santa Carolina, Santa Rita and San Pedro have all outperformed the share price index.

New stock market favourites are emerging as investors realign their portfolios in anticipation of the capital market reforms. The top performers in January were the metals refinery Elecmetal and the bottling plant Cristales, both up by around 62 per cent.

Mr Antonio Cruz, manager of the two Midland Bank foreign investment funds in Chile, sees the greatest growth potential occurring in medium-sized industrial and consumer product companies. 'These companies are making large investments to meet growing demand,' he says. Cement plants, for example, are working at full capacity due to the construction boom in Santiago.

CL Chile, South America P6231 Security and Commodity Exchanges P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis COSTS Equity prices P6231 P9651 The Financial Times London Page 35 666
Money Markets: Sterling futures down Publication 930212FT Processed by FT 930212 By JAMES BLITZ

STERLING futures had another mild fall yesterday as the pound remained weak on the foreign exchanges, raising speculation that the UK government would find it difficult to cut interest rates again, writes James Blitz.

The UK currency flirted with its historic low against the D-Mark throughout yesterday and this helped to depress sentiment in trading on the March futures contract.

The onset of yesterday's keynote speech by Mr Eddie George, the Governor-elect of the Bank of England, also saw selling of the March contract. Mr George is reputed to take a hard-line view about the need to combat inflation, raising speculation that he would warn against hasty interest rate cuts.

Both factors helped to push the March short sterling contract down 8 basis points at one stage yesterday, to a low of 94.07 in the mid-afternoon. The contract finished at 94.08, at which level it prices three-month money at 5.92 per cent in UK Budget week next month.

Dealers remained divided as to whether the contract could fall much further from these levels. Some continued to feel that it was a good buy, with good reasons to expect rates in both the UK and Europe to fall in the near term.

However, a London-based dealer suggested that the contract could easily reach convergence with yesterday's closing level for three-month money, which yesterday was 6 1/8 per cent. In his view, the pound's weakness made another near-term cut in base rates unlikely.

Sentiment in the cash market was much easier after most of the Pounds 1.05bn shortage forecast by the Bank of England in the morning was removed.

The March Euromark contract gained 7 basis points to close at 92.02, following slight falls in the first two days of this week. In the German cash market, call money rates of between 8.55 and 8.60 per cent were quoted unchanged throughout the day.

The better tone in Germany could not lift spirits in French franc markets, however. The Director of the French Bankers' Association said base rates may have to rise if short-term interest rates remain high.

The March franc contract fell 2 basis points to a close of 88.54. Both one-month and three-month French francs ended at around 12 per cent.

GB United Kingdom, EC FR France, EC DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 29 410
US involvement in Bosnia welcomed Publication 930212FT Processed by FT 930714 By LAURA SILBER BELGRADE

Leaders of Bosnia's three ethnic groups yesterday welcomed direct US involvement in the peace process, writes Laura Silber in Belgrade. The move was greeted too by Britain and France, both with troops in Bosnia delivering humanitarian aid, and the European Community, which has been trying to broker peace agreements. 'It gives hope, not a great hope, but hope that a solution can be found,' Commission President Jacques Delors said. Germany said the US six-point plan would boost prospects for an end to the bloodshed.

Nato Secretary-General Manfred Worner also welcomed the US commitment to 'engage actively and directly in the efforts to reach a just .. resolution to the conflict.'

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 141
Parliament and Politics: Lang says government is backing campaign for children's hospice Publication 930212FT Processed by FT 930714

Mr Ian Lang, Scottish secretary, said in the Commons last night that the government is backing a campaign to establish a children's hospice north of the border.

In a written reply, he said ministers would support the Children's Hospice Association Scotland in its proposal to set up a hospice to serve the whole of Scotland. The association was also being awarded a state grant to help with administration costs, he added.

GB United Kingdom, EC P9411 Administration of Educational Programs P8051 Skilled Nursing Care Facilities RES Facilities P9411 P8051 The Financial Times London Page 10 112
Harland and Wolff win contract Publication 930211FT Processed by FT 930304

Belfast shipbuilders Harland and Wolff have won a contract to refit the P&O cruise liner, Sea Princess.

Harland and Wolff Shipbuilding and Heavy Industries Peninsular and Oriental Steam Navigation GB United Kingdom, EC P3731 Ship Building and Repairing P4481 Deep Sea Passenger Transportation, Ex Ferry MKTS Contracts P3731 P4481 The Financial Times London Page 8 65
Fraud inquiry Publication 930211FT Processed by FT 930304

POLICE are investigating an alleged fraud at the British Council, Scotland Yard confirmed yesterday. The council is responsible for furthering British trade and cultural interests abroad.

United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors GOVT Legal issues P9651 The Financial Times London Page 8 55
Telecoms licence may be extended Publication 930211FT Processed by FT 930304 By ALAN CANE

MILLICOM Holdings, a wholly owned subsidiary of the US communications group, is likely to become the first telecommunications operator in the UK authorised to offer entertainment services over a national network, Alan Cane writes.

The company said yesterday that the government had provisionally agreed to extend the scope of Millicom's proposed public telecoms licence to include the delivery of radio and television programmes.

Mr Michael Heseltine, the trade and industry secretary, said that such a substantial change to the terms of the licence would require a further period of public consultation.

The government made a clear distinction between carrying entertainment services - within the scope of the proposed licence - and providing programmes, which would require separate authorisation.

Millicom United Kingdom, EC P4832 Radio Broadcasting Stations P4833 Television Broadcasting Stations P366 Communications Equipment TECH Licences TECH Services P4832 P4833 P366 The Financial Times London Page 8 161
International Company News: Record loss of Dollars 1.3bn at Ford of Europe Publication 930211FT Processed by FT 930304 By KEVIN DONE, Motor Industry Correspondent

FORD'S European automotive operations made a record loss last year of Dollars 1.3bn, compared with a loss of Dollars 1.079bn in 1991.

The loss was largely incurred by Ford's operations in Britain, including Jaguar, the UK car maker.

The loss in Europe included a Dollars 419m one-off charge for restructuring, while adverse currency fluctuations added exchange rate losses of more than Dollars 200m.

Ford of Europe announced late last year that it was planning to cut more than 10,000 jobs by the end of 1993.

The workforce of its European automotive operations, excluding Jaguar, had already been cut by 19 per cent from 115,000 in 1990 to 93,000 late last year and is set to fall to 83,000 by the end of 1993.

Jaguar, which was taken over by Ford at the end of 1989, said that its loss last year was little changed under US accounting rules, at Dollars 394.9m, compared with a loss of Dollars 402.2m in 1991.

Under UK accounting rules, the loss was cut to Pounds 189.5m (Dollars 286m) from Pounds 226.2m a year earlier. The Jaguar UK workforce has also been sharply reduced, to only 6,481 at the end of 1992 from 7,520 a year earlier and 11,661 at the end of 1990.

Jaguar's retail sales worldwide fell last year by 12.4 per cent to 22,478. This was the lowest level since 1982. Production dropped last year by 10.5 per cent to 20,593 - lowest since 1981.

The UK car maker is expecting some recovery in its fortunes this year, however, with a forecast increase in sales of 25 per cent worldwide, led by stronger demand in the US.

Jaguar sales in January were 25 per cent higher than a year ago, helped by a 30 per cent rise in its sales in the US, its most important market.

Mr David McCammon, Ford vice-president for finance in the US, said that most of the group's European automotive losses stemmed from Ford of Britain and from Jaguar.

Ford, the leader of the UK new car market, has suffered heavily during the recession. Its UK sales fell again last year by 8.4 per cent, depressing its UK market share to only 22.2 per cent, from 24.2 per cent a year earlier.

The loss of Dollars 1.3bn incurred last year by Ford's European automotive operations, including Jaguar, followed a net loss of Dollars 1.079bn in 1991, and net profits of Dollars 145m in 1990 and Dollars 1.19bn in 1989.

The losses in Europe more than accounted for Ford's total automotive losses outside the US last year of Dollars 1.1bn.

Ford's European car production fell by 6.9 per cent last year to 1,459,792, although its output of light commercial vehicles rose by 9.5 per cent to 226,547, helped by the launch of the Fiesta Courier van.

The Ford group has fallen to fifth place in the west European new car market.

Ford Motor Ford of Europe Jaguar Cars United States of America United Kingdom, EC P3711 Motor Vehicles and Car Bodies FIN Annual report MKTS Sales P3711 The Financial Times London Page 26 539
UK Company News: Brooke Tool makes disposal Publication 930211FT Processed by FT 930304 By GARY EVANS

BROOKE TOOL Engineering (Holdings) yesterday announced a further step in its programme of selling loss-making businesses with the disposal of Cardinal Broach to management for Pounds 2.35m cash.

At the same time, the company reported a sharp increase in pre-tax losses, from Pounds 1.7m to Pounds 3.14m, for the 12 months to September 30.

Turnover was lower at Pounds 18.9m (Pounds 25.3m). Losses per share increased to 7.3p (3.3p) and the final dividend is omitted. Last year only a 0.25p interim was paid.

Exceptional charges of Pounds 1.24m (Pounds 811,000) included a Pounds 503,000 loss attributable to Cardinal Broach, which makes broaching tools and machines.

The 1991 figures included an extraordinary loss of Pounds 403,000 which has been restated as an exceptional item in line with new accounting standards.

Mr Bernard Friend, chairman, said that the exceptionals covered measures to reduce the cost base and eliminate loss-making activities. They included redundancy payments and losses on disposals.

A number of loss-makers were sold during the year, realising about Pounds 1.4m.

Cardinal Broach represents the group's last connection with the design and manufacture of capital equipment. Mr John Dashper, chief executive, said the sale would allow the group to redirect resources into its remaining businesses in domestic and export markets - which are showing signs of improvement. It would also reduce group borrowings.

Mr Friend said that poor trading and redundancy costs had kept borrowings at too high a level. Interest charges for the year took Pounds 811,000 (Pounds 968,000). The first quarter of the current year had not shown any significant change in trading, but there were more recent signs of improvement. Order books were stronger than at this time last year, particularly in continental Europe and North America.

Brooke Tool Engineering (Holdings) Cardinal Broach United Kingdom, EC P6719 Holding Companies, NEC P3541 Machine Tools, Metal Cutting Types P3495 Wire Springs FIN Annual report COMP Disposals P6719 P3541 P3495 The Financial Times London Page 24 340
Ford loses Dollars 7.4bn after change in accounting Publication 930211FT Processed by FT 930304 By MARTIN DICKSON NEW YORK

FORD Motor, the US carmaker, yesterday reported a Dollars 7.4bn (Pounds 4.9bn) loss for 1992, due largely to a Dollars 6.9bn non-cash charge for a change in accounting principles but also a Dollars 419m fourth-quarter charge for restructuring its European operations.

The accounting change involves retirees' health benefits and affects all US companies. Ford's charge is one of the highest reported, but it will be dwarfed today by a Dollars 20.8bn charge due to be announced by General Motors.

For the fourth quarter, Ford announced a loss of Dollars 840m, or Dollars 1.85 a share, after taking the Dollars 419m charge for restructuring in Europe, where it has been hit hard by recession and is cutting jobs extensively.

The loss compared with red ink of Dollars 476m, or Dollars 1.03 a share last time, and was struck on sales of Dollars 25.4bn, up from Dollars 21.98bn.

The group's full-year loss of Dollars 7.4bn, or Dollars 15.61 a share, compared with a loss of Dollars 2.25bn, or Dollars 4.79 a share in 1991. Excluding accounting changes, it lost Dollars 502m in 1992.

Ford's North American vehicle operations have been helped by a gradual recovery in the market and Ford has been gaining market share.

It held 21.8 per cent of the car market in 1992, up 1.7 points from 1991, and its Taurus model overtook the Honda Accord to become the best-selling US car, helped by some hefty year-end financial incentives to buyers.

Ford's US vehicle operations lost Dollars 405m in 1992, excluding accounting charges, an improvement of Dollars 1.8bn over 1991. However, outside the US losses rose from Dollars 970m to Dollars 1.1bn.

Its financial services company, Ford Credit, had record earnings of Dollars 1.04bn, or Dollars 892m, excluding accounting changes, up from Dollars 749m in 1991.

Mr Harold Poling, chairman, said the company was cautiously optimistic about 1993. It expected the US vehicle market to rise to around 13.5m cars and trucks from 13.1m in 1992, while Europe would drop to around 13.7m, against 14.9m.

He said many problems of 1992 were continuing this year. However, cost reduction efforts and new products, with gradual economic recovery, 'provide the basis for continued improvement in operating results'.

Ford of Europe results, Page 26

Ford Motor United States of America P3711 Motor Vehicles and Car Bodies FIN Annual report MKTS Market shares P3711 The Financial Times London Page 21 417
International Company News: AT&T seeks damages from telecom rivals Publication 930211FT Processed by FT 930218 By MARTIN DICKSON

THE ferocious battle for market share in America's long-distance communications business took a new legal twist yesterday when American Telephone & Telegraph, the largest long-distance group, asked a federal court to award it damages against three long-distance rivals - MCI Communications, Sprint and WilTel.

It complained they had undercut AT&T's rates by providing 'secret' contracts to business customers.

The action stems from an appeals court ruling in Washington DC last November that all long-distance carriers must publish their prices. This reversed a ruling by the Federal Communications Commission, which oversees the industry and allowed AT&T's smaller rivals not to publicly file their rates.

AT&T said its damages claim covered 'many millions of dollars.' MCI said AT&T had been stung by a 'a continuing string of losses to MCI among its largest customers,' and it dismissed as 'absurd ' the assertion that secret deals had denied customers the benefits of competition.

American Telephone and Telegraph US United States of America P481 Telephone Communications COSTS Service prices GOVT Legal issues P481 The Financial Times London Page 27 192
Bomb in Colombian oil town: Union threatened over wage negotiations Publication 930211FT Processed by FT 930212 By REUTER BOGOTA

AT LEAST 12 people were killed and 20 wounded yesterday in a car bomb explosion in the Colombian oil refining town of Barrancabermeja, police said, Reuter reports from Bogota.

RCN radio, in a report from the town about 160 miles north of Bogota, said the death toll had risen to 14 after two of the wounded died from their wounds, but there was no immediate confirmation from police.

Reports from the town said the bomb blew up five blocks from the headquarters of USO, Colombia's powerful oil workers' union. USO is in wage talks with the state oil company Ecopetrol and planned a national day of protest yesterday.

Mr Cesar Carillo, president of the oil workers' union, told Caracol radio in an interview that the union had been threatened with violence during the last few days as a result of the wage negotiations.

'We don't know if the victims are union members or oil workers,' he said. 'The authorities are still getting information. There is a lot of confusion.'

Radio reports said Ecopetrol President Juan Maria Rendon was expected in Barrancabermeja at the time of the blast to inspect company installations but there was no suggestion that he might be among the victims.

The last bombing in Colombia occurred on January 30 when fugitive cocaine king Pablo Escobar allegedly set off a car packed with explosives in a busy Bogota shopping street, killing 21 people and wounding dozens.

There was no indication that drug traffickers might be responsible for the Barrancabermeja blast. The oil capital is, however, in the centre of a major guerrilla zone. Guerrillas have attacked gold and coal mines, oil rigs and pipelines, power lines, government installations and army patrols.

CO Colombia, South America P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times International Page 5 321
Bosnia lays down terms for talks Publication 930211FT Processed by FT 930212 By ROBERT MAUTHNER and REUTER NEW YORK, GENEVA

THE BOSNIAN Moslem foreign minister, Mr Haris Silajdzic, yesterday said his government could not continue to negotiate a peace settlement for Bosnia-Hercegovina 'with a gun at our head'.

Speaking at the United Nations shortly before the US was due to announce its own peace proposals, Mr Silajdzic said he believed Washington's involvement would secure an international settlement based on democratic principles.

He made clear that the Bosnian government would rejoin the negotiations, which it has virtually boycotted since they were moved from Geneva to New York at the beginning of last week, only if certain conditions were fulfilled. These were that the 'genocide' of the Bosnian Moslem population be halted and that the heavy weapons of all sides in the conflict be placed under effective international control.

'If any side does not comply with the placing of heavy weapons under the physical control of the UN, then force should be used.'

A particular effort had to be made to help the Moslem population of eastern Bosnia, which was currently the victim of intensive 'ethnic cleansing' policies undertaken by Bosnian Serb militia and had become 'the most endangered species in the world'. Aid convoys have been unable to reach this region.

Mr Silajdzic said it was astonishing that the Bosnian government was being blamed by international negotiators for blocking a peace agreement, when UN security council resolutions on the supervision of heavy weapons and the delivery of humanitarian aid were not being implemented.

If the latest security council resolution on the delivery of humanitarian aid remains unenforced, then other 'more creative options' should be exercised in getting aid to the needy, he said. The security council could authorise air drops of food, as well as opening Tuzla airport for incoming aid.

Reuter adds from Geneva: UN special investigator Tadeusz Mazowiecki yesterday said he was prepared to resign if concrete measures were not taken to prevent human rights abuses in former Yugoslavia,

BA Bosnia-Hercegovina, East Europe P97 National Security and International Affairs GOVT Government News P97 The Financial Times International Page 3 359
Brussels defends motorcycle plans Publication 930211FT Processed by FT 930212 By REUTER BRUSSELS

PLANS to limit the power of motorcycles and prevent tampering with moped engines are meant to make EC roads safer, the European Commission said yesterday, Reuter reports from Brussels.

Critics say the EC's executive is meddling in matters the prerogative of manufacturers, but Commission officials said they had backing from governments and manufacturers. The proposal to ban motorcycles over 100 brake horsepower would affect only a small number of machines, they added.

It would bring the EC in line with Japan, which has had a 100 brake hp limit for 15 years and makes more powerful models only for export, a Commission official said.

The proposal has been in trouble getting through the European parliament because some MEPs have taken the part of motorcycle users, arguing that factors other than horsepower cause road accidents. The parliament was to vote on the legislation late yesterday.

The other proposal, still being drafted, would set technical specifications for mopeds, aimed to prevent users tampering with engines to make them more powerful.

The two proposals are among 24 draft laws to set up a single set of technical specifications for two- and three-wheeled vehicles marketed in the EC.

QR European Economic Community (EC) P3751 Motorcycles, Bicycles, and Parts TECH Standards GOVT Draft regulations P3751 The Financial Times International Page 3 228
Shevardnadze hope of Karabakh peace: Georgian leader optimistic of chances of settlement in Armenia-Azerbaijan conflict Publication 930211FT Processed by FT 930212 By JOHN LLOYD and STEVE LEVINE TBILISI

MR Eduard Shevardnadze, the president of Georgia, said yesterday there 'were grounds for optimism' for peace between Armenia and Azerbaijan, which have been fighting for five years over the disputed enclave of Nagorno-Karabakh.

The former Soviet foreign minister also warned that the forces of democracy in Russia were 'more troubled than ever' warnedthat their defeat would be 'a disastrous event for the world.'

Mr Shevardnadze said that in recent meetings with Mr Levan Ter-Petrossyan, the Armenian president, and Mr Abulfaz Elchibey, the Azerbaijani president, he had found there was the political will to attempt a negotiated settlement.

'I think that we have come to the point when all our people are tired of this conflict. We (three Caucasian presidents) are all of the same mind,' he said.

Mr Shevardnadze said concessions from both sides had been discussed - and that both sides would 'bring these ideas out in negotiations.'

Mr Elchibey said at the weekend that 'in one or two months, the psychology of peace will show its head' and that the three presidents, together with Mr Boris Yeltsin, the Russian president, 'have common thoughts, common ideas among ourselves'. He warned, however, that reactionary forces in Russia and in the Caucasian states were blocking peace initiatives.

The Nagorno-Karabakh conflict has claimed nearly 3,000 lives and was further escalated when Armenian and Karabakh forces established a land bridge through Azerbaijani territory last summer. Over the past few days, Armenian forces have taken Azerbaijani villages to the north of Karabakh, following earlier setbacks.

Mr Shevardnadze hopes to convene a meeting of the Caucasian presidents, probably in Tblisi, to seek a basis for negotiation. He calls his project an attempt to create 'a peaceful sky over the Caucasus'. He also hopes to involve the north Caucasian republics in Russia.

The Georgian leader also expressed hope that agreements, due to be signed between Georgia and Russia over the next two weeks, would produce a better climate for a settlement of the conflict in the Georgian province of Abkhazia where separatist forces are fighting Georgian troops. He said Russia could play a 'positive role in settling the conflict' - though he accused units of the Russian military and mercenaries from the Russian north Caucasus of supporting the Abkhazians.

He said that he thought it was a 'possibility' that United Nations troops would be involved in Abkhazia.

The Georgian economy is suffering from acute energy and other shortages. Mr Shevardnadze said that former Georgian leader Zviad Gamsakhurdia had made a 'tragic mistake' breaking trade and other links with Russia.

AM Armenia, East Europe AZ Azerbaijan, East Europe GE Georgia, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 3 475
Challenge over EC passport checks Publication 930211FT Processed by FT 930212 By ANDREW HILL BRUSSELS

THE EUROPEAN Commission has been formally challenged to act on a specific complaint about continued passport controls in the EC's barrier-free internal market.

Euro Citizen Action Service (Ecas), a lobby group, has asked the Commission to act urgently against the Dutch authorities for refusing to let a Dutch citizen board a ferry from Vlissingen to Sheerness in the UK without a passport.

Ecas opened a telephone line in the first weeks of 1993 to gather comments about internal border controls, which it believes should have been lifted on January 1. It hopes to use the complaint of Mr Abraham Mooy, a Dutchman living in Belgium, as a test case against countries which have refused to lift such controls.

For now, all 12 member states have continued passport checks on intra-EC travellers arriving at airports. Nine continental member states are trying to lift controls by year-end, but Britain, Denmark and Ireland are likely to maintain checks beyond then.

Mr Mooy's complaint is against Dutch immigration authorities and officials of the shipping line, which refused to let him board the ferry on January 15. He had forgotten his passport and showed officials his Belgian identity card.

The case could embarrass the new internal market commissioner, Mr Raniero Vanni d'Archirafi, who has said he does not want to provoke a confrontation with member states over passport checks.

QR European Economic Community (EC) NL Netherlands, EC P9721 International Affairs GOVT Regulations P9721 The Financial Times International Page 3 258
World News in Brief: High hops Publication 930211FT Processed by FT 930212

German brewers are hoping that a US Spacelab experiment will help produce new and better types of hops. Astronauts will test hops for the effects of radiation and weightlessness.

DE Germany, EC P0139 Field Crops Ex Cash Grains, NEC P2082 Malt Beverages TECH Research P0139 P2082 The Financial Times International Page 1 63
World News in Brief: Human rights group highlights jail risk Publication 930211FT Processed by FT 930212

Aboriginals are 17 times more likely to be jailed than other Australians, according to Amnesty International. The human rights group said Australia's criminal justice system made Aborigines vulnerable to violation of their right to be treated with humanity and respect.

AU Australia P9229 Public Order and Safety, NEC STATS Statistics P9229 The Financial Times International Page 1 72
World News in Brief: Tapie sparks row Publication 930211FT Processed by FT 930212

French urban affairs minister and businessman Bernard Tapie created a row with his political allies in the Left Radicals Movement by announcing he would run for parliament in a colleague's constituency.

FR France, EC P9121 Legislative Bodies GOVT Government News Tapie, B Urban Affairs Minister (France) P9121 The Financial Times International Page 1 66
World News in Brief: Asia pipeline plan Publication 930211FT Processed by FT 930212

China and Japan's Mitsubishi Corporation are to study the feasibility of building a 4,200-mile trans-Asia natural gas pipeline.

Mitsubishi Corp CN China, Asia JP Japan, Asia P4923 Gas Transmission and Distribution RES Facilities P4923 The Financial Times International Page 1 53
World News in Brief: Taiwan fighter production Publication 930211FT Processed by FT 930212

Taiwan is to start mass producing its domestically-developed Indigenous Defence Fighter aircraft next year. It aims to make 250 of the fighters by 1999.

TW Taiwan, Asia P3721 Aircraft MKTS Production P3721 The Financial Times International Page 1 50
World News in Brief: Repelling boarders Publication 930211FT Processed by FT 930212

Britain has issued its first official notice telling shipowners how to protect vessels from pirates. Crews are advised to turn fire hoses on attackers, but the ban on guns aboard merchant ships will stay in place.

GB United Kingdom, EC P44 Water Transportation GOVT Legal issues TECH Safety P44 The Financial Times International Page 1 66
World News in Brief: Call for Danube monitors Publication 930211FT Processed by FT 930212

Bulgaria and Romania have asked the United Nations to station monitors at ports on the lower Danube to check whether sanctions against the rump of the former Yugoslavia are being observed.

BG Bulgaria, East Europe RO Romania, East Europe YU Yugoslavia, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 1 69
People: Beecham's Boyle moves to BUPA Publication 930211FT Processed by FT 930214

David Boyle, a 28-year veteran of Beecham, is moving to take charge of the international division of BUPA. He becomes one of three managing directors on the board of Britain's largest private healthcare group, all reporting to chief executive Peter Jacobs.

BUPA covers around 854,000 people on the international side, with a turnover in 1991 of Pounds 178m. The organisation, which has seen falling income as premiums and costs have shot up in Britain, says that premium increases on the international side, at an average of 15 per cent, have kept pace with the costs of health care and that the number of people covered by the division rose slightly in 1992 compared with the previous year.

His most recent assignment at SmithKline Beecham was a four-year stint as chairman of consumer brands, European division, a position two levels down from the main board of the Anglo-American company. Previously, he had travelled widely in various capacities and had lived in Kuala Lumpur in the mid 1970s as the regional managing director of Beecham products, Far East.

Why is he coming to BUPA? 'The main reason,' says Boyle, 50, 'is that after 28 years it is stimulating and refreshing to make a move.' He adds that there are many similarities between the two jobs: 'On the insurance side, after all, BUPA is simply providing a consumer product.'

BUPA has a significant toehold in the Spanish market via its subsidiary Sanitas, as well as activities in Hong Kong, Malta and Cyprus. Boyle says part of his brief will be to extend the regional coverage, but will not be drawn further.

Boyle replaces David Shaw, who had headed international for two and a half years, and who is retiring after 23 years with BUPA.

*****

Queens Moat Houses, the UK-based hotel group with a large European presence and even bigger ambitions, has appointed two of its continental executives to the main board.

The two new directors are Peter Bertholdt, 47, who is responsible for the group's operations in Germany, Austria and Switzerland and Leonardus van der Meer, 49, who heads the business in the Netherlands and Belgium.

Queens Moat has more hotel rooms outside the UK than in. John Bairstow, the chairman, said last year that the Continent would become even more important to the group. He said that 'the UK will progressively become one of our major areas of operation, rather than the mainstay of our business'; the two new board members had played a central role in establishing Queens Moat on the Continent.

*****

Ian Fraser, md of Reliance Security Services, is also appointed md of RELIANCE SECURITY GROUP; he replaces Peter Paice who is leaving to pursue other interests.

*****

Sean Lance and Neil Maidment have been appointed mds at GLAXO HOLDINGS and on to the main board.

*****

Graham McVey, formerly a director of Reed International and chairman and chief executive of the Reed Business Publishing Group, has been appointed chief executive of FINDLAY PUBLICATIONS.

*****

Mike Rodwell has been promoted to become md of SCHINDLER Ltd, the UK subsidiary of the Swiss group.

*****

Edward Lowndes, 49, has been appointed as the first full-time general secretary of the Society of Practitioners of Insolvency.

SPI, a professional body founded two years ago for the UK's more than 2,000 insolvency practitioners, has been increasingly active as the subject has come under the spotlight during the recession.

It does not license professionals, but has issued a series of ethical guidelines and practice notes, lobbied the government and is developing a network of regional societies.

Lowndes was formerly the director of resources for the paymaster in chief of the army, and recently left on completion of his contract, with the rank of colonel. He is a fellow of the Chartered Institute of Management Accountants, and was once finance officer to the Sultan of Brunei's armed forces.

*****

Christopher Heard, md of Mortgage Trust, has been appointed chairman of the ASSOCIATION OF MORTGAGE LENDERS.

British United Provident Association Society of Practioners of Insolvency (UK) Association of Mortgage Lenders (UK) Queens Moat Houses Reliance Security Group Glaxo Holdings Findlay Publications Schindler United Kingdom, EC P6719 Holding Companies, NEC P8099 Health and Allied Services, NEC P6321 Accident and Health Insurance P8621 Professional Organizations P8611 Business Associations P6162 Mortgage Bankers and Correspondents P7011 Hotels and Motels P5812 Eating Places P7353 Heavy Construction Equipment Rental P27 Printing and Publishing P381 Search and Navigation Equipment P2099 Food Preparations, NEC P28 Chemicals and Allied Products P7381 Detective and Armored Car Services P35 Industrial Machinery and Equipment PEOP Appointments Lowndes, E General Secretary Society of Practioners of Insolvency (UK) Heard, C Chairman Association of Mortgage Lenders (UK) McVey, G Chief Executive Findlay Publications P6719 P8099 P6321 P8621 P8611 P6162 P7011 P5812 P7353 P27 P381 P2099 P28 P7381 P35. The Financial Times London Page 15 816
People: Analyst-go-round Publication 930211FT Processed by FT 930214

The move of John Aitken, the City's top-rated banking analyst, from NatWest Securities to UBS Phillips & Drew should mean that the merry-go-round in City banking analysts has probably come to a stop for the moment.

It started a year ago when Nick Collier, Hoare Govett's banking analyst, moved to Morgan Stanley. His move left Hoare vulnerable since it was broker to Lloyds Bank. It then recruited Peter Toeman and Steven Thorn, the City's number two banking team, from UBS Phillips & Drew.

Shortly afterwards, David Poutney, the other member of the UBS team, left along with Terry Smith, who was head of research and a well-known bank-watcher. They have joined Collins Stewart, a small firm of brokers.

Aitken's move to UBS Phillips & Drew - he used to work for P&D some years ago - plugs an obvious gap in its research team. Meanwhile, Aitken's deputy, Mark Eady, will continue to research the banks for NatWest Securities.

*****

Adam Murza, a former editor of the Estates Times and veteran City property analyst, has quit stockbroking and joined Guardacre Group, an unquoted property investment company.

Guardacre Group UBS Phillips and Drew United Kingdom, EC P6211 Security Brokers and Dealers P6798 Real Estate Investment Trusts PEOP Appointments P6211 P6798 The Financial Times London Page 15 222
Leading Article: Water regulation Publication 930211FT Processed by FT 930214

YESTERDAY'S consultation paper on the future supply of water in the UK is the latest in a series of papers to be published by Mr Ian Byatt, the director general of the Office of Water Services (Ofwat). The papers have been produced in the run-up to next year's periodic review of the regulatory regime for the water industry which will set the pricing formula until 2005.

The publication of these papers has been a commendable demonstration of glasnost. Mr Byatt has set out the conceptual problems he faces in regulating this most monopolistic of industries. The water companies, environmentalists and consumers have all been invited to join the debate and given data on which to make informed judgments.

This openness has well illustrated the exceptionally difficult problems faced in regulating the water industry. One of the most intractable is the requirement imposed on Mr Byatt to allow the water companies to make a reasonable return on capital. This requirement - not imposed on other regulators - was deemed necessary if the companies were to raise over Pounds 30bn needed to modernise the industry.

The definition of a reasonable rate of return led to an early clash between Ofwat and the companies. Mr Byatt proposed a target of 5 to 6 per cent; the companies say they need 9.5 per cent.

A further complication arises from the division of duties between Ofwat, which regulates water prices, and other bodies which regulate water quality. Directives from the European Community and standards set by UK bodies such as the National Rivers Authority can impose big additional costs on the water industry. Mr Byatt is responsible for keeping water bills as low as possible, without being able to control the dominant factor pushing up costs - ever-increasing environmental standards. He has usefully brought into the open the question of whether environmental standards are unnecessarily high and too expensive.

However, some responses from the industry appear to have merit. It has criticised yesterday's paper for a premature judgment that meters curb the growth in demand for water, arguing that preliminary trials have been inconclusive and the results of the Department of the Environment's fuller study will not be available for several months. It has complained too that the arguments in last month's paper were guilty of circularity in defining the value of the companies' assets.

Yesterday's paper should not, therefore, be the last to be published by Ofwat before the periodic review. Further reports are needed in which Mr Byatt summarises the responses to his original position papers and gives an evaluation of their arguments. Both investors and consumers deserve to learn of Mr Byatt's response to these rebuttals, and how he proposes to bridge the gap before he completes his review.

Office of Water Services (UK) Ghana, Africa P9631 Regulation, Administration of Utilities P4941 Water Supply CMMT Comment & Analysis P9631 P4941 The Financial Times London Page 19 490
German bank buys London building Publication 930211FT Processed by FT 930214

BFG Bank, Germany's sixth-largest bank, has bought a London building for Pounds 70m from Shell Pensions Trust. The sale is the latest in a spate of large acquisitions by German investors, and the second of a London building by BFG Bank.

BfG Bank Shell Pensions Trust Germany, EC P6011 Federal Reserve Banks RES Facilities P6011 The Financial Times London Page 8 72
World Trade News: Consortium meets to agree Argentina-Chile gas pipe - Construction expected to start this year Publication 930211FT Processed by FT 930214 By LESLIE CRAWFORD SANTIAGO

A GROUP of Chilean, Spanish and Italian companies will meet Argentine natural gas producers this week to finalise the supply contracts for a Dollars 1bn (Pounds 600m) trans-Andean gas pipeline that will export gas from Argentina to Chile.

The consortium - formed by Chilectra and ENAP of Chile, Italgas and SNAM of Italy, and Gas Natural and Enagas of Spain - wants to tap the natural gas fields in southern Argentina.

It will then transport gas across the Andes, along a 1,200-km pipeline to Santiago, the Chilean capital.

The pipeline is the biggest infrastructure project between neighbouring countries in Latin America since the international debt crisis of the 1980s put a halt to ambitious schemes of what were then military governments in the region.

Pre-feasibility studies for the pipeline have been completed and the consortium has retained Chase Manhattan Bank of the US to act as adviser for the financing of the project.

Construction work is expected to begin this year, with completion scheduled for early-1996.

'The pipeline makes economic sense for the two countries,' says Mr Brian O'Neill, Chase Manhattan's senior vice-president for corporate finance.

'Argentina is in a strong position to become an energy exporter, while Chile clearly needs to burn cleaner fuels,' he said.

Chilean energy officials back the project as a means to convert industry, buses, taxis and other fleets of vehicles to compressed natural gas, thereby reducing the smog that is suffocating Santiago.

Mr O'Neill believes that, if the trans-Andean pipeline is a success, Argentina will be able to set its sights on exporting natural gas from its northern fields to the state of Sao Paulo in Brazil, that country's industrial heartland.

Chile's recent return to international standards of creditworthiness also makes the financing of the Dollars 1bn project more apt to be feasible.

Chase Manhattan envisages a blend of funding options, including bilateral government credits, commercial bank loans and tapping of the Chilean capital markets, as well as a significant equity component from the companies involved.

Chilena Electricidad Italiana per il Gas Gas Natural de Alava ENAP Snam Enagas Argentina, South America Chile, South America P1311 Crude Petroleum and Natural Gas P4922 Natural Gas Transmission TECH Licences MKTS Contracts P1311 P4922 The Financial Times London Page 6 400
World Trade News: Argentina-Chile oil pipeline construction begins Publication 930211FT Processed by FT 930214 By LESLIE CRAWFORD

Construction began this month on a 425km oil pipeline that will link oil fields in southern Argentina to Chilean refineries in the southern ports of Talcahuano and San Vicente, Leslie Crawford writes.

The Dollars 300m project is being built by the two state oil companies, ENAP of Chile and YPF of Argentina, and by Banco Rio de la Plata, an Argentine bank. The pipeline through the Andean mountains is the first project of its kind between the two neighbouring countries. It is expected to reduce Chile's oil import bill by cutting transport costs - ENAP now imports oil from Africa.

The pipeline will also allow Argentina to ship oil to the Far East from Chilean ports on the Pacific Ocean.

ENAP YPF Argentina, South America Chile, South America P4612 Crude Petroleum Pipelines P1623 Water, Sewer and Utility Lines MKTS Production P4612 P1623 The Financial Times London Page 6 165
Japan baffled as US reassesses relationship Publication 930211FT Processed by FT 930214 By JUREK MARTIN and CHARLES LEADBEATER WASHINGTON, TOKYO

SUCCESSIVE Japanese governments have operated in the sure knowledge that the connection to Washington was 'the most important bilateral US relationship in the world'. Every US president for the last 30 years has said it, and so, as both candidate and president-elect, has Mr Bill Clinton.

But two senior Japanese cabinet members, Mr Michio Watanabe, foreign minister, and Mr Yoshiro Hayashi, finance minister, are coming to Washington this week apparently unsure this is still the case.

The Japanese worries have been well advertised. Uncertainty exists over whether the Clinton administration is free-trade or protectionist and, if the latter, the extent to which Japan, with its Dollars 50bn (Pounds 33.1bn) bilateral trade surplus, will become a target.

Every pronouncement by every newly installed US official is scrutinised with minute care by the Japanese.

Beyond commerce, there is also concern about the general US commitment to Asia and particular worries about the new US approach to China. Mr Winston Lord, state department under-secretary with regional responsibilities, is a former ambassador to Beijing and a conspicuous recent critic of Chinese external and human rights policies.

Yet Tokyo's concerns, which extend beyond concrete policies, are not exactly mirrored in Washington. This may well be the essence of the current problem.

Japanese foreign policy tends to be rooted in certain anchors, such as the relationship with the US. For 10 years, from 1977 to 1987, the ultimate assurance of continuity was provided by the comforting presence in the Japanese capital of Ambassador Mike Mansfield, whose understanding of Japan was exceptional and whose political power in Washington (he was a long-standing senator) effectively kept the lid on successive administrations' intermittent inclinations to take a tougher line with Japan.

Mr Michael Armacost, his successor, displayed some of the same skills, but with nothing like the political authority. Now Japan wonders who will be the next 'minder' of the relationship in Washington and in Tokyo.

Mr Lord is a China hand and is surrounding himself mostly with like-minded people, with Mr Thomas Hubbard, a Japan expert and most recently deputy ambassador in Manila, back on board running the Japan desk.

But no sign exists of a decision on the successor to Mr Armacost. Japanese nerves were jangled during the transition by rumours that the post might be offered to Mr Chalmers Johnson, the distinguished Japanologist from the University of California, best known as the 'godfather' of the revisionist school of thinking towards Japan.

In a recent New York Times article, Mr Johnson wrote that the US should recognise its 'failure' to open Japanese markets and 'start over'. A new approach was 'justified on grounds that Japan, as it admits, is not the kind of capitalist economy envisioned by the Gatt negotiators.' That is the sort of language that scares Japan to the core.

Mr Johnson probably will not get the job, but the absence of a clear candidate concerns the Japanese, due to their addiction to form over substance in foreign policy.

Thus, it matters to Tokyo that no meeting has yet been arranged between Mr Clinton and Mr Kiichi Miyazawa, Japanese prime minister, whereas Presidents Reagan and Bush both met Mr Miyazawa's predecessors immediately on assuming office. Not all the blame for this omission is laid at the US door. The truth is that Washington has not yet got round to thinking much about Japan.

But two developments this week, the US commitment to seek an extension of the fast-track negotiating authority on trade and Detroit's decision not to go ahead with anti-dumping suits against foreign car makers, offer some generalised reassurance.

Equally, the weekend session between Mr Hayashi and Mr Lloyd Bentsen, treasury secretary, (the first he has held with a foreign finance minister) seems to indicate the US appreciates Japan's place as an important player in the Group of Seven.

Mr Bentsen has talked of the need to revitalise the G7 before the annual summit in Tokyo in July, with a finance ministerial meeting planned for March as the next step in the process.

But trade and China top Mr Watanabe's agenda. He will propose replacing the long-running Strategic Impediments Initiative with new institutions to discuss trade and medium-term macro-economic issues, such as the US federal deficit, rather than details about the imbalance in particular industries.

Just as Washington's internal politics and personalities are receiving minute attention in Tokyo, much inevitable emphasis is being placed there on the views of Mr Mickey Kantor, trade representative. One official said he could be bad news if led by protectionist sentiment, but he might be good news, if the president were really in charge of trade policy. 'Trade relations could get a lot worse or a lot better. We just don't know yet.'

What to the US is a natural reassessment of the relationship appears to Japan as confusion.

Japan, Asia United States of America P9611 Administration of General Economic Programs P9721 International Affairs GOVT Government News P9611 P9721 The Financial Times London Page 4 846
IG Metall may strike if wage increase denied Publication 930211FT Processed by FT 930214 By JUDY DEMPSEY BERLIN

IG Metall, Germany's engineering trade union, yesterday said it would use the strike weapon 'as the last resort' if employers refuse a wage increase of over 10 per cent this year for its members in east Germany, Judy Dempsey writes from Berlin.

The warning follows the start of arbitration talks in Saxony last week. Further talks will take place in the other east German states over the next few weeks.

Previous talks broke down after employers had said they would not accept rapid pay increases to bring east German wages up to 82 per cent of west German levels, from the 70 per cent level at present.

Yesterday, Mr Klaus Zwickel, IG Metall vice-chairman, said employers were 'reneging' on commitments to income parity between west and east Germany by 1994. He rejected criticism his union was pricing east German workers out of the market.

IG Metall (Germany) Germany, EC P8631 Labor Organizations P9651 Regulation of Miscellaneous Commercial Sectors PEOP Labour P8631 P9651 The Financial Times London Page 2 185
Metal union threatens strike Publication 930211FT Processed by FT 930214 By JUDY DEMPSEY BERLIN

IG Metall, Germany's engineering trade union, yesterday said it would use the strike weapon 'as the last resort' if employers refuse a wage increase of over 10 per cent this year for its members in east Germany.

The warning follows the start of arbitration talks in Saxony last week. Further talks take place in the other east German states over the next few weeks.

Previous talks broke down after the employers' union said it would not accept rapid pay increases which would bring east German wages up to 82 per cent of west German levels from the 70 per cent level at present.

Yesterday, Mr Klaus Zwickel, vice chairman of IG Metall, said the employers' union was 'reneging' on its commitment to income parity between west and east German states by 1994. 'The employers are provoking us. We signed a contract in 1991. And we will stick to it. It is only fair, particularly since east German workers have to pay west German prices, and have seen housing and other subsidies sharply reduced.'

Mr Zwickel rejected criticism that his union was pricing east German workers out of the market - despite the fact that unit labour costs are about 150 per cent higher and productivity is lower than 70 per cent of west German levels.

But IG Metall union officials conceded that it might not have full backing for any strike call because rising unemployment is eroding the union's active membership.

Most engineering workers, some 750,000 in the east German states, are members of IG Metall. But since unification the number east German engineering workers who have actually got a job has shrunk to 300,000. Also, 50 per cent of these are under the supervision of the Treuhand, the east German privatisation agency. Further privatisations could reduce the clout of I G Metall.

'We do not want to be pushed into a strike,' said Mr Zwickel. 'But we will not let our employees be pushed around.'

However, several factory managers in west Germany yesterday believed that the employers' union would find a way out of the contract by invoking 'revision clauses'. This means that employers can argue that if the developments in the new east German states deviated from their original plans, the parties have the right to reconsider the clauses of the original contract.

IG Metall (Germany) Germany, EC P8631 Labor Organizations P9651 Regulation of Miscellaneous Commercial Sectors PEOP Labour P8631 P9651 The Financial Times London Page 2 422
World Stock Markets (America): Steadier day as technology issues bought Publication 930211FT Processed by FT 930214 By PATRICK HARVERSON NEW YORK

Wall Street

ALTHOUGH shares in blue chip industrial companies traded in a narrow range yesterday, secondary stocks posted gains amid selective buying of technology issues, writes Patrick Harverson in New York.

At the close the Dow Jones Industrial Average was down 2.16 at 3,412.42, well above its low for the day of 3,394.32. The more broadly based Standard & Poor's 500 ended a slight 0.90 up at 446.23, while the American SE composite was 1.10 firmer at 416.10 and the Nasdaq composite 2.81 higher at 695.02. Trading volume on the New York SE came to 248m shares.

After Tuesday's losses, the markets settled down as investors awaited the next big move. There was no lead from the economy, and the failure of the Treasury market to hang on to its early gains also left equities rudderless. Dealers and investors, however, were pleased that trading volume has been relatively light during the recent sell-off - an indication that the downward move in prices was a consolidatory move, and not a major shift in sentiment.

Trading in Eastman Kodak was delayed due to an early order imbalance on the sell side. When business finally opened, the stock tumbled Dollars 3 to Dollars 50 1/2 on heavy selling, before rallying to end with a net loss of Dollars 1 3/4 at Dollars 52 after volume of 3.7m shares.

The market was reacting to a downgrade from Mr Eugene Glazer, the sector analyst at broking house Dean Witter Reynolds. Mr Glazer said he had lowered his rating on Kodak from 'buy' to 'neutral' because he believed that the stock had become overpriced following its recent gains, and that investor expectations may have been driven too high.

Ford eased early on, but rallied to end Dollars 7/8 higher at Dollars 49 3/4 on news of a big fourth quarter and full year loss that was roughly in line with market expectations. The other members of the Big Three were firmer, with Chrysler up Dollars 1 at Dollars 40 1/4 and General Motors Dollars 3/4 at Dollars 39 1/4 . The latter was helped by news that the television network NBC had publicly apologised for rigging tests that purported to show a GM truck bursting into flame after a collision.

Aetna Life & Casualty slipped Dollars 3/4 to Dollars 51 3/4 and Travelers eased Dollars 1/2 to Dollars 28 1/8 after the two composite insurers unveiled big fourth quarter losses incurred in the wake of a variety of special charges.

On the Nasdaq market, a selection of technology stocks were strong, with Intel Dollars 4 ahead at Dollars 114 3/4 in volume of 4.6m shares and Microsoft Dollars 1 5/8 firmer at Dollars 85 1/2 , but Apple fell Dollars 1 1/8 to Dollars 55 3/4 .

Canada

TORONTO stock prices extended their February rally in continued heavy trading, closing solidly higher with the help of strong gold and real estate shares.

The TSE 300 index advanced 28.9 to 3,443.0 and rises led falls by 397 to 276 after volume of 60.7m shares. Thirteen of 14 stock groups gained ground, led by the golds sector, up 4.3 per cent, as the spot price for gold in New York added USDollars 3 at USDollars 332.50 an ounce.

United States of America Canada P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 37 582
Commodities and Agriculture: Price rise for rough diamonds Publication 930211FT Processed by FT 930214 By KENNETH GOODING, Mining Correspondent

ROUGH DIAMOND prices are going up for the first time in nearly three years. De Beers, the South African group that controls about 80 per cent of the rough (uncut) diamond market, announced yesterday that it would be changing its prices and assortments from next Monday to produce an overall increase of 1.5 per cent.

Analysts suggest that this is another sign that De Beers has regained control over the market after a year when its grip seemed threatened by deep recession in many industrialised countries and an upsurge in smuggling out of Angola.

Last autumn the group told producers to cut agreed deliveries by 25 per cent as it struggled to bring supply and demand back into balance.

De Beers' London-based Central Selling Organisation said yesterday demand for particular categories of rough stones had recently been strong. 'We think this will be sustained and the market can absorb the price increase relatively easily.'

Mr Michael Coulson, analyst at Credit Lyonnaise Laing, suggested: 'The crisis has passed for the diamond market for the moment. De Beers obviously thinks the market has turned for the better'.

De Beers Consolidated Mines Central Selling Organisation World P1499 Miscellaneous Nonmetallic Minerals P5094 Jewelry and Precious Stones COSTS Commodity Prices CMMT Comment & Analysis TECH Products P1499 P5094 The Financial Times London Page 30 206
Commodities and Agriculture: Kuwait claims big oil production rise Publication 930211FT Processed by FT 930214 By MARK NICHOLSON CAIRO

KUWAIT'S OIL production has leapt by 210,000 barrels a day in the past few weeks to 1.98m barrels a day, according to Mr Ali al-Baghli, the country's oil minister, who said any cut from that level would be 'painful'.

The minister, quoted in Kuwait's al-Anba newspaper, denied that the recent rise in production had contributed to slippage in the oil price and said Kuwait would discuss the proposals for the Organisation of Petroleum Exporting Countries to cut output during this weekend's meeting 'with understanding and reason'.

But the minister's comment that 'a reduction would be painful for us' signals Kuwait's determination to retain output at levels as near present production as possible and resist pressure from fellow Opec members to subscribe to a ceiling much below 2m b/d.

For the last Opec agreement in November Kuwait undertook to produce 1.5m b/d and raise production only as market conditions allowed. Yesterday's figures, however, are well ahead of the oil ministry's previously stated targets for 1993, which put output at 1.85m b/d in the second quarter, 2.05m in the third and 2.15m b/d in the fourth. Kuwait's pre-Gulf war quota was 1.5m b/d, but it was lifting at least 2m b/d before the invasion.

Industry analysts viewed Mr al-Baghli's figures with some scepticism, suggesting that Kuwait's output was likely to be nearer the 1.778m b/d he announced in late January. 'A figure of nearly 2m is a bit of posturing,' said Mr Fareed Mohammedi, an analyst with Petroleum Finance Company in Washington. 'The issue is where Kuwait is going to cut from, and they don't want to cut from 1.5m b/d, they want to cut from 1.9m b/d'

Last month's tour among Opec members by Mr Alirio Parra, the cartel's president, produced broad agreement, between Iran and Saudi Arabia in particular, that the organisation should seek to trim at least 1m b/d from its overall output to support prices, with the Saudis suggesting that the cuts should be pro-rata from all producers.

Mr Gholamreza Agazadeh, Iran's oil minister, was quoted yesterday on Tehran Radio as saying that the cut should be from Opec's nominal, but abused, ceiling of 24.58m b/d reached at its last meeting in November to 23.5m b/d. But he said that such a cut would merely sustain prices at present levels and that he would enter this weekend's meeting calling for a cut of more than 1m b/d. Most industry figures put Opec's actual present production at more than 25m b/d.

Kuwait, Middle East P1311 Crude Petroleum and Natural Gas MKTS Production CMMT Comment & Analysis GOVT International affairs P1311 The Financial Times London Page 30 453
International Company News: Chinese candidates line up for HK listing - The flotations which will add a new dimension to the colony Publication 930211FT Processed by FT 930214 By SIMON DAVIES

This year some of China's largest state-run industries will be listed on the Hong Kong stock exchange, adding a new dimension to a stock market that has long been driven by local political and property influences.

The potential for Hong Kong is enormous, and the pull for advisers has been similarly compelling. More than 40 merchant banks have lined up to fight for the mandate for the flotation of just one of the companies, Qingdao Brewery, which produces one of China's best-known exports, Tsingtao beer.

Shanghai Petrochemical, which is the largest and probably the first of the flotations, is set to raise as much as HKDollars 3bn (USDollars 388m). In total, analysts believe the nine short-listed companies will raise more than HKDollars 7bn.

If successful, there is an enormous supply of further candidates from among the country's financially stretched state industries, which are keen to tap international capital flows by developing a strong Chinese element to what will in five years become a Chinese-owned stock market.

However, there are sizeable obstacles to be overcome before these Chinese flotations can be smoothly launched in Hong Kong. Not least of these is a need for re-education of the companies' management.

Only recently, Chinese company directors would have been jailed for releasing commercial information to foreigners. Now they are going to be obliged to provide even more detailed disclosure than under the old state system.

Management freedom comes at a high price. It will have to cope with the dislocation of facing up to market forces and having responsibility to a new body of shareholders. This compares with the undemanding quota systems that they are used to.

Potential investors will also need educating, as these companies represent an entirely new business concept. 'These corporations are like industrial revolution style company towns, where everyone owes their soul to the company store,' said one merchant banker.

Shanghai Petrochemical, China's sixth largest petrochemical company, is an entire city. The company oversees everything from the law courts to the fire service, and employs an estimated 63,000 people. The general manager is like a mayor, and drives around 'his' city with a red flashing light on the top of his car.

Merrill Lynch was awarded the role of global co-ordinator for the flotation, but despite having a June target for the public offer, there is no decision yet as to what can actually be listed. It is clear that the corporation's social responsibilities will be unacceptable to a new shareholder base, but an alternative structure has yet to be conceived.

Senior representatives of the Hong Kong stock exchange met China's Securities Committee - the new regulatory body for China's capital markets - in Nanjing this week to wrestle with some of the technical problems presented by the listings.

One international corporate lawyer pointed out that a Chinese enterprise has to complete a share offering in order to become a separate legal entity.

As a result, some issues of B shares - shares available only to foreign investors - on the Chinese stock markets have been for companies that did not legally exist during the subscription period. The Hong Kong stock exchange will want to address this.

The Chinese government wants all nine industrial companies to be listed by the end of the year, and there is already rumoured to be a second batch of 12 companies ready for flotation in early 1994.

'When the Chinese top leaders want to do something, they put a lot of effort into it and they get it done very quickly,' said Mr Tommy Wong, of Kwan Wong Tan & Fong, a local accountancy firm which is handling two of the Chinese flotations.

Accountants agree that the process is aided by the level of detail in state company records. As Mr Wong says: 'They shoot people for economic crimes.'

However, translating Chinese accounting systems into a set of internationally accepted accounts is proving complex, with major differences in the treatment of equity accounting, foreign exchange translation, and stock-taking. The revised accounts will bear little resemblance to the current profit claims of the companies.

But an unprecedented number of merchant banks are prepared to take up the challenge. Corporate financiers have been cutting documentation fees to the bone in order to fight for mandates, which are due to be announced before the end of February.

Mr Ambrose Lam, managing director of corporate finance at Standard Chartered Asia, said: 'It is recognised not to be very profitable, but it is worth it to get the recognition, and hopefully to have a better chance with the next batch of issues.'

The Securities Committee is taking an active role throughout. The committee is led by Zhu Rongji - a member of the Communist party's most powerful decision-making body - which emphasises the importance that China is attaching to this programme.

The committee has decided to focus on Chinese incorporated listings in Hong Kong, rather than allowing companies to incorporate and be floated further afield - such as the New York listing of Brilliance Automotive.

Beijing must be heartened by the fact that the HKDollars 403m offer for Hong Kong registered Denway Investments, the Chinese car manufacturer, is understood to have attracted more than HKDollars 200bn in subscription funds.

The response suggests a quite extraordinary level of demand for China shares in Hong Kong. The use of leading international houses such as Merrill's will enable future issues to tap an even broader investor base.

The managing director of a local corporate finance house said: 'Knowing the pent-up demand by Chinese companies for capital, it would be inconceivable that they would float less than 20 state companies per year, after the first batch. Therefore they understand the importance of getting it right first time.'

------------------------------------------------------------ CHINESE CORPORATIONS TO BE LISTED ------------------------------------------------------------ Employees ------------------------------------------------------------ Shanghai Petrochemical 63,000 Yizheng Joint Corporation of Chemical Fibre 19,000 Kunming Machine Tool 25,000 Guangzhou Shipyard 8,000 Qingdao Brewery 2,700 Maanshan Iron and Steel 100,000 Dongfang Electric 3,000 Tianjin Bohai Chemical 29,000 Beijing Renmin Machinery 5,600 ------------------------------------------------------------ Source - Sinoprosper International ------------------------------------------------------------

Shanghai Petrochemical Complex Yizheng Joint Corp of Chemical Fibre Kunming Machine Tool Guangzhou Shipyard Qingdao Brewery Maanshan Iron and Steel Dongfang Electric Tianjin Bohai Chemical Beijing Renmin Machinery Hong Kong, Asia China, Asia P6231 Security and Commodity Exchanges P9651 Regulation of Miscellaneous Commercial Sectors COMP Company News CMMT Comment & Analysis P6231 P9651 The Financial Times London Page 28 1095
International Company News: Westpac stake disposal ends cross-shareholdings Publication 930211FT Processed by FT 930214 By BRUCE JACQUES SYDNEY

WESTPAC Banking Corporation yesterday pulled out of the last of its significant cross-shareholdings with Australian banking colleagues when it sold a 5.6 per cent stake in Perth-based Challenge Bank for about ADollars 15m (USDollars 10m).

This followed Monday's sale of Westpac's shareholdings in both the ANZ Banking Group and the Bank of Melbourne for a total of about ADollars 260m. The sales are part of an asset disposal programme.

FAI Insurances, the financial services group, cut its after-tax loss from ADollars 17.2m to ADollars 6.5m in the December half on a marginal revenue rise from ADollars 513.5m to ADollars 521.8m.

FAI said the result reflected a reduction in underwriting loss from ADollars 49.8m to ADollars 21.8m. It forecast a small loss for the full year to June, 1993.

Westpac Banking Corp FAI Insurances Australia P6712 Bank Holding Companies P602 Commercial Banks P6331 Fire, Marine, and Casualty Insurance P6719 Holding Companies, NEC P6799 Investors, NEC P6411 Insurance Agents, Brokers, and Service COMP Disposals FIN Interim results P6712 P602 P6331 P6719 P6799 P6411 The Financial Times London Page 28 195
International Company News: A&P target of NY state pension fund campaign Publication 930211FT Processed by FT 930214 By MARTIN DICKSON

THE Great Atlantic & Pacific Tea Company, the US supermarket group majority owned by Germany's Tengelmann retailing group, is to be the first company targeted by New York state's large pension fund in a campaign against poorly performing management.

New York's move represents a significant advance by the US movement for better corporate governance, which seeks to give shareholders a greater say in the affairs of companies with weak results.

Until now, action by institutional investors against such companies has been led most vociferously by the Dollars 71bn California Public Employee Retirement System. New York is becoming more publicly aggressive as it has developed a computer-based system to track the financial performance of top US companies.

Mr Edward Regan, Comptroller of New York state, said the Dollars 56bn pension fund would vote against the election of A&P's slate of directors at its annual meeting in July.

It would also seek the support of other shareholders for an amendment to the company's by-laws which would force it to include in its annual proxy or shareholder voting material statements from large shareholders wishing to comment on the group's performance. The fund owns 260,000 of A&P's 38.2m shares outstanding.

Tengelmann's 53 per cent ownership of the chain means New York's campaign cannot succeed without the support of the German company, and this seems unlikely. But the state's stance, if followed by other institutions, could send a powerful message of shareholder dissatisfaction.

Great Atlantic and Pacific Tea Co United States of America P9651 Regulation of Miscellaneous Commercial Sectors P6371 Pension, Health, and Welfare Funds P5399 Miscellaneous General Merchandise Stores P5499 Miscellaneous Food Stores MGMT Management COMP Company News P9651 P6371 P5399 P5499 The Financial Times London Page 27 305
International Company News: Metallgesellschaft plans DM1bn in non-core disposals Publication 930211FT Processed by FT 930214 By DAVID WALLER FRANKFURT

METALLGESELLSCHAFT, the Frankfurt mining and industrial conglomerate which has in recent years been one of Germany's most acquisitive companies, is now planning large-scale disposals.

Mr Heinz Schimmelbusch, chief executive, told analysts yesterday the group plans to make disposals to raise around DM1bn (Dollars 606m) over the next two years.

At the same time, capital investment is to be scaled back by 40 per cent to DM1bn for the current year.

He gave no indication of which companies were for sale, apart from saying they would be non-core businesses and would not include any famous names. This rules out Buderus - the heating products company which now has a separate listing on the German stock-market - or any of the other industrial companies acquired last year from Stora of Sweden in a DM1.45bn acquisition.

A list of potential sales targets has been drawn up, but a final decision on which of the group's 258 subsidiaries are to be sold has yet to be taken.

Mr Schimmelbusch indicated that the group would be reducing the workforce - which rose through acquisitions from 38,173 to 62,547 over 1991-92 - during the the course of the year. But he gave no details of how many jobs would be cut and in which divisions.

The disposals programme is a reaction to difficult market conditions for the Metallgesellschaft group. In the year to the end of September, group pre-tax profits fell 23 per cent to DM245m. This is the second successive year that profits have declined sharply against a background of falling metal prices and difficulties in the car components sector, which have meant that the group's Kolbenschmidt subsidiary lost DM88.6m last year before tax. Group sales last year fell 21 per cent to DM25.6bn.

Analysts estimate that the group's net debt stands at DM2.1bn, compared to equity of DM3.7bn. The group's market capitalisation is DM2.9bn.

Mr Schimmelbusch said that trading in the first four months of the current year was at the same, unsatisfactory level as in the previous year. The central problem was low base metal prices - afflicted by cheap imports from eastern Europe.

Kaufhof, the large German retail group, yesterday reported that sales rose by 13 per cent in 1992 to DM20.3bn, up from DM18bn a year earlier.

The company said the sales growth reflected its strategy of expanding into high-growth niche-retail markets, a segment of the business which accounted for 27 per cent of group sales, up from 23 per cent in the previous year. Department store sales accounted for 47 per cent of the total, down from 53 per cent.

Metallgesellschaft Kaufhof Germany, EC P5051 Metals Service Centers and Offices P5052 Coal and Other Minerals and Ores P516 Chemicals and Allied Products P6411 Insurance Agents, Brokers, and Service COMP Disposals MKTS Sales CMMT Comment & Analysis P5051 P5052 P516 P6411 The Financial Times London Page 26 496
International Company News: Thomson expands broadcasting interests Publication 930211FT Processed by FT 930214 By ALICE RAWSTHORN

THOMSON-CSF, France's state-controlled defence electronics group, is expanding its broadcasting interests by buying the transmitter, antenna and electron tube businesses owned by ABB Asea Brown Boveri, the Swiss-based power engineering concern.

The deal, for an undisclosed sum, will involve the transfer of companies with combined sales of FFr500m (Dollars 93.28m) in 1991.

They include an electron-tube production plant in Switzerland and a joint-venture in Poland, as well as an antenna plant in Germany and a broadcast transmitter unit in Switzerland.

Thomson, which was last year clouded by controversy over its attempt to expand its defence interests by taking over the missiles division of the LTV group in the US, has for some time been keen to augment its broadcast activities, where it services both private and public sector television companies.

The French group already owns electron-tube factories and plants for broadcast transmitters in France and the US.

Thomson said yesterday that the acquisition of the ABB businesses would enable the group to 'maintain critical mass and to continue to increase sales through external growth in a contracting market'.

The ABB deal is the latest in a number of acquisitions for Thomson-CSF.

The French group has bought a series of businesses over the past three years in order to consolidate its position in specific sectors and to sustain sales growth.

Thomson-CSF last year made sales of Dollars 6.2bn.

For ABB, the disposal is part of an ongoing process of shedding peripheral interests.

The Zurich-based group mustered turnover of Dollars 28bn last year.

It specialises in sectors such as electro-technology, environmental technology and transport systems.

Thomson CSF ABB Asea Brown Boveri Thomson France, EC Switzerland, West Europe P3671 Electron Tubes P3679 Electronic Components, NEC COMP Company News COMP Acquisition P3671 P3679 The Financial Times London Page 25 310
UK Company News: Allied-Lyons - Correction Publication 930211FT Processed by FT 930214

Allied-Lyons' pre-tax profit for its 1991-92 financial year was Pounds 610m, a rise of 28 per cent on the previous year. Yesterday's FT 500 survey wrongly indicated a profits decline.

Allied Lyons United Kingdom, EC P6719 Holding Companies, NEC P2082 Malt Beverages P5813 Drinking Places P5921 Liquor Stores P2099 Food Preparations, NEC FIN Annual report P6719 P2082 P5813 P5921 P2099 The Financial Times London Page 24 78
UK Company News: NHL to repay Pounds 120m bond issue on time Publication 930211FT Processed by FT 930214 By JOHN GAPPER, Banking Correspondent

NATIONAL Home Loans, the centralised mortgage lender, yesterday signalled confidence in its prospects of recovery by announcing that it intended to repay Pounds 120.1m in D-Mark bond issues on time rather than rescheduling the debt.

The shares firmed 3/4 p to 6 1/4 p.

The group said it had postponed rescheduling offers to holders of Pounds 48.4m of bonds due for payment on June 7, and Pounds 71.7m of bonds due in mid-1995.

It now intended to repay the debt rather than moving back the repayment dates to the end of 1995.

The company said it had postponed plans to reschedule debt because of the 'significant costs' of making exchange offers, and because improving prospects for the UK housing market had made it more confident of its own trading prospects.

It added that its confidence had also been increased by the falls in sterling interest rates.

Mr Jonathan Perry, chairman, said the cost of exchanging the bonds, which trade on the Frankfurt exchange, included fees and commissions to exchange agents, higher interest rates on the bonds, and legal fees.

The company, which had to reschedule on-balance sheet debt of Pounds 700m last June to keep trading, requires permission both from banks involved in the refinancing, and from holders of Pounds 50m of dollar bonds already rescheduled to 1995.

Mr Perry said that the banks had 30 days to respond to the request for consent.

Dollar bond holders would be consulted at a meeting for which 21 days notice would be given.

He said that if consent was not given, the company would have to return to its original plan to reschedule the D-Mark bonds. The company originally said it was confident that the D-Mark bonds would be rescheduled by the end of 1992.

National Home Loans Holdings United Kingdom, EC P6162 Mortgage Bankers and Correspondents FIN Company Finance P6162 The Financial Times London Page 24 337
UK Company News in Brief Publication 930211FT Processed by FT 930214

LASMO has signed contracts for the sale of gas from the Kadanwari field with the government of Pakistan and the Sui Southern Gas Company (SSGC). Gas will be processed on site and sold under a 15-year contract to SSGC. The field is due on stream in 1995 and is expected to meet about 10 per cent of Pakistan's current gas consumption.

*****

MADDOX GROUP has acquired the principal assets and goodwill of Coventry-based Computer Profiles and Software Profiles for Pounds 150,000 cash and the assumption of certain obligations to a maximum Pounds 50,000. Net assets of the two companies amounted to some Pounds 100,000 at December 31 1992.

*****

ROSS GROUP has subscribed a nominal sum for 49 per cent of Alfaross, a new company registered in Hong Kong and 51 per cent owned by Alfa Technology.

*****

SALE TILNEY subsidiary Spraybake has been sold by the joint receiver to FKI. Spraybake employs 89 staff making paint spraying booths for the motor and industrial markets.

Sui Southern Gas Maddox Group Computer Profiles Software Profiles Ross Group Alfaross Spraybake FKI LASMO Pakistan, Asia United Kingdom, EC Hong Kong, Asia P1311 Crude Petroleum and Natural Gas P4923 Gas Transmission and Distribution P508 Machinery, Equipment, and Supplies P7372 Prepackaged Software P36 Electronic and Other Electric Equipment P6719 Holding Companies, NEC P3444 Sheet Metal Work MKTS Contracts COMP Acquisition COMP Shareholding COMP Disposals P1311 P4923 P508 P7372 P36 P6719 P3444 The Financial Times London Page 23 254
Canon to buy Next hardware Publication 930211FT Processed by FT 930214 By MICHIYO NAKAMOTO and LOUISE KEHOE TOKYO, SAN FRANCISCO

CANON, the Japanese office equipment manufacturer, is set to acquire the computer hardware business of Next Computer, the innovative US computer company. It already holds a 16.7 per cent stake in Next, and was the company's first outside investor.

Formed in 1985 by Mr Steven Jobs, the computer entrepreneur who co-founded Apple Computer, Next is abandoning computer manufacturing to concentrate on selling its highly-regarded computer software.

The move represents a disappointment for Mr Jobs, who had hoped to repeat his achievements at Apple by creating another industry-leading computer company.

It also reflects Canon's growing involvement in the computer business, where its presence so far has been restricted mainly to the manufacture of peripherals, particularly laser printers.

Mr Jobs owns 46 per cent of Next while Mr Ross Perot, the Texas billionaire and former presidential candidate, owns 11 per cent.

It has, however, sold only about 50,000 computers, in spite of having software that is widely praised by computer experts.

In May, Next will introduce a new version of its Nextstep computer operating system for personal computers. This will place Next in competition with Microsoft, which dominates the PC operating system.

However, Mr Jobs is confident that it can overcome Microsoft's near monopoly. 'We believe that we are two to three years ahead of Microsoft and Taligent,' he said. Taligent is a joint venture between Apple Computer and International Business Machines that is developing a new PC operating system.

Next will close its Freemont, California, factory by the end of the month, he said. The company will cut its workforce from 530 to about 200.

'Canon has not decided what it wants to do, but there should be a decision by the end of the month,' said Mr Jobs.

Just last month, he announced Next had achieved its first quarterly operating profit in the fourth quarter of 1992. He said revenues for 1992 were Dollars 127m (Pounds 88.5m), up 10 per cent from 1991. Next had been planning a public share offering.

If an agreement is finalised, Canon would also gain exclusive sales rights to Next's software products in the Pacific and Asia as well as the right to use software that would enable Canon copiers and printers to run on Next software.

Canon will continue to supply Next hardware and maintenance service in the Asia and Pacific areas in which it already does so. Motorola supports Next customers in the US.

A Canon representative said yesterday that 'Canon has a history of diversification and it is conceivable that in future it will build a computer business' based on the Next hardware operations it is considering acquiring.

Canon Inc NeXt Inc United States of America P3861 Photographic Equipment and Supplies P3571 Electronic Computers P3579 Office Machines, NEC P7372 Prepackaged Software COMP Acquisition TECH Licences P3861 P3571 P3579 P7372 The Financial Times London Page 21 493
Letter jobs shed Publication 930211FT Processed by FT 930211

MORE THAN 160 jobs are to go at Royal Mail's sorting office in York, which employs 750 people. The office is to install letter sorting machines.

Royal Mail GB United Kingdom, EC P4311 U S Postal Service PEOP Labour P4311 The Financial Times London Page 8 54
Graduate starting pay 'is Pounds 13,450' Publication 930211FT Processed by FT 930211

THE STARTING salary for a typical graduate recruited by a large employer is likely to be Pounds 13,450 in the private sector and Pounds 12,600 in the public sector, according to Incomes Data Services, the pay research body. Graduate recruitment fell 15 per cent last year against 1991 and is expected to fall 4 per cent this year.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour P99 The Financial Times London Page 8 85
Call for change over councillors Publication 930211FT Processed by FT 930211

THE state should compensate firms whose workers serve as councillors, Mr Jack Straw, shadow environment secretary, said yesterday.

He wants compensation for the employer, not the employee as at present. He said: 'The employer would pay the wage or salary in full but would be compensated for the loss of service by the state.'

GB United Kingdom, EC P9121 Legislative Bodies PEOP Personnel News P9121 The Financial Times London Page 8 81
Borrowing rules for public bodies may ease Publication 930211FT Processed by FT 930211 By ALISON SMITH

SCHOOLS and hospitals could be allowed to borrow against their assets if government plans for finding new ways of involving private finance in public projects are implemented.

The Treasury believes that the Department of Health, the Department of Education and the Home Office are among areas with the most scope for the government's private finance initiative to move beyond the transport infrastructure.

All three departments are also in the first round of the longer-term public spending review announced earlier this week, and so have a particular incentive to find ways of stretching their budgets.

Extending the ability to borrow would build on the move announced in the Autumn Statement, when the rule preventing universities from borrowing against Exchequer-funded assets was ended. The old universities have made little use of the power so far, but many new universities - formerly polytechnics - which have had a similar ability for a few years, have taken more advantage of the change.

'We need to think whether the model applies elsewhere,' one minister said yesterday. Proposals are unlikely to be far enough advanced for inclusion in next month's Budget, but could be ready in time for the first unified Budget and spending statement in December.

Mr Stephen Dorrell, the financial secretary to the Treasury, is to use a series of meetings with all Whitehall departments over the next few months to discuss ideas for pressing ahead with the private finance initiative.

He will outline the government's plans to the cross-party Treasury committee next week.

Private involvement in transport projects - where the cost can be passed on to the user through charges - has seen the greatest advance in the initiative so far.

Mr John MacGregor, the transport secretary, is to publish a consultation paper after Easter on introducing tolls on motorways, and there is already discussion of how the rules on funding for roads might be adapted to rail projects.

Ministers believe that the private sector has a valuable role to play in upgrading public-sector capital stock. Large sums could be at stake. While there are no precise figures for capital spending on schools and hospitals in 1992-93, capital investment in health, excluding trust hospitals, is estimated at Pounds 1.43bn, and in education, by local government, at Pounds 1.08bn.

Giving the private sector a greater role would not necessarily mean that the public sector would withdraw from providing capital in these spheres, ministers say.

However if private finance proved a better way of providing capital for a particular type of asset, they say, then the public spending priorities would be bound to change.

GB United Kingdom, EC P80 Health Services P82 Educational Services P9411 Administration of Educational Programs P9431 Administration of Public Health Programs RES Capital expenditures GOVT Government spending P80 P82 P9411 P9431 The Financial Times London Page 8 482
Society uses BES for homes disposal Publication 930211FT Processed by FT 930211 By JOHN GAPPER

BRISTOL & West Building Society will today become the first society to use the government's Business Expansion Scheme to try to take repossessed properties off its balance sheet and rent them to the private sector through assured tenancies.

The society has spent two years trying to devise a method of using the scheme - which offers tax relief to savers who make five-year investments - to reduce its stock of repossessions. Any such scheme has to be approved by the Building Societies Commission.

The Pounds 45m Bristol & West scheme is intended to rent out up to 800 of the society's repossessed properties through housing associations. Building societies' legal duty to gain the highest possible price for repossessed properties has largely prevented them from renting directly to tenants.

Mr Tony FitzSimons, the society's chief executive, said last night that the scheme would offer investors attractive returns, and would allow the society to move properties off its balance sheet without selling them at low prices because they are repossessions. The society has established a separate company as a vehicle for the scheme.

Many building societies have been trying to devise ways of reducing the stock of repossessed properties, which have obliged them to increase their provisions for bad debts.

Bristol and West Building Society GB United Kingdom, EC P603 Savings Institutions P6531 Real Estate Agents and Managers TECH Services P603 P6531 The Financial Times London Page 7 251
Glasgow project Publication 930211FT Processed by FT 930211

SCOTTISH WIDOWS, the life assurance group, has bought two Glasgow buildings for development as a mixed retail and office project with an estimated value of about pounds 20m on completion. The buildings were sold by Legal & General, another life assurance group, for pounds 5.5m. The development will have seven shops and 25,000 sq ft of offices.

Scottish Windows Fund and Life Assurance Society GB United Kingdom, EC P6311 Life Insurance P6552 Subdividers and Developers, Ex Cemeteries COMP Acquisition P6311 P6552 The Financial Times London Page 7 95
International Capital Markets: Malaysian bank issues Dollars 75m three-year CD Publication 930211FT Processed by FT 930211 By REUTER SINGAPORE

MALAYSIA'S Public Bank (PBB) has issued a three-year negotiable floating rate certificate of deposit worth USDollars 75m, Reuter reports from Singapore.

The issue, lead managed by OCBC and Hongkong and Shanghai Banking Corp, pays 37.5 basis points over the six-month London interbank offered rate, OCBC said. A group of 18 banks took part in the issue, originally for Dollars 50m but raised to Dollars 75m after oversubscription.

MBf Asia Capital Corp (MACC), the Hong Kong-based merchant banking unit of Malaysia's MBf Group has bought 68.4 per cent of MBf Card Services for MDollars 32.5m from MBfI Australia.

MBf Card is the largest issuer of credit cards in Malaysia and of MasterCards in south-east Asia.

Public Bank MY Malaysia, Asia P602 Commercial Banks FIN Share issues P602 The Financial Times London Page 29 151
International Capital Markets: Venezuela proposes telecom share sale Publication 930211FT Processed by FT 930211 By REUTER CARACAS

VENEZUELA plans to sell Dollars 600m worth of shares in CANTV, the telephone company managed by GTE Corporation of the US, by June this year, Reuter reports from Caracas.

Mr Julian Villalba, president of the Venezuelan Investment Fund, said that a small block of shares would be issued on the Caracas stock exchange to establish market value and the rest would be placed on foreign stock exchanges.

'We are looking to register them on an exchange, through any mechanism, and it doesn't have to be on Wall Street,' said Mr Villalba. The Dollars 600m in shares would represent one-third of the state's 49 per cent stake in CANTV.

The government had said it would sell its stake in the telephone concern in the first quarter of 1993. Recent news reports said the government planned to delay the sale until next year to get a better price.

In November 1991, a consortium of companies led by GTE paid Dollars 1.88bn for 40 per cent of CANTV and took managerial control. Another 11 per cent of shares were sold to employees.

The government hoped that recent investments worth several hundred million dollars to improve and expand the system would factor into the share price, Mr Villalba said.

Mr Villalba said the new sale of shares could be made in the US but officials would look at exchanges in Europe or Asia. Lehman Brothers would be lead underwriters of the sale on foreign exchanges, he said.

The government said it expected to raise about Dollars 2bn this year from the privatisation of state companies, including about Dollars 1.2bn from utilities.

The controlling US shareholders in New Zealand's Telecom Corporation have extended until September 12, 1994 an option to sell their shareholdings. Under a 1990 agreement, Bell Atlantic and Ameritech of the US bought 100 per cent of Telecom from the New Zealand government, on condition that they reduced their shareholding to 49.9 per cent by September, 1993.

CANTV VE Venezuela, South America P481 Telephone Communications P9631 Regulation, Administration of Utilities COMP Disposals P481 P9631 The Financial Times London Page 29 364
International Company News: Molson suffers setback Publication 930211FT Processed by FT 930211 By BERNARD SIMON TORONTO

MOLSON Companies, the diversified Canadian brewer, suffered a 24 per cent setback in its latest quarterly earnings, largely as a result of a weak beer market, retaliatory duties on beer imposed by the US and the costs of converting to a new beer bottle.

Net earnings fell to CDollars 25.3m (USDollars 20m), or 42 cents a share, in the three months to December 31, the third quarter of the company's fiscal year, from CDollars 33.4m, or 59 cents a share, a year earlier.

Revenues rose to CDollars 769.8m from CDollars 723.3m.

The negative factors were partially offset by CDollars 4.9m in fees received from the North American ice hockey league, one of whose teams is owned by Molson.

Nine-month earnings fell to CDollars 100.1m, or CDollars 1.68 a share, from CDollars A 110.4m, or CDollars 1.97 a share.

The company said yesterday the decline in earnings for the year as a whole was likely to be 10 to 12 per cent.

Molson Breweries CA Canada P6719 Holding Companies, NEC P2082 Malt Beverages P5211 Lumber and Other Building Materials P5251 Hardware Stores P5231 Paint, Glass, and Wallpaper Stores FIN Interim results P6719 P2082 P5211 P5251 P5231 The Financial Times London Page 27 217
International Company News: Baby Bell agrees to buy two cable TV companies Publication 930211FT Processed by FT 930211 By MARTIN DICKSON NEW YORK

SOUTHWESTERN Bell, one of the seven Baby Bell regional telephone companies in the US, has agreed to buy two cable television systems in suburban Washington DC for Dollars 650m - a move which marks a dramatic escalation of the battle between telephone and cable industries to bring communications into the 21st century American home.

Southwestern Bell is the first US telephone company to try to buy control of a US cable television company and its move could set off a scramble by other telecommunications companies. However, the purchase requires regulatory approval from the Justice Department, the Federal Communications Commission and Judge Harold Greene, who has overseen the Baby Bells since they were split off from American Telephone & Telegraph in a 1984 anti-trust court settlement. Clearing all these fences could take Southwestern Bell a very long time.

The seller of the two systems is Hauser Communications, a privately owned company.

Southwestern Bell provides local telephone services in Texas and other southwestern states. It is barred from owning a cable company there, under 1984 cable legislation preventing any local telephone company from owning a cable business in its core operating area.

Southwestern Bell already owns a cellular telephone franchise in the Washington area and could eventually try to link this into its cable system. This would mean a competitive challenge to the Baby Bell which provides normal, wired telephone services in this area, Bell Atlantic.

Southwestern Bell owns and operates a system in Britain and has interests in others in Israel.

Southwestern Bell Hauser Communications US United States of America P481 Telephone Communications P4841 Cable and Other Pay Television Services COMP Acquisition P481 P4841 The Financial Times London Page 27 302
International Company News: Woolworth appoints Lavin as new CEO Publication 930211FT Processed by FT 930211 By KAREN ZAGOR

WOOLWORTH Corporation yesterday named Mr William Lavin as chairman and chief executive to replace Mr Harold Sells when he retires, at the age of 65, in July.

Mr Lavin, 48, has served as the US retailer's chief financial officer since 1991. He joined Woolworth in 1981 as an assistant controller.

On Wall Street, shares in Woolworth rose Dollars 5/8 to Dollars 29 3/4 . An announcement about Mr Sells successor has been expected since September, when a Securities and Exchange Commission filing showed Mr Sells had sold Dollars 3.4m of stock in the company. Woolworth said then the move was in preparation for his retirement.

Mr Sells, who became Woolworth's chief executive in 1983, began his career working for Kinney Shoe in 1945. Kinney is now a division of Woolworth.

Woolworth said it has changed the organisational structures of its FW Woolworth and Kinney Shoe units. FW Woolworth will now run Rx Place, a deep-discount drug store chain which had been operated as a separate unit. Kinney Shoe will run the Little Folk Shop and Kids Mart children's apparel stores.

Woolworth Corp US United States of America P5331 Variety Stores P5661 Shoe Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5641 Children's and Infants' Wear Stores COMP Company News PEOP Appointments Lavin, W Chairman Designate Woolworth Corp P5331 P5661 P5611 P5621 P5641 The Financial Times London Page 27 250
International Company News: Buoyant CBS registers sharp rise in net income Publication 930211FT Processed by FT 930211 By KAREN ZAGOR

CBS Inc, which owns one of the three US television networks, yesterday unveiled a 254 per cent surge in fourth-quarter net income, reflecting the network's rise to the top of the prime-time television ratings and a better advertising environment.

The group posted fourth-quarter net income of Dollars 33.3m, or Dollars 2.14 a share, against Dollars 9.4m, or 61 cents, a year earlier. Sales rose 3 per cent to Dollars 968.3m from Dollars 937.4m.

For the whole of 1992, CBS earned Dollars 81m, or Dollars 5.23, compared with a loss of Dollars 85.8m, or Dollars 5.32 in 1991.

Income from continuing operations stood at Dollars 162.5m, or Dollars 10.51, against a deficit of Dollars 98.7m, or Dollars 6.11 a year ago. Sales rose 15 per cent in the year to Dollars 2.5bn from Dollars 3.04bn.

Although the results were broadly in line with expectations, shares in CBS slipped Dollars 1 3/8 to Dollars 200 1/8 in NYSE trading.

Mr Laurence Tisch, chairman and chief executive of the group, said the television network returned to a modest level of profitability in 1992, helped by improved results in entertainment, news and sports programming. He said the company was also 'applying our resources in wiser, more cost-effective ways.'

The strong growth in the network's prime-time ratings, which Mr Tisch said was the biggest single-season gain by any network since 1976-77 lifted revenues.

'We presently believe that CBS's 1993 operating earnings may surpass 1992's level as a result of further gains in earnings at the television network,' he said.

CBS Inc US United States of America P7812 Motion Picture and Video Production FIN Annual report P7812 The Financial Times London Page 27 297
International Company News: Quebecor net profits climb 78% Publication 930211FT Processed by FT 930211 By ROBERT GIBBENS

QUEBECOR, the Canadian publishing, commercial printing and forest products group, has posted a 78 per cent gain in net profits for 1992 and reduced consolidated debt by CDollars 413m (USDollars 344m) to lower its debt-equity ratio to 31:69, writes Robert Gibbens.

Earnings were CDollars 56.2m, or 92 cents a share, up from CDollars 31.5m, or 66 cents a year earlier, on sales of CDollars 2.54bn, up almost 7 per cent. After special items, attributable profits came to CDollars 87.3m, or CDollars 1.43 a share, against CDollars 18.5m, or 39 cents in 1991.

Publishing and distribution earnings rose 13 per cent, while printing gained 18 per cent. Forest products turned round from losses to break even.

Quebecor is North America's second biggest commercial printer through affiliated Quebecor Printing, which is also publicly-held.

Quebecor Inc CA Canada P2711 Newspapers P2721 Periodicals P2752 Commercial Printing, Lithographic P5199 Nondurable Goods, NEC P5099 Durable Goods, NEC FIN Annual report P2711 P2721 P2752 P5199 P5099 The Financial Times London Page 27 182
International Company News: Disposals planned by Metallgesellschaft Publication 930211FT Processed by FT 930211 By DAVID WALLER FRANKFURT

METALLGESELLSCHAFT, the Frankfurt mining and industrial conglomerate which has in recent years been one of Germany's most acquisitive companies, is now planning large-scale disposals.

Mr Heinz Schimmelbusch, chief executive, told analysts yesterday the group plans to make disposals to raise around DM1bn (Dollars 606m) over the next two years. Capital investment is to be reduced by 40 per cent to DM1bn for the current year.

He gave no indication of which companies were for sale, apart from saying they would be non-core businesses and would not include any famous names. This rules out Buderus - the heating products company which now has a separate listing on the German stock-market - or any of the other industrial companies acquired last year from Stora of Sweden in a DM1.45bn acquisition.

A list of potential sales targets has been drawn up, but a final decision on which of the group's 258 subsidiaries are to be sold has yet to be taken.

Mr Schimmelbusch indicated that the group would be reducing the workforce - which rose through acquisitions from 38,173 to 62,547 over 1991-92 - during the the course of the year. But he gave no details of how many jobs would be cut and in which divisions.

The disposals programme is a reaction to difficult market conditions for the group. In the year to the end of September, group pre-tax profits fell 23 per cent to DM245m - the second successive year that profits have declined sharply.

Metallgesellschaft DE Germany, EC P5051 Metals Service Centers and Offices P5052 Coal and Other Minerals and Ores P516 Chemicals and Allied Products P6411 Insurance Agents, Brokers, and Service P874 Management and Public Relations COMP Disposals P5051 P5052 P516 P6411 P874 The Financial Times London Page 26 307
International Company News: TRW registers improvement Publication 930211FT Processed by FT 930211 By MARTIN DICKSON NEW YORK

TRW, the US high technology group, yesterday reported fourth-quarter earnings of Dollars 59m, or 94 cents a share, against a Dollars 231m loss or Dollars 3.76 last year, when it took a restructuring charge. Excluding charges, the 1991 quarter's earnings were Dollars 25m.

Full-year earnings totalled Dollars 194m, or Dollars 3.09 a share, before accounting changes. They totalled Dollars 116m, or Dollars 1.88 a share in 1991, excluding restructuring charges.

TRW Inc US United States of America P3592 Carburetors, Pistons, Rings, Valves P3562 Ball and Roller Bearings P3714 Motor Vehicle Parts and Accessories P3724 Aircraft Engines and Engine Parts P3679 Electronic Components, NEC FIN Annual report P3592 P3562 P3714 P3724 P3679 The Financial Times London Page 26 134
International Company News: Kraft-RJR Nabisco deal faces anti-trust challenge Publication 930211FT Processed by FT 930211 By KAREN ZAGOR NEW YORK

NEW YORK'S attorney-general, Mr Robert Abrams, yesterday filed an anti-trust lawsuit to challenge Kraft General Food's Dollars 450m acquisition of RJR Nabisco's cold cereal business, a month after the deal was completed.

Mr Abrams alleged that the acquisition decreased competition in an already non-competitive industry and eliminated the possibility of a new competitor.

Kraft General Foods, the core US food division of Philip Morris, said it was confident that the deal complied with anti-trust laws and was in the best interests of competition and consumers.

Kraft added that the Federal Trade Commission (FTC) had carried out a thorough investigation of the acquisition and had not objected to it.

Wall Street's reaction was muted. Shares in RJR Nabisco added Dollars 1/8 to Dollars 8 3/4 and Philip Morris firmed Dollars 5/8 to Dollars 73 7/8 .

Observers were surprised that a state official had decided to act after the FTC had decided not to block the deal.

An earlier attempt by RJR to sell the cold cereal business to General Mills was aborted after it became clear that federal anti-trust authorities were likely to conduct a 'lengthy and prolonged review'.

Mr Abrams claimed that the price of ready-to-eat cereals had climbed 71 per cent in the past eight years. 'These soaring price increases, far out of line with other food products, are a clear result of an over-concentrated industry. The General Foods-Nabisco deal will just make the problem worse,' he said.

US United States of America P2043 Cereal Breakfast Foods COMP Acquisition GOVT Legal issues P2043 The Financial Times London Page 26 280
International Company News: Chrysler issue raises Dollars 2bn Publication 930211FT Processed by FT 930211 By KAREN ZAGOR NEW YORK

CHRYSLER, the US vehicle manufacturer, has raised more than Dollars 2bn after selling 52m shares at Dollars 38 3/4 each in the second biggest public common stock issue by a US company.

The company exercised a 'green shoe' option - or stabilisation provision - to buy an additional 6m shares, swelling the offer size by 30 per cent. The company has indicated it will use at least half the funds raised to cut its Dollars 3.9bn underfunded pension obligations.

Chrysler Corp US United States of America P3711 Motor Vehicles and Car Bodies FIN Share issues P3711 The Financial Times London Page 26 121
Parliament and Politics: Cabinet set to consider hospitals Publication 930211FT Processed by FT 930211

THE CABINET is expected to discuss the future of London's hospitals today, but any decision is unlikely to be announced until at least next week. In a government-commissioned report Sir Bernard Tomlinson recommended hospital closures that would cut 2,500 beds in the capital, transferring resources to the family doctor and community services.

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P9431 Administration of Public Health Programs RES Facilities GOVT Government News P8062 P9431 The Financial Times London Page 9 94
Parliament and Politics: Canary Wharf site defended Publication 930211FT Processed by FT 930211

CANARY WHARF and other developments in London's Docklands were still destined to become a 'symbol of prosperity', a defiant Mr John Redwood, minister for local government and inner cities, told the Commons last night.

But his optimism was ridiculed by Mr Doug Henderson, shadow local government minister, who said Canary Wharf had become 'the lost city of Wapping'.

Mr Redwood urged his critics to 'wait to see what happens yet'. He insisted that Canary Wharf - which Mr Henderson said was 85 per cent empty - was already a famous name.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P953 Housing and Urban Development GOVT Government News P6552 P953 The Financial Times London Page 9 129
Parliament and Politics: Canary Wharf 'a symbol of prosperity' Publication 930211FT Processed by FT 930211 By IVOR OWEN

CANARY WHARF and other developments in London's docklands were still destined to become a 'symbol of prosperity', a defiant Mr John Redwood, minister for local government and inner cities, told the Commons last night, Ivor Owen writes.

His optimism was ridiculed by Mr Doug Henderson, shadow local government minister, who said Canary Wharf had become 'the lost city of Wapping'.

Mr Redwood was taunted from the Labour benches over a forecast he made in 1988 that docklands would be seen as an example of the success of 'popular capitalism', with Canary Wharf as globally famous as Trafalgar Square.

The minister was reminded he had said the government would recover the money it had provided for the docklands development, over a 10-year period. Mr Henderson said: 'Instead of getting the money back, the developers are asking for more to save the project.'

Mr Redwood urged his critics to 'wait to see what happens yet'. He insisted that Canary Wharf - which Mr Henderson said was 85 per cent empty - was already a famous name.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P953 Housing and Urban Development GOVT Government News P6552 P953 The Financial Times London Page 9 217
Parliament and Politics: Ridley in call for 'burden sharing' Publication 930211FT Processed by FT 930211

LORD RIDLEY of Liddesdale, the former cabinet minister Nicholas Ridley, last night called for other nations to help bear the burdens of 'the world's policemen' now carried mainly by the US, Britain and France.

In his maiden speech, Lord Ridley said he very much wanted to be in the government's camp on defence, but he said he was 'frightened that overnight the government will raise its tents and disappear into the darkness'.

He insisted that ministers had to approach the issue from a 'resources angle'. Although the Cold War had ended, it had unleashed a whole maelstrom of nationalism, Moslem fundamentalism and ancient ethnic conflicts and tensions, he said.

Britain should continue to play its part in policing trouble spots, he said, but 'the burden must be shared much more evenly . . . there are plenty of rich nations in the world and they contribute nothing like their full share of the cost of these operations'.

Former Labour defence secretary Lord Healey also said the time had come to relate spending on defence with the country's economic situation.

GB United Kingdom, EC P9711 National Security RES Resources P9711 The Financial Times London Page 9 209
Challenger leads in Madagascar presidential poll Publication 930211FT Processed by FT 930211 By AP ANTANANARIVO

Opposition leader Albert Zafy took a strong lead yesterday according to the first results of an election in Madagascar expected to topple President Didier Ratsiraka, the island nation's strongman for 17 years, AP reports from Antananarivo.

Mr Zafy, a surgeon and leader of a democracy movement which had forced Mr Ratsiraka to share power with a transitional government, took 70 per cent of the votes in half the capital's polling stations.

A substantial part of the national results in the two-man run-off was expected by the weekend but final results are not likely for a month.

The voting was monitored by observers from Europe, the US and Africa.

Mr Zafy campaigned on the need for political reform and economic change in the country of 13m.

MG Madagascar, Africa P8651 Political Organizations P91 Executive, Legislative and General Government GOVT Government News P8651 P91 The Financial Times London Page 4 162
Stronger Franco-German links urged Publication 930211FT Processed by FT 930211 By DAVID BUCHAN PARIS

FRANCE could consider narrowing the franc's present margin of fluctuation against the D-Mark but only if it got some right to 'co-manage' such a 'D-Mark zone', a French opposition leader said yesterday.

Addressing a conference on 'Europe: the Way Ahead', sponsored by the Financial Times and Les Echos, Mr Edmond Alphandery said the joint programme of the UDF-RPR opposition parties, which are ahead in the polls for the March election, was designed to reinforce Europe's integration and its monetary system.

'This will necessitate without doubt a new Franco-German dialogue in the monetary domain,' said Mr Alphandery, a UDF deputy who is tipped as a possible finance minister if the opposition wins in March.

Mr Alphandery stressed there was no chance of any new centre-right government devaluing the franc. It would, instead, seek to take monetary policy out of the political arena by speedily introducing legislation to make the Bank of France independent.

But the inherent 'instability' of the EMS, conceded by Mr Alphandery, led Mr Peter Sutherland, chairman of the conference and of Allied Irish Banks, to urge an immediate move to monetary union by a smaller number of EC countries rather than waiting for 1997, the earliest date foreseen in the Maastricht treaty. France, Germany, the Benelux countries, Denmark and Ireland, Mr Sutherland said, 'could be ready to go ahead now. So why are we waiting? There is nothing to suggest that conditions in 1997 will be any better than they are now.'

Caution about rapid moves to economic and monetary union (Emu) came from Mr David Band, chief executive of Barclays de Zoete Wedd Holdings. The lesson of turbulence on the foreign exchanges was, he said, that 'economic convergence has to precede exchange rate convergence'.

He objected that the pursuit of Emu had made the EMS too brittle.

Mr Jean-Pascal Beaufret, deputy director of the French Treasury, said that, with Emu, capital markets would converge in the Community. But he suggested this would stop short of the concentration that had taken place in the US, with New York becoming the only major financial marketplace. He said equity markets would remain largely national and he vaunted the merits of Paris.

Mr Gilles Menage, president of Electricite de France, said there was effectively a single EC market in electricity already, with his own state-owned utility exporting 13 per cent of its output. He called for Brussels to take a 'less dogmatic' approach in introducing greater competition.

FR France, EC P8651 Political Organizations P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs CMMT Comment & Analysis P8651 P9311 P9721 The Financial Times London Page 2 447
US line on Bosnia welcomed at UN Publication 930211FT Processed by FT 930211 By ROBERT MAUTHNER and RALPH ATKINS NEW YORK, LONDON

THE long-awaited US peace initiative on Bosnia was welcomed at the United Nations, not least because it puts an end to a period of uncertainty since the stalled international negotiations on Bosnia moved from Geneva to New York at the beginning of last week, and it offers an opportunity to break the deadlock.

Mr Fred Eckhard, spokesman for the co-chairmen of the conference on the former Yugoslavia, Mr Cyrus Vance and Lord Owen, said they welcomed the decision by the US government 'to take an active role' in the peace process.

They were particularly pleased at the US commitment to help enforce any settlement.

The two international mediators would 'go out of their way' to make available to the new US envoy, Mr Reginald Bartholomew, all the information at their disposal. Their assumption was that the Vance-Owen plan was still on the table and would form the basis for further negotiations.

Mr Vance said later that he and 'Reggie' (Bartholomew) were old friends. 'He is a fine person. I have worked with him for many years.'

Lord Owen described Mr Bartholomew as 'a serious professional', whose appointment he welcomed. He had last spoken to him when he briefed Nato ambassadors in Brussels in December. 'It was clear then that he was well-versed in the (Bosnian) problem.'

In spite of the warm words of welcome, some anxiety was expressed in conference circles about how Mr Bartholomew would go about his task.

The Americans were not coming to the negotiations with their own map but, after talking to the warring parties, they would have to decide what changes they wanted to propose to the Vance-Owen plan for dividing Bosnia into 10 semi-autonomous provinces.

As the representative of the US, which had openly expressed support for the Bosnian Moslems, Mr Bartholomew would also have to establish the same kind of impartiality that Mr Vance and Lord Owen had achieved in their dealings with the warring parties.

That might be difficult in the case of the Bosnian Serbs, who have been openly criticised by the US administration for their policies of ethnic cleansing and territorial conquest.

Ralph Atkins reports in London: Mr John Major, UK prime minister, welcomed the US move, saying the appointment of a representative would 'give added impetus' to peace negotiations.

US United States of America BA Bosnia-Hercegovina, East Europe P97 National Security and International Affairs PEOP Personnel News GOVT Government News Bartholomew, R US Peace Envoy to the former Yougoslavia P97 The Financial Times London Page 2 439
World News in Brief: Accountants disappointed Publication 930211FT Processed by FT 930211

Ian Plaistowe, president of the Institute of Chartered Accountants in England and Wales, said he was 'surprised and disappointed' by trade and industry secretary Michael Heseltine's comment that there were too many 'wealth managers' and not enough 'wealth creators' in business. Accountancy column, Page 12; New accounting discipline, Page 22

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P9611 Administration of General Economic Programs GOVT Government News Plaistowe, I President Institute of Chartered Accountants in England and Wales P8721 P9611 The Financial Times London Page 1 100
Brussels may set guidelines for steel output Publication 930211FT Processed by FT 930211 By LIONEL BARBER and ANDREW HILL BRUSSELS

THE European Commission is considering a new role as EC steel market supervisor, setting guidelines on future production levels.

The plan, aimed at tackling Europe's steel industry crisis, is under review in Brussels. But the Commission will stop short of dictating prices and production levels to individual companies, like the 'crisis cartel' set up by Viscount Etienne Davignon, then industry commissioner, during the early 1980s, EC officials stressed yesterday.

Under the proposals, Brussels would lay down recommendations on production and delivery levels within the EC for each quarter. EC officials maintained yesterday this would not encourage a cartel. 'We don't have to tell them what to do,' said an EC official, 'and they don't have to phone each other.'

Another measure under review is for the steel industry to pool 'crisis funds' for the restructuring of each individual sector.

The Commission is anxious to place the burden of decisions about restructuring on Europe's steelmakers, and does not wish to be accused of manipulating the market. But Brussels believes it has a vital role to play as broker between steelmakers and governments.

EC officials said yesterday the Commission would make clear it is willing to support an industry-wide restructuring plan only if Europe's steelmakers produce a 'definite' closure programme by the end of September which can be carried out by the end of 1994, according to a senior EC official.

A future rescue plan is also heavily dependent on the support of EC member states which would have to bear a portion of the EC funding of up to Ecu900m (Pounds 730m) to cover redundancy costs. The overall cost of restructuring could be more than Ecu6bn, according to a report by Mr Fernand Braun, the EC's special steel envoy.

But the Braun report warns that without a rescue plan involving some rise in prices in the next few weeks or months, some of Europe's largest steelmakers will see their cash flow dry up or turn negative by year-end.

The Braun report - delivered to the Commission last week - includes a range of potential cuts in capacity which were put on the table by some 70 managing directors of EC steel companies in the past four months.

Mr Martin Bangemann, EC industry commissioner, has begun canvassing fellow Commissioners' support and will have to present formal proposals next Wednesday. The EC will discuss the steel industry crisis at a special meeting on February 25.

The deepening recession forced steelmakers to raise earlier estimates of possible capacity cuts to 25.8m tonnes of crude steel and 17.9m tonnes of rolled products.

At least 50,000 jobs are likely to be lost in the plant closures, leading to an estimated Ecu2.5bn in social costs and Ecu3.5bn in industrial costs, according to the Braun report.

Certain manufacturers and governments in Spain, for example, are already concerned that they will be forced to cut more capacity than they would like. But Commission officials are adamant that this time the industry will have to agree a closure plan first, before the rescue plan and EC funding can then come fully into force.

'We are not going to launch all sorts of measures and just hope that in the process these people will come up with capacity reductions,' said an EC official.

European Commission (EC) QR European Economic Community (EC) P331 Blast Furnace and Basic Steel Products P9611 Administration of General Economic Programs RES Capital expenditures MKTS Production PEOP Labour GOVT International affairs P331 P9611 The Financial Times London Page 1 601
Foreign Exchanges: Yen consolidates its strength Publication 930211FT Processed by FT 930211 By JAMES BLITZ

THE YEN yesterday consolidated its stronger position against both the dollar and the D-Mark, as dealers continued to speculate on the possibility of a G7 accord to reduce the Japanese trade surplus, writes James Blitz.

The yen climbed to Y120.64 against the dollar before closing at Y120.90, up from Y121.35. It finished at Y73.00 to the D-Mark, from a previous close of Y73.42. In New York it ended at Y121.23 per dollar.

The Clinton administration has indicated that the Japanese trade surplus is a matter of deep concern. But there was scepticism yesterday over whether US and Japanese officials would agree to boost the currency further when they meet this weekend.

According to Mr Mark Cliffe, chief economist at Nomura Securities in London, the main policy debate in Tokyo is on how to boost the fiscal stimulus to the economy rather than on raising interest rates.

Mr Neil Mackinnon, an economist at Citibank in London, said the Japanese currency will not strengthen very much because interest rates in Tokyo are unlikely to rise in the near term, limiting the returns for potential investors.

He believes the yen could appreciate to Y65 to the D-Mark and that there may be a test of the historic high of Y119.00 against the dollar, set on September 28 last year. 'But I do not see the 16 to 20 per cent appreciation in the yen/dollar rate which some people are suggesting,' he said.

Inside the European exchange rate mechanism, there were growing signs of tension in spite of last week's cuts in the Bundesbank's official interest rates.

The Bundesbank's decision to accept a tender for its repo at 8.50 per cent, against 8.57 per cent last week, was widely expected by the market, although it raised concern that German policy-easing was on the slow side.

The Belgian authorities raised their end-of-day support rate by 50 basis points, to 9.3 per cent, to counter selling pressure on the Belgian franc. The authorities have privately committed their currency to diverge by only a limited amount against the D-Mark in the ERM grid. But dealers were yesterday buying currency options to hedge against a weaker Belgian franc in the event that the ERM breaks up - and this pushed the Belgian franc as much as 30 basis points away from the D-Mark.

The Belgian currency was only 10 basis points weaker than the D-Mark on the grid last night. But Mr Mark Austin, a Treasury economist at Midland Global Markets in London, remained pessimistic. 'It is hard to believe that we will get through the run-up to the French elections next month without fireworks in the ERM,' he said.

Sterling yesterday traded more comfortably after two hair-raising days against the D-Mark and dollar. It closed unchanged at DM2.3625 and slightly easier at Dollars 1.4275. In New York it dipped to Dollars 1.4236.

Japan, Asia Belgium, EC United Kingdom, EC Germany, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 31 515
Economic Viewpoint: Time for the UK to buck up Publication 930211FT Processed by FT 930211 By SAMUEL BRITTAN

The pessimism and self-hate about the UK economy has gone too far. Listening to British businessmen denigrating British business performance induces a desire to see what statistics of comparative performance really show.

As I have often remarked, they show that the rapid growth of other European countries and Japan is mainly a catching-up phenomenon; and that in the 1980s relative UK performance started to improve. They suggest that it would be rash to interpret the prolonged recession as a sign of deep structural malaise.

Of course statistics can and often do lie. But it is so difficult to assess anything as diverse as a country's total business and industrial performance by personal impressions that the available numbers should be used as at least a supplement.

The most intensive scrutiny of the available evidence so far comes from a study by the distinguished economic historian, Professor Nick Crafts, in a paper for the Institute of Economic Affairs entitled Can De-Industrialisation Seriously Damage Your Wealth?. Because the paper neither echoes the gloomy talk about a collapsing industrial base, nor the once-more fashionable remedies of state aid for investment, it has been largely ignored. But it has far more to tell us than we can expect from the forthcoming report of the crystal-gazers assembled by the chancellor.

In fact, Crafts has a better chance of convincing those on the fence than most other commentators. His paper is a survey of almost all the available quantitative research, not only his own. He eschews ideology and indeed speculative argument. So far is he from being a Thatcherite that he appeared as a witness for Peter Jay in a television debate against the proposition that there had been an economic miracle in the 1980s. Nor has he previously been an IEA writer.

My only quarrel with Crafts is his use of the awful Harvard system in which bracketed references such as (Joachim and Heifetz, 1985) clutter up the text. They will not convince anyone who does not already believe the author's thesis and are out of place in all but highly specialised original studies. They should be replaced by plain English statements of the trend of recent scholarship; references can be given in the bibliography.

In any case the substantive conclusion is that the gap in GDP per person employed between the UK and European competitors is much less than the gloom talk suggests. A table in Economic Viewpoint on November 19 suggested that there is no gap compared with Japan either.

Admittedly, UK performance has lagged more in manufacturing than in the rest of the economy. The big gap here is still with the US. American manufacturing output per head was twice as high as Britain's in 1870, when Mr Gladstone was presiding over his first effective administration. The proportional gap was, at a maximum, around 1950 and has since been declining.

The manufacturing gap with Continental Europe has never been so large as with America. German manufacturing output per head was indeed nearly 50 per cent above the UK's in 1977. But by 1989 the differential had fallen to 5 per cent. The gap with Japan (not shown in the chart) is similar.

Crafts also nails the myth of 'de-industrialisation'. Numbers employed in UK industry have fallen more than in most other countries, but mainly because the starting point was so high. By the late 1980s, the UK had much the same proportion of the labour force in industry as several other countries with a similar level of income per head - for example, France and the Netherlands. It is Germany and Japan that are the odd countries out with their high proportion employed in manufacturing.

Most interesting of all is his refutation of the supposed 'balance of payments constraint on growth'. He notes, without becoming bogged down in them, the arguments about the

validity of the 'trade gap' estimates, or about how much of the gap is the result of inward investment, particularly by Japanese companies.

Crafts is prepared to accept that although the share of British exports in world trade has more or less stabilised, the UK has an exceptionally high tendency to devote increases in the national income to imports. This can be offset by allowing the real exchange rate to depreciate by about 1 1/2 per cent a year.

I should spell out that this need not mean a depreciation of the nominal exchange rate - that is the rate quoted in the newspapers - by this amount. If inflation by Britain's trading partners is, say, 3 per cent a year, then a lower UK inflation rate of 1 1/2 per cent in traded goods and services will suffice. On the other hand a larger nominal depreciation will fail to do the trick if it is offset by inflation. Crafts concedes too much to the Europhobic view that such adjustments would not be possible in the exchange rate mechanism, mainly because he expects German inflation to be zero, which would indeed be good news to the Bundesbank.

A falling real exchange rate is not a godsend, but perhaps a necessary evil. It is normally accompanied by a deterioration in the terms of trade - that is, UK citizens effectively receive less in imports for a given level of exports. Crafts suggests that the effect is to reduce British living standards by 0.4 per cent a year. This is not a trivial offset to an underlying growth rate of 2 or 3 per cent, but hardly justifies the prevailing gloom and doom.

Crafts devotes much attention to supposedly new theories which suggest that there are large returns to investments, which are not captured by the companies that make them, and that therefore government subsidy is justified. He accepts the theoretical possibility, but cites much experience showing that real world subsidies tend to retard rather than promote growth. An example is the advanced gas-cooled reactor programme which is said to have produced nothing of any commercial value over 20 years.

Moreover, John Smith please note. 'German policies to subsidise high technology sectors like aircraft, nuclear energy and telecommunications have been no more successful than British ones.'

Nor are these failures accidents. Politicians' incentives to win votes encourage excessive subsidisation of producer interests and this cannot be effectively monitored or deterred by the mass of voters on whom the costs fall.

Crafts is very critical of some aspects of British business culture. The vulnerability to hostile takeover, unique in Europe, causes British companies to maintain dividends and forego investment opportunities in development and training. He also criticises the absence of long-term consensual relationships between UK workers and their companies.

But on balance he believes the reforms of the 1980s improved matters. The main future emphasis should not be on subsidy for manufacturing or high technology but the pursuit of multilateral international agreements to reduce the extent of government support for industry and to promote freer trade. And if multilateral agreements are elusive, I would go for unilateral measures in this direction.

------------------------------------------------------------------------ GDP per person employed (UK=100)* ------------------------------------------------------------------------ US/UK Germany/UK France/UK ------------------------------------------------------------------------ 1870 95.1 48.8 53.0 1913 127.9 64.1 61.7 1929 154.0 64.3 72.7 1960 167.5 90.2 88.6 1973 151.6 104.7 110.2 1987 128.9 105.6 116.4 ------------------------------------------------------------------------ *Comparisons for each year with the UK; changes in position between years reflect relative growth not absolute levels of performance. ------------------------------------------------------------------------ Source: Prof Crafts ------------------------------------------------------------------------

United Kingdom, EC P96 Administration of Economic Programs CMMT Comment & Analysis ECON Gross domestic product P96 The Financial Times London Page 18 1269
Letter: Housing policy a danger to standards Publication 930211FT Processed by FT 930211 From Mr CHARLES A WOOD

Sir, Your editorial ('Housing policy', February 5) makes absolute sense.

One of the great problems facing housing associations has been arbitrary change in government regulation. It is happening again: in effect part of the financial regime set up in 1989 is being dumped. In that regime housing association grant has been calculated from a formula which included cost, interest rates and affordability to tenants.

What is happening now is that (presumably) the Treasury is ordering a cut in grant to 55 per cent in two years, which will drive rents well beyond the reach of the low paid.

Certain MPs, particularly Sir Paul Beresford, have suggested that private property developers should be allowed to compete with housing associations for government grant. In my view this will lead to low construction standards and uncertain standards of housing management.

Surely the lesson of the 1960s policy errors is that the drive to lower costs is often misconceived. Housing associations are not perfect; nor are they mad bureaucracies. It cannot be in the national interest to destroy diversity and local accountability.

Charles A Wood,

chairman,

New Islington and

Hackney Housing Association,

122 Kingsland High Street,

London E8 2PR

United Kingdom, EC P9531 Housing Programs P6531 Real Estate Agents and Managers CMMT Comment & Analysis GOVT Regulations P9531 P6531 The Financial Times London Page 18 238
Letter: Classroom peace threatened by dogma and bureaucracy (2) Publication 930211FT Processed by FT 930211 From Mr NIGEL DE GRUCHY

Sir, I have to challenge your assertion in your leader that the action being contemplated by the NASUWT union and perhaps other organisations is a threat to 'classroom peace'.

Nothing could be further from the truth. While the main concern of NASUWT is the mountainous increase in workload, a successful boycott of the government's over-prescriptive and distorting arrangements for national curriculum testing and assessment would have beneficial effects for the children.

The beneficial side-effect would be that teaching would be restored to the classroom. The disruptive, distorting and bureaucratic nightmare being imposed on pupils and teachers by the government's reforms would recede.

You also made the huge assumption that the government's version of testing would help to raise standards. I believe the overwhelming majority of teachers do not share your view.

Nigel de Gruchy,

general secretary,

NASUWT,

5 King Street,

Covent Garden,

London WC2E 8HN

United Kingdom, EC P8211 Elementary and Secondary Schools P9411 Administration of Educational Programs CMMT Comment & Analysis P8211 P9411 The Financial Times London Page 18 189
Letter: Classroom peace threatened by dogma and bureaucracy (1) Publication 930211FT Processed by FT 930211 From Mr PETER SMITH

Sir, Your leading article, 'Classroom peace' (February 9), makes eminent commonsense. Teachers, for totally professional reasons and not because they are so-called 'trendy lefties' intent on a fight with the government, sincerely believe that students will suffer if the government this summer presses ahead with its publication of English tests for 14-year-olds.

My union agrees with your conclusion, that the way out is for the government to concede with good grace a year's delay in publishing the test results. Sadly Mr John Patten, the education secretary, appears unwilling to listen. Instead he appears to be looking for confrontation through a crude, old-fashioned exercise of teacher-bashing.

He would receive praise not derision from teachers, and indeed parents, if he put the interest of pupils before a dogmatic desire to discredit a very caring profession.

Peter Smith,

general secretary,

Association of Teachers

and Lecturers,

7 Northumberland Street,

London WC2N 5DA

United Kingdom, EC P8211 Elementary and Secondary Schools P9411 Administration of Educational Programs CMMT Comment & Analysis P8211 P9411 The Financial Times London Page 18 191
Letter: Revenue staff cuts will carry a cost Publication 930211FT Processed by FT 930211 From Mr CLIVE BROOKE

Sir, Andrew Jack's article, 'A taxman assesses years of change' (February 8), gives a somewhat misleading impression that Inland Revenue staffing has remained much the same during the 1980s. The facts are quite dif-ferent.

In 1979 there were 86,000 Inland Revenue employees. That figure is now down to 68,000, with 18,000 having been shed. And the government and the department have plans - as yet unpublished - significantly to reduce staff numbers further during the 1990s by shifting taxation administration on to taxpayers and the private sector through moving towards a US-style self-assessment system.

As the Chartered Association of Certified Accountants warns, this will carry a cost - not simply in money terms, but in a changed relationship between the Revenue and the taxpayer.

Your readers should know that it is rumoured that last year, for the first time, the Revenue wrote off more than Pounds 1bn of unpaid taxes. While part of that increased write-off without a doubt is attributable to the recession, much in our view is due to the government's unwillingness to employ the number of tax collectors required.

It is a strange world in which, while the government has to borrow ever more and contemplate raising taxes to cope with a soaring public sector borrowing requirement, it fails to recover a fair amount of what is due to it already for the want of a relatively small number of staff.

Clive Brooke,

general secretary,

Inland Revenue Staff

Federation,

Douglas Houghton House,

231 Vauxhall Bridge Road,

London SW1V 1EH

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis PEOP Labour P9311 The Financial Times London Page 18 291
Letter: Donor-aided research programme needs greater funding Publication 930211FT Processed by FT 930211 From Dr P F A VAN LOOK

Sir, Your article, 'Not in the best of health' (February 4), quotes me as having said that lack of money has not been a problem for research in human reproduction and contraception.

Regrettably, this statement has been taken out of context and, as a result, may give the impression that this field of research in general, and our programme in particular, is well provided for. I wish this were true.

The special programme for research, development and training in human reproduction is an international research programme. It is co-sponsored by the United Nations Development Programme, the United Nations Population Fund, the World Health Organisation and the World Bank. The programme's activities are financed, not from the WHO's regular budget, but from voluntary contributions by some 20 developing and developed country governments and organisations.

Until recently, these enlightened donors have been able to raise about 90 per cent of the programme's biennial funding targets. However, the fact that donors have provided such support should not be taken to mean that there is no funding shortage for the field in general or for our programme. It only reflects the donors' strong commitment and realistic budgeting on our part.

I would point out that funding for our current 1992-93 two-year programme is likely to reach only about 75 per cent of target because several of our European donors are forced to reduce their budgets for overseas development aid and a number of their currencies have recently been devalued.

P F A Van Look,

acting director,

special programme of research, development and research training in human reproduction,

World Health Organisation,

CH-1211 Geneva 27,

Switzerland

United Kingdom, EC P8733 Noncommercial Research Organizations P9721 International Affairs CMMT Comment & Analysis P8733 P9721 The Financial Times London Page 18 311
Book Review: Monopoly seeks platonic relationship Publication 930211FT Processed by FT 930211 By HUGO DIXON

PRIVATISATION, PUBLIC OWNERSHIP AND THE REGULATION OF NATURAL MONOPOLY By C D Foster Blackwell, Pounds 40, 458 pages

How does one find individuals who can be trusted to regulate important parts of the economy? Such individuals have discretionary powers over many basic goods and services, so only the select and most enlightened can do the job.

This question - which deliberately echos Plato's description of the qualities required for a perfect ruler - is raised by Sir Christopher Foster in his book on economic regulation. Like Plato, he is torn between acknowledging that regulation is sometimes necessary, and realising that power has a tendency to corrupt. Unlike Plato, his field of interest is not society as a whole, but those parts of the economy that gravitate towards monopoly if left to their own devices.

Sir Christopher, who has been an economics professor, civil servant and businessman and is currently advising the UK government on the privatisation of British Rail, rejects the idea that governments can pursue a policy of benign neglect once they have privatised 'natural monopoly' industries such as telecommunications, gas, railways, airports and electricity. But he is exercised by the fact that any regulatory system is vulnerable to being subverted.

Such subversion - known in the jargon as regulatory capture - can occur if the regulator is turned into a tool of either the industry concerned or politicians. The book is an extended treatise on how regulatory systems have been consistently captured, and how the only antidote is a strong system of regulation independent from vested interests.

This prescription may seem as idealistic as many of Plato's. But Sir Christopher argues that, through a mixture of luck and foresight, the system introduced in Britain to accompany the privatisation of utilities is a good approximation to what is required. It is based on a series of independent regulatory bodies - Oftel, Ofgas, Ofwat, Offer - headed by strong individuals with considerable discretionary powers.

But the book is not an apologia for the British status quo. Sir Christopher is concerned that regulators are still vulnerable to pressure from both politicians and industry - a topical concern, given Sir James McKinnon's decision this week to step down early as director-general of gas regulator Ofgas, and the recent drubbing politicians have given Mr Stephen Littlechild, director-general of electricity regulator Offer, for failing to protect miners' jobs.

The book is also a timely contribution to the debate on how regulatory systems should be designed, as yet more countries privatise utilities and the UK embarks on its next privatisation wave with BR and maybe the Post Office. Though not an easy read and sometimes repetitive, it is rich in insights. Particularly appealing is its broad historical sweep, which traces the development of economic regulation in Britain and the US.

The chapter on Gladstone's attempt to regulate railways in the 1840s shows how the complex economic issues manifest today have been present from the start. It also reveals how the railway barons were able to mobilise immense lobbying power - at one point, 132 MPs were railway directors - to emasculate his bill.

Further chapters explain how this early failure to control railway monopolies led to such a public outcry, albeit after a time lag of nearly half a century, that excessive controls were imposed. These, in turn, nearly bankrupted the industry and paved the way for nationalisation.

The US experience with economic regulation, though less traumatic, does not provide a model because it is too legalistic, according to Sir Christopher. It is not simply that it is costly. The court-like procedures also enable a monopoly to use its greater resources and control of information to tie its regulator in knots.

These failures lead Sir Christopher to defend the current British model and propose various measures to shore up the regulators' independence.

Some concern the vital but neglected subject of information. Monopolies not only dominate their industries. They also control the detailed financial information about how their industries work, putting them in a privileged position compared with regulators, potential rivals and consumers. Though regulators can ask for some information, the book argues that monopolies are adept at playing games: dragging their heels, or flooding regulators with irrelevant data.

Sir Christopher advocates stronger powers for regulators to extract information and then publish it. This is partly to help potential rivals enter a monopolised industry and partly because he favours 'sunshine' regulation - exposing monopoly abuses to the glare of publicity.

Sunshine regulation was pioneered by Charles Francis Adams, a 19th century Boston patrician, who waged a successful campaign against railway barons through pamphleteering and journalism. Mr Alfred Kahn, taking a similar approach, told his staff at the US Civil Aeronautics Board: 'If you can't explain what you are doing to people in simple English, you are probably doing something wrong.'

The new breed of British regulator has developed its own version of sunshine regulation. Sir James McKinnon, in particular, has been a master of the strongly worded statement to the press - a practice Sir Christopher applauds, since it helps regulators build up public support, which in turn should act as a bulwark against interference with their independence.

Much of Sir Christopher's argument for independent regulators is persuasive. But it ultimately rests - as did Plato's - on enlightened individuals filling the top posts. For, as Sir Christopher acknowledges, if bad regulators were to be in charge, it might after all be better if they were shackled by a cage of law.

United Kingdom, EC P2731 Book Publishing CMMT Comment & Analysis TECH Products P2731 The Financial Times London Page 18 949
Arts: Dylan - Pop concert Publication 930211FT Processed by FT 930211 By ANDREW CLEMENTS

What drives Bob Dylan on to tour and tour again remains a profound mystery. The never-ending circuits of the world must fulfil some deep psychological need that a more sedentary form of existence could not. For Dylan to stay in seclusion, dispensing the occasional album with the seigneurial flourish befitting a rock legend of his luminosity obviously would not suit him. Yet there is no evidence that he takes any obvious delight in the contact with his fans; for two hours he gives and the audience takes, while not a word is spoken and smiles are strictly rationed.

It is an uncomfortable prospect; there are too many gruesome reports from around the world of an apparently bored Dylan going through the motions oblivious of surroundings while his band does its best to second-guess the next move, to approach any appearance with positive expectations. Tuesday's concert was the third in Dylan's week-long London run. By his standards it was a relaxed and involved affair; at times he seemed almost perky. It was also, in its way, totally spell-binding.

There were plenty of ragged edges (does this man ever rehearse a song from beginning to end, one wonders?), a sprinkling of miscalculations (usually involving the harmonica), but never a hint that he was anything but fully engaged. His current four-piece band has a country-rock feel, leavening its heavyweight guitars and drums with string bass, slide guitar and mandolin; that sound was laid down at the very start of the set, moving from 'Maggie's Farm' through 'Every Grain of Sand' and 'Tangled Up in Blue' (the resilience of this song in particular tested almost to destruction) on to a fierce, unforgiving 'All Along the Watchtower' which gradually built in intensity and concentrated Dylan's efforts ever more. The same kind of momentum was generated at the end of the evening, by which point it was possible to adjudge that Dylan was, really, enjoying himself.

Perhaps that is the point. It is the search for the fix that comes from the occasional great performance which keeps him going, so that each concert is an experiment, an attempt to find another means to that end. How else to explain the constant worrying away at the lyrics and the melodic lines? In a treasurable acoustic set halfway through Dylan refurbished something of his most familiar songs from the sixties. There was nothing arbitrary or wilful about it - the tender way in which 'Mr Tambourine Man' was recast, shorn of its yearning vocal line and delivered as an introverted chant complete with haunted harmonica coda, or 'Don't Think Twice' had its melody completely recast seemed anything but arbitrary. For the fans hearing those songs now may be a precious exercise in nostalgia; for Dylan still, extraordinarily, they carry the potential for renewal and refinement.

At the Hammersmith Apollo until Saturday

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Arts: Woody the wizard - Cinema Publication 930211FT Processed by FT 930211 By NIGEL ANDREWS

SHADOWS AND FOG (15) Woody Allen OLIVIER OLIVIER (15) Agnieszka Holland THE LIVING END (18) Gregg Araki STAY TUNED (PG) Peter Hyams

Woody Allen's deliciously strange Shadows And Fog is about the Known and the Unknowable. Part tragedy, part comedy; part human puppet-show, part charabanc tour through the dark night of the soul; it is a fantasy prelude in film noir tones to the later Husbands And Wives.

In America many hated it: mainly because there are so many plots bubbling at once that it is like being in a mad wizard's kitchen. We have Allen himself as Mr Kleinman, the bumbling coward roped into a posse hunting a mass killer in a European town. We have circus sword-swallower Mia Farrow, flouncing out on husband John Malkovich after he has slept with trapeze artist Madonna. We have the star-packed brothel (Kathy Bates, Lily Tomlin, Jodie Foster) where Farrow spends a fugitive night. We have Farrow-smitten student John Cusack; mad doctor Donald Pleasence; neighbour Kate Nelligan . . .

Whoah. Enough, you cry. How many films are being reviewed here under one title? But the multi-story skittishness of Shadows And Fog is its charm. If Husbands And Wives gave us the first great film from a new, free-associating Woody - conventional style and structure splintering under the power of improvised emotion - Shadows And Fog is like a gentler dressage for that drama of deconstruction.

Across the dinky squares, through the picture-book fog and darkness, lope the funny-mysterious Lilliputians. In style the film is a toy-theatre spoof on German Expressionism, doing for Lang and Murnau what Love And Death did for Dostoevsky and Tolstoy. But Shadows And Fog is also about good and evil, destiny and predestination. Herr Kleinman - Allen with specs and nervous soliloquies - knows he has been 'chosen' but cannot figure out what for. Farrow's runaway circus girl leaps into her fated midnight and finds a fated self-fulfilment. (She links up with Allen in what may be their last and most touching boy-meets-girl vignette.) And Doc Pleasence, pondering a morgueful of corpses, gazes straight and steely-eyed into the heart of life, death and the beyond.

Though Carlo Di Palma's black-and-white photography mimics a gloom-laden cine-Europe of 60 years ago, the film is also free-spirited enough to throw in some prime Woody repartee. (Farrow: 'I slept with one man for money. Does that make me a whore?' Allen: 'Only by the dictionary definition.') And a classically deft scene of romantic misunderstanding between Cusack and Malkovich shows that the director does not save all the good laughs for himself.

But Shadows And Fog is best when comedy balances on a knife-edge of the macabre; when the inquisitive despair that Allen over-formalised in his Chekhov-Bergman pieces (Interiors, September) is given the true texture of filmic malaise - human fear and defiance glittering in the shadows of the unknowable.

When a film comes to a sudden narrative pause and flashes up the title 'Paris, six years later,' we fear the worst. Either the characters who were children will have grown up to become unrecognisable adults. Or those who were grown-ups will be the same actors with a wisp of grey hair and a look of telegraphic disenchantment.

But Agnieszka Holland's powerfully imaginative Olivier Olivier skips over every lurking trap. In part one nine-year-old Olivier disappears from his rural home - never seen again after leaving to take food to Granny (yes, shades of Red Riding Hood) - and parents Francois Cluzet and Brigitte Rouan are split apart by sobs and recriminations. In part two 15-year-old Olivier is tracked down by Paris cop Jean-Francois Stevenin and restored to his ecstatic parents and startled sister.

But is it Olivier? The questionable resemblance of new actor to old has the audience clucking scornful scepticism: only to be out-clucked by the movie itself as it sows doubts in the midst of delight and then delivers a knock-out denouement.

Taken from a newspaper item, the story grows its own reality like a cutting newly planted in rich soil. One-time co-screenwriter with Wajda (Man Of Iron, Danton), Agnieszka Holland has learned the art of more-comes-from-less. The film never stops to 'explain' its characters. The stormy father, the besotted mother; the enigmatic sister with her sacrificial rites and mystic powers (from self-inflicted cigarette burns to telekinesis); the teenage Olivier's moody inconsistency of recall. The characters are 'givens' who create their own human weather system, as alien and yet as recognisable as the sirocco. And domestic trivia, from a squalling cat to the musical beds of sleepless children climbing in with sighing adults, become the meteorology of changing emotion.

Gregg Araki's The Living End is an AIDS-era road movie and as dotty as that sounds. Two HIV-positive Californians, bookish Jon and hellraising Luke, throw themselves into each other's arms and then onto the open road in this film that resembles a cross between a gay Badlands and a Wild At Heart for sexual militants. Casual murders; lots of outlaw lyricism; and a sense of two people narcissistically narrating their own lives as they glide attitudinisingly towards death.

Jon (Craig Gilmore) is a film critic writing a thesis on the 'Death of Cinema'. (No comment.) Luke is a drama queen with bronzed pectorals who wants to blow his brains out during a final dazzling orgasm. When not giving screen time to these tinpot tragic heroes, debut director Araki branches out into caricatured women. These range from two loudmouthed lesbians scripted for penis-envy dialogue to a Bette Davis lookalike with pillbox hat and kitchen knife. This last floats into an early love scene between Luke and a pick-up, delivers the line 'This isn't the Seventies any more, you know' and stabs the pick-up to death.

Reality? Fantasy? Comedy? Horror? Who knows. Who, alas, cares. Mark this down as the first, worst film of a director who may improve when he empties his system of gay special pleading and camp melodramatics.

Stay Tuned is, if possible, worse. Married couple John Ritter and Pam Dawber, Faustians of the hi-fi age, have adventures in a nightmare TV-land run by Satan figure Jeffrey Jones. Sucked into this 'other world' via a giant satellite dish, they become actors in spoof shows like The Golden Ghouls, Meet The Mansons and Northern Overexposure.

The cod titles are the funniest thing. Elsewhere this is fast, frenetic, fun-free tripe: scripted by ex-advertising duo Tom Parker and Jim Jenewein and directed by Peter Hyams.

To conjure the true spirit of comedy this week requires necromancy. The late Buster Keaton, greatest of silent comics, unlocks his stone-faced splendour in a season at the Barbican. Sherlock Junior is joined by two classic shorts, The Love Nest and The Playhouse, in a programme no connoisseur of mute mirth should miss. (But be warned: the odd sound effect has been added to Sherlock).

The opposite of a comedian who never speaks is a film-maker whose characters never shut up. A sad farewell to Joseph L. Mankiewicz, who died last Friday. He spent his life wiring great film stars for sound, plugging them in and then standing back to watch the mixture of noise, sparks and explosions. He twinned Brando and Gielgud in Julius Caesar. He set Olivier and Caine at each other's larynxes in Sleuth. And in All About Eve, starring Bette Davis and a famous line about bumpy nights, he made the most glorious impostor among movies. It pretends to be a film; it is really a stage play with a camera breathing down its neck. But who objects? No movie ever matched its glittering, sideswiping dialogue or its showman's wisdom about show business.

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Arts: Richard III - Theatre Publication 930211FT Processed by FT 930211 By MALCOLM RUTHERFORD

The story goes that in previous centuries actors playing Richard III would shift their deformity from left to right from night to night. This reduced the risk of back problems such as have afflicted Simon Russell Beale who had to withdraw from the RSC's production at the Donmar Warehouse because of a slipped disk.

Beale will return to the part at Stratford next month. Meanwhile Richard has been taken over by Ciaran Hinds, an actor in an altogether different mould. Beale is small and agile, almost double-jointed. Hinds is physically large and, in this part at least, deliberately clumsy.

Visitors to the Warehouse will have recently seen Hinds playing Samuel Byck in Stephen Sondheim's Assassins, and Richard III is an appropriate play to follow, for what is it about but a series of assassinations? Richard like Assassins is directed by Sam Mendes and some of the techniques are becoming familiar: for instance, the use of the separate cubicles at the back of the stage.

The production was seen at the Other Place in Stratford last summer. It is not the best that Mendes has done. The costumes, located loosely somewhere early in the 20th century, are dull. There is not enough to differentiate the characters. Too much of the play comes across as a pageant without spontaneity. Possibly one is over-influenced by the Northern Broadsides production, seen at the Riverside Studios in December, and has come to expect Richard III to be fun. Mendes's production is a little too like a run-up to Macbeth without the poetry and without the depth. He treats it too much as history and not enough as melodrama.

Nevertheless, there are some excellent scenes and one sub-theme in particular is played for all it is worth. This is the relationship between Richard and Buckingham which becomes central to the plot. Stephen Boxer's Buckingham is not just another toad or accessory to the crimes. He is the man who, like Lady Macbeth with her husband, urges Richard on. Later, again like Lady Macbeth, he quails and Richard knows when to drop him. In the early stages of this production, Buckingham is almost the best part in the play: Boxer is outstanding.

Then there is the set-piece towards the end when the ghosts of his victims come to visit Richard in his dream on the eve of battle. Mendes directs this as if it takes place in a subdued tavern in Cheapside. Richard sits slumped over his wine at one end of the table. At the other end is Richmond, the future Henry VII. The ghosts come in together and drink round the table to Richmond's victory. There is Mendes at his best. He is less happy in handling the women in general who, most of the time, simply record and prophecy doom. He does not catch their fickleness in the way they can succumb to Richard.

On the small Donmar stage, Hinds suffers for his size. His hump looks like a pillow, even a kitbag, strapped across his shoulders. He has sleeked back hair and an off-putting long brown coat. Yet when he plays Richard as the religious devotee, pretending to be reluctant to accept the crown, he seems a much more versatile actor. Still, playing the role as a hulking straight murderer is a perfectly legitimate interpretation. I enjoyed it.

Donmar Warehouse (071) 867 1150. The production runs until February 20, then moves to Tokyo and Rotterdam, before going home to Stratford

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Arts: Schubert on the South Bank Publication 930211FT Processed by FT 930211 By RICHARD FAIRMAN

The South Bank Schubert series, now well underway, is a lop-sided one, with all the interesting events happening at the Queen Elizabeth Hall. This is where we are hearing the chamber music written for intimate evenings among the composer's circle of friends, although it cannot have been the intention of the organisers that their audiences should be the same kind of size.

This part of the series lasts until March. There are string quartets, piano sonatas and duets, some songs. Best of all, on Tuesday, was the only truly novel item - a selection of Schubert's partsongs, which proved so entertaining that some in the audience may have gone away to look out more. There are plenty of them, too: three full pages listed in Grove, no less. Can they all be so imaginatively varied?

Many of these pieces were written for specific occasions, which will explain why Schubert tried his hand at some unusual combinations of voices and instruments. One father, wanting to celebrate the convalescence of his dance-mad daughter, commissioned the lively 'Der Tanz'. Several of the more ambitious songs, including 'Nachtgesang im Walde', a Lied that has outgrown its origins, have a quartet of horns in support.

In among these trifles, however, are at least a few minor masterpieces. It is difficult to resist Schubert's setting of the 23rd Psalm ('The Lord is my Shepherd') and especially when its wide-eyed innocence is as beautifully caught as it was here by the ladies of the BBC Singers accompanied by Imogen Cooper. Then again, the 'Gesang der Geister uber den Wassern', for male octet with a quintet of lower strings, looks far ahead of its time to becoming a 'serious song' in the Brahms manner, mellow, pensive, richly textured.

In every item the BBC Singers were on expert form, holding in check the individual voices which wobbled away during the recent Janacek weekend. Sian Edwards conducted, a relaxing duty, one imagines, before ENO responsibilities claim her attention. The partsongs were preceded by the Chilingirian String Quartet in the A Minor Quartet, undemonstrative and affectionate Schubert playing, which captured the Landler spirit nicely. Unfortunately the Borodins' recording was fresh in my mind and this was not its equal.

Schubert series continues at the Queen Elizabeth Hall until 2 March (Box Office 071-928 8800)

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Arts: Today's Television Publication 930211FT Processed by FT 930211 By PATRICIA MORISON

A beast called the Devilfish, an enormous octopus which swims in the south Pacific, is the subject of Wildlife on One (BBC 1, 8.00). Hard, really, to think of anything nastier than a creature which may be 16ft long, is boneless and changes its shape at will. It pounces on its prey, which it embraces, poisons, and then digests. Yet perhaps we should beware of misjudging a beast which is considered intelligent and endowed with emotions.

Close To Home (C4, 8.00), delves into a classic and unattractive case of 'nimbyism' (ie. 'Not In My Backyard') in Manchester. Residents are indignant because the Probation Service is turning hotels in their areas into bail hostels. Never mind that it is immeasurably fairer and cheaper to get defendants into hostels and out of prison. The 'nimbies' protest that vodka bottles get thrown across the fence into their gardens. .

The Essential History of Europe: Belgium (BBC 2, 8.00) scrutinises the entrails of Belgium. It presents that country as a land of terrific gastronomy but, in terms of national identity, a total wash-out.

United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 17 208
Arts: Holzmair & Tan - Recital Publication 930211FT Processed by FT 930211 By DAVID MURRAY

At the Wigmore Hall on Monday, the baritone Wolfgang Holzmair sang two dozen Romantic songs, accompanied by Melvyn Tan at a fortepiano. Their umbrella-title was 'Zwielicht' (twilight), but that placed no serious limits on the range of the programme: any song seemed to qualify so long as it mentioned the moon, the stars or both. That left room for nocturnal delights and horrors, storms and dewy calm, knights, hunters and lovers; and the whole recital gave unqualified pleasure.

In a certain style of Lieder singing, Holzmair is a very model. The voice has a marked personal character, and he wields it with communicative flair. He indulges no great variety of vocal colour (and his tone is thin in the lowest register), though he likes to float soft, high-lying phrases on a cultivated head-voice. Nor does he underline or italicise key words, unlike some senior platform stars; and yet verbal sense is always foremost - every part of every song has something to say, whether vehement or sweetly reasonable.

For this kind of delivery, Tan's fortepiano (quite a large one) made the perfect backing. Not only because its light, brittle tone was guaranteed never to cover the voice, nor because it resembled the instruments Mendelssohn, Schubert and Schumann knew far better than any modern grand; but also because Tan allows himself a degree of expressive licence, in impeccable period style, which is virtually unheard of among modern accompanists.

Rhythms can be delicately bent (his treatment of the repeated chords on Schumann's 'Mondnacht' was marvellous), inner voices enhanced by spontaneous rubato. None of that was a distraction from the singing, since the fortepiano's scale of sound is so unthreatening; but it lent life and pretty surprises to all the music, complementing Holzmair's direct, seemingly artless manner - which by itself might have begun to seem a bit over-plain.

Tan's exuberant mannerisms, in the purely visual sense, were another matter (had I been Holzmair, whose own bearing is modest and decorous, I should have been tempted to swat him); but if that kind of carrying on is what he needs to achieve such fresh results, one must not complain. Predictably, Mendelssohn's piano-parts sounded delectable on the instrument. Much less predictably, its limited capacity for sustaining sound - for Schumann, the usual pedalled richness a la Steinway was simply unavailable - inspired Tan to find all kinds of compensation in phrasing and highlights. He and Holzmair made a curious partnership, but a most successful and satisfying one.

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Management (Marketing and Advertising): Selling coffee to the Brazilians - The world's largest coffee producer is fighting to maintain its home market Publication 930211FT Processed by FT 930211 By CHRISTINA LAMB

From plush government ministries in Brasilia to humble wattle and daub homes in the poverty-stricken north-east it is impossible to go anywhere in Brazil without being offered a cafezinho, a small cup of strong black coffee so full of sugar that a spoon stands up in it.

It is such a national symbol that last year, when the presidency wanted to convey to the people the full gravity of the country's economic crisis, it stopped serving cafezinhos in its offices. Surely the world's largest coffee-producing country does not need to advertise the stuff to its own people.

Yet Brazil is currently in the throes of an advertising blitz on television and in magazines to promote the world's favourite pick-me-up. Supermarkets are handing out leaflets and recipe cards and taste stands have become a common sight at conferences and seminars in the latest stage of the Brazilian coffee industry's first-ever promotion campaign.

For while Brazil remains the world's second largest consumer, per capita consumption has plummeted by almost 50 per cent in the last 10 years. The worried coffee industry started to respond in 1989 - initially through targeting retailers and trying to encourage the public to differentiate between blends and become more discriminating. Latterly, the generic campaign - which has cost more than Dollars 10m (Pounds 6.6m) and is the first of its kind by any sector of the Brazilian food and drink trade - has been aimed more directly at consumers.

Nowhere is more associated with coffee than Brazil. It has been grown there since 1727, after a goatherd in Ethiopia discovered his charges became more frisky whenever they ate coffee beans. Brazil is now responsible for 25 per cent of world production though coffee is no longer the basis of its economy.

Always focused on exports, the Brazilian coffee industry until recently paid little attention to the home consumer. As a result the local population thought it was being fobbed off with inferior products and began turning to other beverages such as tea or juice.

In 1988 a study commissioned by the Brazilian Coffee Roasters and Grinders Association found that 67 per cent of Brazilians thought that 'all good and pure coffee was exported and that sold in Brazil was impure and of low quality'.

This was partly true. Years of government price controls meant that the local industry had no incentive to produce better coffee for the domestic market. However, since 1989 a world glut and falling international prices has intensified the need to build up the home market. America Sato, president of Abic, explains: 'It has become essential for our survival to recapture Brazilian consumer confidence in the quality of our coffee.'

In its study Abic found that Brazilian per capita consumption had dropped from 4.6kg per annum to 2.8kg since the 1970s and was falling off rapidly. 'We were ceding space to other drinks and there is a big potential for increase,' Sato says.

As a first step the industry created a 'self-monitoring and purity control programme', establishing the Abic seal of quality and contracting consultants Peat Marwick and Ernst & Young to oversee a constant evaluation. The seal is now on 80 per cent of coffee for domestic consumption.

The 600 members of Abic united to invest Dollars 2m a year in marketing. 'If we were to reconquer the consumer it had to be through an institutional campaign rather than just separate companies advertising their own products,' says Sato.

Abic contracted the Sao Paulo-based Rino advertising agency with the aim of increasing total consumption by 20 per cent in the next two years to 11m bags (each 60kg). Rino Ferrari, who heads the campaign, says: 'It is a major challenge. Coffee has a serious problem in Brazil. It's not just a matter of saying coffee tastes good, but of totally changing the image of coffee.'

The liberation of prices in 1991 meant that the industry could concentrate on quality for the home market and the latest stage of the campaign focuses on quality and diversification. Sato explains: 'In the past all coffee in Brazil was seen to be equal and of a lower standard. Now we're saying 'coffee is different and each consumer has his or her own palate so buy accordingly'.'

The television ads currently showing during prime time show a group of different people, all wearing the same mask, under the slogan: 'Purity you must demand. Quality you should choose.'

The aim is to make consumers aware that coffee comes in different flavours and aroma resulting from different types of beans and degrees of roasting. Rino is also distributing free recipe cards and running adverts in women's magazines to show the different potential uses of coffee - in cakes, ice cream and Irish coffee, for example. Ferrari says: 'We're aiming at everyone over 25 from all social classes but the real ambition is to get the habitual consumer to drink more, be more selective in the purchase and more adventurous in the use.'

To encourage publicity an annual prize has been set up for reporting on coffee and Abic has started its own newspaper. An accord has been signed with Campinas University to monitor consumer reaction.

The next step is a Dollars 2m promotion of coffee as a stimulant, aimed at young people whom Abic has found begin drinking coffee only after starting work. 'Coffee is seen as Brazil's national drink throughout the world,' says Ferrari. 'We have to make sure Brazilians keep drinking it.'

Brazilian Coffee Roasters and Grinder Association Brazil, South America P2095 Roasted Coffee P8611 Business Associations MKTS Market data MKTG Marketing P2095 P8611 The Financial Times London Page 16 972
Technology: CFCs get the cold shoulder Publication 930211FT Processed by FT 930211 By HAIG SIMONIAN

Italy's Candy white goods group this week unveiled what it says are the world's first mass-produced refrigerators which work without environment-damaging chlorofluorocarbons.

The new fridges use HFC 134a, an alternative chemical which is now the front-runner to replace CFCs in refrigerator applications. Unlike CFCs, HFC 134a does not harm the earth's ozone layer. It is in commercial production by ICI and Du Pont.

The Candy range, which is being introduced two years ahead of a European Community accord to phase out CFCs by 1995, may soon be followed by other leading manufacturers. A number of European companies are believed to be working on CFC-free fridges, some of which may be unveiled at next week's big Domotechnica consumer durables trade fair in Cologne.

Although the new range does not include CFC refrigerant, it is still only a half-way house as far as the use of chemicals for insulation is concerned. For their insulating material the Candy fridges use HCFC 141b gas, a hydrochlorofluorocarbon which Candy admits is 'a transitory solution'. Although the chemical dissipates in the atmosphere 10 times faster than CFCs, researchers are still working on an environmentally harmless solution for insulation use.

Silvano Fumagalli, chairman of Candy's main operating company, said the group, like other big white goods makers, was looking into the use of cyclopentane as an alternative. Experimental fridges using cyclopentane are already believed to have been tested.

However, the gas is dangerous to handle and foam produced from it is a less effective insulator than that from HCFC 141b.

Fumagalli said Candy was working closely with chemical companies in the search for suitable alternatives. The new Candy fridges already marked a step forward in eliminating CFCs without compromising operating standards, he said.

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Technology: Searching for a clearer picture of the future - After European HDTV's expensive crash, Della Bradshaw, Louise Kehoe and Michiyo Nakamoto ask what can be salvaged from the wreckage Publication 930211FT Processed by FT 930211 By DELLA BRADSHAW, LOUISE KEHOE and MICHIYO NAKAMOTO

The single European market is only one month old, yet the community's flagship technology project has already foundered.

The high-definition television strategy promised to bring cinema-quality pictures to Europe's television screens, by imposing a single standard, HD-Mac, on Europe's broadcasters. But that promise now seems increasingly hollow.

'The European Commission's approach has been most unfortunate,' says Philip Carse, a consultant at National Economic Research Associates (Nera) in London. 'It has backed a standard which is becoming more obsolete by the minute.'

For the European taxpayer the bill for research and development into HDTV runs into hundreds of millions of pounds. But the cost to Europe's struggling electronics companies is more than monetary.

They have now missed the opportunity to accrue manufacturing experience in the latest technologies, while Japanese manufacturers have grasped the opportunity with both hands. Japanese broadcasters, too, are garnering experience in programme making for HDTV.

But as manufacturers sift through the bones of Europe's high-profile venture, many experts are increasingly sceptical that consumers would have paid for a technology which brought only incremental improvement in the quality of the television picture.

'My view was that it would always be a slow take-up,' says John Forrest, chief executive of NTL, the privatised transmitter and engineering arm of what was the UK's Independent Broadcasting Authority. 'The question was whether people would be prepared to pay to switch from pretty good quality television to HDTV. It was not the same jump as from black-and-white television to colour.'

Even the most ardent proponents of HDTV acknowledge that the full benefits of the improved picture cannot be achieved on the standard 21- or 23-inch television set. Initially viewers would probably need projection television - where the picture is broadcast like an old-fashioned home movie on to a screen. As technology developed, large flat-screen television sets would be used, but for these viewers would probably have to wait until the next century.

HDTV promises a better-quality picture because it crams more picture elements, or pixels, into each square inch of the screen. While conventional TV pictures have 120,000 pixels, HDTV has about 700,000.

The fundamental dilemma was whether consumers would even notice the difference. To the exasperation of many television engineers, viewers appear quite content to watch fuzzy pictures on tiny portable televisions with aerials made out of wire coathangers. And most viewers are prepared to ignore, or at least tolerate, the deterioration in picture quality when watching a programme which has been recorded at home on a VCR.

Perhaps the biggest factor pointing to the demise of HD-Mac was that it was developed for satellite and cable transmission only. In the UK, for example, only 12 per cent of homes are connected to such services - most viewers receive their programmes through a network of terrestrial transmitters.

Carse, one of the authors of a recent Nera report on HDTV, compiled in conjunction with Brunel University, says that if the analogue HD-Mac system were implemented in Europe only about 5 per cent of viewers would take up the service.

In Japan, NHK, the national broadcaster, has also opted for analogue HDTV technology which therefore can only be broadcast on satellite and cable. NHK has been broadcasting daily eight-hour doses of programmes in High Vision, the Japanese name for HDTV, which the public can view at more than 450 points in public areas, such as railway stations and public halls.

Although NHK and consumer electronics manufacturers have kept up the publicity in a concerted effort to maintain the momentum - November 11 has even been named national High Vision day since the Japanese system uses 1125 lines - there is growing scepticism about Japan's chosen path.

High Vision has been introduced at a time when grim economic news has largely extinguished consumer interest in expensive, highly sophisticated luxury electronic goods. The cost of a HDTV set in Japan is at least Y1m (Pounds 5,300).

To compound the problem, public knowledge of digital television is increasing, and the improved picture-quality of High Vision seems to pall in the face of what digital television could offer - better information services, interaction with computers and, above all, superior picture and sound quality.

For the broadcaster, digital signalling brings other advantages. At least four times as many digital channels can be squeezed into a given amount of broadcast capacity as analogue ones. That means that one or two high-definition channels could be transmitted in the capacity used today for a conventional signal. Digital signals also use only one thousandth of the power of their analogue counterparts.

Everyone acknowledges that eventually everybody will go digital - the only question is when. The US government has decided to skip the analogue phase altogether. The Federal Communications Commission has recently completed technical tests of five proposed HDTV systems and a panel of FCC testers is meeting in Washington this week to prepare a preliminary decision on which should become the US standard.

The Advisory Committee is scheduled to bring its recommendation to the full FCC at the end of this month and a final decision should then be reached by the summer. 'The FCC intends to double the number of broadcast stations in the US, with the new stations being dedicated to HDTV service,' says Jerrold Heller, executive vice president of General Instrument's VideoCipher Division, in San Diego, which has developed DigiCipher, one of the five systems being tested.

The advisory committee could select a single system but seems increasingly likely to recommend a combination of two approaches.

If all goes according to schedule, then the first HDTV sets should be available to consumers by mid-1995 or early 1996, at a price of up to Dollars 3,500 (Pounds 2,300). Prices are expected to come down quickly with volume manufacturing, but even at Dollars 1,000 an HDTV set would be between two to four times as expensive as a television set in the US today.

In Europe it looks increasingly as if viewers will have to wait until the introduction of a digital system before they will be able to view HDTV. Rob van Oostenbrugge, European television development manager at Philips, the company which precipitated the European crisis by announcing it would not be manufacturing HDTV sets this year as previously planned, believes it will be at least 2000 before a digital standard can be adopted in Europe. Others believe digital broadcasts could be introduced via satellite more rapidly.

In the meantime, the demise of the European version of HDTV means European television viewers will continue to face a plethora of standards - Pal, Secam, Pal Plus, D2-Mac.

'It will only become worse not better,' complains van Oostenbrugge. This proliferation of standards will fragment the marketplace further and drive up costs to the consumer, he argues.

For European broadcasters and electronics manufacturers, digging among the ashes of HD-Mac, the news is not all gloomy. Numerous developments can be retrieved and exploited.

Although the picture transmission part of the HD-Mac specification is analogue, much of the studio technology and that used in the television sets themselves is digital, and could be developed for use with a digital high-definition system.

What the consumer will see more quickly is the proliferation of wide-screen television sets, an interim step on the way to HDTV. Wide-screen sets have screens with a height to width ratio of 16:9 compared with 4:3 for conventional box-shaped sets. The wide-screen format also brings slightly better picture quality.

European broadcasters are already beginning to broadcast some programmes - notably films - in the wide-screen format and manufacturers are selling the new sets in Scandinavia, France and Germany.

The options for European broadcasters when selecting the digital HDTV standard will be numerous. A Scandinavian group which includes the Swedish Broadcasting Corporation and the Swedish Television Company, for example, has developed a prototype system for digital terrestrial HDTV called HD-Divine (digital video narrow-band emission).

And in the UK, NTL has developed a system for the Independent Television Commission which squeezes digital signals between the existing analogue signals. The spaces are 'no go' areas for further analogue signals as these would interfere with those already there.

A third option would be to adopt the same system as the US. The likelihood of this increases if Japanese manufacturers and broadcasters also decide to follow the US in digital broadcasting.

While European manufacturers and broadcasters puzzle over the next move, their Japanese counterparts are forging ahead, gaining invaluable experience on how to best exploit HDTV in programme making and equipment manufacturing. By waiting for a digital standard, manufacturers in the US are in pole position to determine a world standard for digital high-definition broadcasts.

European Economic Community (EC) P3651 Household Audio and Video Equipment P3663 Radio and TV Communications Equipment P9611 Administration of General Economic Programs TECH Products CMMT Comment & Analysis P3651 P3663 P9611 The Financial Times London Page 16 1516
Management (Marketing and Advertising): Soft approach keeps toilet paper ads rolling - Andrex's plans to take its puppy campaign to the Continent Publication 930211FT Processed by FT 930211 By GARY MEAD

In 1942, Andrex Surgical Toilet Wadding established a set of brand values which, in 50 years, have hardly changed.

Today it is difficult to imagine any consumer goods company running advertising with the same blatant snob-price appeal; yet premium pricing remains the foundation of Andrex's extraordinary success.

That success was demonstrated recently by market research which puts Andrex into fourth place in the league table of UK brands sold through grocers. On an advertising spend of Pounds 13m, according to Nielsen research data, Andrex sold Pounds 193m in 1992, moving ahead of Nestle's coffee brand, Nescafe (Pounds 177.8m). Only Unilever's soap powder, Persil (Pounds 237.2m), Coca-Cola (Pounds 237m) and Procter & Gamble's soap powder, Ariel (Pounds 224.4m), did better.

On other score sheets Andrex's showing is even more impressive; according to the trade magazine Marketing, its Pounds 5.7m television advertising campaign achieved a higher prompted recall than any other brand, leaving the much-hyped Nescafe Gold Blend advertising, featuring the drawn-out saga of a couple whose on-off relationship is conducted over coffee beans, in only fifth place.

The fast-food chain McDonald's spent almost three times that sum on its television advertising in 1992, but languished 19 places behind Andrex in Marketing's prompted recall chart.

Andrex's up-market strategy was evident from its first campaign, with press advertising which subtly probed the consumer psyche: 'You buy powder and good soap, of course, but are they everything? What do you use in your toilet? Is it as safe and as pure as it should be? Are you paying enough for it?'

Customers probably were; at the time of its launch Andrex was sold only in Harrods. In the meantime Andrex, now owned by Scott Paper, has become a classic example of a brand which has successfully managed to charge substantially more - a price premium of up to 40 per cent above the market average - and yet dominate on what should be a thoroughly commoditised and price-only battlefield.

Andrex currently has about 34 per cent (by value) of the UK toilet tissue market, the next major brand being Kleenex, owned by Kimberly-Clark, with 12.6 per cent (ranked 26 in Nielsen's top 100 brands). The questions now are how far it can sustain its position in the UK - especially given the rise of own-label brands right across the spectrum of consumer products - and how far Scott can penetrate the continental European market. Kleenex, for one, is investing Dollars 200m in what is claimed to be Europe's biggest toilet tissue mill, in France, aiming at taking the European toilet tissue market by storm this decade.

It took a step in that direction one year ago, by introducing common European packaging for the entire Kleenex toilet tissue range.

In the UK, though, Andrex faces its major marketing battle not against Kleenex but against own-label products, with a 39.7 per cent market share, again by value. In volume terms own-label products have a 41.2 per cent share, against Andrex's 29.2 per cent and Kleenex's 11.6 per cent. Premium price toilet tissue accounts for 61.6 per cent of the UK market, giving Andrex, a premium product, plenty of scope for eating into the own-label threat.

Andrex is a UK-only brand so far; Scott markets toilet tissue under other brand names, Scottex and Cotonell, in the rest of Europe. But Scott intends following up the astonishing popularity of its UK television advertising campaign - featuring a Labrador puppy which entangles itself in toilet tissue - by extending the same campaign into the rest of Europe.

The puppy has been with Andrex since 1972 and, like many successful advertising images, was a matter of chance. Andrex's advertising agency, J Walter Thompson, had originally thought of using a little girl to muddle up a toilet roll; but the Independent Television Commission, the UK body which monitors television advertising, ruled against the idea on the grounds that it might be seen as encouraging children to waste paper.

JWT has been Andrex's advertising agency since 1956, which itself is something of an achievement given that client-agency relationships tend to be stormy affairs. The puppy was thus substituted, with the idea of demonstrating what Andrex claims as its key attributes - softness, length and strength.

At least one own-label premium toilet tissue in the UK - Tesco's - has thought Andrex's original slogan - 'soft, long and strong' - good enough to be worth adopting on its own product.

At the end of January this year JWT Europe got the go-ahead from Scott to set the puppy running across west Europe's TV screens. It is now being used in Spain, Portugal, Belgium, Italy and Germany. Andrex's marketing manager, Paul Duncanson, is fond of the puppy: 'I cannot overestimate the contribution that little animal has made.'

He has every reason to be proud; since the puppy first appeared, Andrex's volume share of the UK toilet tissue market has risen from 5 per cent to its current dominance.

But Scott faces a tricky problem in its effort to repeat across Europe its UK branding success with Andrex. In France, for example, the biggest brand, Lotus, has a volume share of less than 16 per cent and sells at a price premium of only 19 per cent above the market average.

In Germany - the largest European toilet tissue market accounting for about a quarter of EC volumes - the biggest brand is Bess, with a national volume share of only 11 per cent. But the own-label sector has 67 per cent of the market, and has recently witnessed a price war. Scott and JWT will be hoping that their old dog will be able to come up with a few new tricks to please potential continental customers.

Scott Paper Europe P2676 Sanitary Paper Products MKTS Market shares MKTG Marketing P2676 The Financial Times London Page 16 1003
People: Sir Hal leaves the driving seat Publication 930211FT Processed by FT 930211

Ex-Tory MP Sir Hal Miller is to leave his job as chief executive of the Society of Motor Manufacturers when his contract expires at the end of March.

The extrovert 64-year-old former member for Bromsgrove and Redditch, brought in by the SMMT to give a higher profile to the manufacturers' body as its first full-time chief executive, has held the post only since November 1991.

He is to take up an as-yet unidentified 'senior position' in the textiles industry.

His departure, announced yesterday, came as a surprise to many in the industry, who had expected him to renew his contract for a further year. Sir Hal was believed to have wanted to oversee preparations for the 1994 motor show, which is potentially the last to be held at Birmingham.

A review of the show's frequency and location could see it moving to Earls Court in London and becoming an annual affair from 1996.

Otherwise, despite the recession in the UK motor industry, he will be leaving with at least one feather in his cap: during his 16 months in office he is widely credited with having played possibly the lead role in persuading the government to abandon the 10 per cent Special Car Tax which had been the industry's bete noir for two decades.

There are, as yet, no declared favourites to succeed him, though one candidate must be fellow former MP Roger King, whom Sir Hal drafted in as the SMMT's head of external affairs shortly after his own arrival.

Society of Motor Manufacturers and Traders (UK) United Kingdom, EC P8611 Business Associations PEOP Appointments Sir Hall Miller, Chief Executive Society of Motor Manufacturers and Traders (UK) P8611 The Financial Times London Page 15 299
Accountancy Column: Poacher turned gamekeeper has accountants in his sights - Andrew Jack explains the little-known background to Michael Heseltine's attack on 'wealth managers' Publication 930211FT Processed by FT 930211 By ANDREW JACK

A WELCOMING sight lies just a few pages inside the front cover of the freshly-printed 1993 members' directory of the Institute of Chartered Accountants in England and Wales. It is a smiling photograph of Mr Ian Plaistowe, this year's president.

But if Mr Michael Heseltine, the UK secretary of state for trade and industry, were to turn to the previous page, he would be unlikely to share that facial expression for long. Judging by a speech he gave last week, he would probably substitute a gritty grimace for the grin.

The page proudly states that the institute counted 100,135 members on its rolls by July 1 last year. The rest of the directory - all 1,500 pages of it in microscopic print - is devoted to listing each of them and their firms.

By the end of last month, that figure had risen to 102,390. There was even a formal presentation of an engraved paperknife to the lucky 100,000th member. Mr Heseltine would no doubt have preferred to offer a mallet, or some other more practical industrial object.

In a sombre address to the Scottish Division of the Institute of Directors in Edinburgh last Friday, he criticised what he saw as Britain's imbalance of 'wealth managers' to 'wealth creators', contributing to the lack of innovation in business. Accountants and lawyers were high up his hit list.

While the route to the top of German and Japanese companies is through engineering, science or research qualifications, in the UK it has been through 'the City, Parliament and above all accountancy,' he said. 'I find it hard to believe this offers us the best way ahead.'

Knocking comments about accountancy are nothing new. It may be one of the world's younger professions, but it has long been the butt of jokes and dismissive comments. Early last year, Mr Akio Morita, the chairman of Sony, described as 'very curious' the fact that many UK companies are headed by accountants rather than engineers. Some bruised beancounters have taken particular satisfaction in seeing Sony's own financial position deteriorate since that time.

But Mr Heseltine's prominence as head of the government department with responsibility for British industry and for monitoring and regulating accountants, means that his comments are worthy of attention - and given even greater weight by the comparative silence on the subject by Mr Neil Hamilton, his junior minister.

To be fair, his dismissive remarks were only part of a wide-ranging speech on the need by companies to take a longer-term view. But the opinions certainly struck a raw nerve in Mr Plaistowe, who wrote an indignant response to the secretary of state on Monday in which he said he was 'surprised and disappointed'.

He accused the minister of falling into 'a notorious elephant trap' by making comparisons with other countries, and asked him to address the issue of why so many talented young graduates considered accounting such an attractive career. 'We have a qualification which is highly prized,' he said yesterday. 'People choose it because it gives them a wide range of options.'

Mr Heseltine's antagonism towards accountants is not new. In his book Where there's a will published in 1987, he says auditors should ideally be appointed by a body independent of a quoted company's board. He says auditors should be banned from conducting non-audit work such as management consulting for audit clients.

He also tells how he helped create the Audit Commission for local government, rejecting the idea that an auditor could be independent when appointed by the local authority on which it was reporting.

But his views have apparently hardened in the last few years. In 1990, he was still reported as claiming in a speech that 'accountancy is not boring' and that it provides 'wonderful training' as a preparation for business.

Sigmund Freud would no doubt have drawn considerable significance from Mr Heseltine's early experiences as an accountant. Though strangely missing from Who's Who and other biographical reference works, the minister began his career as an articled clerk with Peat Marwick Mitchell, now part of KPMG Peat Marwick, in the 1950s - but failed the final exams.

He did extremely well by the profession, founding the weekly journal Accountancy Age through his publishing company Haymarket, and then selling it at a healthy price. The relationship may have begun to sour in the 1980s, when he launched another journal called Account, which folded within a matter of months.

Whatever the reason, Mr Heseltine has a point. Both the absolute number of accountants and their proportion of the population in the UK is very high. Add the Scottish and Irish to the English and Welsh chartered accountants, include the certified, public finance and management accountants, and the total quickly tops 200,000.

As the table shows, these levels are substantially above those in Japan and Germany. In between come a number of tax havens or countries with favourable regimes for multinational companies, such as Luxembourg and Gibraltar. The only countries with more accountants per capita than the UK are members of the Commonwealth such as Australia and Canada.

Conclusions and trends are certainly very difficult to draw from these figures. Some of the statistics are outdated, and others not entirely reliable. The abilities, qualifications and range of functions carried out by members of the different professional bodies varies widely between countries. In Japan, they cease to be counted as accountants once they leave public practice.

In the UK, by contrast, many of those with accountancy qualifications do not work in public practice at all. More than half of chartered accountants work in business and industry, and a significant proportion - particularly of the certifieds - work in other countries.

None the less, Mr Heseltine's argument is partly echoed by Mr Peter Davis, chairman of the Board of Chartered Accountants in Business, and out-going finance director of Sturge Holdings. 'Accountants are not generally good wealth creators, initiators or risk takers,' he says. 'But Britain is still producing its share of entrepreneurs, and accountants have an important secondary role in business.'

Perhaps what the professional bodies should consider is a more radical overhaul of their syllabi to make them more relevant to the majority of recruits who move into business after qualifying. But Mr Plaistowe makes a fair point when he says accountants can hardly be blamed for any failure of other businesses to make sufficient investment to attract as many good recruits.

Arguably, Mr Heseltine, wearing his hat as regulator of accountancy, should be returning to the thoughts in his book six years ago about conflicts of interest and the question of to whom auditors should report. As with the number of accountants, these issues have only continued to grow in the meantime.

United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P8721 P9651 The Financial Times London Page 12 1178
Parliament and Politics: Survival strategy - Political Notebook Publication 930211FT Processed by FT 930211 By PHILIP STEPHENS

There are dark mutterings again on the Tory backbenches. It is not so much panic, more a mood of resigned desperation. Each week, it seems, brings a fresh crisis, each crisis a fresh U-turn.

The latest furore over Maastricht is symptomatic. Nothing new has happened. It has been apparent for months that the eventual vote on Labour's amendment to remove the British opt-out from the social chapter would create an unholy alliance to threaten the government's slim majority.

Lord Tebbit, Mr John Smith and Mr Paddy Ashdown have added nothing to their previously stated positions. The latter two insist that the treaty would survive the amendment. Lord Tebbit and his faithful band of Euro-sceptics in the House of Commons are in ironic agreement with the Foreign Office that insertion of the social chapter would wreck the legislation.

The vote is at least four - and possibly as many as eight - weeks away. A defeat would be a serious blow for Mr John Major. But it would be followed by a vote of confidence. The prime minister would win. The amendment could then be removed again at the bill's report stage.

That the issue has caught alight so far in advance of its denouement simply underscores the brittle confidence of the government and its supporters. When there is no immediate crisis in sight they go in search of one.

But it is not quite so hard to understand the deeper undercurrents of anxiety among Tory MPs. The crumbling of confidence in the pound on financial markets has provided an awkward reminder that sterling crises also happen outside the exchange rate mechanism. Economic recovery seems as elusive as ever. The chancellor is threatening to increase taxes. Unemployment is heading above 3m. Friends in the City warn that inflation might soon be a problem.

The backbenchers have no simple or coherent remedy of their own. His intensive pre-Budget consultations have left Mr Norman Lamont's ears ringing with confusion.

Some want immediate tax increases - via the extension of value added tax - to halt the haemorrhaging in government finances. Others insist that any significant rise in taxation eventually would send Mr Major the way of Mr George Bush. The favoured compromise is the announcement in March of modest tax increases to take effect in December.

In truth, the average Tory MP is as uncertain as the average cabinet minister about how best to nurture sustained recovery. As Mr Lamont discovered to his cost, in such febrile times even a cut in interest rates can be mis-interpreted.

The reflex response of some has been to demand that Mr Major reshuffle his ministerial team - as if a few new faces around the cabinet table would somehow calm the markets and fill the high streets. No matter that the ministerial tier below the cabinet is hardly brimming with talent.

Others have resorted to the traditional call for the government to sharpen its presentation. Somehow a few more speeches, a few appearances on the evening news programmes should persuade the nation - and its supporters - that the government is not drifting on to the rocks.

Mr Major does have a strategy. It is straightforward and entirely rational. But it is hardly one he can shout from the rooftops. The prime minister intends that he and his government should survive the next six months.

The prevailing assumption in the cabinet is that until recovery is visible and until the the party has stopped tearing itself apart over Europe, the government should be content to avoid defeats at Westminster.

It will fudge, compromise and where necessary perform indelicate U-turns to preserve its 21-seat majority in a fractious House of Commons. Radical policies can wait until the government regains its grip.

Evidence of the strategy was provided by decision to defer closure of one of the Royal Navy's dockyards. It will be apparent again when Mrs Virginia Bottomley announces that her plans to rationalise London's hospitals will be the subject of further prolonged consultation. It is clear in the determination of senior ministers to avoid if at all possible the need for new legislation to rescue the coal industry. It is infecting ministerial deliberations on the future shape of the police force and on measures to help the unemployed.

Senior ministers are acutely aware that the strategy carries a price. They will be accused of fudge and mudge, of indecision and lack of direction. But they will survive to see better days. To adapt a phrase from the playground: sticks and stones may break my bones but headlines will never hurt me.

United Kingdom, EC P91 Executive, Legislative and General Government CMMT Comment & Analysis P91 The Financial Times London Page 9 801
Parliament and Politics: Minister denies juice hazard Publication 930211FT Processed by FT 930211 By JOHN WILLMAN

THE government yesterday denied that it had put public health at risk by allowing the continued sale of apple juice which contained high levels of a chemical that can cause cancer and birth defects, John Willman writes.

The Ministry of Agriculture confirmed that high levels of patulin, produced by moulds on rotting apples, had been found in five out of 32 samples of apple juice tested in March.

Mr Nicholas Soames, the food minister, told the Commons that the levels of patulin discovered in the juice were not considered an 'immediate hazard to health'.

The minister said a report would be published next month, but Mr Gavin Strang, Labour agriculture spokesman, said the government should have published the test results last year and 'removed all toxic juice from the shelves'.

United Kingdom, EC P2033 Canned Fruits and Vegetables P9641 Regulation of Agricultural Marketing TECH Standards GOVT Government News P2033 P9641 The Financial Times London Page 9 171
Parliament and Politics: Brown accuses Tories of protecting big business Publication 930211FT Processed by FT 930211 By IVO DAWNAY, Political Correspondent

MR GORDON BROWN, the shadow chancellor, yesterday charged the Conservative government with failing to address abuses of power by the banks, privatised utilities and the food and farm sector.

Accusing his Tory opponents of protecting the vested interests of big business to which many have personal links, he said Labour would champion consumers' efforts to fight overcharging and poor service.

His attack signalled the second stage in the opposition's effort to project itself as the party of the citizen and as opposed to the influence of entrenched interest groups. This was first outlined by Mr John Smith, the Labour leader, in Bournemouth on Sunday.

Mr Brown used an open meeting of Labour's finance committee to highlight alleged abuses of power and privilege by what he described as 'cartels and cliques'. His chief targets were the high street banks which, he said, were still charging 20 per cent above base rate on credit card accounts.

In addition, he said some 30 per cent of small businesses had not received the full benefit of recent interest rate cuts. At the same time, bank charges had risen by Pounds 2bn or 50 per cent during the recession while dividends and boardroom salaries rose by 80 per cent and 60 per cent respectively.

Calling for a new inquiry into banking practice, he said its terms should examine the case for customer contracts, which would give legally enforceable rights to advance warning of increases in charges.

Among a number of other proposals were the creation of a banks' ombudsman, regularly published comparative tables on bank charges to encourage competition and choice, a fresh look at how to promote long-term investment and efforts to increase Europe-wide banking competition.

The shadow chancellor said: 'When people ask why, in the face of increased criticism, the Conservatives will not act, they should remember that much of the Tory party - in the Commons and Lords and even in the cabinet - comes from the banks, is of the banks and may soon be on its way back to the banks.'

Broadening his attack to the privatised utilities and the food industry, Mr Brown went on to charge that electricity, gas, and telecommunications charges in the UK were far above those of Japan, the US and Germany.

'The dark recesses of private power needed to be opened up to scrutiny with rights of representation for the consumer,' he said. Citing a number of former cabinet ministers now on the boards of privatised companies, he added: 'The Conservatives will not act simply because they are too close to the boardroom of the utilities.'

United Kingdom, EC P8651 Political Organizations P9651 Regulation of Miscellaneous Commercial Sectors GOVT Government News P8651 P9651 The Financial Times London Page 9 475
Parliament and Politics: 'Polecat' fails to rouse rage Publication 930211FT Processed by FT 930211 By RALPH ATKINS THE 'polecat adorned with ermine'

a soubriquet he chose himself - was back. Lord Tebbit yesterday demonstrated his flair for grabbing the headlines and shaping debate at Westminster.

'When I was translated to the peerage there must have been a good many in high, or even low places muttering, 'well that's got him nailed up safely in his political box',' he told the press gallery.

Not for the first time in his political life, Lord Tebbit was biting the hand of the establishment that once fed him.

He may have been flattering himself unduly. Elsewhere at Westminster the reaction was more condescending than outraged. Mr Douglas Hurd, foreign secretary, did not rise to the bait, while a government whip sniffed: 'He (Tebbit) is yesterday's man.'

The 61-year-old former Conservative party chairman, trade and industry secretary and employment secretary has only a fraction of the influence he once held. At his height he was one of the closest allies of Baroness Thatcher, the former prime minister.

He was the epitome of a Thatcherite minister, a grammar-school boy who worked his way to the top. His brash straight-talking fitted in a conviction-driven government. He told the unemployed to get on their bikes to look for work. He was ambitious, privately harbouring ambitions to be Conservative leader. But he left the government mainly to look after his wife who was badly injured when the IRA bombed the Grand Hotel in Brighton during the 1983 Tory conference.

He did not, however, have a personal following in the Commons, and after leaving office he earned disrespect for raising immigration as a political issue. Now he risks devaluing his credibility with each ever-stronger outburst.

His importance rests on the belief that he does, to some extent, speak the mind of Baroness Thatcher, still a totem for the Tory right wing. He is a master at rabble-rousing, successfully dividing last October's Conservative conference with an electrifying speech on Europe in front of Mr John Major and Mr Hurd. He is an embodiment, perhaps, of the darker side of many Tories - enunciating their fears about an encroaching European state - who can be safely disowned in public.

Hence the lukewarm reaction of Euro-sceptic Tory MPs yesterday may not have been surprising. 'We don't take our orders from Tebbit,' said one. 'We will take our own decisions in our own time,' said Mr James Cran, a prominent dissident.

Lord Tebbit may have damaged their tactics. One loyalist Tory said the debate about Labour's amendment to the Maastricht treaty was peaking too early. No vote is likely for at least a month, he said. It would be easier now for constituency associations to be warned that their MP was backing the social chapter.

But that may be too optimistic. Lord Tebbit's talent for self-resurrection is not exhausted yet.

United Kingdom, EC P9131 Executive and Legislative Combined PEOP Personnel News Lord Tebbit, Former Conservative Party Chairman and Trade and Industry Secretary (UK) P9131 The Financial Times London Page 9 516
Parliament and Politics: Lilley pledge on benefits Publication 930211FT Processed by FT 930211 By DAVID OWEN

THE GOVERNMENT'S manifesto pledges to uprate child benefit and the basic retirement pension in line with inflation for the lifetime of the present parliament would not be affected by its recently announced long-term public spending review, Mr Peter Lilley, social security secretary, told MPs last night.

The government had 'no intention of reneging on' these promises, he said. 'Our manifesto was explicit: we believe the basic pension must remain the foundation for retirement . . . likewise, we are committed to child benefit.'

Mr Lilley also set the benefits agency and councils a combined target for the year ahead of identifying and stopping Pounds 1bn of fraud across the full range of benefits. It was, he said, 'essential to staunch the flow of money to those whom parliament did not intend to receive it'.

Confirming that the government was uprating all main benefits in line with inflation, the social security secretary said he had been 'mindful particularly' of those hit by the recession.

Mr Lilley said two main principles underlaid the long-term review in the context of social security, the government's biggest-spending department. These were to focus improvements in benefits to those in greatest need and to harness private provision wherever possible.

United Kingdom, EC P9441 Administration of Social and Manpower Programs GOVT Government spending P9441 The Financial Times London Page 9 237
Parliament and Politics: High rents blamed for pub price rises Publication 930211FT Processed by FT 930211 By PHILIP RAWSTORNE

BEER prices in pubs have risen 17 per cent in real terms since 1989 mainly because of the higher rents and charges imposed on pub leaseholders by national brewers, the Commons agriculture committee was told yesterday.

Though wholesale prices had moderated, consumers had so far gained little benefit, Mr Stephen Cox, of the Campaign for Real Ale, said.

Many of the pub-owning companies that had been formed as the national brewers were forced to dispose of a third of their pubs by the government's reforms - known as the beer orders - had 'borrowed so heavily to buy pubs that they are in no position to pass on brewery discounts to customers,' he said.

Mr Ted Weakner, chairman of the London and South-East Licensed Victuallers Association, said many tenants had been forced to accept uneconomic rents and repair costs or quit their pubs.

Both Camra and the licensed victuallers told the committee that a review of the effects of the beer orders should be carried out urgently. The government has already indicated that any review will be left to the European Commission in 1997.

United Kingdom, EC P5813 Drinking Places P9121 Legislative Bodies COSTS Product prices GOVT Government News P5813 P9121 The Financial Times London Page 9 225
UK Economic Indicators Publication 930211FT Processed by FT 930211

------------------------------------------------------------------------ ECONOMIC ACTIVITY - Indices of industrial production, manufacturing output (1985=100); engineering orders (Pounds billion); retail sales volume and retail sales value (1985=100); registered unemployment (excluding school leavers) and unfilled vacancies (000s). ------------------------------------------------------------------------ Indl. Mfg. Eng. Retail Retail Unem- prod. output order* vol. value* ployed Vacs. ------------------------------------------------------------------------ 1991 1st qtr. 106.7 113.4 31.8 120.0 139.8 1,989 138.6 2nd qtr. 105.2 112.4 31.4 118.6 147.7 2,231 111.2 3rd qtr. 106.3 112.3 30.8 119.7 149.8 2,414 107.9 4th qtr. 106.2 110.8 29.9 119.6 175.4 2,515 114.1 November 106.2 111.0 30.9 120.4 169.0 2,518 111.8 December 105.8 110.8 29.9 119.3 203.8 2,551 123.3 1992 1st qtr. 105.3 111.1 30.8 119.6 145.9 2,635 119.8 2nd qtr. 104.9 111.5 31.0 120.0 153.6 2,712 115.2 3rd qtr. 105.7 111.4 30.5 120.7 154.3 2,805 107.0 4th qtr. 121.2 181.2 2,918 102.7 January 104.7 110.1 31.1 119.7 144.9 2,607 119.1

February 106.1 111.6 31.4 120.1 145.2 2,645 120.0 March 105.1 111.6 30.8 118.9 147.5 2,653 120.2 April 105.6 111.8 31.1 119.7 154.8 2,695 117.8 May 104.5 111.2 31.0 120.0 152.9 2,716 115.2 June 104.5 111.6 31.0 120.3 153.1 2,724 112.5 July 105.6 111.7 31.5 119.9 155.0 2,760 112.6 August 105.5 111.4 31.2 121.0 154.0 2,811 108.4 September 105.9 111.1 30.5 121.3 153.9 2,843 100.1 October 107.0 111.3 121.5 160.1 2,868 98.2 November 106.3 110.7 121.5 172.6 2,913 100.8 December 120.7 211.0 2,974 109.1 ------------------------------------------------------------------------ OUTPUT - By market sector; consumer goods, investment goods, intermediate goods (materials and fuels), engineering output, metal manufacture, textiles, clothing and footwear (1985=100); housing starts (000s, monthly average). ------------------------------------------------------------------------ Cnsmer. Invest. Intmd. Eng. Metal Textiles Housg. goods goods goods output mnfg. etc. starts* ------------------------------------------------------------------------ 1991

1st qtr. 110.4 117.1 101.4 113.9 108.0 89.4 12.3 2nd qtr. 110.0 114.5 99.9 111.3 111.0 87.9 14.3 3rd qtr. 109.4 114.1 102.2 110.5 111.2 87.6 14.3 4th qtr. 108.5 111.7 103.2 108.2 109.4 86.4 11.8 November 107.9 112.8 103.1 109.0 110.0 87.0 12.0 December 109.2 111.6 102.4 108.0 109.0 86.0 9.2 1992 1st qtr. 110.3 110.5 101.4 107.8 107.3 86.5 14.0 2nd qtr. 111.4 111.0 99.9 108.3 107.9 87.5 14.5 3rd qtr. 110.9 111.8 101.3 108.3 105.7 88.0 13.1 January 108.9 109.8 101.1 107.0 106.0 86.0 14.0 February 110.9 110.7 102.5 108.0 109.0 87.0 13.1 March 111.0 110.9 100.6 108.0 107.0 87.0 14.8 April 111.1 111.5 101.1 109.0 108.0 87.0 14.0 May 111.3 110.4 99.6 108.0 110.0 88.0 14.1 June 111.7 111.2 99.0 108.0 105.0 88.0 15.5 July 111.3 111.7 101.0 108.0 107.0 87.0 14.2 August 110.5 112.0 101.2 108.0 109.0 88.0 12.5 September 111.0 111.6 101.8 108.0 101.0 89.0 12.6 October 110.7 112.4 103.5 109.0 103.0 89.0 11.8 November 110.0 111.1 103.1 108.0 102.0 88.0 11.3

December 9.4 ------------------------------------------------------------------------ EXTERNAL TRADE- Indices of export and import volume (1985=100); visible balance (Pounds m); current balance (Pounds m); oil balance (Pounds m); terms of trade (1985=100); official reserves. ------------------------------------------------------------------------ Export Import Visible Current Oil Terms of Reserves volume volume balance balance balance trade* US Dollars Bn ------------------------------------------------------------------------ 1991 1st qtr. 122.6 135.8 -3,040 -2,814 +217 98.9 42.33 2nd qtr. 126.0 137.6 -2,234 -424 +213 98.2 44.26 3rd qtr. 127.8 139.8 -2,385 -1,301 +319 98.0 44.59 4th qtr. 128.8 139.2 -2,631 -1,784 +453 97.5 44.13 November 128.3 139.3 -985 -702 +167 97.8 43.91 December 132.1 141.0 -727 -445 +189 96.9 44.13 1992 1st qtr. 127.1 143.1 -3,046 -2,860 +422 99.4 44.31 2nd qtr. 129.4 147.9 -3,181 -3,081 +355 100.9 45.70

3rd qtr. 130.5 148.2 -3,238 -2,172 +367 101.7 42.68 4th qtr. 132.2 146.2 -4,306 -3,706 +340 96.6 41.65 January 121.4 137.0 -1,153 -1,091 +149 99.0 44.59 February 130.3 147.3 -1,008 -946 +113 99.9 44.75 March 130.0 145.1 -889 -827 +170 99.4 44.31 April 128.0 150.8 -1,381 -1,348 +117 100.2 45.77 May 133.2 146.9 -854 -820 +167 101.1 45.80 June 127.1 146.0 -946 -913 +71 101.5 45.70 July 129.2 149.1 -1,113 -758 +43 101.6 45.75 August 132.4 149.8 -1,140 -784 +246 102.5 44.45 September 129.9 145.7 -985 -630 +78 101.1 42.68 October 134.3 144.9 -1,152 -952 +168 97.2 42.14 November 133.3 145.7 -1,413 -1,213 +87 96.4 42.09 December 129.0 147.9 -1,741 -1,541 +85 96.2 41.65 1993 January 42.56 ------------------------------------------------------------------------ FINANCIAL - Money supply M0, M2 and M4 (annual percentage change); bank sterling lending to private sector; building societies' net inflow; consumer credit++; Clearing Bank base rate (end period). ------------------------------------------------------------------------

Bank BS Cnsmer. Base MO M2 M4 lending inflow* credit++ rate % % % Pounds m Pounds m Pounds m % ------------------------------------------------------------------------ 1991 1st qtr. 2.9 10.5 10.6 +12,189 2,085 +485 12.50 2nd qtr. 1.7 11.5 8.9 +7,786 2,555 +477 11.50 3rd qtr. 2.0 11.0 7.1 +8,608 739 +202 10.50 4th qtr. 2.9 9.8 6.1 +7,866 426 -104 10.50 November 3.0 9.9 5.7 +4,079 -49 +32 10.50 December 3.1 9.2 6.3 +1,937 -54 -138 10.50 1992 1st qtr. 2.2 7.2 6.0 +5,485 266 +120 10.50 2nd qtr. 2.0 4.8 5.3 +9,917 77 +5 10.00 3rd qtr. 2.3 4.2 5.3 +4,604 -262 -11 9.00 4th qtr. 2.8 4.5 +4,860 214 +136 7.00 January 2.1 7.6 6.2 +3,344 293 +82 10.50 February 2.2 7.4 5.9 +1,164 145 +87 10.50 March 2.3 6.7 5.8 +977 -172 -27 10.50 April 2.3 5.2 5.6 +4,306 212 +16 10.50 May 2.5 4.9 5.1 +2,724 179 +45 10.00

June 1.3 4.2 5.3 +2,886 -314 -56 10.00 July 2.5 4.5 5.7 +2,943 -325 +83 10.00 August 2.4 4.5 5.5 +2,342 327 -69 10.00 September 2.1 3.5 4.8 -681 -264 -25 9.00 October 2.4 3.7 5.4 +5,020 281 +67 8.00 November 3.0 2.9 4.5 -86 -184 +13 7.00 December 3.0 3.7 -74 117 +56 7.00 1993 January 4.1 6.00 ------------------------------------------------------------------------ INFLATION - Indices of earnings (1988=100); basic materials and fuels; wholesale prices of manufactured products (1985=100); retail prices and food prices (Jan 1987=100); Reuters commodity index (Sept 18th 1931 =100); trade weighted value of sterling (1985=100) ------------------------------------------------------------------------ Earn- Basic Whsale. Reuters ings matls.* mnfg.* RPI* Foods* cmdty.* Sterling* ------------------------------------------------------------------------ 1991 1st qtr. 126.0 103.0 130.6 130.8 123.9 1,689 93.8 2nd qtr. 128.1 103.4 133.1 133.6 126.1 1,737 91.4

3rd qtr. 130.8 101.5 133.9 134.2 125.7 1,680 90.7 4th qtr. 132.4 102.5 134.6 135.5 126.5 1,625 90.9 November 133.0 102.6 134.7 135.6 126.8 1,631 91.0 December 132.3 103.4 134.8 135.7 127.2 1,609 91.2 1992 1st qtr. 135.8 102.9 136.5 136.2 129.0 1,599 90.6 2nd qtr. 136.1 102.2 137.9 139.1 129.1 1,598 92.3 3rd qtr. 137.5 100.7 138.5 139.0 127.3 1,542 90.9 4th qtr. 106.6 139.1 139.6 127.7 1,648 79.8 January 134.0 103.2 135.8 135.6 128.4 1,596 90.8 February 135.7 103.2 136.3 136.3 129.1 1,586 90.9 March 137.6 102.2 137.3 136.7 129.4 1,615 90.1 April 135.5 102.7 137.8 138.8 128.9 1,614 91.4 May 136.6 102.2 137.9 139.3 129.5 1,593 92.8 June 136.3 101.6 138.1 139.3 129.0 1,586 92.9 July 136.4 101.0 138.4 138.8 127.2 1,555 92.5 August 138.0 100.0 138.5 138.9 127.5 1,530 92.0 September 138.2 101.0 138.6 139.4 127.1 1,540 88.2 October 140.1 103.7 138.7 139.9 127.4 1,610 80.8 November 139.1 107.0 139.2 139.7 127.3 1,656 78.3 December 109.0 139.5 139.2 128.4 1,675 80.0 1993 January 110.6 140.6 1,703 80.6 ------------------------------------------------------------------------ *Not seasonally adjusted ++Net changes in amounts outstanding, excluding bank loans. ------------------------------------------------------------------------

United Kingdom, EC P99 Nonclassifiable Establishments ECON Economic Indicators P99 The Financial Times London Page 9 1195
Parliament and Politics: Minister denies apple juice hazard Publication 930211FT Processed by FT 930211 By JOHN WILLMAN, Public Policy Editor

THE Government yesterday denied that it had put public health at risk by allowing the continued sale of apple juice which contained high levels of a chemical which can cause cancer and birth defects.

The Ministry of Agriculture confirmed that high levels of patulin, produced by moulds on rotting apples, had been found in five out of 32 samples of apple juice tested in March.

Mr Nicholas Soames, the food minister, told the Commons that the levels of patulin discovered in the juice were not considered an 'immediate hazard to health'.

The findings had been referred to the official Committee on Toxicity, and a report would be published next month, the minister said.

Answering an emergency question from the opposition, Mr Soames said that agriculture ministry in accordance with the 'best scientific advice available in the land'.

He said food safety standards in Britain were the highest in the world.

Dame Elaine Kellett-Bowman (C Lancaster) demanded: 'Will you assure the young woman who rang my constituency office this morning, and is expecting a baby shortly, that she need have no fears for the baby or herself?'

Mr Soames replied: 'I am happy to give the absolute assurance that that is the case.'

Mr Gavin Strang, Labour spokesman on agriculture, said the government had not denied that patulin could cause cancer and other 'life-threatening' conditions.

The government should have immediately published the test results last year and 'removed all toxic apple juice from the shelves,' he said.

Their failure to do so underlined the need for an independent food standards agency, he said.

But Mr Soames accused him of 'ridiculous and idiotic scare-mongering'.

Supermarket chains such as Sainsbury and Marks & Spencer said yesterday that they rigorously screened their apple juice for patulin.

However, the Consumers' Association said that the public should have been told as soon as the high levels of patulin were discovered.

'The government's handling of the problem is the latest in a long line of cover-ups by the government,' said Mr John Beishon, the association's director.

United Kingdom, EC P2033 Canned Fruits and Vegetables P9641 Regulation of Agricultural Marketing TECH Standards GOVT Government News P2033 P9641 The Financial Times London Page 9 384
Personal View: Absence of road pricing takes its toll Publication 930211FT Processed by FT 930211 By GILES KEATING

Would the British electorate rather pay road tolls or medical bills? Astonishingly, this basic question is not being asked in the government's new review of public spending priorities, which covers only health, education, social security and the Home Office.

Road tolls are being eased on to the political agenda, but as a separate item promoted by the Transport Department. Yet the provision of roads is as much part of the welfare state as the provision of state pensions and schools. And although public expenditure on roads is modest compared with the health bill, the yield from tolls could easily be more than Pounds 10bn.

There could be even a bigger effect on the public sector borrowing requirement if roads were privatised. The German government has recognised the benefit of such a move, having just approved plans to privatise its autobahns and impose an annual fee.

Resource allocation on Britain's road system is one of the last outposts of Soviet-style economics. Road usage in big cities and on many inter-city routes is limited by queueing rather than pricing, as used to happen in Moscow's food stores. No attempt is made to charge for factors such as vehicle emissions, congestion or accidents, echoing the practice applied to East Germany's chemicals plants.

There is a strong economic case for sweeping all this away and replacing it with electronic road pricing, especially in urban areas, with premium rates for the rush hour and discounts after midnight. For users concerned that the system might allow their movements to be tracked, technology exists for them to be charged anonymously.

By contrast, the market for healthcare is bedevilled with information problems, as US medical services demonstrate. Doctors know much more than their patients, which allows them to charge for unnecessary tasks. The threat of negligence suits helps to institutionalise this over-provision. Private health insurance suffers from market failure owing to 'too much information': there can be no insurance for chronic conditions where it is known that treatment has to be provided, nor can hereditary conditions be covered.

Recent studies of road pricing do not give figures of probable revenues, so we have made tentative estimates. We reckon the annual toll revenues at Pounds 11.5bn, assuming a rate of 3p a kilometre for cars on motorways and trunk roads, close to the French level, and 8p in towns. This also assumes that tolls cut traffic volumes by one-fifth. Experience of tolls on UK river crossings and Continental motorways suggests that a substantial net income would remain after collection charges. Moreover, the flotation value of the railway companies should be increased.

If the entire road network were privatised, the private sector would raise the capital to develop and install the toll collection systems and to fund the existing road building programme. The flotation value would be very roughly Pounds 75bn, at a price/earnings ratio of 12, neglecting tax, if annual collection costs were 10 per cent of revenues, and if creation of the toll systems cost one year's revenue. The German government estimates that its autobahn network is worth DM120bn-DM130bn (more than Pounds 50bn).

The effect on the PSBR would be significant. If these proceeds were spread over five years, the PSBR would be cut by Pounds 18bn initially (Pounds 15bn from the flotation, plus Pounds 3bn saving on road expenditure), and by more as the savings on debt interest built up. After five years, there would still be an annual saving of some Pounds 9.5bn (Pounds 6.5bn from lower interest payments, plus the Pounds 3bn). The exact figures would of course depend on many items, including the treatment of local authority spending and on whether the road fund licence was retained.

This privatisation would create a series of companies with good potential to develop new technologies and services for sale on domestic and international markets. At home, they could sell real-time traffic information systems to drivers and, eventually, road guidance systems to take over control of vehicles on the motorways. Abroad, they could sell their expertise in electronic toll collection and guidance systems into what looks set to be a rapidly developing market.

Road pricing offers a way of slashing the PSBR, while reducing congestion and pollution, and creating the base for a world-class high-technology industry in the UK. The economic arguments in its favour seem almost overwhelming compared with those for charges in other areas of the welfare state. Yet it is not even on the agenda. Something is wrong.

The author is chief economist at Credit Suisse First Boston

United Kingdom, EC P9621 Regulation, Administration of Transportation P4785 Inspection and Fixed Facilities CMMT Comment & Analysis GOVT Government spending P9621 P4785 The Financial Times London Page 19 798
Leading Article: From conflict to co-operation Publication 930211FT Processed by FT 930211

MR JACQUES Delors told the European Parliament yesterday that 'the very idea of a united Europe is in peril'. He was right. The European Community's economic malaise is undermining its political credibility. Many belabour the UK for 'competitive devaluation', or 'Anglo-Saxon circles' for undermining chances of economic and monetary union. This search for scapegoats is more than a pity; it is a mistake.

Mr Delors rightly argues for a co-operative solution to Europe's economic problems. The difficulty has been that sensible co-operative solutions have not been on offer. On the contrary, those co-operative solutions that have been offered - the European Monetary System, as it operated between German unification and September of last year, for example - have made things worse, a possibility Mr Delors does not recognise.

Nothing can be less appealing than defending the policies of the present government of the UK. Even so, it cannot be credibly criticised for whimsical resort to beggar-my-neighbour policies, as some do, however upsetting to other EC member states has been the manner of their implementation.

UK gross domestic product contracted by more than 4 per cent between the second quarter of 1990 and the third quarter of last year. The UK also ran a trade deficit with the rest of the European Community of Ecu8.5bn (Pounds 6.3bn) in 1992, larger than that of any other EC member country, bar Spain, while, its overall current account deficit was Pounds 11.8bn (2 per cent of GDP). Against so grim a background, even a devaluation of 16 per cent cannot be viewed as predatory, whether or not it turns out to be a 'dead end', as the French prime minister has argued. No country can owe either exchange rate overvaluation or never-ending recession to its trading partners.

Sterling was forced out of the ERM because its parity proved incompatible with economic recovery. It is for the same reason that the much-condemned speculators have doubted other parities within the system. What made these parities inconsistent with tolerable economic performance was German economic policy, on the one hand, and the determination to eschew a degree of exchange rate flexibility, on the other. It is peculiar, therefore, for leading figures in German politics, largely responsible for the former, and leading figures in French politics, principally responsible for the latter, to blame the consequences of those decisions on speculators, 'Anglo-Saxons', and other bugbears.

The EC must deal with the underlying causes of its malaise. The Bundesbank, for example, is not so much a cause, more a victim of events. The most important cause was the refusal to allow the ERM to operate flexibly after German unification. The outcome has been a vicious circle of economic deterioration and political conflict. The co-operation for which Mr Delors rightly calls needs to start here. All else is secondary.

European Economic Community (EC) P96 Administration of Economic Programs CMMT Comment & Analysis ECON Gross domestic product P96 The Financial Times London Page 19 502
Observer: Troublemaker Publication 930211FT Processed by FT 930211

How do you spot an anarchist in Switzerland?

He doesn't use the postcode.

Cameroon, Africa P99 Nonclassifiable Establishments PEOP Personnel News P99 The Financial Times London Page 19 35
Observer: Van hopes Publication 930211FT Processed by FT 930211

Wheels within wheels. Motor-industry watchers goggled at the speedy departure from DAF of Sandy Mathieson to return to his former British Leyland haunts with Rover. Could this herald a Rover-led rescue of Leyland DAF's Birmingham van plant?

For one thing, Mathieson was in the front seat beside current Rover chairman George Simpson while he was turning round British Leyland's van business before the merger with DAF in 1987.

For another, the man who then took over the controls - Graham Morris - is also back with Simpson overseeing European marketing operations. And, for good measure, the faltering van plant supplies the key body components for Land Rovers and Range Rovers to boot.

Alas, hopes that Simpson and Morris had pulled in Mathieson for a mercy dash appear to be mere wishful thinking. It's said he'd decided to make his move well before DAF ran out of road.

Rover Group United Kingdom, EC P3711 Motor Vehicles and Car Bodies CMMT Comment & Analysis PEOP Appointments P3711 The Financial Times London Page 19 180
Observer: Vein hopes Publication 930211FT Processed by FT 930211

Talk about cutthroat competition. Hoping to boost its supplies, Norway's Haukeland blood bank is offering donors free admission to the local cinema, currently showing Dracula.

Meanwhile, recession is prolonging the life of a Finnish monopoly industry. The country's sole shoeshine boy, 69-year-old Leonty Ivanov, has postponed his planned retirement because lack of custom at his Helsinki stand means he'll need longer to pay off his tax arrears.

Finland, West Europe P8099 Health and Allied Services, NEC P7251 Shoe Repair and Shoeshine Parlors CMMT Comment & Analysis PEOP Personnel News P8099 P7251 The Financial Times London Page 19 105
Observer: Wash out Publication 930211FT Processed by FT 930211

Malaysian company Hidong deserves at least a small prize for its excuse for not yet publishing its results for the half year to September 30. It blames difficulties in replacing departed accounts staff, due to flooding during the monsoon period of November and December.

Malaysia, Asia P99 Nonclassifiable Establishments PEOP Personnel News CMMT Comment & Analysis P99 The Financial Times London Page 19 71
Observer: City chiller Publication 930211FT Processed by FT 930211

The City of London establishment should surely shiver at the sight of Morgan Stanley International, the London end of the pushy Wall Street broker, sharing the underwriting of the Commercial Union rights issue with Kleinwort Benson.

It's one thing for firms like Morgan Stanley to earn a crust by brokering clever deals to UK corporate clients. But the CU deal was a bog-standard rights issue which Kleinwort, CU's traditional adviser, would have dearly loved to have done on its own and collected the full fee.

Presumably Morgan Stanley's name has been added as a reward for past favours to CU. It certainly belies the accusation that US investment banks are only interested in doing deals and not prepared to invest in long-term relationships with their clients.

Morgan Stanley International Commercial Union United Kingdom, EC P6211 Security Brokers and Dealers P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance RES Services use CMMT Comment & Analysis P6211 P6311 P6331 The Financial Times London Page 19 173
Observer: Heavy loss Publication 930211FT Processed by FT 930211

Before Britain loses Storehouse's David Dworkin to a new life in California, Observer thinks readers should know the secrets of the BhS and Mothercare group chief executive's diet. After all, even though by no means porky on reaching BhS from America in late 1989, he has since personally shed as much further excess fat as he took out of the business.

His intake is apparently based on regular helpings of carbohydrate. Favourite lunch is a jacket potato followed by yoghurt, but he denies wandering around the head office eating a bowl of Rice Krispies. Whenever his blood sugar is a little low he unzips a banana.

Another ingredient, which may account for the breath of fresh air he has brought to Storehouse, is plenty of exercise. But since he sometimes takes it to the extent of working in cycling shorts, he may well be better suited to life on the west coast.

United Kingdom, EC P6719 Holding Companies, NEC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5311 Department Stores CMMT Comment & Analysis PEOP Personnel News Dworkin, D group chief Storehouse P6719 P5719 P5611 P5621 P5311 The Financial Times London Page 19 208
Observer: Gros Mac Publication 930211FT Processed by FT 930211

What price haute cuisine now? A study by consultants MKG Conseil shows that France's most prominent restaurateur today is McDonald's, which last year overtook all rivals with a 26 per cent hike in sales to FFr4.1bn.

McDonalds Restaurants France, EC P5812 Eating Places CMMT Comment & Analysis MKTS Sales P5812 The Financial Times London Page 19 65
Observer: Fate of the art Publication 930211FT Processed by FT 930211

Amid all the fuss about what's to happen to British Rail's multi-billion-pound pension fund, one little detail seems to have been missed. Who gets the art collection?

British Rail's decision to invest Pounds 40m of its workers' pension monies in works of art in the 1970s has proved to be one of its more imaginative business decisions. Helped by Sotheby's, BR bought 2,200 high-quality objects from Old Masters and Impressionists to Chinese antiquities.

Luckily it got rid of most of them before the art bubble burst in 1989, and reckons to have earned an annual return after inflation of 6 per cent on its investment.

With the Impressionists, including important works by Renoir and Monet, it did much better. Having put in Pounds 3.4m, it recouped 10 times as much just before that particular segment of the market's technicolour collapse.

Only around 350 objects remain in the collection but they include some of the finest canvases, particularly of the Old Master kind. There is a striking Van Dyck of the Little Princesses, on loan to the National Gallery of Scotland, and a Goya Bullfight currently thrilling aficionados in the Fitzwilliam. A similar Goya sold in December for almost Pounds 5m.

Somehow Observer suspects that, if the remnants of the collection pass into the Treasury's hands, they will either be off-loaded at just the wrong moment or stuck in some anonymous warehouse. Perhaps the pension fund trustees should strike first, and hand what's left to the railway museum at York.

United Kingdom, EC P6371 Pension, Health, and Welfare Funds P4011 Railroads, Line-Haul Operating CMMT Comment & Analysis P6371 P4011 The Financial Times London Page 19 284
A meeting of suspicious minds: The tensions surrounding today's EC-US trade talks in Washington Publication 930211FT Processed by FT 930211 By LIONEL BARBER and NANCY DUNNE

An air of apprehension hangs over today's trade talks in Washington between the European Community and the US, the first high-level meeting between the two partners since President Bill Clinton took office last month.

On both sides, there is nervousness about how Sir Leon Brittan, the intellectual EC external trade commissioner, will cope with Mr Mickey Kantor, the new US trade representative and a shrewd deal-maker whose strongest card is that he has President Clinton's ear.

The need to establish personal chemistry is important because EC-US relations face a rough passage, at least in the short term. In the first three weeks of the new US administration the EC has had to digest statements and actions in Washington which, though some were not initiated by the Clinton government, have heightened the already sharp European fears of trade conflict with the US.

They include:

A US Commerce Department decision to impose stiff anti-dumping duties on carbon steel products from 19 countries, including some EC members. A US threat to freeze out EC companies bidding for millions of dollars worth of US government contracts, because of objections to a EC utilities directive. Potentially more damaging is the hint that the US might withdraw from the General Agreement on Tariffs and Trade's multinational government procurement code.

The new administration's resistance to extending the fast-track negotiating authority beyond its expiration date on May 31. An extension of the fast track, under which the president offers completed trade agreements for congressional ratification without the opportunity for amendment by the legislature, probably offers the best prospect of wrapping up the six-year-old Uruguay Round of the Gatt world trade talks. There is some cause for optimism. Earlier this week the Canadian trade minister was advised in Washington that an extension would be sought.

Sir Leon denounced the steel and procurement decisions as 'unilateral bullying'. He has also been frustrated by the administration's 'go-slow' tactics on the Gatt. Without an agreement, he believes, a faltering world economy risks missing out on an expansion of trade of between Dollars 100bn and Dollars 200bn. Failure to reach a Gatt deal would further weaken an already-strained framework for resolving trade disputes.

EC apprehension stems partly from the change of power in Washington. President Bush was a known quantity, rarely allowing trade to dominate relations with Europe. He was adept at using threats of protection by Congress as a foil, warning allies that he represented the best deal on offer.

President Clinton is an unknown quantity. His big theme is change; but his relations with Congress are untested. His obvious focus is domestic, or as Mr Kantor put it in his confirmation hearings: 'Trade policy is to be part of a co-ordinated and integrated economic strategy.'

Some EC trade officials worry that this implies the entry of new players in Washington into the field of trade policy previously the preserve of a handful of politically insulated 'experts', such as Mrs Carla Hills, Mr Bush's trade representative. Particular concern centres not only on Congress but also on the writings of Ms Laura D'Andrea Tyson, the head of the Council of Economic Advisers and an advocate of 'reciprocity' in trade, and perhaps Mr Lloyd Bentsen, the Treasury secretary and architect of tough 1988 trade legislation. Some hope that the discreet Mr Robert Rubin, running Mr Clinton's economic security panel in the White House, could be a counterbalance.

This uncertainty explains why Sir Leon made a serious effort to reach an outline agreement on the Uruguay Round with the outgoing Republican administration.

On January 2, four days before he formally took over his post, Sir Leon spent all day closeted with Mrs Hills. He offered sharp cuts in tariffs, prompting US officials to believe a large market-access package could be completed before the inauguration. What happened next is in dispute. EC and US officials in Brussels say the outgoing administration failed to respond with a serious counter-offer. In Washington, US officials say Sir Leon subsequently backtracked because of division within EC.

Sir Leon now faces a fresh US team. It is an administration which, on the fragmentary evidence of its first three weeks, with so many policies at home and abroad subject to review and with so many senior positions still unfilled, is not about to be rushed. Nor is Mr Kantor, a man patient and clever enough to have faced down the ultimate negotiator, Mr James Baker, when the two determined the framework of last year's presidential debates.

The key will be Mr Clinton himself. Those who know him well, like Ms Paula Stern, former head of the International Trade Commission, an independent regulatory body, are convinced that philosophically he is a free trader, which was indeed the balance of the evidence of last year's campaign. She insists Mr Clinton understands better than did Mr Bush that 'America's prospects are tied up with global prosperity'.

In spite of the EC's fears about resurgent US protectionism, Mr Clinton's words on trade as president have so far been carefully measured. He certainly did not encourage the US auto industry's pursuit of anti-dumping remedies and this lack of support was probably a factor behind Detroit's decision on Tuesday not to proceed as threatened. Nor can new protectionist impulses necessarily be read into the steel tariffs ruling, imposed in the first week of the new government but long in train.

Still, the US 'wait-and-see' approach to the Gatt is not without risk, not least because it could exacerbate several bilateral disputes already in the pipeline. The dispute over state support for Airbus Industrie, the European aircraft builder, may have temporarily been settled. But the EC remains angry over US taxes on European luxury cars, while the US-EC accord on agricultural export subsidies reached late last year, supposedly clearing the way for a Gatt deal, is still fragile. Above all, the steel and procurement rows, both of which Sir Leon and Mr Kantor must address today, underline the dangers of conflict.

What irks Brussels is that the US steel duties include a 10-year period in the 1980s when the EC was operating under a global 'voluntary' restraint agreement with the US. The US action looks like a breach of faith, but it also represents an abuse of the wide-ranging US anti-dumping law to protect a cossetted industry, says an EC official.

The dispute over the EC utilities directive is murkier. It allows EC governments to reject tenders where the non-EC content is more than 50 per cent. Also, preference is given to tenders where more than half the contents are EC-produced, even if the price is up to 3 per cent higher. Mr Kantor claims the directive blocks US access to government contracts; but EC officials see it as an important market-opening initiative and a centrepiece of the single market programme, allowing outside bidders to enter a business worth about Ecu50bn (Pounds 40.6bn) in telecoms and electrical equipment alone.

One potential compromise is to drop temporarily the 3 per cent clause in return for reciprocal concessions under the US Buy America Act, a federal law which encourages domestic procurement. But the bilateral disputes cannot conceal the main task in front of Mr Kantor and Sir Leon. This is to establish a road map for a future Gatt agreement which includes tackling specific areas of dispute and a commitment to an early deal.

Without such a commitment, says Mr Gijs de Vries, a Dutch Euro MP and close observer of US-EC relations, trade tensions will come to dominate the transatlantic alliance, putting at risk necessary co-operation in other areas such as bringing peace to the former Yugoslavia and helping reform in the former Soviet Union. The Clinton administration would not dissent from this view. But defusing trade disputes will not be easy in the current climate of suspicion on both sides.

United States of America European Economic Community (EC) P9611 Administration of General Economic Programs GOVT International affairs P9611 The Financial Times London Page 19 1350
Leading Article: Act on Cambodia Publication 930211FT Processed by FT 930211

SINCE THE signing in October 1991 of Cambodia's peace agreement, most of the 370,000 refugees in border camps have safely returned home, and 4.7m people have registered to vote in May's elections. Those are the positive achievements of the 22,000-strong United Nations presence. The failures, however, are mounting.

The UN Transitional Authority in Cambodia, Untac, which was charged with supervising, monitoring and verifying the ceasefire, has instead watched war continuing. Rather than being disarmed and cantoned by Untac, factional forces have intensified their fighting. The Khmer Rouge, though it committed itself to the agreement, is not participating in elections and has perpetrated numerous ceasefire violations including attacks on UN personnel. It controls at most 20 per cent of Cambodia's territory and probably a far smaller proportion of the population. But violence is spreading. Government forces last week attacked Khmer Rouge positions in flagrant violation of the ceasefire.

Ceasefire and disarming of troops were to be the building blocks of the free and fair elections which the UN was to supervise. Though they have not been achieved, the country is nevertheless proceeding to elections.

Cambodians, especially the Khmer Rouge, are responsible for the deterioration. However, Untac's authority has been undermined by inability, under its peacekeeping mandate, to react strongly to ceasefire violations. It has not acted quickly or firmly enough to correct the situation.

It is no longer enough for Untac to hang on grimly and hope for the best. The danger of pushing ahead with elections without implementing other parts of the plan has been all too painfully demonstrated in Angola. If the Cambodian peace process is to be put back on track sufficiently for elections to produce a constitution and a government which can be recognised internationally, the UN needs to take action.

The options are not easy. It would probably not be possible to win support for a substantial change in Untac's mandate. What is needed is a substantial effort to win observance of the original peace agreement, even if that means postponement of elections.

China needs to exert leverage on the Khmer Rouge - so far it has avoided overt moves to distance itself. France, seeking to re-exert its influence through President Mitterrand's visit today, has mischievously promoted the holding of presidential elections before a constitution is drawn up. The permanent members of the UN Security Council, as well as Japan which is primarily financing the operation, must face up to the problem and act to correct it. If the country descends again into civil war, the years of effort put into obtaining a peace agreement, and the Dollars 2bn allocated to the UN force, will be wasted - not to mention the lives of yet more Cambodians.

UN Transitional Authority (Cambodia) Kampuchea, Asia P97 National Security and International Affairs CMMT Comment & Analysis P97 The Financial Times London Page 19 485
Banks suggest register to stop excessive lending Publication 930211FT Processed by FT 930211 By PATRICK DE JACQUELOT and ROBERT PESTON

OVERSEAS banks based in London have suggested to UK banks that a joint register of corporate loans should be compiled to stop lending to companies that have excessive debts.

The Foreign Banks and Securities Houses Association has sent a detailed proposal to the Bank of England and the British Bankers Association. It hints that overseas banks would reduce their commitment to operating in the City of London if a register was not created.

Many of them made big losses on loans to the late Robert Maxwell's group of companies and to other concerns such as Brent Walker, the property and leisure group. They believe this may not have happened if it had been easier to ascertain the companies' overall indebtedness.

The banks had originally wanted the Bank of England to maintain the register. The task is done in most continental European countries by their central banks.

The Bank of England is reluctant to take it on. It believes a register would at best provide only limited information on most companies' indebtedness because the UK economy is so open.

The scheme proposed would involve voluntary bank participation and the register would be run by a specially created company, owned by banks and other financial institutions. Confidentiality would be guaranteed regarding sensitive information.

The start-up costs are estimated to be about Pounds 10m and the running costs, including 11 to 15 staff, in the range of Pounds 1m to Pounds 4m a year.

The scheme would cover only the 1,500 biggest British companies and their UK subsidiaries. Participating banks would report their loans to these companies each month. The banks' proposal stresses that British companies benefit greatly from the presence in London of about 470 foreign banks. But the confidence of these banks has been eroded and needs to be restored if they are to continue to lend to British companies.

To be effective the register would need to gather information not only from banks but also from other providers of loans, such as leasing and factoring companies, insurance companies and finance houses.

The foreign banks accept that getting agreement from all these institutions would be very difficult.

The British Bankers' Association is due to circulate the proposal to its members.

Patrick de Jacquelot is London correspondent of Les Echos.

Bank of England British Bankers Association United Kingdom, EC P602 Commercial Banks P601 Central Reserve Depositories P8621 Professional Organizations COMP Company News TECH Standards P602 P601 P8621 The Financial Times London Page 8 431
M and S to take more graduates Publication 930211FT Processed by FT 930211 By CATHERINE MILTON

MARKS and Spencer is to increase its graduate recruitment by almost 50 per cent this year because of the UK food and clothing retailer's confidence about its trading position in 1995.

M and S said it had planned to take just 130 graduates in September 1993, but would now recruit 190 including 'a handful from the Continent'.

The company added: 'Training takes a year to 18 months. We look at it as a sign of confidence of what our position will be in 1995.'

M and S wants to increase its visibility in the European recruitment market. 'We believe competition will increase when the recession ends and we will need to source the best candidates Europe-wide,' it said.

Marks and Spencer United Kingdom, EC P5311 Department Stores MGMT Management P5311 The Financial Times London Page 8 152
Church launches corporate video Publication 930211FT Processed by FT 930211 By ALAN PIKE, Social Affairs Correspondent

THE CHURCH of England, which has a Pounds 500m annual budget and 11,000 clergy, is bringing itself into line with other organisations of its size by releasing a corporate video.

'Yours faithfully, the Church of England' was launched yesterday to depict in 28 minutes some of the range and variety of the Church's activities.

It shows Dr George Carey's enthronement as archbishop of Canterbury; the work of industrial chaplains on Tyneside; Dr John Habgood, archbishop of York, speaking on the asylum bill in the House of Lords, and November's general synod vote in favour of women priests.

The Rev Eric Shegog, the Church's director of communications, said the Christian church had always employed the latest forms of communication as they evolved. 'We started with illustrated manuscripts, went into stained-glass windows and when Caxton came along we jumped on that bandwagon.'

Although initially available only on subscription, the Pounds 10 video will eventually be for retail sale. It was made by Boxclever Productions, whose other clients include British Aerospace, at a cost of Pounds 30,000.

In true corporate tradition, the video ends with a message from the archbishop of Canterbury suggesting the customer might care to sample the product. Dr Carey says: 'Whatever a person is looking for, you are bound to find it in the Church of England.'

United Kingdom, EC P8661 Religious Organizations TECH Products TECH Services P8661 The Financial Times London Page 8 250
Feltrim Names seek early ruling Publication 930211FT Processed by FT 930211 By RICHARD LAPPER

MEMBERS of the Feltrim syndicates at Lloyd's who are seeking compensation for more than Pounds 600m in insurance losses have applied for a summary judgment in their legal action against more than 50 agents at the London insurance market.

The action is being taken by the Feltrim Names Association, formed by 1,500 Names - individuals whose wealth backs the market - who were members of Feltrim syndicates 540 and 847. They allege that negligence by agents was responsible for losses which could reach Pounds 600m.

A summary judgment seeks to speed up court processes where the plaintiffs believe they can present a case to which there is no arguable defence. Through the normal process the case could take up to 18 months to reach court.

Separately, 200 Names are pressing regulators to intervene over the rising cost of administering claims against syndicate 126 which stopped underwriting 10 years ago.

About 3,000 Names originally joined syndicate 126 attracted by the record of its underwriter, Mr Ian Posgate. Losses on the 1982 year are about Pounds 40m - 154 per cent of the syndicate's original allowable premium income of Pounds 26.9m.

Alexander Syndicate Management, a company specialising in run-off - managing the business of a syndicate which is no longer active - has been administering the syndicate's affairs. It has subcontracted claims-handling to AJ Archer, the listed agency group.

Mr Chris Burton, a director of AJ Archer and secretary to ASM, said yesterday that fees charged by Archer to ASM contained 'no profit element'.

Feltrim Names Association (UK) United Kingdom, EC P86 Membership Organizations P6411 Insurance Agents, Brokers, and Service GOVT Legal issues P86 P6411 The Financial Times London Page 8 293
For CDs even the bad times are good: With computer games competing, companies are sticking to old artists Publication 930211FT Processed by FT 930211 By MICHAEL SKAPINKER

BOB DYLAN was back in London this week, singing his old reliable hits such as Maggie's Farm, Mr Tambourine Man and Don't Think Twice, It's All Right. The critics complained that he seemed bored - if so, he was again capturing the spirit of an age.

Last year the British music industry saw deliveries to record dealers drop 2.4 per cent to Pounds 692.5m - the first fall since 1980. In the most difficult trading conditions that many in the music industry have seen, companies have fallen back on old and trusted names.

Mr Simon Burke, managing director of the retail arm of the Virgin group, says: 'There's been an undue emphasis on safe bets, like Cher, Madonna, Michael Jackson. They're eminently bankable, but they're not new.'

Music manufacturers and retailers report that other successes have been compilations of greatest hits by familiar names such as Pink Floyd, Cliff Richard, Queen, Genesis and Simple Minds.

Industry executives say that although new names pop into the charts frequently, few have a lasting impact. Mr Paul Conroy, managing director of Virgin Records, which Mr Richard Branson sold to Thorn EMI last year, says: 'There have been a lot of one-off hit singles. But the artists don't go off and develop acts. You look at the acts that there are and a lot of them are old people.'

Mr Burke adds: 'The strength of creative output is not as great as in the old eras of music, but these things go in cycles. During the 1980s music had a pretty good time, but you can't do that forever.'

The drop in sales has been particularly marked among the under 25s, usually a mainstay of the music business. The recession and the absence of new hits account only partly for the dearth of young buyers. Industry executives point to the large number of alternative leisure pursuits available, particularly computer games.

Mr Burke says that although music sales in Virgin stores will be higher this year than last, it is the teenagers buying computer games who will really lift the company's profits. 'There's a buzz around new computer game releases that there used to be 10 years ago around new music releases,' he says.

Mr Brian McLaughlin, UK managing director of HMV, the music retailing arm of Thorn EMI, says sales have been better in the 25-40 age group. 'They're becoming a more important part of our business. They're more interested in music than they've ever been.'

The compilations of old hits have sold particularly well to this group. Many were previously vinyl record buyers who are now building up compact disc collections.

A particular disappointment to the industry has been the failure of classical music and opera to retain the sales momentum they built up in the late 1980s and early 1990s. The success of Nigel Kennedy, the British violinist, and the immense sales generated by the opera star Luciano Pavarotti raised the hope that classical music had extended its appeal.

Mr Burke says: 'That burst of enthusiasm for classical music was a bit of a flash in the pan. It was a trend based on a few artists and a few particular works that people wanted.'

The industry hopes that the success of the Classic FM radio station will regenerate interest in classical music. Some classical compositions are still attracting buyers. A surprise success has been the Polish composer Henryk Gorecki's third symphony.

Mr Rupert Perry, UK chief executive of EMI, says a music industry revival may be some way off. If past experience is any guide, he says, the music industry will recover a year after the rest of the economy.

He and many of his colleagues reject the recent accusation by Sir Malcolm Field, managing director of WH Smith, that manufacturers have kept CD prices too high and that they should cut them to stimulate sales. 'WH Smith's results weren't good, so he's trying to point a finger,' says Mr Perry.

Mr McLaughlin says: 'It's always questionable that if you drop prices volume will go up. We're not seeing any resistance to CD prices. CD sales are still growing, even during a recession.'

United Kingdom, EC P3652 Prerecorded Records and Tapes P5735 Record and Prerecorded Tape Stores IND Industry profile P3652 P5735 The Financial Times London Page 8 743
British music market sees first decline since 1980 Publication 930211FT Processed by FT 930211 By MICHAEL SKAPINKER

THE UK music market shrank last year for the first time since 1980 with suppliers and distributors' revenues falling by 2.4 per cent to Pounds 692.5m, the British Phonographic Industry said yesterday, Michael Skapinker writes.

Sales of compact discs continued to grow, however, and the number of CDs sold last year exceeded sales of cassette tapes for the first time.

The BPI, which represents UK music companies, said sales of CD albums were now greater than those of cassettes and long-playing records combined.

Deliveries of CD albums to record dealers totalled 70.5m units, an increase of 12.2 per cent. That was a smaller rise than in 1991, when deliveries were 23.4 per cent higher than in 1990.

Consumer groups have criticised music manufacturers for charging too much for CDs. Last month Sir Malcolm Field, group managing director of the WH Smith retail chain, also called on manufacturers to reduce CD prices.

Manufacturers' claims that they have already reduced some CD prices appear to be supported by the BPI figures. The wholesale value of CD albums delivered to retailers was Pounds 380.5m, an increase of 10.1 per cent.

The remorseless decline of vinyl records continued last year, with unit sales of LPs falling 48.3 per cent to 6.7m. That compares with 37.9m in 1989. The wholesale value of the LP market fell 48.6 per cent in 1992 to Pounds 23.9m. Cassette deliveries to record dealers fell 15.5 per cent to 56.4m. Cassette wholesale values were down 13.4 per cent to Pounds 207m.

Deliveries of cassette singles rose by 29.8 per cent to 13.8m. However, they were overtaken for the first time by CD singles, which grew 68.7 per cent to 16.4m. Seven-inch vinyl singles fell 41 per cent to 12.9m, and delivery of 12-inch vinyl singles dropped 30 per cent to 9.9m.

United Kingdom, EC P3652 Prerecorded Records and Tapes P5735 Record and Prerecorded Tape Stores MKTS Market data P3652 P5735 The Financial Times London Page 8 342
More than a third falter in further education Publication 930211FT Processed by FT 930211 By ANDREW ADONIS

MORE than a third of people aged 16 to 19 on full-time further education courses in England and Wales do not complete their studies or attain the intended qualifications, says a report published yesterday.

This implies that about Pounds 330m a year is spent on courses that confer no qualifications on those taking them.

The report by the Audit Commission, the local government watchdog, and the Office for Standards in Education (Ofsted), finds that non-completion rates average 13 per cent for A-level courses and 18 per cent for vocational courses. Similar proportions of enrolled students complete courses but fail to gain qualifications.

Both these groups are included in the UK's over-16 education participation rate, which at about 70 per cent last year is already among the lowest in Europe.

The agencies recommend that funding should not encourage students 'indiscriminately' on to courses.

The report says: 'The intention of current reforms is that much more of the impetus towards efficiency should be provided by the market freedoms which institutions will have. But there is a potential danger of inefficiencies arising from competition.'

It is also proposed that government league tables should include non-completion rates and the relative value to students added by different institutions.

Mr Andrew Foster, controller of the Audit Commission, said: 'It must be a matter of concern for students, teachers and our economic future that so many young adults do not complete or are unsuccessful in their courses. This represents a waste of both resources and talent.'

The high levels of non-achievement and non-completion will strengthen the case for reforms that bring the array of over-16 qualifications into a single structure.

The government remains opposed to such reform, with strong pressure from the Conservative party to maintain the so-called 'gold standard' of A-levels.

The report adds that the existing system of careers guidance for pupils in their last year of compulsory schooling 'generally works well'.

Unfinished Business: Full-time Educational Courses for 16 to 19-year-olds. HMSO. Pounds 9.

United Kingdom, EC P82 Educational Services CMMT Comment & Analysis P82 The Financial Times London Page 8 362
Japan appoints first Welsh consul Publication 930211FT Processed by FT 930211

JAPAN is to appoint Mr Robin Geldard, a commercial lawyer based in Cardiff, as its first honorary consul in Wales.

The appointment was announced by Mr David Hunt, Welsh secretary. He also said that last year was a record for inward investment in Wales. A total of 206 projects involved capital expenditure of more than Pounds 1bn and the potential creation of 14,000 jobs.

United Kingdom, EC Japan, Asia P9721 International Affairs PEOP Appointments P9721 The Financial Times London Page 8 91
Move to win gene research centre Publication 930211FT Processed by FT 930211

THE UK submitted an Pounds 8m bid yesterday to host a new international science centre near Cambridge.

The government's Medical Research Council and the Wellcome Trust, the largest UK charity, would fund the building of the European Bioinformatics Institute, which will provide information on human, animal and plant genes.

Germany is competing for the institute. It wants to put it in a new building at the European Molecular Biology Laboratory in Heidelberg.

United Kingdom, EC P8731 Commercial Physical Research MKTS Contracts RES Capital expenditures RES Facilities P8731 The Financial Times London Page 8 104
Fall in level of skill shortages Publication 930211FT Processed by FT 930211

SKILL shortages are at a much lower level than two years ago but still exist, especially among small engineering companies, according to a Department of Employment report.

Five per cent of large companies interviewed had hard-to-fill vacancies last year compared with 22 per cent in 1990.

Other findings include:

In large establishments hard-to-fill vacancies were most often reported in the distribution and consumer services sector.

Sixty per cent of companies felt that the level of skills needed by the 'average' employee were increasing.

Three quarters of large companies funded or arranged off-the-job training.

Skill Needs in Britain 1992. Employment Gazette, February 1993.

United Kingdom, EC P99 Nonclassifiable Establishments P8331 Job Training and Related Services CMMT Comment & Analysis TECH Standards P99 P8331 The Financial Times London Page 8 139
Air passenger numbers rise Publication 930211FT Processed by FT 930211

PASSENGER numbers at Britain's main airports rose 5.3 per cent last month to 5.27m compared with January last year, BAA, the airport operator, said yesterday.

All three London airports recorded rises - Heathrow an increase of 6.1 per cent, Gatwick 4.2 per cent and Stansted 9.4 per cent. Glasgow, Edinburgh and Aberdeen airports also saw increases averaging 3.3 per cent, BAA said.

North Atlantic traffic from all UK airports increased by 8.9 per cent, European traffic rose 7.8 per cent and long-haul traffic rose 8.5 per cent. Only the domestic sector failed to show an increase - it was down 3.2 per cent.

United Kingdom, EC P45 Transportation by Air MKTS Shipments P45 The Financial Times London Page 8 128
Patten to meet teachers' unions Publication 930211FT Processed by FT 930211 By ANDREW ADONIS

MR JOHN Patten, education secretary, agreed to meet the six teachers' unions yesterday in an attempt to diffuse the controversy over this year's compulsory English tests for 14-year-olds in England and Wales.

However, he ruled out any changes to the tests, and the agreement to meet the NASUWT, the second largest teachers' union, is conditional on its calling off a ballot on a boycott of all this year's tests.

Mr Patten said the tests 'must go ahead', claiming that they were 'vital' to improving standards. He added: 'For too long, too many of our children have left our schools without the ability to express themselves properly.'

He recognised, however, that taking account of the 'genuine concern' of teachers had been 'critical in helping to iron out wrinkles in the system' in the past.

Mr Peter Smith, general secretary of the Association of Teachers and Lecturers, the leading moderate teachers' union, welcomed Mr Patten's response. He said: 'Dialogue aimed at resolving a difference is better than rhetoric which opens up a chasm. It is a sign that Mr Patten takes this matter seriously.'

Teachers' unions claim that the English tests, to be taken for the first time in June, have been inadequately prepared, and that material for them arrived at schools too late.

Mr Patten said he would meet union leaders to 'discuss ways in which we can build on the lessons that will be learnt this year in order to ensure the successful rolling implementation of the national curriculum'.

Letters, Page 18

National Association of Schoolmasters and Union of Women Teachers (UK) United Kingdom, EC P82 Educational Services P9411 Administration of Educational Programs P8631 Labor Organizations GOVT Government News P82 P9411 P8631 The Financial Times London Page 8 302
Ofwat urges water companies to plug leaks Publication 930211FT Processed by FT 930211 By BRONWEN MADDOX, Environment Correspondent

OFWAT, the water industry regulator, yesterday urged water companies to plug leaks in mains and install more meters rather than build expensive new reservoirs to meet growing demand for water.

Mr Ian Byatt, Ofwat's director-general, said meters had been installed in only 5 per cent of households. But he warned that some metered customers had been charged too much. Ofwat says the steps being taken by water companies to meet the growing new demand for water will account for a quarter of the rise in water bills above the rate of inflation between 1990 and 1995.

Yesterday's report by Ofwat is the last in a series of consultation papers leading up to next year's periodic review, at which the regulator will reassess the basis for annual price rises for the first time since the 1989 privatisation. Wide differences between the companies and the regulator have emerged on the question of how customers should pay for improvements.

Ms Janet Langdon, director of the Water Services Association - which represents the 10 large water and sewerage companies - said yesterday: 'We don't think it's yet clear that metering reduces demand - it is premature to conclude that ahead of the results of trials by the Department of the Environment and the companies.'

She added: 'We have a statutory duty to supply water, and if it suddenly ran out there would be the most fantastic row.'

Mr David Luffrum, finance director of Thames Water - which is considering building a large reservoir near Abingdon, Oxon - said: 'We believe in metering where it makes sense and leakage reduction where it is cost-effective, but we don't believe that on their own these will be sufficient, and a reservoir may be needed.'

According to Ofwat, average water bills for metered households in some regions were between Pounds 12 and Pounds 60 a year higher than for unmetered households, and sewerage bills were between Pounds 8 and Pounds 73 higher.

Mr Alan Jones, finance director of Northumbrian Water, said: 'You can take many different views on how to calculate these figures - they include assumptions about how much water the average customer consumes which we are discussing with Ofwat'. The regulator says Northumbrian has the biggest gap between metered and unmetered charges.

Mr Byatt said the 'infrastructure charge' levied on new domestic customers when they were connected to the system was 'too high' and varied between companies to an extent which 'cannot be properly justified'. The report says new properties in Eastbourne, East Sussex, pay Pounds 1,154 compared with Pounds 394 in Hastings.

Editorial comment, Page 19

United Kingdom, EC P4941 Water Supply P9631 Regulation, Administration of Utilities CMMT Comment & Analysis P4941 P9631 The Financial Times London Page 8 471
1,600 Daf job losses 'imminent' Publication 930211FT Processed by FT 930211 By KEVIN DONE, Motor Industry Correspondent

ABOUT 1,600 jobs are expected to be cut at Leyland Daf, the UK subsidiary of the beleaguered Anglo-Dutch commercial vehicle maker, in a first round of redundancies that will probably be announced tomorrow.

The UK workforce of Leyland Daf, which collapsed into administrative receivership last week, totals about 5,500 with 2,200 in Leyland, Lancashire, and 2,000 in Birmingham.

Union leaders who held talks with the receivers yesterday said last night that they believed the first redundancies at the company's plants were 'imminent'. The receivers warned earlier this week that job losses were 'inevitable'.

Mr John Talbot and Mr Murdoch McKillop, the joint administrative receivers, warned yesterday that the refusal by a small number of component makers to resume supplies to the UK Leyland Daf plants were jeopardising the resumption of production.

'A handful are still refusing to supply,' said Mr McKillop. that was even though all suppliers appointed since the company went into receivership would be 'paid in full as an expense of the receivership'.

The failure of Leyland Daf had been 'an extremely serious problem' for many suppliers, admitted Mr Talbot.

However, he called on suppliers 'to think very carefully about the consequences of their actions'. He added: 'It is very important that production at the Leyland Daf plants is maintained and the company's manufacturing is stabilised'.

Observer, Page 19 Ford losses, Pages 21 and 26 Toyota profits down, Page 28

Leyland DAF United Kingdom, EC P3713 Truck and Bus Bodies PEOP Labour P3713 The Financial Times London Page 8 268
Vosper Thornycroft plans to hire 200 new workers Publication 930211FT Processed by FT 930211

VOSPER THORNYCROFT, the Southampton-based naval shipbuilder, plans to take on 200 more employees over the next two years to fulfil export contracts. The increase goes against the trend in naval shipyards. The company now employs about 1,750 people after a reduction of 180 jobs last year. Vosper's prospects were changed by contracts from Qatar and Oman. Mr Martin Jay, the company's managing director, said further workers would be needed if other expected Middle Eastern contracts were won.

United Kingdom, EC P3731 Ship Building and Repairing P6719 Holding Companies, NEC PEOP Labour P3731 P6719 The Financial Times London Page 7 112
Acas workload jumps to record Publication 930211FT Processed by FT 930211 By CATHERINE MILTON, Labour Staff

ACAS, the conciliation service, dealt with a record 72,166 unfair dismissal and discrimination claims last year - almost 20 per cent more than in 1991.

The rising workload of the service, which has a statutory duty to conciliate between employees and employers before a case goes to an industrial tribunal, indicates the increased reliance of individuals and unions on the law to resolve disputes.

It also reflects the continued rise in unemployment as individuals made redundant claim that employers have failed to meet statutory or collectively negotiated provisions governing redundancy procedures.

Sex discrimination claims rose 66 per cent to 5,778. Almost 40 per cent more people brought claims that employers had failed to pay wages or benefits laid down by wages councils under the Wages Act.

The number of people claiming racial discrimination rose almost 20 per cent to 1,748.

Acas said 35 per cent of all claims were settled, 31 per cent were withdrawn and 34 per cent were heard by an industrial tribunal.

Acas said the figures were consistent with the service's expectation. It also said the increasing demand for conciliation meant diverting resources from its advisory service.

Advisory Conciliation and Arbitration Service (UK) United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors COMP Company News TECH Services P9651 The Financial Times London Page 7 233
Power chiefs reach accord on coal-fired electricity Publication 930211FT Processed by FT 930211 By MICHAEL SMITH and ROBERT TAYLOR

REGIONAL ELECTRICITY companies told the government yesterday that they had resolved potential differences over coal-fired power which had threatened to delay a solution to the pits crisis.

Company chiefs assured officials at the Department of Trade and Industry that they have broadly agreed on the take-up of power generated by the coal which the electricity generators have tentatively agreed to buy from April.

The move came as British Coal clashed with the National Union of Mineworkers over the future of 10 collieries whose closure has been declared illegal by the High Court.

Mr Mark Stephens, acting for the NUM, said he had started proceedings yesterday against British Coal seeking an explanation why it had failed to comply with a High Court ruling on consultation over the 10 pits. British Coal said it would ask the High Court to confirm that it had complied with the ruling.

The assurance to the DTI by 11 of the 12 regional companies is significant because their agreement is essential to support the tentative agreement between British Coal and the generators for the sale of 40m tonnes of coal next year and 30m tonnes in each of the four subsequent years.

The regional companies are not yet prepared to sign agreements to take the coal-fired power, but they have indicated that no significant problems remain.

United Kingdom, EC P12 Coal Mining P4911 Electric Services TECH Sales agreements P12 P4911 The Financial Times London Page 7 258
Exports 'aiding recovery': CBI finds regional rises in foreign orders since sterling's devaluation Publication 930211FT Processed by FT 930211 By PETER NORMAN, Economics Editor

EXPORT demand is shaping the regional pattern of economic recovery in Britain, with industry in north-west England, Wales and Scotland reporting increased foreign orders following sterling's devaluation after it left the European exchange rate mechanism in September, says a survey published yesterday.

The latest quarterly survey of regional trends from the Confederation of British Industry and Business Strategies, an economic consultancy, found that total manufacturing orders and output fell in all UK regions except Wales in the four months to January.

But export orders rose in Wales, Scotland and north-west England between last October and January, while manufacturers in the north-west and south-west increased deliveries to foreign customers.

Manufacturers in all regions expect increased export orders in the first four months of this year. On balance, industrialists in all regions expect to deliver more goods abroad - except in the east Midlands where export deliveries are expected to be unchanged.

The survey of 1,173 UK companies, which was carried out between December 21 and January 11, found increased optimism about the business situation and export prospects over the next 12 months in all regions. Mr Charles Burton, joint managing director of Business Strategies, said the fact that increased optimism was so clearly linked to improved export prospects gave some hope that the expected recovery would not be another false dawn.

According to Mr Andrew Sentance, the CBI's director of economic affairs, business confidence improved most in south-west England, the west Midlands, Wales and south-east England. The smallest rise in optimism was reported in the east Midlands, northern England, Yorkshire and Humberside, East Anglia and Northern Ireland.

The survey found that manufacturers in all regions expect increased orders in the first four months of this year but output is expected to grow less robustly as companies run down stocks. Companies in northern England anticipate a sharp reduction in stocks over the coming months with the result that output in that region is expected to continue falling.

Capital spending on plant and machinery is also expected to keep falling in all regions except East Anglia, Wales and south-west England.

Mr Burton said that planned increases in investment might have been triggered by the government's decision in the Autumn Statement to increase capital allowances for a limited period.

CBI/BSL Regional Trends Survey, CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU. Annual subscription: Pounds 120 (CBI members), Pounds 195 (non-members)

United Kingdom, EC P9611 Administration of General Economic Programs ECON Balance of trade CMMT Comment & Analysis P9611 The Financial Times London Page 7 445
Finance rules for public bodies may ease Publication 930211FT Processed by FT 930211 By ALISON SMITH

SCHOOLS and hospitals could be allowed to borrow against their assets if government plans for finding new ways of involving private finance in public projects are implemented.

The Treasury believes that the health and education departments and the Home Office are among areas with the most scope for the government's private finance initiative to be extended.

All three departments are also in the first round of the longer-term public spending review announced earlier this week, and so have a particular incentive to find ways of stretching their budgets.

Extending the ability to borrow would build on the move announced in the Autumn Statement, when the rule preventing universities from borrowing against exchequer-funded assets was ended. The old universities have made little use of the power so far, but many new universities - formerly polytechnics - which have had a similar ability for a few years, have taken more advantage of the change in the rules.

'We need to think whether the model applies elsewhere,' one minister said yesterday. Proposals are unlikely to be far enough advanced for inclusion in next month's Budget, but could be ready in time for the first unified Budget and spending statement in December.

Mr Stephen Dorrell, the financial secretary to the Treasury, is to use a series of meetings with all Whitehall departments over the next few months to discuss ideas for pressing ahead with the private finance initiative.

He will outline the government's plans to the cross-party Treasury committee next week.

Private involvement in transport projects - where the cost can be passed on to the user through charges - has seen the greatest advance in the initiative so far.

Mr John MacGregor, the transport secretary, is to publish a consultation paper after Easter on introducing tolls on motorways, and there is already discussion of how the rules on funding for roads might be adapted to rail projects.

Ministers believe that the private sector has a valuable role to play in upgrading public-sector capital stock. Large sums could be at stake. While there are no precise figures for capital spending on schools and hospitals in 1992-93, capital investment in health, excluding trust hospitals, is estimated at Pounds 1.43bn, and in education, by local government, at Pounds 1.08bn.

Giving the private sector a greater role would not necessarily mean that the public sector would withdraw from providing capital in these spheres, ministers say.

However, if private finance proved to be a better way of providing capital for a particular type of asset, ministers believe, then the public spending priorities would be bound to change.

United Kingdom, EC P9199 General Government, NEC GOVT Legal issues P9199 The Financial Times London Page 7 461
Thames steps up pressure over Channel 5 licence Publication 930211FT Processed by FT 930211 By RAYMOND SNODDY

THAMES Television is expected to call next week for the early re-advertisement of a national Channel 5 licence.

This follows the Independent Television Commission's formal rejection of a plea to reconsider its decision in December not to award a licence to Channel Five Holdings.

The main companies involved in that bid were Thames and Time Warner, the world's largest media group. Channel Five Holdings wrote to the commission - the commercial broadcasting regulatory body - on January 20 asking for its case to be reconsidered. The appeal was rejected by the commission the following day.

It is believed the appeal contested the commission's two grounds for rejecting the bid from Channel Five Holdings: concern over investor commitment and the channel's cost, audience share and revenue projections.

Thames was fully committed for 35 per cent and Time Warner for 10 per cent plus an undertaking that a recommendation for a further 25 per cent would be put before the main Time Warner board.

Last month Time Warner visited the commission and suggested that if there was any sign of flexibility the money would be available from the US company to fund the venture.

The commission's legal advice was that it could not reopen a final decision. The commission made clear that even if it had the discretion to reopen the decision it would choose not to.

It then decided to look at the possibility of using different frequencies to run several local city-based television services.

The announcement, which surprised the National Heritage Department, would require legislation. The next broadcasting legislation is not expected before 1995.

Even if local stations got approval it is unlikely they could be set up before 1997.

'This is not just kicking Channel 5 into touch, it's kicking it out of the stadium,' one senior broadcasting executive said yesterday.

Channel Five Holdings continues to reserve its right to try to seek a judicial review over the rejection of its bid.

Thames Television United Kingdom, EC P4833 Television Broadcasting Stations TECH Licences COMP Company News P4833 The Financial Times London Page 7 361
Docklands to be council's base Publication 930211FT Processed by FT 930211 By VANESSA HOULDER, Property Correspondent

TOWER HAMLETS Council is moving its headquarters to a new building at East India Dock in the London Docklands.

The council has signed a 10-year lease on the 140,000 sq ft building which is jointly owned by NCC, a Swedish construction group, and Trygg-Hansa SPP, Sweden's largest insurance and pensions group.

This is the first letting at the East India Dock development, which consists of four buildings totalling 600,000 sq ft.

About 800 staff who work in eight buildings scattered around the borough will move to the new headquarters in the summer. The council estimates that the move will save it about Pounds 6m over the next 10 years.

The council said the move was linked to a structural reorganisation due in April.

The East India Dock building will house the council chamber as well as its engineering, finance, personnel and strategic services. Most of the other services are now based in seven local centres.

Last summer the council shortlisted seven Docklands developments, including Canary Wharf, for its new town hall.

United Kingdom, EC P9121 Legislative Bodies RES Facilities P9121 The Financial Times London Page 7 201
Accountants scornful of Heseltine's 'wealth' jibe Publication 930211FT Processed by FT 930211 By ANDREW JACK

ACCOUNTANTS have resp-onded with anger to remarks by Mr Michael Heseltine, the trade and industry secretary, that there are too many 'wealth managers' and not enough 'wealth creators' in business.

In a letter to Mr Heseltine, Mr Ian Plaistowe, president of the Institute of Chartered Accountants in England and Wales, said he was 'surprised and disappointed' by the remarks - made to the Institute of Directors last Friday.

Mr Plaistowe said Mr Heseltine had been 'badly briefed' on the accountancy profession by his officials. He insisted that the profession was 'one of the few sectors in which the UK is a world-beater in terms of quality and breadth'.

He accused Mr Heseltine of falling into 'a notorious elephant trap' by trying to compare the number of accountants in the UK with those overseas, when the statistics measure profess-ions with very different functions.

Mr Plaistowe said accountants would not survive unless they were providing skills and services that the market wanted.

He also argued that graduates applied for jobs with accountancy firms because these organisations spent so much money on training, 'which puts most of the rest of business to shame'.

Accountancy Column, Page 12

United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P8721 P9651 The Financial Times London Page 7 235
Colin Powell says he may retire early: Top US general denies rift over Clinton defence policies Publication 930211FT Processed by FT 930211 By JUREK MARTIN WASHINGTON

GENERAL Colin Powell confirmed yesterday he was thinking of retiring early as chairman of the US joint chiefs of staff, but flatly denied this was because of disagreements with the Clinton administration.

He appeared on morning television shows after a report in the New York Times had quoted 'friends and associates' as saying he was unhappy with President Bill Clinton's determination to admit homosexuals to the US military and with the extent of the defence budget cuts under consideration.

Gen Powell's second two-year term as chairman of the joint chiefs is to expire at the end of September.

He said yesterday that he had told Mr Dick Cheney, the previous secretary of defence, last summer that he would not seek a third term, even if President George Bush were re-elected last November. The general added that he had spoken then of leaving the post a month or two early so as to resettle his family.

He vigorously denied suggestions that he was at odds with the new administration's policies: 'I'm not in any conflict with the administration over their plans and I am not planning to retire early as a result of any conflict.'

Gen Powell said the military had received 'good guidance' from Mr Clinton and Mr Les Aspin, the new secretary of defence, with both of whom he had 'a fine relationship'. He said he had every intention of testifying before Congress in support of the new and reduced defence budget.

The general was also at pains to stress that the military at large was not distressed by the new policies. 'There's nobody over here in a blue funk, thinking the whole word has dropped on us,' he said. 'We shouldn't let the impression be created around the country that somehow we are fighting the president.'

He reiterated his 'concerns' about admitting gays to the military, but said the president's guidance on the issue was clear and he was not about to be 'insubordinate' by frustrating it.

Gen Powell, 55 and black, is rated a phenomenally successful chairman of the joint chiefs, and not only because of the victory in the Gulf war. His doctrine of 'maximum force' has been criticised by some who feel that it delayed US intervention in humanitarian crises such as that in Somalia, but his reluctance to commit forces overseas without a clearly defined mission commands much respect in Washington, where he is rated as a consummate politician.

United States of America P9711 National Security PEOP Personnel News General Colin Powell, chairman US joint chiefs of staff P9711 The Financial Times London Page 6 457
Poll 'won't overturn' Mexican austerity: Finance minister assures Damian Fraser tight economic policies will stay despite 1994 election Publication 930211FT Processed by FT 930211 By DAMIAN FRASER

MEXICO'S government will maintain its tight fiscal and monetary policy throughout next year, and expects little increase in economic growth from this year, according to Pedro Aspe, the finance minister.

The austere economic policy, if adhered to, would disappoint those in and out of Mexico expecting a significant relaxation in the approach to the 1994 presidential election. The government intends to run a budget surplus of 1.7 per cent of gross domestic product this year and, through its commitment to a stable exchange rate, has allowed one-year interest rates to rise to about 19.7 per cent - about ten percentage points more than projected year-on-year inflation.

The tight economic policy slowed growth last year to an estimated 2.8 per cent, far below the government's original aim, and has been widely criticised for being too cautious. The commitment to maintain the tight programme suggests the government has given up its target of reaching 6 per cent growth by the end of the administration of President Carlos Salinas de Gortari.

Mr Aspe said in an interview: 'We are going to stick to exactly the same policy and (expect) growth this year of 3 per cent and next year - maybe a little more but nothing spectacular.' Fiscal and monetary policy 'has been exactly the same in 1989, 90, 91, 92, 93 - and it will be exactly the same in 1994. We do not use stop-go policies.'

Mr Aspe remains committed to reduce inflation to single digits which, on an annual basis, may happen as early as next month, and then to the levels of Mexico's main trading partners. The central bank reported inflation of 1.3 per cent in January, which is by tradition a high-inflation month. This was the lowest inflation for January since 1975.

The finance minister is not convinced a loosening of policy would help the ruling Institutional Revolutionary Party in the presidential election. 'People would notice immediately and say: 'Oh my God what are they doing? We are going to have fun for six months and then a mess again.' You cannot fool around with fiscal and monetary policy.'

The Mexican government freely admits economic growth in the short term remains at the mercy of the proposed North American Free Trade Agreement, whose swift passage through the US Congress depends on the Mexican and the US administrations reaching prompt agreement on parallel accords on labour and the environment.

If Nafta is passed in the US, capital flows into Mexico would almost certainly increase, and interest rates could be lowered without endangering the exchange rate target of a maximum rolling devaluation of 0.4 of a peso per day (4.6 per cent a year). Indeed, the government is so convinced that Nafta would sharply alter expectations of future growth in Mexico that it has discussed ways to prevent excessive capital inflows fuelling inflation.

If Nafta is not passed - which the Mexican government considers highly unlikely - the government may find it difficult to finance the growing current account deficit, expected to be more than Dollars 20bn this year. Government officials, however, are open to increasing the maximum rate at which the peso is devalued, if that looks necessary. The government is not considering a one-off devaluation.

The government is also prepared to accelerate economic reforms if Nafta is not passed, in part to reassure financial markets. 'We will have to speed up structural change' if Nafta is not passed, says one senior official. 'I think we can convince people to respond in this way, rather than shoot yourself in the foot (by reversing reforms).'

Political analysts have long speculated that rejection of Nafta would lead, in Mexico, to a nationalist backlash and to pressure to slow or overturn some of the present government's economic reforms. According to the official, it would lead to a faster opening of the economy.

Mexico P9311 Finance, Taxation, and Monetary Policy GOVT Government revenues GOVT Government News ECON Inflation P9311 The Financial Times London Page 6 688
IMF demands consistency: Brazil told to present economic programme Publication 930211FT Processed by FT 930211 By CHRISTINA LAMB RIO DE JANEIRO

MR Michel Camdessus, managing director of the International Monetary Fund, has told Brazil it must present an economic programme before full-scale negotiations can begin on a new accord.

The decision disappointed Mr Paulo Haddad, economy minister, who has been in Washington this week for his first round of meetings with multilateral financial institutions and members of the US administration.

The main aim of trip was to discuss with the IMF the targets for a new accord in place of a Dollars 2.1bn stand-by, signed in January last year, which collapsed after the initial payment because of Brazil's failure to meet conditions.

Mr Rubens Pontes, the minister's chief of staff, said yesterday that the meetings had gone well: 'We didn't expect a red carpet, given Brazil's poor record of meeting IMF targets. But, in the circumstances, the reception was almost warm and the fund is definitely disposed to collaborate.'

Mr Camdessus accepted Mr Haddad's request to use the last accord as a basis for the new one, rather than negotiate from scratch. However, he insisted that, so as to have numbers to work with, Brazil must put a consistent economic programme in place before new targets could be set. Mr Pontes said that the absence of a programme so far was a reflection of the new government's 'more realistic stance. We are trying to clean the house and resolve a series of structural problems before formulating a programme.'

Brazil is anxious for a new accord in order to move towards concluding the restructuring of Dollars 44bn in foreign debt, for which it must put up Dollars 3.2bn in collateral, at least half of which it hopes to obtain from multilateral institutions.

International Monetary Fund Brazil, South America P93 Finance, Taxation, and Monetary Policy GOVT International affairs P93 The Financial Times London Page 6 323
World Trade News: Japan's discounts safeguarded Publication 930211FT Processed by FT 930211 By ROBERT THOMSON and MICHIYO NAKAMOTO TOKYO

JAPAN'S Fair Trade Commission has ordered the sales subsidiaries of four leading electronics companies, Matsushita Electric Industrial, Sony, Hitachi and Toshiba, to allow retailers to discount their products without fear of losing supply contracts.

An investigation by the FTC, the anti-monopoly body, found evidence that the four companies had ordered large retailers not to discount the prices of electronics goods below certain specified levels.

FTC investigators also said that at least one of the companies is believed to have offered incentives to retailers who complied with the pricing orders and threatened to cut supplies to retailers who dared to discount deeper than the recommended level.

The case highlights the close relationship between each of the four companies and their extensive network of small dealers, who are believed to have complained to the companies that their sales were hurt by discounting by larger retailers.

A recent flurry of activity by the FTC follows past complaints by US trade officials, who alleged that the Commission was unwilling or unable to enforce Japan's anti-monopoly laws. They demanded that the Commission's investigative staff be strengthened.

The Commission's investigations have almost doubled in the past two years, but US officials have continued to suggest that the FTC is unwilling to tackle the country's better known companies or unravel the often complex relationships between large manufacturers and retailers.

The present case is linked to an FTC order to Japanese manufacturers in July 1991, making clear that retailers were free to set their own prices.

Last year, sales arms of the four electronics companies indicated to the FTC that they would abide by the advisory, but investigations into their trading practices continued.

If the electronics companies defied the FTC's order, they could be fined, but they indicated yesterday that executives would 'study' the order to see how it affected their business practices.

Sumitomo Chemical of Japan and Rhone-Poulenc, are forming a joint venture company to develop and market agricultural chemicals in France, Michiyo Nakamoto adds from Tokyo.

Sumitomo, which has a worldwide agrochemical business worth about Y6bn (Pounds 31.9m) to Y7bn and is a leader in the field in Japan, will own a large majority share of the new company, the company said. The joint venture, to be staffed mainly by Rhone-Poulenc employees, will mostly market the French company's products, but is expected to to develop and market Sumitomo's agrochemicals in future.

Sony Corp Toshiba Corp Matsushita Electric Industrial Hitachi Japan, Asia France, EC P5064 Electrical Appliances, Television and Radios P9651 Regulation of Miscellaneous Commercial Sectors P287 Agricultural Chemicals COSTS Product prices TECH Sales agreements GOVT Government News COMP Joint venture P5064 P9651 P287 The Financial Times London Page 6 462
World Trade News: Potholes in the private road to public utilities - Turkey's BOT system Publication 930211FT Processed by FT 930211 By JOHN MURRAY BROWN

SIR ROY Watts, chairman of Thames Water, the privatised UK water authority, must have thought the deal was in the bag when he flew to Ankara last Friday to sign up for a Dollars 700m (Pounds 460m) dam project using the Build Operate and Transfer BOT form of financing, a concept pioneered by Turkey.

As it turned out, there appeared still to be some details to attend to. Thames now hopes to initial an implementation agreement in the next couple of weeks, but that, as a number of contractors have discovered, is just the first hurdle.

The attempt to revive BOT, a method of franchise financing which uses private sector debt to fund public infrastructure, reflects the desperate state of public finances in Turkey. The move also underscores a personal rivalry between Prime Minister Suleyman Demirel and the man who more or less invented the BOT concept, President Turgut Ozal.

Under BOT, a contractor owns a plant for a set period - in Thames' case 15 years - before transfering it to the public utility. The contractor arranges finance, repaying the debt with revenues generated from the project.

Turkey is currently looking at three big schemes. The Thames Water project at Izmit, south-east of Istanbul, involves dam construction, pumping stations and more than 60 miles of water mains.

At Birecik on the Euphrates, a consortium led by Philipp Holzmann of Germany is looking at a DM2bn (Pounds 800m) hydro-electric scheme.

Discussions are under way with Enron, the US engineering giant, on three combined cycle gas and oil power stations at a total project cost of Dollars 2bn.

The beauty of BOT is that it enables the government to finance public infrastructure 'off balance sheet' as it shifts the risk from the government to the private sector. This is a key factor at a time when outstanding public and private external debt is Dollars 56bn.

In addition, bankers argue that because the private sector is taking the risk, BOT will ensure more rigorous project disciplines. The onus is on the private sector developer to see the project is viable and can be completed on time - otherwise he cannot recover his costs.

Another attraction is that the consortium's financing will typically incorporate an equity element, in effect bringing in foreign capital investment which would not be available under a turnkey government project.

However, where BOT has come unstuck is where discussion turns to the levels of guarantee available in the securities package. The traditional concerns are currency risk, resource risk and, most critical of all, protection against force majeure, where natural or other disasters prevent the contractor from completing, leaving the question as to who has to repay the banks.

As a first stage, Thames has to sign an implementation agreement which gives the consortium the licence to sell water, hitherto the state's legal monopoly. Perhaps inevitably, there is already some opposition within Public Works, the agency handling state sector water projects, which is naturally reluctant to see its powers curtailed by a private sector developer in an area traditionally handled by government.

Accounting for resource risk will be just as challenging. According to Chase Manhattan, which is advising Thames, the Izmit authority will undertake to buy 140m cubic metres of water a year. The terms of the offtake agreement in effect means the purchaser pays for the water whether or not he takes delivery - the only way these BOT schemes can hope to work.

Thames has also to secure an offtake arrangement with the Istanbul water authority, under which the Izmit authority will sell water on to its Istanbul counterpart.

On the Birecik scheme, for example, where Chase is also the adviser, the consortium has to secure a sales agreement with TEK, the state-owned power utility to buy the project's electricity. In addition, an accord has to be struck with DSI, the state hydraulics corporation, to guarantee that the Ataturk dam upstream discharges a certain volume of water to enable Birecik's turbines to operate.

The price has then to be agreed, denominated in a hard currency. On the Ankara metro scheme, one of the reasons BOT failed to attract bank support was the difficulty matching the project's external debt servicing needs with the Turkish lira revenue flows from the metro's tolls.

If these problems seem surmountable, the parties are expected to have more difficulty agreeing a formula in the case of force majeure interrupting the revenue flows, and in turn affecting the ability of the developer to repay the banks.

Chase is using a subordinated loan mechanism, in effect a standby facility which will repay the banks in the event of force majeure. Again, the Ankara metro, which the Treasury eventually decided to finance with a full sovereign guarantee, envisaged an unlimited subordinated loan, another reason that the BOT scheme collapsed.

During construction, Chase has set the level of the loan at Dollars 270m, which falls away to Dollars 50m during the less risky operational period. However, it is still unclear who will be the subordinated lender. Some observers fear this could still prove the project's Achilles heel.

Thames Water Turkey, Middle East P9631 Regulation, Administration of Utilities P1623 Water, Sewer and Utility Lines P1629 Heavy Construction, NEC MGMT Management GOVT Government News P9631 P1623 P1629 The Financial Times London Page 6 908
World Trade News: Indonesian paper mill for India Publication 930211FT Processed by FT 930211 By KUNAL BOSE and STEFAN WAGSTYL CALCUTTA, NEW DELHI

SINAR Mas, an Indonesian industrial group, plans to build a Rs3bn (Pounds 62m) paper mill in India.

The company, Indonesia's second largest combine, is submitting a proposal to the Indian government for a 200,000 tonnes a year paper mill. The mill would import pulp for conversion into paper for sale in India and other south Asian countries.

The project is one of several investment schemes in India proposed by foreign companies since the government of Mr P V Narasimha Rao, the prime minister, embarked on economic liberalisation in mid-1991. The authorities last year approved investments totalling about Dollars 1.3bn. But the actual flow of funds has been much smaller - around Dollars 300m. It is not clear how quickly Sinar Mas will go ahead with its scheme.

Mr M K Raina, a leading executive in the Indian paper industry who is to head the Indonesian group's Indian operation, said Sinar Mas would invest a total of Dollars 1bn in India over five years in various projects including the paper mill.

Sinar Mas Dipta India, Asia P2611 Pulp Mills RES Capital expenditures RES Facilities P2611 The Financial Times London Page 6 213
Clinton signs orders to reduce government payroll and perks Publication 930211FT Processed by FT 930211 By JUREK MARTIN WASHINGTON

PRESIDENT Bill Clinton yesterday continued his attack on excessive federal employment by signing executive orders designed to reduce the government payroll by 100,000 over the next four years.

He also directed departments to cut their management costs by 3 per cent a year over the next four years, to get rid of as many as one third of existing advisory boards and commissions, and to eliminate a wide range of the perks available to senior bureaucrats.

The president estimated net savings of about Dollars 9bn and repeated his exhortation of Tuesday, when he announced a 25 per cent reduction in the White House staff, that government must learn to get by on less. 'This is only a beginning, not the end,' he added.

Additionally, Mr Bruce Babbitt, the interior secretary, announced that he was reviewing special bonus payments made to senior members of his department by Mr Manuul Lujan, his predecessor. The leitmotif of Mr Clinton's drive to cut the size and cost of government is the presumed excesses of the Bush and Reagan administrations.

Most of the job savings will be achieved by natural wastage, not redundancies, the White House said. All departmental plans must be in place by 1995. Total federal employment is around 3m, including the notionally independent and 800,000-strong postal service.

Mr Clinton was expected to make much of his symbolic lead in cutting federal spending at a televised 'town meeting' in Detroit, due to take place late last night.

Mr Babbitt said his most interesting discovery was the 'pony perk,' a plan to expand a federally maintained equestrian complex for the convenience of government officials. That particular plan is dead as of today,' he said.

United States of America P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 6 316
World Trade News: Qatar to increase steel production Publication 930211FT Processed by FT 930211 By MARK NICHOLSON CAIRO

QATAR's state-owned steel company, just emerging from cumulative losses of Dollars 100m in the 1980s, is set to award a Dollars 275m (Pounds 182m) contract to nearly double capacity with the aim of exporting to Far Eastern markets.

Qatar Steel Company (Qasco), which is 70 per cent owned by the Qatar government, said 25 foreign companies have submitted bids for the project and a decision is expected within weeks. Mr Nasser al-Mansouri, head of the company, was quoted in the United Arab Emirates newspaper al Khaleej as saying that building would begin before the end of this year.

A new plant will be built under the expansion to raise capacity from the present 560,000 tonnes of reinforced steel bars by between 300,000 tonnes and 500,000 tonnes. The company's present plant, built in 1978 at a cost of Dollars 300m, has for several years been operating at around 70 per cent of its design capacity.

Qatar plans to capitalise on its considerable resources of cheap gas from its north field operations.

Mr al-Mansouri said Qasco will have to double its paid-up capital of Dollars 82m which, he said, would be welcomed by the company's present foreign partners. Two Japanese groups, Kobe Steel and Tokyo Boeki, hold 20 and 10 per cent of Qasco respectively. The company would not comment on how the recapitalisation and expansion would affect its shareholding structure.

Qasco last year made sales of Dollars 192m and record profits of Dollars 40m, largely through sales to neighbouring Gulf countries, Algeria, Iran and Egypt. The group's recent profits have enabled it to clear deficits incurred during the mid-1980s and Mr al-Mansouri said the company expects to complete repayment by next year of loans taken to build Qasco's existing plant.

The company is aiming to broaden its market , towards the potentially vast Iranian market and the Far East.

Qatar Steel Qatar, Middle East P331 Blast Furnace and Basic Steel Products P1541 Industrial Buildings and Warehouses MKTS Contracts RES Capital expenditures P331 P1541 The Financial Times London Page 6 356
US ready to support Bosnian peace effort with troops Publication 930211FT Processed by FT 930211 By JUREK MARTIN WASHINGTON

THE US last night committed itself to the international effort to end fighting in Bosnia. It named a special envoy to assist the efforts of Mr Cyrus Vance and Lord Owen, the UN and EC negotiators.

Mr Warren Christopher, the secretary of state, also said the US was prepared 'to do its share to enforce a settlement'. Without discussing details, he said this could mean sending US forces, along with UN and Nato counterparts, to ensure that any peace agreement was sustained.

The US plan was warmly welcomed in New York by Mr Vance and Lord Owen. When they arrived a week ago at the UN for a final negotiating push, both had feared the US would opt to rearm the Bosnian Moslems.

Mr Christopher said this had been seriously considered but rejected after consultation with Britain, France and Canada, which advised that their forces already in Bosnia would be 'gravely endangered' by such a move. Similar considerations, he added, constrained the present use of US air power.

As Mr Christopher outlined it, the US approach involved 'active engagement' in the Vance-Owen plan, 'bringing the full weight of US diplomacy to bear.' He said: 'We do not expect a miracle but we believe we can make a difference.'

Mr Christopher conceded that he had feared that the Vance-Owen plan might be imposed on the warring parties. 'We will not arrive with a map and we have no prescribed solution,' he said.

The US special envoy to the negotiations will be Mr Reggie Bartholomew, currently US ambassador to Nato, a selection which is understood to have pleased Lord Owen.

Mr Bartholomew will first fly to Moscow to confer with Russian President Boris Yeltsin. President Bill Clinton discussed the US plan with Mr Yeltsin by phone. The Russian leader was supportive, Mr Christopher said.

President Clinton is also sending a message to all the warring parties that only a negotiated settlement can end the conflict and that one will not be 'imposed'.

But, in an explicit warning to Serbia, he is seeking tighter economic sanctions to deter a widening of the war.

Mr Christopher would not be drawn on any US military commitment, but stressed that any agreement should contain 'quite viable enforcement procedures'.

He said 'our conscience revolts' at the evidence of Serbian ethnic cleansing, murders, rapes, shelling, the forced displacement of peoples and 'atrocities committed by others as well'.

US line welcomed, Page 2

Bosnia-Hercegovina, East Europe United States of America P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 1 442
Rwanda rebels make offer of a ceasefire Publication 930211FT Processed by FT 930211 By REUTER KIGALI

Rwandan rebels yesterday said they were ready to end three days of fighting with government forces but would not withdraw from territory they had captured, Reuter reports from Kigali.

The fighting raged on in northern districts as the rebel Rwanda Patriotic Front's radio broadcast the announcement.

Refugees continued to trek into Kigali. Food was growing scarce in the city and prices have shot up amid panic buying.

The fighting was the worst flare-up since a ceasefire was agreed last August.

Rwanda, Africa P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 4 113
Israelis kill two in Gaza clashes Publication 930211FT Processed by FT 930211 By REUTER JERUSALEM

ISRAELI soldiers yesterday shot dead two Palestinians and wounded at least four others, one of them an 11-year-old boy, during clashes in the occupied Gaza Strip, Reuter reports from Jerusalem.

The army confirmed soldiers had killed two Palestinians but gave no details of the wounded.

Palestinians in the Gaza Strip said soldiers manning an army post in Jabalya refugee camp had shot and wounded several people when a crowd of youths stoned them.

In the business district of Arab East Jerusalem, border police fired live rounds into the air and shot tear gas and rubber bullets at demonstrators who threw stones and burned tyres, police said.

Israel, Middle East P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 4 139
Golden screen haunts LDP Publication 930211FT Processed by FT 930211 By ROBERT THOMSON TOKYO

THE MYSTERY of the golden screen is haunting Japan's ruling Liberal Democratic Party.

This unsolved case of alleged corruption - involving banks, senior politicians and an exquisite Y4bn (Pounds 23m) traditional folding screen - has resurfaced this week, at a particularly bad time for Mr Noboru Takeshita, the former prime minister.

He is to appear before parliament next week - with Mr Ichiro Ozawa, a former LDP secretary-general - to answer questions over a separate scandal involving illegal donations by a road haulage company, Tokyo Sagawa Kyubin.

Opposition parties delayed the passage of the budget for the fiscal year to begin in April, so as to force the LDP to offer the two politicians for formal questioning. This will be the third such appearance in recent months by Mr Takeshita.

Simultaneously, a former auditor at Heiwa Sogo, the small bank at the centre of the screen mystery, is on trial for commercial breach of trust, and is expected to explain at least part of the background to the mystery in coming days. His testimony could provide opposition politicians with a further opportunity to undermine Mr Takeshita, who has resisted demands that he resign from parliament.

The gold-leaf screen mystery began in 1985, when there was a struggle for the control of the ailing Heiwa Sogo, and four of its executives sold the screen for Y4bn to a Toyko art gallery. It had just been valued at only Y500m. Some of the sale proceeds were used to buy shares in Heiwa Sogo, but it is alleged that other funds were given to politicians, including Y300m to a secretary to Mr Takeshita, according to court testimony by former executives at the bank.

But the secretary, Mr Ihei Aoki, who is at the centre of the mystery, committed suicide in April 1989 amid another scandal, the Recruit stocks-for-favours affair. This was the scandal which ultimately forced Mr Takeshita to resign as prime minister.

Japanese prosecutors are also attempting to link the sale of the golden screen to the eventual takeover of Heiwa Sogo by Sumitomo Bank in October 1986, though there is no suggestion that the latter bank has done wrong.

Mr Takeshita, who knew executives at both banks, is believed to have played a role in bringing them together, and opposition politicians want to him to clarify whether he saw Y300m.

Late last year, Mr Takeshita said the affair was also a mystery to him.

Japan, Asia P91 Executive, Legislative and General Government GOVT Legal issues P91 The Financial Times London Page 4 434
Move to make Japanese groups more transparent Publication 930211FT Processed by FT 930211 By ROBERT THOMSON TOKYO

A GOVERNMENT advisory panel has recommended that companies be required to appoint independent auditors, in an attempt to make corporate Japan more transparent and less prone to scandal.

The Justice Ministry is likely to draft legislation to amend the commercial code based on the panel's recommendations, but the changes will be opposed by many companies, as auditing has traditionally been an in-house operation in Japan.

A spate of securities industry scandals and demands for increased shareholder rights prompted the panel's review, which included a study of whether companies should be able to buy their own shares. No formal recommendation was made on this controversial issue.

But the panel did recommend that shareholders should have improved access to company accounts.

Under present legislation, shareholders must have at least a 10 per cent stake in the company before getting access to the account books, but the minimum shareholding needed is likely to be reduced to 3 per cent.

That change, and a simpler court filing process for class actions, are in line with US demands for an improvement in shareholder rights in Japan.

The demand was made during the bilateral Structural Impediments Initiative (SII) talks, designed to reduce the 'structural' obstacles to trade.

The panel also recommended that restrictions on corporate bond issues be eased, in particular a requirement that companies must issue bonds to a total less than twice the net value of its assets.

Corporate bonds are becoming increasingly popular among Japanese companies, but there are still strict limits on bond trading and issuance.

These and other recommendations, approved yesterday by a sub-committee in the justice ministry, are scheduled to be formally presented to the justice minister later this month, and then to a cabinet meeting next month.

If the panel's proposals are adopted, an auditor's term will be extended from two to three years, while companies capitalised at Y500m (Pounds 2.6m) or more, or with debts of Y20bn or more, must appoint three auditors, one more than is now required.

But most controversial is the requirement that one of three auditors should be independent. Japanese companies have traditionally appointed auditors from among middle-managers passed over for promotion to the senior ranks or from among executives due to retire but wanting to maintain a presence within the company.

Auditors still generally regard themselves as part of the company and it is highly unusual for them to find fault with financial statements.

By the panel's standards, an independent auditor is an individual who has not worked for the company, or any of its subsidiaries, during the past five years.

Japan, Asia P9651 Regulation of Miscellaneous Commercial Sectors P99 Nonclassifiable Establishments TECH Standards COMP Company News P9651 P99 The Financial Times London Page 4 468
UN soldiers fail to pacify the killing fields: The Cambodian peace keepers were welcomed with relief a year ago but their popularity is waning Publication 930211FT Processed by FT 930211 By VICTOR MALLET

THEY came at midnight, a dozen men firing automatic weapons and grenades at a crowd of villagers who were dancing and watching videos outside a Buddhist temple.

The party a few nights ago in the village of Sret, 12 miles east of Siem Reap and the ancient Khmer monuments of Angkor, was an annual festival in memory of a former abbot. Eight people were killed, including a 13-year-old girl.

Nobody is sure who carried out the attack or why, but Khmer Rouge guerrillas are among the suspects; three of the dead were government policemen.

Two days later the village looked sleepy and surprisingly cheerful. Yes, the inhabitants agreed, they were frightened at night now, but they had lived through bad times before.

They had survived the rule of Prince Sihanouk in the 1950s and 1960s, the dictatorship of Lon Nol, who overthrew the prince, the terror of the Khmer Rouge guerrillas who ousted Lon Nol, and the Vietnamese invasion which got rid of the Khmer Rouge. Now they had Untac.

Untac - the UN Transitional Authority in Cambodia - was immensely popular when it was established in March last year because Cambodians thought it would stop the killing. It has failed to do so, and its popularity is waning fast.

Bangladeshi troops are stationed three miles from Sret, but they did nothing because the attack on the village lasted only five or 10 minutes before the gunmen melted into the countryside.

It was not an isolated incident. In the early hours of yesterday morning gunmen, some of them on motorcycles, attacked Siem Reap with guns and grenades, killing at least two Cambodians and firing at Untac's pre-frabricated offices.

Mr Yasushi Akashi, the head of Untac, said he viewed the assault with 'the utmost seriousness'. Siem Reap is Cambodia's main tourist destination, and President Francois Mitterrand of France is due to go there this week to see the temples of Angkor.

The failure of the UN's largest peace keeping operation, with its Dollars 2bn (Pounds 1.3bn) budget and its complement of 22,000 soldiers and civilians, is as damaging for the reputation of the UN as it is for the hopes of the Cambodian people.

Untac has succeeded neither in bringing about the ceasefire agreed by all the factions at the Paris peace conference in 1991, nor in curbing banditry.

Mutilated corpses are still seen floating down the Mekong river, and government troops continue to extort money from passing cars and river boats.

In one particularly humiliating incident on a road north of Phnom Penh last month, unarmed Untac troops from Poland saw soldiers shoot dead the driver of a van that had failed to stop at a casual roadblock; then the Poles watched helplessly as the soldiers killed the two passengers in the van in cold blood.

Untac's reputation has been further undermined by traffic accidents involving the UN's big white cars as well as the inevitable problems of whoring and drinking in a country where both are cheap.

There have been successes. Indian army doctors at the Untac field hospital in Siem Reap, for example, have been treating dozens of Cambodians for tuberculosis.

The continuing repatriation of 370,000 refugees from Thailand has been running much more smoothly than expected; and Untac electoral officers have registered 4.7m Cambodians for the general election in May.

But even these successes are now at risk. In its announcement last week of a government offensive against the Khmer Rouge, Untac disclosed that some returned refugees had been conscripted by the government and used as forced labour.

Worst of all, there are doubts about whether Untac can ensure that the elections are 'free and fair', as required by the Paris peace accords. Yesterday Mr Akashi acknow-ledged that he was 'still not satisfied that the conditions for free and fair elections can be met'.

The troops and guerrillas of the four main factions should by now have been regrouped in cantonment areas and disarmed, but the disarmament process was abandoned when the Khmer Rouge refused to co-operate.

UN military observers say the civil war, now essentially between the Vietnamese-installed government and the Khmer Rouge, has intensified since 1991, and both sides are using their weapons to intimidate voters.

Khmer Rouge guerrillas, as well as refusing Untac officials access to most of their territory in north-western Cambodia, have seized voter registration cards from villagers in contested areas.

Government soldiers are suspected of killing more than 20 people working for the royalist party Funcinpec and have been accused by UN electoral officers of widespread intimidation in the last few weeks.

Untac's response has been extraordinarily phlegmatic in the face of repeated setbacks. Lt-Gen John Sanderson, the Untac military commander, has been nicknamed 'No Problem' because of his apparently incurable optimism.

Untac's defence is that it cannot impose peace by force; it is for the Cambodians to fulfil their obligations and for Untac to help them do so.

Certainly Cambodians must accept their share of the blame. Prince Sihanouk, regarded by Cambodians and foreigners alike as the one man who might be able to broker a deal between the various factions, has been spending more time in Beijing than at home.

The Khmer Rouge has flouted the peace agreement and the ceasefire from the start, while on the government side corrupt officials have filled their pockets with ill-gotten gains in the expectation of losing much of their power after the election.

If the elections go ahead as planned in May - and the expectation at the moment is that they will in spite of the fighting - Funcinpec is likely to emerge as the strongest party in the new assembly.

The outcome of the resultant imbalance between political and military power is that Prince Sihanouk, who could become president, and his son Prince Ranariddh, the Funcinpec leader and possible future prime minister, will probably try to construct a coalition to accommodate both the Khmer Rouge and the present regime.

Not everyone believes it will be possible to reconcile the two factions which are even now fighting each other across much of northern and western Cambodia. 'I think regardless of what happens during the elections, you're going to have civil war immediately afterwards,' says one senior Untac military officer. 'I think it's going to be pretty intense, and I think it will reach Phnom Penh.' That view is a pessimistic one, but it is not unique.

----------------------------------------------------------------------- UNTAC INFANTRY ----------------------------------------------------------------------- Miltary sector Battalion Provinces ----------------------------------------------------------------------- 1 Netherlands Banteay Manchey 2 Bangladesh Siem Reap 3 Pakistan Preah Vihear 4 Uraguay Stung Teng, Ratanakiri Kratie, Mondolkiri 5E India Kompong Cham, Prey Veng, Syay Rieng 5W Indonesia Kompong Thom 6 France Takeo, Sihanoukville, Koh Kong, Kampot 8 Malaysia Battambang 9E Bulgaria Kandal, Kompong Speu 9W Tunisia Kompong Chhnang, Pursat Phnom Penh Ghana Phnom Penh special zone ----------------------------------------------------------------------- Source: United Nations Transitional Authority in Cambodia (Untac) -----------------------------------------------------------------------

See Editorial Comment

Kampuchea, Asia P97 National Security and International Affairs CMMT Comment & Analysis P97 The Financial Times London Page 4 1196
Taiwan breaks with the political past: Native-born PM ends reign of Chiang Kai-shek's old comrades Publication 930211FT Processed by FT 930211 By SIMON DAVIES

PRESIDENT Lee Teng-hui has taken a big step towards purging Taiwan of its political domination by the ageing supporters of Chiang Kai-shek, its founder, by appointing the first native Taiwanese, Mr Lien Chan, to be prime minister.

Taiwan has been shaken by political instability in recent months, as former Nationalist soldiers have fought to retain a vestige of control within the ruling Kuomintang (KMT) party against President Lee's reformist Mainstream faction. The old guard has finally lost.

The stock market surged initially on the long-expected news, seen as providing a seal of approval for President Lee's pro-business policies. But a late sell-off by profit-takers led yesterday's Taipei index to close 59 points lower at 3,578.

Mr Lien, 56, former governor of Taiwan Province, is from one of Taiwan's wealthiest families.

Deemed an uncharismatic man, he is expected to act as an executive lieutenant to Mr Lee, without providing any political challenge. With Mr Lien's appointment, President Lee is finally in a position to push forward a democratic reform programme with a minimum of opposition from within his own party.

His success has surprised many analysts, following his poor performance in December's parliamentary elections when the KMT received its lowest-ever vote of 53 per cent.

Taiwan, Asia P91 Executive, Legislative and General Government PEOP Appointments Chan, L Prime Minister Taiwan P91 The Financial Times London Page 4 250
Japanese car industry welcomes US decision not to file dumping suit Publication 930211FT Processed by FT 930211 By MICHIYO NAKAMOTO TOKYO

THE Japanese car industry and authorities yesterday welcomed the decision by the US big three car-makers not to file a dumping suit against Japanese manufacturers, but expressed continuing concern over protectionist tendencies in the US, Michiyo Nakamoto writes from Tokyo.

The ministry of international trade and industry said the decision reflected a sensible judgment. Mr Yutaka Kume, chairman of the Japan automobile manufacturers' association, said it was the 'right decision'. He reiterated the industry's belief it had not been dumping in the US market.

Japan, Asia United States of America P3711 Motor Vehicles and Car Bodies P9611 Administration of General Economic Programs GOVT International affairs P3711 P9611 The Financial Times London Page 4 133
Iraq rejects deal over jailed Britons Publication 930211FT Processed by FT 930211 By REUTER BAGHDAD

Iraq yesterday turned down an appeal to release two Britons serving long jail terms for illegally entering the country, the head of the British Red Cross said, Reuter reports from Baghdad.

Mr Michael Whitlam, director general of the British Red Cross, said he had offered Iraq's deputy prime minister, Mr Tariq Aziz, further humanitarian assistance to the Iraqi people if Mr Michael Wainwright and Mr Paul Ride were set free. Mr Wainwright, 42, was sentenced to 10 years after cycling into Iraq from Turkey last May. Mr Ride, 33, was jailed last August for seven years for straying across the border from Kuwait.

Iraq, Middle East United Kingdom, EC P9721 International Affairs PEOP Personnel News P9721 The Financial Times London Page 4 136
India's exports fall by 12.5% Publication 930211FT Processed by FT 930211 By STEFAN WAGSTYL NEW DELHI

INDIA'S exports in December fell 12.5 per cent to Dollars 1.48bn (Pounds 980m), against the equivalent month in 1991, due to weak demand in the former Soviet Union, the disruptive impact of a prolonged domestic airline strike and unrest following destruction of the Ayodhya mosque.

The figures, released yesterday, confirm the damage done to foreign trade by disruption to travel caused by the strike, and through the violence in Indian cities after the mosque was sacked on December 6.

The fall in exports will hit hopes of achieving a target of 10 per cent export growth in the year to the end of March 1993. A boost to exports is a key element in India's economic reform programme. It needs them to pay for imports of oil and capital equipment.

Imports in December grew 2.6 per cent to Dollars 1.94bn, making for a monthly trade deficit of Dollars 460m. For the nine months to end-December, the deficit was Dollars 3.55bn, more than double the Dollars 1.63bn in the equivalent period of 1991.

Exports rose 3.4 per cent, with those to countries outside the former Soviet bloc up 11.4 per cent. Imports for the nine months rose 16.5 per cent.

India, Asia P9611 Administration of General Economic Programs ECON Balance of trade P9611 The Financial Times London Page 4 233
Delors seeks to elevate EC concerns Publication 930211FT Processed by FT 930211 By DAVID GARDNER STRASBOURG

EUROPEAN Commission president Jacques Delors yesterday launched his most stinging attack to date on the 'renationalisation' of economic policy in the EC, which, through competitive devaluations, was jeopardising plans for economic and monetary union and 'the very idea of a united Europe'.

He warned that Brussels 'will take up the cudgels again' to get controversial items of the EC's social charter, chief among them the European works councils directive, into Community law.

Mr Delors was presenting the Commission programme for 1993-94 to the European parliament, after socialist MEPs had led threats of a vote of no confidence in the EC executive, complaining of its 'minimalist' policy ambitions and democratic shortcomings.

In a combative speech, pleading for a renewal of faith in Europe, Mr Delors called on the EC and its member states to 'stop contemplating their navels.

'The people of Europe are asking: Are you capable of coming up with an economic and social programme that will stem the tide of unemployment and give us confidence in the future?'

Mr Delors has shown signs in the past 10 days of returning to the offensive after the political near-hibernation enforced on the Commission in the wake of Danish voters' rejection of the Maastricht treaty.

The Edinburgh summit in December restored optimism that Denmark and the UK will now ratify the treaty but colleagues acknowledge that Mr Delors - who wrote yesterday's 'state of the union' address himself - is treading a fine line. 'We've been told to keep our heads down on anything affecting ratification. . . . or which could be seen as power-grabbing,' says one senior Commission official. 'But we have agreed to take a firm line on principle.'

Although he named no member state, Mr Delors seemed yesterday to aim his sharpest barbs at the UK, as he urged co-ordination in macroeconomic and monetary policy against 'the siren voices tempting us to go it alone', and vowed to make the EC's social charter - rejected by the UK - a reality.

'Competitive devaluations are not the solution to the problems facing us today; history teaches us otherwise,' Mr Delors insisted, echoing French premier Pierre Beregovoy's attack on the UK for pushing sterling down at the expense of other EC currencies.

He also implicated Germany in his critique, referring to the 'glimmer of hope' brought by last week's German interest rate cuts, after 'months of expensive pussy-footing'.

MEPs voted by 271:95 to approve the new Commission.

European Economic Community (EC) P9611 Administration of General Economic Programs P9721 International Affairs CMMT Comment & Analysis P9611 P9721 The Financial Times London Page 3 447
German motorway charge drives into trouble Publication 930211FT Processed by FT 930211 By QUENTIN PEEL BONN

THE German government's plan to impose a new road tax on autobahn users ran into a barrage of abuse yesterday, mostly from motorists.

As Germans woke up to the fact that their favourite weekend pastime - alternately dicing with death at unlimited speeds, and sitting in autobahn traffic jams - was going to cost them up to DM400 (Pounds 166) a year, the flak started flying.

Mr Otto Flimm, president of ADAC, the motorists' club, said his members already paid petrol taxes and it was unreasonable to make them pay twice. He suggested a special tax on lorries.

Mr Ekkehard Gries, transport spokesman of the Free Democrats (FDP), the crusading free marketeers in the ruling coalition, called the plan 'nothing more than money-skimming'.

Even the left wing, anti-motor lobby was critical. Mr Franz Steinkuhler, leader of the engineering union, IG Metall, called it 'an act of monumental dim-wittedness'.

The Greens said making motorists pay to drive on motorways would only encourage them to use them more, in order to get value for their money. According to an instant opinion poll by the Forsa research institute, 46 per cent of Germans will stop using the autobahns if the charge is introduced. Some 12 per cent said they would take to public transport, and 37 per cent will carry on regardless.

The final blow came from Mr Klaus Steffenhagen, chairman of the police trade union in North Rhine-Westphalia, where a web of autobahns covers the industrial heartland. He said his members were already overworked and underpaid, and would not enforce the new system. 'We will fight this one all the way,' he said, 'to make sure our members don't have to turn into tax inspectors.'

The extraordinary backlash took Chancellor Helmut Kohl and his colleagues by surprise. The transport ministry hastily explained that the tax was only a first step, to an electronic toll system which would charge motorists by the mile.

Mr Dieter Vogel, the government spokesman, said no date for its introduction, nor any figure for the motorway charge, had been agreed.

Germany, EC P9621 Regulation, Administration of Transportation P4785 Inspection and Fixed Facilities GOVT Taxes P9621 P4785 The Financial Times London Page 3 379
Belgians promise to defend franc amid new ERM jitters Publication 930211FT Processed by FT 930211 By ANDREW HILL, ANTONIA SHARPE and DAVID WALLER BRUSSELS, LONDON,, FRANKFURT

BELGIUM said yesterday it would use 'all possible means' to defend its currency, as the Belgian franc was caught up in the latest bout of nervousness in the exchange rate mechanism (ERM).

The Belgian National Bank raised its end-of-day interest rates - applied to primary dealers and banks' daily currency investments - from 8.8 per cent to 9.3 per cent, to help protect the currency.

The step helped the Belgian franc to strengthen within the ERM, after several days of weakness.

Belgium's interest rate action, countering the recent trend of lower European credit costs, came as the German Bundesbank yesterday fractionally cut its money market rates.

In its first money market operations since it cut the Lombard and discount rates last Thursday, the Bundesbank reduced its securities repurchase rate from 8.57-8.58 per cent to 8.50-8.51 per cent.

The cut was smaller than expected after the Bundesbank had cut the Lombard rate by 0.5 of a point and the discount rate by 0.25 of a point.

In a move related to last week's heavy ERM intervention to support the Danish krone, Denmark's central bank yesterday borrowed Dollars 1bn in the international bond market to strengthen its foreign exchange reserves.

Mr Niels Sorensen, a senior official at Denmark's National Bank, said the central bank's reserves had fallen considerably in February. 'When the speculation subsides, money usually flows back (into the krone) but, since we are not sure when that will be, we thought it would be a good idea to do some borrowing,' Mr Sorensen said.

Mr Alfons Verplaetse, governor of the Belgian central bank, said he could not envisage a situation in which the German and French central banks would collaborate to support the French franc and the D-Mark, leaving the Benelux currencies undefended.

Analysts say the Belgian franc - one of the strongest ERM currencies during the last few months - is being hit by doubts about Belgium's slowing economy and growing budget deficit. It is also being affected by uncertainty about the future of the country after the vote to transform Belgium into a federal state.

Belgium, EC P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories ECON Balance of payments ECON Balance of trade P9311 P601 The Financial Times London Page 3 400
Belgium vows to defend franc amid new ERM jitters Publication 930211FT Processed by FT 930211 By ANDREW HILL, ANTONIA SHARPE and DAVID WALLER BRUSSELS, LONDON, FRANKFURT

BELGIUM said yesterday it would use 'all possible means' to defend its currency, as the Belgian franc was caught up in the latest bout of nervousness in the exchange rate mechanism (ERM).

The Belgian National Bank raised its end-of-day interest rates - applied to primary dealers and banks' daily currency investments - from 8.8 per cent to 9.3 per cent to help protect the currency.

The step helped the Belgian franc to strengthen within the ERM, after several days of weakness.

Belgium's interest rate action, countering the recent trend of lower European credit costs, came as the German Bundesbank yesterday fractionally cut its money market rates.

In its first money market operations since it cut the Lombard and discount rates last Thursday, the Bundesbank reduced its securities repurchase rate from 8.57-8.58 per cent to 8.50-8.51 per cent.

The cut was smaller than expected after the Bundesbank cut the Lombard rate by 0.5 of a point and the discount rate by 0.25 of a point.

In a move related to last week's heavy ERM intervention to support the Danish krone, Denmark's central bank yesterday borrowed Dollars 1bn in the international bond market to strengthen its foreign exchange reserves.

Mr Niels Sorensen, a senior official at Denmark's National Bank, said the central bank's reserves had fallen considerably in February. 'When the speculation subsides, money usually flows back (into the krone), but since we are not sure when that will be, we thought it would be a good idea to do some borrowing,' Mr Sorensen said.

In Brussels, Mr Alfons Verplaetse, governor of the Belgian central bank, said: 'I'm convinced that right now there is no speculation going on against the Belgian franc.

'It's true to say that the currency markets are very nervous, but whatever the nature of this nervousness one can't say that we (only) defend the Belgian franc when things are going smoothly.'

Mr Verplaetse added that he was sure the French franc was 'a solid currency'.

He said he could not envisage a situation in which the German and French central banks would collaborate to support the French franc and the D-Mark, leaving the Benelux currencies undefended.

Analysts say the Belgian franc - one of the strongest ERM currencies during the last few months - is being hit by doubts about Belgium's slowing economy and growing budget deficit. It is also being affected by uncertainty about the political future of the country after Saturday's vote to transform Belgium into a federal state.

Dealers believe the Belgian central bank last week widened slightly the narrow ERM band within which it has held the franc steady against the D-Mark since 1990.

Belgium, EC P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories ECON Balance of payments ECON Balance of trade P9311 P601 The Financial Times London Page 3 493
Bonn gloomier on outlook for west Germany Publication 930211FT Processed by FT 930211 By QUENTIN PEEL BONN

THE German government yesterday produced its gloomiest annual economic report in a decade, forecasting a decline in gross domestic product of up to 1 per cent. It was promptly attacked by the opposition for excessive optimism.

Mr Gunter Rexrodt, the newly appointed economics minister, said all the economic indicators for west Germany were negative at the turn of the year, including industrial orders, production levels, investment activity, capacity utilisation and - above all - unemployment.

In the east, however, there were a few hopeful signs, especially in construction activity and the service sector, although the economic recovery was still decidedly hesitant, he said.

The other element of extremely cautious optimism to emerge from the report, presented to both cabinet and parliament yesterday, was the forecast that wages will grow by less than the rate of inflation in the coming year. Gross wages would rise between 2.5 and 3 per cent, compared with price rises of about 3.5 per cent, it suggests.

Mr Rexrodt said the priority for the German government must be to avoid slipping into an all-out recession, although Mr Otto Lambsdorff, his own party leader in the Free Democrats (FDP), says the economy is already in its sharpest post-war recession.

The minister stressed the importance of the solidarity pact under discussion between the central government, the 16 Lander and the opposition Social Democrats, as well as employers and trade unions.

He said he had been instructed to produce by September a report on how to improve the attractiveness of Germany as an investment location, reducing the high cost structure and increasing labour mobility.

The key figures in the government's forecast for the year are a decline in GDP of between zero and 1 per cent for west Germany, an expansion of 5 to 7 per cent in the east, with an all-German forecast of zero growth.

Average unemployment in the west is predicted to rise by some 450,000 to 2.25m, or a rate of 7.5 per cent, and to increase only marginally in the east to about 1.2m, a rate of 15 to 16 per cent. The national unemployment average would be 9 per cent, the report says.

It forecasts a growth in exports of 1.5 to 2.5 per cent in the west (8 to 10 per cent in the east, where exports to eastern Europe have collapsed), based on the assumption of a steady revival in world trade, especially in the US economy.

It is based on important assumptions: of a successful conclusion to the Gatt round of trade liberalisation talks, gradual easing of international interest rates, a slight depreciation in the D-Mark's value, substantial efforts to restrict public spending, and wage moderation (including a slowdown in the rate of equalisation of eastern and western wages). It particularly criticises the 'blatant disproportion' between unit wage costs in east and west Germany, with the former now 60 per cent higher than the west, in spite of the collapse of the eastern economy.

Mr Wolfgang Roth, SPD economics spokesman, said there was no clear indication where the 5-7 per cent growth rate in east Germany would come from, given the collapse of east German industry. A zero overall national growth rate would require an immediate reversal of a steady contraction.

He sharply criticised the Bundesbank for its failure to cut its lead interest rates more aggressively. He said last week's cuts - half a percentage point of the Lombard rate, from 9.5 to 9 per cent, and a quarter point off the discount rate, to 8 per cent - were a 'mincing step' which was 'pure poison for the economy'.

Germany, EC P9611 Administration of General Economic Programs STATS Statistics ECON Gross domestic product ECON Employment & unemployment ECON Balance of trade P9611 The Financial Times London Page 2 646
Barre sounds the alarm over Anglo-Saxon ambush of franc Publication 930211FT Processed by FT 930211 By WILLIAM DAWKINS

THE CURRENCY markets will launch a heavy but unsuccessful attack against the franc next month, during the French parliamentary election, according to Mr Raymond Barre, former prime minister of France.

Mr Barre, a leading proponent of the hard franc policy and a senior ally of the UDF centre-right party, said the attack will be inspired by Anglo-Saxon financial institutions unwilling to see the creation of a European currency which could rival the dollar. He does not suspect any government influence, he emphasised. The attack will be beaten off by joint intervention by the Banque de France and the Bundesbank.

'I am not among those who see plots everywhere. It's not at all my temperament. But I really think there is a will in a certain number of economic and financial circles not to promote - in fact to do everything to prevent - the creation of European monetary and economic union, and in consequence to blow up the EMS,' said Mr Barre.

He would not be drawn further, beyond saying that he knew of a research study by (unidentified) financial institutions analysing the risks posed by a single European currency for their own businesses. 'It's my absolute and objective conviction. I expect, as a result, that there will be a strong assault on the franc before the elections, or in the period of the elections or just after the elections,' he said.

The vote, on March 21 and 28, is likely to produce a record parliamentary majority for the opposition centre-right alliance of the RPR, which is divided over the Maastricht treaty on political and monetary union, and the pro-European UDF. 'When these foreign circles see that a strong part of RPR is hostile to the Maastricht treaty and to French monetary policy, they ask themselves if a government of the new majority tomorrow would be unified enough to hold the political line.'

The right-wing leaders are so firmly in favour of holding to the franc fort policy that the new government would find it very difficult to let the franc float or to go for devaluation, he argued. 'Absolute determination' will be required of the new administration.

If monetary union succeeds in some form, as Mr Barre believes it will, he argues that the new European currency will have the status of a widely used commercial, financial and reserve currency, similar to sterling at the end of the 19th century. 'The day you have a European currency which is used in the trade exchanges of the first commercial power in the world, the European Community, the day when it's possible for Community banks to use the Ecu, and when their reserves will be held in the Ecu, we will have the real alternative to the dollar. Money is power - that's what it's about,' said Mr Barre.

He believes that the future currency, possible towards the end of the decade, will initially include seven (France, Germany, the three Benelux countries, Spain and Italy) or eight members.

The Bundesbank will again support the French currency in the speculative attack likely next month, partly because 'it won't want to take the risk of letting the EMS collapse. The Bundesbank cannot take this responsibility.' But, just as important, said Mr Barre, is that 'the Bundesbank considers that the fundamentals of the French economy are satisfactory. I am convinced that, if the fundamentals had been negative, the Bundesbank would never have supported them, even in taking into consideration the political factors.'

Editorial comment, Page 19

France, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs CMMT Comment & Analysis Barre, R Former Prime Minister France P9311 P9721 The Financial Times London Page 2 629
Ukraine's shipping minister sacked Publication 930211FT Processed by FT 930211 By CHRYSTIA FREELAND KIEV

THE Ukrainian government yesterday sacked Mr Viktor Pylypenko, the merchant marine minister, amid allegations of corruption. He is accused of involvement in corruption at the Black Sea Shipping Company, which a government commission alleges evaded up to Dollars 20m in taxes and sold more than 30 ships illegally.

The decision to sack the minister - part of a wider anti-corruption drive launched by Mr Leonid Kushma, the prime minister - must be approved by the Ukrainian parliament, of which Mr Pylypenko is a member.

A spokesman for the government accused him this week of having spent more than Dollars 100,000 to build a lavish bathroom in his office.

The allegations yesterday are the most recent charges to be levelled against the company. With 206 vessels, it is Ukraine's largest shipping concern, and a potential magnet for foreign investors.

Ukraine, East Europe P9621 Regulation, Administration of Transportation PEOP Personnel News Pylpenko, V Merchant Marine Minister Ukraine P9621 The Financial Times London Page 2 176
French right plans state sell-offs: Two opposition parties unveil manifesto for March elections Publication 930211FT Processed by FT 930211 By WILLIAM DAWKINS PARIS

TAX reforms and state spending cuts, and an estimated FFr50bn (Pounds 6.25bn) worth of privatisations over three years are promised in an election manifesto presented jointly yesterday by France's two centre-right opposition parties.

Greeted as 'empty, vague and worrying' by the ruling Socialists, the programme is less sweeping than that of the previous right-wing government in 1986-1988 and reflects the opposition's limited room for manoeuvre at a time of slow growth and monetary instability. 'Clarity, change and prudence,' were the key words, said Mr Francois Bayrou, UDF secretary general.

The opposition alliance, fighting as UPF or Union for France, is set to win the elections, on March 21 and 28, by a record margin, with around two-thirds of the seats in the national assembly, according to recent polls. Yet the manifesto does little to reconcile splits between the pro-European UDF and the Gaullist RPR, half of whose national assembly deputies voted against the Maastricht treaty on European monetary and political union last year.

On monetary policy, the future French government says it will present plans in the spring to make the Bank of France independent and do all that is needed to support the franc. It proposes a joint Franco-German monetary initiative 'so as not to lose the achievements of 13 years' co-operation in the EMS'. This is likely to antagonise the anti-Maastricht faction in the RPR.

On privatisation, the UPF plans to sell all state-owned banks, insurers and industrial companies operating in competitive markets. An independent agency will set share prices and select stable shareholders for the privatisation candidates. A significant amount of shares will be reserved for private investors.

State monopolies, like telecommunications, electricity and gas, and transport, will be opened to competition and their equity capital will be gradually opened to outside investors. The privatisation programme is far less ambitious than that of the last right-wing government, estimated by Mr Edouard Balladur, finance minister of the time, at FFr140bn; a reflection of the fact that today's stock market conditions are poorer.

On the domestic economy, the manifesto promises a job creation drive, through a 'pact for jobs' between companies and regions to boost training and recruitment, to be rewarded by lower social security and other charges. In addition, tax breaks are on offer for small businesses. Taxes overall must come down, especially for the middle classes, one-man businesses and to help research and training, it says.

It promises tax and other incentives - including a large public works programme - for construction and housing.

On the government's finances, the UPF plans to reduce the budget deficit - officially estimated at FFr184bn last year - by FFr110bn over the next three years, according to Mr Alain Juppe, the RPR's secretary general. Of this, FFr30bn to FFr40bn would come from spending cuts, FFr15bn from the impact of growth on tax revenue, and the rest from privatisations.

France, EC P8651 Political Organizations P91 Executive, Legislative and General Government GOVT Government News P8651 P91 The Financial Times London Page 2 521
Portuguese telecoms company to cut its workforce by 20% Publication 930211FT Processed by FT 930211 By PETER WISE LISBON

TELECOM Portugal, one of the country's three telecommunications operators, plans to cut its workforce by 20 per cent by the end of 1994.

The shedding of more than 2,000 of Telecom's 11,000 employees is part of a plan to restructure the company to take account of the European Community single market and in preparation for at least partial privatisation, company sources said.

Management will encourage workers to leave through early retirement and voluntary, rather than forced, redundancies. The move follows 1,500 job losses at Telecom last year.

The measure will include streamlining the five-member board - one of the proposals made in a study by consultants MAC-Group. Telecom currently has accumulated loses of Es150bn (Pounds 698m) and assets of Es400bn. Tariffs will be raised 5.5 per cent later this year. The inflation rate is expected to reach 7 per cent.

Telecom was recently hived off from Correios e Telecomunicacions de Portugal, which will remain the public postal service. Telecom and the two other telephone operators, Telefones de Lisboa e Porto and Marconi, will be brought together as three separate divisions of a holding company, Comunicacoes Nacionais.

The Telecommunications Ministry wants to privatise the companies gradually to give Portuguese investors time to pay and keep the country's telecommunications out of foreign hands.

Telecom Portugal Telefones de Lisboa e Porto Cominicacoes Nacionais Portugal, EC P481 Telephone Communications P9631 Regulation, Administration of Utilities PEOP Labour COMP Company News P481 P9631 The Financial Times London Page 2 262
World News in Brief: Thirty years for IRA chief Publication 930211FT Processed by FT 930211

IRA quartermaster James Canning, 37, was jailed for 30 years at the Old Bailey for conspiring to cause explosions and possessing explosives. His lover Ethel Lamb, 60, was jailed for three years for assisting him.

United Kingdom, EC P9229 Public Order and Safety, NEC GOVT Legal issues PEOP Personnel News P9229 The Financial Times London Page 1 71
World News in Brief: Iraq rejects plea for Britons Publication 930211FT Processed by FT 930211

Iraq turned down an appeal for the release of Britons Michael Wainwright and Paul Ride, who are serving long jail terms for entering the country illegally.

Iraq, Middle East United Kingdom, EC P9721 International Affairs PEOP Personnel News P9721 The Financial Times London Page 1 59
Hurd warns of showdown with Euro-sceptics Publication 930211FT Processed by FT 930211 By IVO DAWNAY, DAVID GARDNER and IVOR OWEN

THE government threw down the gauntlet to Conservative Euro-sceptics and the opposition parties yesterday by insisting it would rather sink the Maastricht treaty outright than accept British adherence to the social chapter.

But as Mr Douglas Hurd, the foreign secretary, issued the warning, Lord Tebbit, a former party chairman, urged Tory MPs to defy the leadership and vote for a Labour amendment on the social chapter - expressly in order to destroy the treaty.

In a vituperative speech to political journalists, the arch Euro-sceptic argued that support for the amendment would not lead to its imposition. He said: 'Those who are fighting to preserve self-government for Britain are well entitled to use every procedural device to destroy the treaty'.

Lord Tebbit's intervention provoked an outcry from government loyalists and put the anti-Maastricht faction on the defensive.

Sir Teddy Taylor, a leading opponent of the treaty, described it as unhelpful, but added: 'There is no way we are going to co-operate in the treaty going through if we don't get a referendum.'

The latest outbreak of internecine warfare within the Tory ranks came as Mr Jacques Delors, the European Commission president, joined the fray by implicitly criticising the UK with his most stinging attack yet on the 'renationalisation' of economic policy in the EC.

In a Strasbourg speech presenting the Commission's programme for 1993-94, he said competitive devaluations were jeopardising plans for economic and monetary union and 'the very idea of a united Europe'.

Mr Delors also warned that Brussels would 'take up the cudgels again' to get controversial items from the EC's Social Charter into Community law - a move that will confirm the worst fears of British Conservatives.

The government's decision to raise the stakes over the vote - in spite of commanding only a narrow 21-vote overall majority - came after careful consultation between Mr Hurd and Mr John Major, the prime minister.

In a BBC radio interview, the foreign secretary called on Conservative MPs to take note that: 'We are not going to join a treaty which imposes the social chapter.'

Downing Street insisted that the prime minister was confident the party would support the government in the Commons' vote, expected in about six weeks. But a senior official stressed that there was no possibility of Britain returning to treaty negotiations with its European Community partners if the amendment was passed.

'The politics of this is that once you open up this can of worms everything comes out. We can only ratify the treaty that we negotiated. If it is not ratified by all 12, the treaty does not come into being,' he said.

In fact, a defeat for the government on Labour's amendment would not necessarily halt the ratification process. The government would have opportunities both in the House of Lords and at the Commons report stage to reverse it.

Privately, Labour acknowledged it had little chance of imposing the social chapter on the government, but every effort would be made to maximise the Conservatives' discomfiture.

'Polecat' fails, Page 9 Editorial Comment, Page 19

United Kingdom, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 1 543
Tiny Rowland names joint chief executive Publication 930211FT Processed by FT 930211

Tiny Rowland and Dieter Bock explained yesterday how a new joint chief executive arrangement between the two men would operate at Lonrho, the international trading conglomerate. Mr Rowland, who has run the company for the past 31 years, is likely to spend more time in Africa, while German financier Mr Bock will focus on financing. The main aim was to continue to cut borrowings, he said. Although Mr Rowland named Mr Bock as his successor, he said he intended to continue as joint chief executive for at least three years.

Report, Page 21

Lonrho United Kingdom, EC P6719 Holding Companies, NEC P5511 New and Used Car Dealers P2211 Broadwoven Fabric Mills, Cotton P2085 Distilled and Blended Liquors P2082 Malt Beverages P1041 Gold Ores PEOP Appointments Bock, D Joint Chief Executive Lonhro P6719 P5511 P2211 P2085 P2082 P1041 The Financial Times London Page 1 156
Stock and Currency Markets Publication 930211FT Processed by FT 930211

--------------------------------------------------------------- STOCK MARKET INDICES --------------------------------------------------------------- FT-SE 100: 2,816.4 (-14.9) Yield 4.34 FT-SE Eurotrack 100 1,121.50 (-2.64) FT-A All-Share 1,374.08 (-0.5) FT-A World Index 141.89 (+0.1%) Nikkei 17,089.90 (+67.63) New York: Dow Jones Ind Ave 3,412.42 (-2.16) S&P Composite 446.22 (+0.89) --------------------------------------------------------------- US CLOSING RATES --------------------------------------------------------------- Federal Funds: 2 13/16% (2 7/8%) 3-mo Treas Bills: Yld 2.983% (2.983%) Long Bond 104 15/32 (105 3/16) Yield 7.25% (7.193%) --------------------------------------------------------------- LONDON MONEY ---------------------------------------------------------------

3-mo Interbank 6 1/4% (same) Liffe long gilt future: Mar 101 13/16 (Mar101 1/16) --------------------------------------------------------------- NORTH SEA OIL (Argus) --------------------------------------------------------------- Brent 15-day (Mar) dollars 18.40 (18.25) --------------------------------------------------------------- Gold --------------------------------------------------------------- New York Comex (Feb) dollars 333.4 (329.4) London dollars 330.15 (328.15) --------------------------------------------------------------- STERLING --------------------------------------------------------------- New York: Dollar 1.42365 (1.4305) London: Dollar 1.4275 (1.4305) DM 2.3625 (same) FFr 7.995 (7.9975) SFr 2.19 (2.1875)

Y 172.5 (173.5) Pound Index 76.4 (76.6) --------------------------------------------------------------- DOLLAR --------------------------------------------------------------- New York: DM 1.6605 (1.65375) FFr 5.6146 (5.6012) SFr 1.5385 (1.532) Y 121.235 (121.175) London: DM 1.655 (1.652) FFr 5.6 (5.59) SFr 1.534 (1.529) Y 120.9 (121.35) Dollar Index 67.0 (same) Tokyo close Y 121.52 ---------------------------------------------------------------

United Kingdom, EC Japan, Asia United States of America P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 226
New rescue plan for threatened pits: Draft white paper would avoid legislation - MPs' recommendations sidestepped Publication 930211FT Processed by FT 930211 By DAVID OWEN and MICHAEL SMITH

THE DRAFT white paper on the future of Britain's threatened coal industry has passed over most of the main recommendations of the Commons trade and industry committee in favour of an alternative plan to expand the market without new legislation.

The government hopes its four-pronged approach will create an extra market of, on average, about 12m tonnes a year for domestic deep-mined coal. This could be higher in the first year and the package would save about a dozen of the 31 mines threatened with closure.

The plan would also pave the way for the government to press ahead with privatisation of the industry next year.

The draft under discussion envisages expanding the market for deep-mined coal by:

blocking imports of orimulsion - a bitumen-based fuel;

slowing the planned rundown of coal stocks;

cutting output from open-cast mines;

using subsidies to halt growth in coal imports.

The draft avoids the committee's more radical proposals - halting purchases of nuclear-generated electricity from France, cutting the Pounds 1.2bn domestic nuclear levy and postponing electricity market liberalisation. All these measures would require legislation.

The committee's recommendations would result in an additional market of at least 16m tonnes a year, implying more than half the threatened pits could be rescued. In an unusual move, Mr Richard Caborn, the committee's Labour chairman, plans to tell a press conference today that its proposals could be implemented for much less than the Pounds 500m originally stated.

A recent FT survey of the Conservative MPs most likely to rebel over coal indicated that proposals to save between 12 and 14 pits would safeguard the government's Commons majority. But the rescue plan hinges on cajoling National Power and PowerGen, the main electricity generators for England and Wales, into signing new five-year coal contracts. These would be over and above the 40m tonnes next year and 30m tonnes in the subsequent four years that they have tentatively agreed to buy.

Senior ministers are relying on the combination of a direct Treasury subsidy and the implicit threat of a Monopolies and Mergers Commission inquiry into the power industry to secure a deal.

They want the two generators, in which the government retains a 40 per cent interest, to sign a 'heads of agreement' by the end of this month.

While ministers acknowledge they are meeting resistance from the generators, which are not legally obliged to buy any coal, they think the promise of five years of stability in the industry will persuade them to back down.

Mr Michael Heseltine, trade and industry secretary, has concluded that fresh legislation would threaten lengthy rows at Westminster and provoke a backlash from the generators' non-coal suppliers.

He has been advised that the government's plan would not fall foul of the European Commission or the General Agreement on Tariffs and Trade. If agreement is reached, he will present the package to MPs as a strictly limited programme to phase out existing coal subsidies, emphasising that present arrangements for the electricity market involve an implicit subsidy for coal of around Pounds 1bn a year.

This would be reduced to Pounds 350m or less next year and to nothing by 1998.

Spreading the rundown of stocks over five years rather than the expected two would have the most significant early impact, making room for more than 6.5m tonnes of additional consumption in both 1993-94 and 1994-95.

Pegging coal imports at current levels and effectively banning orimulsion could each expand the annual market for domestic deep-mined coal by 3m tonnes by 1995-96. Cutting open-cast output to 10m tonnes a year could in time lift demand by a further 4m tonnes.

But excessive coal stocks and the availability of cheap imports have helped to strengthen the generators' bargaining position: they could in theory avoid buying any British coal at all in 1993-94, as the select committee report acknowledged.

Michael Smith adds: Mr Neil Clarke, British Coal chairman, last night expressed strong reservations about the white paper's expected contents, saying failure to postpone electricity market liberalisation would leave British Coal 'prey to the market power of its principal customers'.

Electricity suppliers, Page 7

United Kingdom, EC P12 Coal Mining P9651 Regulation of Miscellaneous Commercial Sectors GOVT Draft regulations P12 P9651 The Financial Times London Page 1 733
OFT reviews UK stock market rules Publication 930211FT Processed by FT 930211 By RICHARD WATERS

THE Office of Fair Trading is investigating London stock exchange rules which have helped to centralise share trading on the UK's official stock market.

The rules guarantee that the exchange's share prices are always the best available on any electronic price system, encouraging investors to use the official market rather than trading outside the exchange.

Unusually among leading international markets, the London exchange controls almost all the turnover of shares in the companies it lists. The New York stock exchange has seen trading seep away to rival trading systems in recent years, while the leading European bourses have lost business to London.

The Securities and Futures Authority, the UK regulatory body, says less than 5 per cent of turnover in UK companies' shares takes place outside the exchange.

The exchange's rules 335 and 362 forbid brokers and dealers from quoting better prices on any other electronic trading system than the ones they quote on the exchange's own system. The regulations cover both the domestic stock market, prices for which are carried on Seaq (the Stock Exchange Automatic Quotation system), and the international share market which has grown up rapidly in London in recent years on the back of the international Seaq service.

The rules were adopted at the time of Big Bang in 1986, when share trading moved off the exchange's floor to be replaced by a telephone market supported by the price quotation system.

The OFT said it was looking at the regulation, along with other exchange rules. It added the investigation was in its early stages, and that it was still gathering information on the effect of the regulation.

The exchange said: 'We're not aware of any investigation by the OFT, or of any complaints about our rules.' The competition authorities have fought a running battle over the exchange's rulebook in recent years, concerned that vestiges of the old exchange cartel have survived the deregulation of the mid-1980s.

A number of rivals want to challenge the exchange's dominance of London trading. Tradepoint Financial Networks, a system headed by Mr Stanley Ross, one of the founding figures of the Eurobond market, last week completed efforts to raise Dollars 11m and plans to launch later this year. Instinet, the Reuters subsidiary which has taken a substantial share of US share trading, has also tried to break into London.

London Stock Exchange (UK) United Kingdom, EC P6231 Security and Commodity Exchanges P9651 Regulation of Miscellaneous Commercial Sectors MKTS Market shares TECH Standards P6231 P9651 The Financial Times London Page 1 434
London Stock Exchange: Fisons in the bid frame Publication 930211FT Processed by FT 930211 By CHRISTOPHER PRICE, JOEL KIBAZO, PETER JOHN and STEVE THOMPSON

TAKEOVER speculation over Fisons increased yesterday, partly as a result of heavy trading in the derivatives market by Morgan Stanley, the US investment bank and securities house. The whole drugs sector was in favour again, rebounding from its recent poor performance on the belief that losses related to US healthcare reforms had been overdone. However, Fisons ended the day, against the overall market trend, as one of the strongest performers in the FT-SE Index of London's 100 most highly valued stocks.

Rumours have circulated around the company for some time but speculation has increased over the past few days. One bearish analyst said yesterday: 'The company is an obvious takeover target because the management has lost credibility.' Hanson, French group Rhone Poulenc, and ICI's soon to be demerged pharmaceuticals arm Zeneca, were cited as companies that might be interested in making an offer. Fisons shares avoided the malaise in the market on Tuesday and yesterday the shares added 10 at 246p. Turnover of 5.8m was at the high end of average volumes and was further boosted by the equivalent of another 2.5m shares in the options market.

Insurers troubled

The well-flagged Pounds 428m rights issue by Commercial Union caused no real problems for the shares, which bounced after an initial markdown by dealers and a brief flurry of selling. But it troubled other composites as the market focused on the next potential group to raise equity capital.

CU shares dropped to 580p following the cash call news before stabilising and staging a strong upward push to close 12 higher at 610p. Mr Trevor May, insurance analyst at BZW, said the market's support reflected the company's 'proven track record' but cautioned that the shares were 'fully valued'. Other specialists were more enthusiastic. Mr Youssef Ziai, at Morgan Stanley, said worries about a cash call had acted as a brake on the shares and he now expected a period of outperformance.

Switching out of General Accident to take up the CU 'rights' and worries that GA may be the next insurer to raise capital saw the former's shares 26 weaker at 569p. It was pointed out that GA followed CU in raising capital via preference issues last year. Guardian Royal eased 3 to 167p but was not seen as likely to launch any fund-raising short term. Nor was Royal, 4 better at 273p.

Reuters hit

News and information group Reuters Holdings dropped sharply on selling from the US following the company's results statement on Tuesday, as well as some disillusionment among UK investors.

Reuters shares were below 1200p at one stage and closed a net 66 lower at 1316p on active turnover of 3.4m, the highest for almost a year. The slide was prompted principally by a fall of Dollars 3 7/8 in the American Depositary Receipts on Wall Street ahead of a results presentation for US analysts.

In addition, agency broker James Capel reiterated its sell recommendation, arguing that the stock was over-rated and needed to fall another 100p before reaching a justifiable level.

A barrage of sell recommendations unsettled the oil majors, where BP dipped 5 to 266p and Shell 7 to 588p.

Mr Jeremy Hudson, oil analyst at Lehman Brothers, described both stocks as trading sells ahead of this weekend's Opec meeting. He said BP has risen 46 per cent since the dividend cut last August and had outperformed the FT All-Share Index by 11 per cent during the last month.

'There is very little room for disappointment at the Opec meeting or for any reversal of the pound against the dollar,' said Mr Hudson, who added that current valuations now appear to discount most of the strong 1994 earnings recovery prospects. NatWest Securities adopted a bearish stance on Shell, citing 'awful margins in refining and chemicals'.

There was no let-up in takeover speculation surrounding the bank sector, with old favourites Standard Chartered and TSB both sharply higher on stories that Lloyds Bank could be about to embark on a big bid.

Lloyds is scheduled to announce preliminary results tomorrow. TSB closed 8 1/2 up at 171p on heavy turnover of 9.6m shares but remained well below the 179p all-time peak they achieved at the start of last week when the latest spate of rumours first emerged.

Standard Chartered, due to report 1992 profits well ahead of last year's Pounds 205m on March 10, jumped 21 to 631p. Lloyds held at 515p.

Trafalgar House gained 2 at 86 1/2 p on talk that an expected cash call would be in the form of convertible stock issued to shareholders and amount to between Pounds 200m and Pounds 300m.

Cadbury-Schweppes rose 6 to 467p on talk of a positive note and upgrade by SG Warburg. While moving its figures from the bottom to mid-range in the market, Warburg was seemingly pointing up Cadbury's currency attractions and the fading need for a rights issue as a result.

Selected food retailers bounced after the recent pounding on the back of VAT fears. Argyll Group firmed 6 to 367p, Kwik Save 7 to 802p and Tesco 5 to 239p. J. Sainsbury missed the party, the shares being under a shadow from a line of unplaced stock. They closed steady at 529p. However, Albert Fisher managed to place its overhang and the stock rose 3 to 69p. Turnover was a large 11m.

Bid talk around Alexon refused to die, the shares adding a penny at 82p. Boots shed 4 to 486p on worries over NHS prescription costs. Kingfisher fell 10 to 516p on concern over the rights issue to fund its supposed purchase of Darty, the French electrical retailer. Storehouse confirmed the departure of its chief executive and it lost 10 to 184p.

ICI fell 26 to 1145p after investors sold heavily in the US on Tuesday night. There was also growing concern that actual and expected rights issues, combined with the UK government's heavy gilts programme, would drain money from the market and cast doubt over any ICI fund-raising exercise. If ICI is unable to raise money after its results on February 25, some analysts are doubtful over the likelihood of the proposed split between the chemicals and pharmaceuticals arms going ahead.

BOC firmed 3 to 739p ahead of figures today. The market is looking for a first quarter profit of about Pounds 89m.

Shares in Simon Engineering tumbled after the company revealed a Pounds 5m contract loss. The news prompted analysts to reduce profits forecasts and the shares fell 20 to 119p.

Bid talk in Vickers gathered momentum and the shares jumped 8 to 132p. Industrial group Charter Consolidated, which sold its stake in Johnson Matthey on Tuesday, was once again mentioned as a likely predator. Charter shares were a penny easier at 655p while those of Johnson fell 5 to 468p.

Late selling of Lucas Industries saw the shares give up 6 to 139p in trade of 3.3m. The company has been seeing analysts and some said trading conditions in the automotive division are worse than expected, although this might be offset by tough cost-cutting plans.

Heavy two-way business persisted for a third day in Forte, with dealers saying that buying led by James Capel was being met by bears in the market still convinced that the dividend may be at risk. After gaining against the market trend, the shares lost 4 to 186p in heavy turnover of about 8m.

French press talk persisted over changes being planned by Walt Disney management to their arrangement with Euro Disney which would be beneficial to the latter's shareholders. The shares surged, but later retreated to close just 2 ahead at 915p.

Rights issue talk pervaded the drinks stocks, with the usual favourite, Allied Lyons, being joined by Grand Metropolitan. According to market gossip, GrandMet was casting around to make a Pounds 200m-plus call in order to finance debt and a possible acquisition. Its shares weakened 7 to 437p, with Allied 3 off at 586p.

Market rumours ahead of the latest consultation from Ofwat, the water regulatory authority, proved wide of the mark. The paper, released yesterday, said that Ofwat would 'look carefully' at the way growth is financed.

NEW HIGHS AND LOWS FOR 1992/93

NEW HIGHS (108).

BRITISH FUNDS (8) Funding 3 1/2 pc 1999-2004, Tr. 2 1/2 pc I-L 2001, Tr. 2 1/2 pc I-L 2003, Tr. 2pc I-L 2006, Tr. 2 1/2 pc I-L 2009, Tr. 2 1/2 pc I-L 2011, Tr. 2 1/2 pc I-L 2013, Tr. 2 1/2 pc I-L 2016, AMERICANS (3) Allegheny & Western, Honeywell, Whirlpool, CANADIANS (1) American Barrick Res., BANKS (2) Asahi, Sumitomo, BLDG MATLS (4) Anglian, Lafarge Coppee, Marshalls 6 1/2 pc Pf., Sheffield Insulations, BUSINESS SERVS (1) Johnson Cleaners, CHEMS (1) Wolstenholme Rink, CONTG & CONSTRCN (1) Bellway, ELECTRICALS (8) ASEA B, Critchley, Denmans, Ericsson (LM), Johnson Electric, Mitsubish Electric, Pifco, Do. A, ELECTRICITY (1) China Light, ELECTRONICS (4) Admiral, Forward, ISA Intl., Micro Focus, ENG AERO (1) Hunting 8 1/4 pc Pf., ENG GEN (2) Barry Wehmiller, Halma, FOOD MAN (1) Unilever, HEALTH & HSEHOLD (2) Bespak, Paterson Zochnis, HOTELS & LEIS (1) Boosey & Hawkes, INSCE COMPOSITE (2) Allianz, Hibernian, INSCE LIFE (1) Torchmark, INV TRUSTS (33) MEDIA (8) GWR, Haynes Publishing, LWT 5 29/32 pc Cv. Pf., MMI, Portsmouth & Sunderland, Scottish TV, TVS Ent. 7.4pc Pf. 2008, Ulster TV, MERCHANT BANKS (1) Schroders N/V, MTL & MTL FORMING (1) Ferraris, MISC (4) Black Arrow, Danka Bus. Systems, Great Southern, Portmeirion Potts., OIL & GAS (5) Aran Energy, Monument, Norsk Hydro, Ohio Res., Ramco, OTHER FINCL (2) First National Finance, Do. 6.3pc Cv. Pf., OTHER INDLS (1) Vinten, PACKG, PAPER & PRINTG (5) Carnaud, Enso-Gutzeit, Lawson Mardon, Metalbox, MY, STORES (1) Oriflame, WATER (3) Cheam A, Do. B, Welsh.

NEW LOWS (6).

BLDG MATLS (1) Chieftain, CONTG & CONSTRCN (1) Amco, ELECTRONICS (1) Standard Platform, FOOD MANUF (1) Dalepak, MISC (2) Hornby, Toye.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 40 1685
London Stock Exchange: Share prices continue to give ground Publication 930211FT Processed by FT 930211 By TERRY BYLAND, UK Stock Market Editor

BID speculation provided the few firm features yesterday in a UK stock market where caution on the near-term outlook still prevailed. The latest of the expected flow of rights issues - a call for Pounds 428m from Commercial Union and a very small fund-raising from Stonehill - were taken comfortably but the conglomerates sector was on alert for a convertible issue this morning.

Investors now face a heavy run of trading statements from the leading names of British industry, beginning today with British Petroleum, BT and BOC Group.

Equities opened lower but rallied well until one UK house began to sell the March contract on the FT-SE 100 Index which quickly collapsed to a discount against the underlying stock market.

Share prices quickly followed suit as the securities house unloaded blue chip stocks. The pace was set by a sharp fall in Reuters in London after the shares had been hit hard on Wall Street overnight.

At worst, the Footsie was more than 21 points off with London looking nervous as New York opened lower. But the initial fall on the Dow Industrial Average was trimmed to 2.97 in UK hours, and late weakness in sterling was again interpreted as good for Britain's export stocks while not inhibiting chances of a base rate cut in the Budget in March.

The FT-SE 100 closed at 2,816.4, a net 14.9 down, with the 2,800 mark still unchallenged, at least for the time being. Profit-taking spread across the range of the stock market and the FT-SE Mid 250 Index weakened 17.9 to 3,001.9.

Seaq volume slipped to 616.1m shares from the 694.8m recorded in the previous session; Tuesday's retail business was worth Pounds 1.58bn, in the higher range of recent daily averages.

The renewed weakness in the pound is working to the benefit of share prices in London, according to Mr Marcus Grubb at Salomon Brothers. He also believes that the Bundesbank will ease policy in the face of a slowing economy in Germany. The setback in sterling which followed the currency's exit from the ERM network provided a mirror image of the rise in the UK stock market between September and December last year.

The mood in equities appeared less negative yesterday than on Tuesday, and the overall picture was more irregular than the fall in the Footsie might suggest. Oil shares, which have been very firm for some days, encountered cautious profit-taking as the sector braced itself for trading figures today from BP. Food retailers, casualties in the recent selling bout, found buyers.

Bank stocks were firmer but the impetus here came from speculative activity rather than from views on the trading experiences likely to be revealed very shortly by the big UK houses. Suggestions of bid moves against some of the weaker names in the financial sector have been heard before and traders saw no new factors this time.

The relatively favourable reception for the rights issue from Commercial Union still left share prices vulnerable to further fund-raising moves. Some analysts, however, believe that, at present interest rate levels, corporate finance directors may be looking at the bond and convertible bond markets rather than at equities as venues for fund-raising.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 40 571
London Stock Exchange: Equity futures and options trading Publication 930211FT Processed by FT 930211 By JOEL KIBAZO

MORE RIGHTS issue fears, coupled with a general lack of buying interest, led to a lacklustre day in derivatives yesterday, writes Joel Kibazo.

The early announcement of a cash call from Commercial Union was at first poorly received and the March contract on the FT-SE 100 Index opened weakly at 2,823.

However, the view that the funds were to be put to good use helped to steady nerves and the March contract shrugged off the early gloom to move into positive territory on sporadic buying, mainly from independent traders.

That positive mood received a sharp knock when a leading securities house moved to sell the contract. March fell sharply and was soon trading at a discount to the underlying cash market, which had followed it down.

With a dull Wall Street and few buyers, March fell to a day's low of 2,808 at 2.50pm. But a feeling that the contract's fall had been overdone, together with general short-covering, helped it rally in the last half-hour of trading.

March finished at 2,827, down 6 from the previous close and at a premium of 12 to cash. Turnover fell to 9,918 lots.

In traded options, a total of 30,523 contracts had been dealt by the close, with some 7,616 lots transacted in the FT-SE 100 option. Tesco was the most active stock option with volume of 2,733 contracts.

United Kingdom EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 40 262
World Stock Markets: Pharmaceuticals begin to lose their glamour - Paul Abrahams highlights the US/UK switch into cyclicals, and reservations about European growth Publication 930211FT Processed by FT 930211 By PAUL ABRAHAMS

Pharmaceutical stocks, a salve for market woes for much of the recession, have started to wobble.

Most British and American drugs stocks have been caught as investors switch out of defensive companies into cyclical recovery plays - groups which have suffered during the slowdown in the world economy, but are likely to post significant earnings increases once it begins to pick up.

European drug groups have also suffered, because the ability of some companies to continue to churn out double-digit earnings growth is becoming increasingly questionable. The operating environment for healthcare stocks is changing fast, and changing for the worse.

The main problem facing the sector is the issue of pricing. Governments around the globe, faced by rapidly growing healthcare spending, are turning their attention to the apparently excessive profits of the drugs groups.

The governments' response has been to limit demand for medicines or cut prices. The Japanese and German markets, the world's second and third largest respectively, both endured price cuts last year.

In the US, legislation against groups which increase prices above the rate of inflation is also being threatened by the Clinton administration.

The effect on the pharmaceuticals market has been a divergence between companies which, in the past, have driven earnings up with volume growth, and those which have produced it with price increases - and will no longer be able to do so.

The most outstanding European drugs stock over the last six months has been the Swedish group Astra.

The company is small compared with Anglo-American industry giants but, nevertheless, it is the world's fastest-growing drugs group. It has outperformed its local market by 35 per cent over the last six months, rising from a low of SKr484 in August to close yesterday at SKr677 in the 'B' shares.

Astra's volume growth has been outstanding in all of its three main therapeutic areas, gastrointestinal, respiratory and cardiovascular. It is also one of the few pure pharmaceuticals plays on the European continent.

During the first nine months of last year, sales of Losec, its anti-ulcer treatment, increased by 41 per cent to SKr5bn, while those for Pulmicort, its asthma treatment, rose 59 per cent to SKr1.347bn.

The group is predicting a sales increase of up to 25 per cent for the full year, an impressive achievement. James Capel estimates that, during 1991, only 15 per cent of Astra's growth in the US was owed to price increases.

The other outstanding stock has been Roche, the Swiss concern, which has outperformed its local market by about 10 per cent since July. Roche, one of Switzerland's three chemicals giants, is the least exposed to cyclical non-drug operations.

Similar to Astra, Roche is generating growth by increasing sales, rather than prices. With a wide portfolio of relatively small products in terms of sales, its drugs division increased its turnover last year by 16 per cent to SFr6.9bn.

The other Swiss groups have not performed so well. Sandoz has only tracked its domestic market over the last six months. The problem is that Sandoz's pharmaceuticals and nutrition divisions have been held back by the remainder of the group.

Through its construction and chemical activities, the company has been exposed to recession. In addition, its agrochemicals division has also been hit by last year's reform of the European Community's common agricultural policy.

Ciba-Geigy, its Basle neighbour, is the world's largest agrochemical group and has also suffered from the downturn in the world economy.

Although Ciba-Geigy's pharmaceuticals sales have been growing fast, thanks partly to the group's highly successful US launch of its nicotine patch, its speciality chemicals operations have suffered from the general economic downturn.

James Capel estimates that 20 per cent of group operating profits are cyclical, compared with 8 per cent of Roche's.

Ciba-Geigy's shares have underperformed the local market by 10 per cent since July. In particular, the group has suffered from heavy selling of its American Depositary Receipts (ADRs) in the US.

Meanwhile, analysts are also tipping Novo Nordisk because of its volume sales increases. James Capel estimates that only 5 per cent of the Danish company's operating profits are cyclical. The healthcare business is expected to produce double-digit sales growth, as its insulin and hormone replacement therapies continue to do well.

It may also receive a boost from Seroxat, its anti-depressant which has just been launched in the US by SmithKline Beecham, the Anglo-American company.

Big chemical groups with pharmaceuticals divisions, such as Bayer, in Germany, and Akzo, of the Netherlands, have suffered from their vulnerability to economic cycles. However, investors may well be looking to pick up their shares as recovery plays. As usual, timing will be crucial.

United States of America Europe P2834 Pharmaceutical Preparations P9611 Administration of General Economic Programs MKTS Market data CMMT Comment & Analysis P2834 P9611 The Financial Times London Page 37 835
World Stock Markets (Asia Pacific): Nikkei firmer ahead of options settlements Publication 930211FT Processed by FT 930211 By EMIKO TERAZONO TOKYO

A ROUND of small-lot buying at the end of the session lifted share prices, and the Nikkei average closed moderately higher amid quiet pre-holiday trading, writes Emiko Terazono in Tokyo.

The 225-issue average gained 67.73 at 17,089.90, having fallen to the day's low of 16,897.86 in the morning session. It recovered towards the close and hit the day's high of 17,092.00.

Volume was little changed at 190m shares against 186m. Activity centred on position adjustment and technical trading by dealers and arbitrageurs ahead of Friday's options settlements. Declines, however, retained a small lead over rises at the close by 474 to 436, with 198 issues unchanged. The Topix index of all first section stocks lost a net 0.17 at 1,295.93, and in London the ISE/Nikkei 50 index eased 0.38 to 1,044.19.

Most investors remained absent ahead of today's national holiday. The sharp rise in the yen against the dollar also unnerved some investors, while the weekend meeting between Mr Yoshiro Hayashi, finance minister, and Mr Lloyd Bentsen, US treasury secretary, was also focusing attention.

Traders said prices moved forward just before the close in technical trading linked to options activity. The settlement price for February options contracts will be fixed on Friday morning.

Export-oriented high technology issues lost ground on the higher yen. Fujitsu retreated Y20 to Y537, while Sony fell Y60 to Y4,080 and TDK, the tape maker, lost Y120 to Y3,370.

Speculative trading by dealers also led activity. Gajoen Kanko, the ailing hotel and restaurant operator, advanced Y25 to Y265 and Nagase moved ahead Y45 to Y830.

Isuzu Motors, the most active issue of the day, rose Y6 to Y380 on the 'restructuring theme', while Nissan Chemical appreciated Y8 to Y758.

Non-ferrous metal producers eased on falling gold prices. Sumitomo Metal Mining lost Y1 to Y649 and Mitsubishi Materials Y2 to Y407.

Housing-related stocks advanced on reports of strong condominium sales in January. Daikyo, the leading condominium developer, rose Y29 to Y824 and Mitsui Home gained Y50 to Y1,570 on the second section.

Some oil refiners were firmer on prospects of lower oil import prices due to the higher yen: Showa Shell Sekiyu put on Y30 at Y1,490. Arabian Oil climbed Y50 to Y3,700 on reports that a consortium, including the company, had started an oil development project off the Vietnamese coast.

In Osaka, the OSE average slipped 22.18 to 18,474.38 in volume of 52.4m shares.

Roundup

POLITICAL considerations came to the fore in some Pacific Rim markets.

AUSTRALIAN shares were mostly firmer as the market took a lead from better than expected half-year results from Commonwealth Bank of Australia. The All Ordinaries index added 7.2 at 1,591.1 in turnover that slowed to ADollars 153m.

Shares in Commonwealth Bank, in which the government has a 70 per cent stake, were 23 cents higher at ADollars 6.20.

HONG KONG began quietly, again inhibited by the political outlook, but a late burst of buying, particularly of banking shares, helped the Hang Seng index finish 46.03 stronger at 5,835.55 in turnover of HKDollars 1.9bn.

TAIWAN made a strong start but succumbed to heavy profit-taking in reaction to news that Provincial Governor Lien Chan was being nominated as premier. The weighted index, more than 80 points higher at mid-morning, ended a net 58.93 down at 3,578.10.

BANGKOK was led higher by demand for bank shares and the SET index gained 17.45, or 1.8 per cent, at 990.13.

BOMBAY rose for the third consecutive session, with speculative buying taking the BSE index up 40.44 to 2,812.12.

Japan, Asia Australia Hong Kong, Asia Taiwan, Asia India, Asia Thailand, Asia P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 37 632
World Stock Markets (Europe): Milan eases after resignation of justice minister Publication 930211FT Processed by FT 930211 By Our Markets Staff

CORPORATE and political news dominated trading yesterday, writes Our Markets Staff.

MILAN turned lower late in the day as Justice Minister Claudio Martelli - a member of Prime Minister Giuliano Amato's Socialist party - resigned after being told he was under investigation on corruption charges.

The Comit index ended down 3.53 at 496.15 and Italian shares quoted on the Seaq system in London continued subsequently to trade lower.

The bourse had unexpectedly overcome a weak start to trade higher for much of the afternoon session. However, analysts expect that the ever-widening political scandal, together with technical account-end considerations, will make for a choppy ride for the remainder of the week.

Strong overseas demand for Stet took the telecommunications holding company L23 higher to fix at L2,283, before L2,285 after hours.

But Fondiaria, which announced a board reshuffle, dipped L192 to L29,008 before easing to L28,973 in late trade.

FRANKFURT saw a battle between bulls and bears produce a surge in market turnover. The DAX index closed just 8.23 higher at 1,649.81, off an intraday high of 1,656.83, and the indications were that some of the remaining gains were being dissipated in after hours trading. Turnover rose to DM8.2bn from DM5.8bn.

Banks fell again after last week's gains, BHF losing DM5 to DM440 on news of a rights issue. Chemicals were relatively weak on average, Bayer adding a mere 10 pfg to DM257.70 as it detailed a cut in staff bonus payments.

The main winners were carmakers, where Daimler rose DM11 to DM614, and electricals with AEG up DM5.40 to DM168.90 and Siemens DM7.50 better at DM638.50. Dealers said that the main reason for the gains, with fund managers, especially foreigners, underweight in German shares, seemed to have operated irrespective of the depressing fundamentals for the car sector.

PARIS sold Michelin after the tyre group reported a fall in 1992 second half sales. While the figures only confirmed the depressed state of the sector the shares dipped FFr8.90 or 4.5 per cent to FFr187.40. The CAC-40 index, which had seen a day's high of 1,899, closed barely changed, down 0.73 at 1,893.32. Turnover was FFr2.6bn.

UAP was another faller, down FFr10 at FFr520, after releasing disappointing 1992 earnings after Tuesday's close.

Schneider gained FFr11 to FFr666 on news that it was to sell a subsidiary in an effort to reduce debt.

AMSTERDAM was interested in cyclicals while Fokker, which denied reports that credit lines had been suspended, fell to the day's low of Fl 8.40 before recovering slightly to close down Fl 1.00 at Fl 9.40. The CBS Tendency index was unchanged at 97.9 after a high of 98.5.

BRUSSELS was flat after a day of heavy and hectic trade as the market focused on further pressures on the Belgian franc and a subsequent interest rate rise. The Bel-20 index finished virtually unchanged, losing 0.09 to 1,213.85 in high volume of BFr1.71bn.

Electrabel lost BFr170 or 2.9 per cent to BFr5,720, but among dollar-oriented shares, Petrofina gained BFr170 or 2.3 per cent to BFr7,670.

MADRID was active in Banesto prior to the bank announcing that it had reached agreement for a US investment group to take a minority stake. The shares saw a high of Pta2,545 before closing Pta70 higher at Pta2,435. The general index eased 0.77 to 234.26 in turnover of Pta18.6bn.

ZURICH was easier in quiet conditions that left the SMI index 14.9 lower at 2,120.8.

STOCKHOLM was encouraged by hopes of lower interest rates while Ericsson remained a favourite following the release of good 1992 results on Tuesday. Its B shares closed up SKr11 at SKr220 in high volume. The Affarsvarlden index gained 15.6 to 964.5 in turnover of SKr1.5bn.

OSLO remained active with the all-share index gaining 4.76 or 1.2 per cent to 406.62 in turnover of NKr509.1m. HELSINKI extended its gains as investors anticipated a number of company results, and the HEX index rose 15.4 to 926.4.

ISTANBUL broke through the 5,000 level in early trading before retreating on profit-taking. The 75-share index closed down 28.98 to 4,943.40 in turnover of TL500bn.

------------------------------------------------------------------------ FT-SE Actuaries Share Indices February 10 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes ------------------------------------------------------------------------ Open 10.30 11.00 12.00 FT-SE Eurotrack 100 1125.44 1126.43 1126.19 1127.47 FT-SE Eurotrack 200 1177.34 1176.00 1176.70 1177.76 13.00 14.00 15.00 Close FT-SE Eurotrack 100 1126.07 1125.67 1122.00 1121.50 FT-SE Eurotrack 200 1175.04 1175.80 1171.11 1171.08 ------------------------------------------------------------------------ Feb 9 Feb 8 Feb 5 Feb 4 Feb 3 FT-SE Eurotrack 100 1124.14 1131.12 1129.52 1113.35 1097.03 FT-SE Eurotrack 200 1177.40 1190.15 1189.21 1183.60 1171.25 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1127.61; 200 - 1179.39 Low/day: 100 - 1121.09 200 - 1170.48. ------------------------------------------------------------------------

Italy, EC Germany, EC France, EC Netherlands, EC Belgium, EC Spain, EC Switzerland, West Europe Sweden, West Europe Norway, West Europe Finland, West Europe Turkey, Middle East P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 37 837
World Stock Markets: South Africa Publication 930211FT Processed by FT 930211

STRONG overseas demand for gold shares boosted activity in the sector and the index ended 99, or 11 per cent, ahead at 990, but off the day's high of 1,011. Some analysts reported that new US buyers had come into the market, attracted by the cheap levels of gold stocks. Vaal Reefs rose R17, or 10.4 per cent, to R180. The overall index put on 68 at 3,542 and industrials added 36 at 4,645.

South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 37 104
Money Markets: Repo is disappointing Publication 930211FT Processed by FT 930211 By JAMES BLITZ

SHORT-DATED Euromark futures fell back yesterday after the Bundesbank reduced the lowest accepted rate in its weekly securities repurchase tender by only 7 basis points, writes James Blitz.

Hopes of a substantial cut in the rate at which the Bundesbank offers funds to commercial banks had been dashed at the weekend after Mr Helmut Schlesinger, the central bank's president, indicated that last week's reduction in Germany's officially posted interest rates would not mean a lowering in the cost of money market funds. However, there was still some disappointment when the lowest accepted repo rate came in at 8.50 per cent, from last week's 8.57 per cent.

The March Euromark contract declined by 4 basis points from its previous close, finishing at 91.97. At this level it prices three-month money next month at 8.03 per cent. Call money was virtually unaltered yesterday at 8.60 per cent.

The duller tone continued to take its toll on French franc markets. The cost of three-month cash hovered around 12 per cent, while the March French franc contract closed 30 basis points down on the day at 88.57. At this level it assumes that three-month money will come down only 50 basis points between now and the French elections.

There was little activity in sterling markets. The March futures contract rose 6 basis points to close at 94.16, while three-month money was unchanged at 6 3/16 per cent.

One dealer suggested yesterday that the March contract was a very good buy from here. He listed several events which could raise expectations of a cut in UK base rates in the next two months.

These include two Bundesbank meetings, and a further one on the day after the March contract expires; a G7 finance ministers' meeting in London on February 27, which may discuss the high level of European interest rates; and the UK Budget on March 16.

Convergence of the March contract with the current level of three-month money could, of course, bring the March future down to around 93.75. Devel-oping problems over the Maastricht treaty could also undermine the pound on the foreign exchanges.

However, if sterling stabilises at its current level, there may be reasons to buy the contract now.

Germany, EC European Economic Community (EC) United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 31 406
World Commodities Prices: Market Report Publication 930211FT Processed by FT 930211 By REUTER

LME COPPER prices were depressed by Tuesday's unconvincing chart close, and eased back under stale bull liquidation. News that Polish copper miners had called off a strike alert underlined bearish sentiment. ZINC fell below important support around Dollars 1,110 for three-month metal, undermined by the absence of further production cut news. ALUMINIUM went into reverse after news of an unexpected 17,000 tonne rise in December IPAI producer stocks. Also, there is heavy technical resistance above Dollars 1,240 for three-month metal. NICKEL eased under technical liquidation, lacking follow-through to recent investment fund interest. But prices held stable around the lows. Robusta COFFEE futures finished with gains of Dollars 17 to Dollars 25 a tonne on key positions, but were below the day's highs as the market continued to be highly volatile. Dealers said technical factors remained dominant. Conditions remained very nervous and the threat of a resumed downtrend remained.

Compiled from Reuters

United Kingdom, EC P0179 Fruits and Tree Nuts, NEC P333 Primary Nonferrous Metals P6231 Security and Commodity Exchanges COSTS Commodity prices P0179 P333 P6231 The Financial Times London Page 30 193
Commodities and Agriculture: Gatt to set up banana row panel Publication 930211FT Processed by FT 930211 By FRANCES WILLIAMS GENEVA

LATIN AMERICAN banana producers yesterday stepped up their fight against the European Community's present and future banana import policies within the General Agreement on Tariffs and Trade.

The body's governing council agreed to set up an independent disputes panel to examine whether the existing restraints on imports of 'dollar' bananas operated by five EC member states breach international trade rules. The panel will report by the beginning of May, under expedited procedures following the breakdown of talks under the 'good offices' of Mr Arthur Dunkel, the Gatt director-general.

Meanwhile, the five banana producers involved - Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela - have served notice that they will mount a challenge in Gatt against proposals for an EC-wide banana import regime, which are due to come into force on July 1. They claim the measures will cost them Dollars 1bn in lost export earnings over the next two years.

The proposals, approved by EC ministers last December but still to be confirmed, would impose a prohibitive tariff on imports of dollar bananas beyond a 2m tonne quota while allowing unrestricted duty-free imports from higher-cost Caribbean suppliers with EC treaty ties. Latin American banana exports to the EC have expanded rapidly to about 2.6m tonnes in 1992.

By the time the report of the panel set up yesterday has been adopted by the Gatt council the new Community rules may have already superseded the patchwork of restrictions now operated by Britain, France, Spain, Portugal and Greece. But the Latin American producers believe that a May panel verdict in their favour would help clear a legal pathway for a similar verdict later on the new measures. These, they allege, violate existing Gatt obligations, run counter to draft rules on farm trade under negotiation in the Uruguay Round of global trade talks, and threaten them with economic devastation.

Colombia, South America Costa Rica, Central America Gibraltar, West Europe Nicaragua, Central America Venezuela, South America European Economic Community (EC) P0179 Fruits and Tree Nuts, NEC P9611 Administration of General Economic Programs MKTS Foreign trade GOVT International affairs P0179 P9611 The Financial Times London Page 30 371
Commodities and Agriculture: Aluminium flood rings alarm bells in CIS - As exports have soared shortages have appeared at home Publication 930211FT Processed by FT 930211 By KENNETH GOODING

MR KARL WOBBE admits he seriously underestimated the ability of the Russian aluminium industry to keep production going against all the odds. 'At the begining of 1992 I thought their industry would collapse because of raw materials shortages,' he recalls. Instead, the smelters in the Commonwealth of Independent States are estimated to have produced about 3.1m tonnes of the metal last year, close to the industry's capacity of between 3.5m and 3.6m tonnes.

Much of that aluminium poured into western Europe, the nearest big consuming market, where it was paid for in currencies much more stable and desirable than the rouble.

That produced shortages in the CIS itself, even though the chaotic conditions there cut demand for aluminium substantially. For example, fish canning industries in Russia and the Ukraine were particularly vocal about aluminium shortages - among other things, the metal is used for canning caviar.

So both the European industry and the CIS authorities have good cause for concern about the continuing high level of aluminium exports.

Mr Wobbe, management board director responsible for aluminium production at VAW of Germany, says that during a recent visit to the CIS: 'We got the feeling that the Russian aluminium industry wants to contact the European industry to find ways of improving the situation. They understand that most (west European) smelters are not making money. I feel they are now more willing to take part in discussions'.

The question remains, however, who will do the talking for the CIS industry?

There is a great struggle going on about who should have control of the industry and take important decisions on its behalf. Much of CIS aluminium production has been controlled for the past two years by Concernalumini but that organisation now has a tarnished image, having failed to provide the hoped-for investment for modernisation. Now the power seems to be switching to a new Russian state organisation: the Committee for Metallurgy. This body has its own Committee for Aluminium with Mr Gregory Maslov at its head. Mr Maslov therefore seems likely to emerge as the most powerful individual in the CIS aluminium industry.

However, the recent turmoil has given individual smelter managers much more power - simply because they have the metal and the money it produces. And smelter managers are already at odds with the new state organisation about the terms for privatising the aluminium industry. They want 51 per cent of the shares in each smelter to be distributed to employees, 25 per cent to the local authority and 24 per cent to the state body. Mr Maslov and his committee want 51 per cent, leaving 25 per cent for local authorities and only 24 per cent for employees. The Russian parliament will decide this contentious issue in April.

Meanwhile, Russia has signalled that it wishes to cut aluminium exports by raising tariffs steeply this year. Compared with tariffs of Ecu50 (Pounds 41) a tonne in place at the end of 1992, the tariff for exports of primary aluminium has been lifted to Ecu130 a tonne and that for metal used in barter deals is up to Ecu205. To close a loophole that has allowed large quantities of metal - not just aluminium - to be exported under the guise of 'scrap', the tariff on aluminium scrap has been bumped up to Ecu460 a tonne.

More aluminium is being shipped out to the US and Asia instead of Europe but, even though US import duties have been removed and the metal attracts a 6 per cent duty when entering the European Community area, the Russians say it is still cheaper to deliver to Europe and the London Metal Exchange.

In spite of the Russian efforts, European aluminium producers seem to have lost patience and are urging the European Commission to take action soon.

Mr Dick Dermer, president of the European Aluminium Association, says that the market is being seriously distorted by CIS exports, which are 'endangering the viability of the European aluminium industry.

'The European Community primary aluminium industry has for the past two years been operating at a loss as a direct result of the distortion in the aluminium market created by the dramatic and unexpected increase in exports from the CIS since 1990,' he suggests.

His association started monitoring imports at the begining of 1992 and estimates that 600,000 tonnes of CIS aluminium reached the EC last year, up from 450,000 tonnes in 1991 and an average of about 82,000 tonnes a year before 1990.

The European producers say CIS imports have depressed aluminium prices on the London Metal Exchange - the most widely-used guide to world prices - and forced the European industry to make expensive production cuts. Europe accounts for about 25 per cent of world aluminium supply but is making a disproportionately large sacrifice as the industry cuts back because of low prices - 80 per cent of the 1.1m tonnes of world capacity that has been shut down is in Europe.

Mr Dermer says 'the industry has no other option than to demand that the European Commission installs a transitional period of safeguard measures with regard to aluminium from the CIS'.

He will give no details but other European executives say the industry wants the commission to limit CIS imports to 82,000 tonnes a year, the 'normal' level before the surge in 1990, and it wants those quotas to include secondary (scrap) metal. Once that protection is in place, the EC authorities should jointly discuss how CIS producers could be helped 'to adjust their sales and pricing policy to the market economy rules and mechanisms,' says Mr Dermer

The EC should help the CIS to stimulate a revival of its domestic aluminium consumption, to rationalise and modernise existing facilities and to develop a workable legal system. 'The community's primary aluminium industry is willing to assist in that process,' he adds.

However, these proposals do not go unchallenged. Mr Tony Bird of the Anthony Bird Associates consultancy group, suggests that, not only would a quota system probably be illegal (Russia cannot be accused of dumping because its production costs are the lowest in the world and it is not selling aluminium at a higher price in its domestic market than in the west) neither would it work.

Mr Bird says: 'Aluminium is a commodity. Russian aluminium is almost the same as anybody else's aluminium. The market for aluminium does not work in the same way as the market for cars or photocopiers. If it is displaced from one market, it can flow easily into another. So, if CIS metal is not allowed to enter the EC, it can instead be sold in a third country, which will then ship its own metal to the EC to compensate.'

VAW's Mr Wobbe says CIS producers are keen to modernise their smelters but they want to pay back loans with the aluminium produced and banks are very reluctant to provide any cash while aluminium prices are as low as they are today.

VAW is working on a feasibility study for the modernisation of the Novokuznetsk smelter in Siberia. A new facility would be built alongside the existing smelter, which would be closed only once the new one was ready. This would boost output from 180,000 to 250,000 tonnes. The Russians want VAW to consider similar schemes at other smelters.

Mr Wobbe says the Novokuznetsk feasibility study (which the Russians are paying for) will be completed in May. 'The problem then is to finance the project. The smelter is looking for a financial partner. I believe we can find the finance, but at present aluminium prices of Dollars 1,200 to Dollars 1,250 a tonne the profit would not be high. A higher aluminium price would certainly help.

'The (Russian metallurgy) committee understands the effect exports are having on prices and that's why it wants to strengthen its grip on aluminium - and all other raw material industries.'

Commonwealth of Independent States P3334 Primary Aluminum P9611 Administration of General Economic Programs IND Industry profile MKTS Market data P3334 P9611 The Financial Times London Page 30 1373
Commodities and Agriculture: US farmers seek protection against Canadian pasta wheat Publication 930211FT Processed by FT 930211 By BERNARD SIMON TORONTO

THE INTERNATIONAL grain subsidy war has taken a strange twist with US farmers pressing for action against Canada's fast-rising share of the US domestic market for durum wheat.

Several US senators have threatened retaliatory action against Canada after a bilateral panel set up under the 1989 free trade agreement ruled this week that pricing methods used by the Canadian Wheat Board were acceptable pending review by an independent auditor.

Senator Max Baucus of Montana has introduced a Bill that would give Washington authority to impose special tariffs on Canadian wheat and require extra paperwork from importers.

US imports of durum from Canada soared to 225,000 tonnes in the final four months of last year, making it Canada's second biggest customer after India. Canada exported virtually no durum, which is used mainly for pasta, to the US before 1990; now it has about a quarter of the market.

The cut-throat price war in offshore markets has made the unsubsidised US domestic market one of the most lucrative for Canadian exporters.

For example, Washington last year provided a USDollars 40 per tonne bonus under its Export Enhancement Program for a shipment to Algeria, which has traditionally been among Canada's biggest durum customers. The Algerians paid about Dollars 110 per tonne fob, compared with the US domestic price of Dollars 150.

A Canadian Wheat Board spokesman yesterday ascribed Canada's success in the US market largely to 'a very good quality product, which mills consistently from shipment to shipment.' In addition, pasta's fast-growing popularity has raised per-capita consumption.

The free-trade panel urged the creation of a joint working group to oversee regular audits of Canadian durum shipments to the US.

Canada United States of America P0111 Wheat P9641 Regulation of Agricultural Marketing MKTS Market shares GOVT Draft regulations P0111 P9641 The Financial Times London Page 30 322
World Commodities Prices: Wool Publication 930211FT Processed by FT 930211

Last week's accelerating decline in Australian wool prices went further this week, with a new low point for the present selling season reached on every day. The Australian Wool Corporation's market indicator was 457 cents a kg. on February 10, 31 cents or 6% lower than a week before. The lowest point reached in the previous 1991-92 season was 434 cents a kg. These are seriously uneconomic prices for most growers and some are withdrawing their wool at reserve prices of their own, or withdrawing it immediately prior to the auction.

United Kingdom, EC P0214 Sheep and Goats P6231 Security and Commodity Exchanges COSTS Commodity prices P0214 P6231 The Financial Times London Page 30 123
Commodities and Agriculture: EC banana talks still deadlocked Publication 930211FT Processed by FT 930211 By DAVID GARDNER STRASBOURG

EC farm ministers were last night still unable to unblock proposals they agreed in principle in December to set quotas and tariffs on banana imports from Latin America, writes David Gardner in Strasbourg.

A blocking minority made up of Germany, Denmark and the Benelux countries looked set to drag proceedings late into the night. Mr Rene Steichen, EC farm commissioner was holding firm to the proposals and the March 1 deadline to endorse them legally. The plan would fix a 2m tonnes quota on Latin American imports at an Ecu100 (Pounds 82) a tonne duty, with fruit imported above that level attracting an Ecu850 tariff.

Strong pressure was being brought to bear on the Netherlands and Belgium to agree the measures, as they had done in December, and the Dutch and Belgian ministers were understood to be seeking instructions from their governments.

European Economic Community (EC) P9641 Regulation of Agricultural Marketing GOVT International affairs P9641 The Financial Times London Page 30 178
Government Bonds: Treasuries firm ahead of second tranche of refunding auction Publication 930211FT Processed by FT 930211 By PATRICK HARVERSON, SARA WEBB and RICHARD WATERS NEW YORK, LONDON

AFTER modest gains in the morning, US Treasury prices dropped sharply yesterday afternoon following a disappointing 10-year auction and a worrying rise in the Commodity Research Bureau index.

In late trading, the benchmark 30-year government bond was down 5/8 at 104 9/16 , yielding 7.243 per cent. At the short end of the market, the two-year note was down 1/16 at 100, to yield 4.233 per cent.

After Tuesday's successful three-year note sale, sentiment about the auction of Dollars 10.75bn in 10-year notes was generally positive during morning trading. At the start of the week, analysts had worried that the three-years would be the hardest sell, so having got what was believed would be the trickiest part of the refunding out of the way, the market bid up prices confident that the 10-year sale would go smoothly.

However, prices slumped mid-afternoon in the wake of an auction that proved disappointing and a rise in the CRB index of 21 commodities, a keenly watched indicator of inflationary trends.

ITALIAN government bonds fell a point as news emerged that Mr Claudio Martelli, the justice minister, had resigned from the government.

The BTP futures contract fell a point to 95.90 having settled at 96.89 on Tuesday.

Mr Martelli, a socialist, is under investigation on corruption charges. He is the first minister to be brought down by the Milan corruption scandal which broke a year ago.

Dealers said the bond market tumbled on fears that Mr Martelli's resignation might damage the coalition government.

SPANISH government bonds ended firmer after Tuesday's profit-taking, with buying interest concentrated on the short end.

Yields fell at yesterday's Treasury bill auction. As expected, the yield on one-year Treasury bills fell to 12.536 per cent from 13.041 per cent.

THE German government bond market closed firmer, helped by good domestic buying yesterday. The Liffe bund futures contract rose from 93.18 at the opening to trade at around 93.35 by late afternoon.

The results of the Bundesbank's keenly watched securities repurchase tender, announced yesterday, had little effect on the bund market.

The Bundesbank accepted DM62.5bn of bids for 14-day and 28-day securities repurchase agreements, allocating net new liquidity of DM3.9bn.

The lowest minimum rate at the repo fell 7 basis points to 8.50 per cent. Dealers said the rates at this week's repo - the first since last Thursday's cut in the Lombard and discount rates - were in line with expectations.

BELGIAN government bonds saw another volatile day, with prices ending just above the day's lows in spite of a firmer franc.

The franc started to firm against the D-Mark after the central bank raised a money market interest rate, the end-of-day rate, from 8.80 per cent to 9.30 per cent.

The Belgian government bond market came under pressure earlier this week on worries about currency, the political situation and the government's large borrowing requirement.

UK government bonds closed higher, with the futures market out-performing cash bonds. The Liffe gilt futures contract gained over half a point, rising from 100.27 to 101.15. In the cash market, the 9 3/4 per cent gilt due 2002 rose from 111.00 to 111 1/8 by late afternoon.

Dealers said that the market remained concerned about the outlook for inflation given Tuesday's disappointing producer input prices.

The market is waiting for Friday's retail price index data for January to see whether there are any signs that inflation has picked up.

FURTHER strengthening of the yen against the US dollar helped to push up Japanese government bond prices yesterday, but light profit-taking eroded some of the day's gains leaving the market only slightly higher compared with its previous close.

The June futures contract, which opened at 109.66, reached a new high of 109.76 as the yen strengthened to 120.68 to the dollar.

However, dealers noted some profit-taking, and the futures contract closed at 109.53, up from Tuesday's close of 109.50.

In the cash market, the yield on the No 145 traded in a range of 4.21 per cent to 4.26 per cent, before closing at 4.235 per cent, against Tuesday's close of 4.245 per cent.

Japanese officials were said to be ready to let the yen strengthen to help curb Japan's rising trade surplus.

The dollar fell from a high of Y123.93 in Tokyo on Tuesday to a low of Y120.68 yesterday on expectations that Mr Yoshiro Hayashi, finance minister, and Mr Lloyd Bentsen, US treasury secretary, would agree to allow the yen to rise when they meet for the first time in Washington on Saturday.

STANDARD & Poor's has confirmed the AAA rating of the Pounds 180m securitised issue from Truck Funding, the Leyland Daf finance vehicle, launched at the end of last year, writes Richard Waters.

The deal was structured to cope with events such as the insolvency of the manufacturer, S&P said. UBS Phillips & Drew, which handled the issue, agreed to provide a non-recourse facility of up to Pounds 45m to cushion investors against cash flow problems on the bonds.

United States of America Italy, EC Spain, EC Germany, EC Belgium, EC United Kingdom, EC Japan, Asia P6211 Security Brokers and Dealers MKTS Market data STATS Statistics COMP Company News FIN Company Finance P6211 The Financial Times London Page 29 895
International Capital Markets: Iosco drops common capital rules plan Publication 930211FT Processed by FT 930211 By RICHARD WATERS

EFFORTS to create world wide minimum capital rules for securities firms, in progress for more than three years, were finally abandoned yesterday by securities regulators from around the world.

The failure to reach agreement means that substantial differences are likely to persist in the way securities markets around the world are regulated, leading to a continuing flow of financial market activity to more lightly regulated financial centres.

The International Organisation of Securities Commissions (Iosco), the body which represents securities regulators in most of the world's financial centres, decided to abandon efforts to reach common international capital adequacy rules after the latest meeting of its technical committee, held in Trinidad.

The search for common capital rules, mirroring the international agreement on bank capital reached by the Basle group on banking supervision, was launched by Iosco in the middle of 1989. Only a year ago, the Iosco technical committee appeared to have reached agreement in principle on a standard which also met with the approval of international bank regulators.

However, by last autumn, large differences became apparent between the US Securities and Exchange Commission on the one hand, and a group of regulators led by the UK Securities and Investments Board on the other. Mr Richard Breeden, SEC chairman, held out at that stage for higher levels of capital than were acceptable to financial centres such as London.

A compromise promoted by the chairman of the Hong Kong stock exchange was rejected yesterday. The US claimed that the proposed capital levels were too low, while the UK and France maintained they were too high, said Mr Bill Albrecht, acting chairman of the US Commodity Futures Trading Commission, who was present at the meeting.

World P6211 Security Brokers and Dealers P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards COMP Company News P6211 P9651 The Financial Times London Page 29 323
International Capital Markets: Venezuela to sell CANTV shares overseas Publication 930211FT Processed by FT 930211 By REUTER CARACAS

VENEZUELA plans to sell Dollars 600m worth of shares in CANTV, the telephone company managed by GTE Corporation of the US, by June this year, Reuter reports from Caracas. The shares represent one third of the state's 49 per cent stake.

Mr Julian Villalba, president of the Venezuelan Investment Fund, said a small block of shares would be issued on the Caracas stock exchange to establish market value and the rest would be placed on foreign stock exchanges.

In November 1991, a consortium of companies led by GTE paid Dollars 1.88bn for 40 per cent of CANTV and took managerial control. Another 11 per cent of shares were sold to employees.

Mr Villalba said the new sale of shares could be made in the US but officials would look at exchanges in Europe or Asia.

CANTV Venezuela, South America P481 Telephone Communications COMP Shareholding P481 The Financial Times London Page 29 169
International Bonds: Denmark's Dollars 1bn offering sells well in spite of tight pricing Publication 930211FT Processed by FT 930211 By ANTONIA SHARPE

THE Kingdom of Denmark launched its widely-expected Eurodollar bond yesterday, and syndicate managers expected more new issues today, including a Ecu500m three-year offering from the European Community.

Mr Andrew Pisker, head of new issues at the lead manager, Lehman Brothers International, acknowledged that Denmark's Dollars 1bn 5 3/4 per cent offering due 1998 was aggressively priced to yield 20 basis points over comparable US Treasuries. However, he reported good sales into Europe and the UK in spite of the tight spread.

Other syndicate managers said the spread on the Danish deal was five basis points too tight, but agreed that the issuer had been able to take advantage of the current demand among investors for dollar-denominated paper. The syndicate on the Danish deal had not broken by late afternoon.

Mr Niels Sorensen, head of the foreign debt department at Denmark's National Bank, said he was happy with the cost-advantageous terms of the bond and that the proceeds had been swapped into floating-rate D-Marks. The funds will be used to strengthen the central bank's foreign exchange reserves which have been depleted by the recent intervention to support the Danish krone within the exchange rate mechanism.

Investor preference for dollar paper enabled the Republic of the Philippines to increase its previously-announced three-year offering to Dollars 150m from Dollars 125m and set the yield at 320 basis points above comparable US Treasuries, at the lower end of the indicated range of 320-330 basis points. Syndicate managers said the success of the Filipino deal partially reflected that it had been well flagged in advance of its launch yesterday.

An official at the lead manager, JP Morgan, said that 80 per cent of the offering was split between Asia and Europe and the remaining 20 per cent was placed in the US. After the syndicate was broken, the bonds were bid at par, above their re-offer price of 99.88.

Elsewhere, Credit Local de France raised Pounds 100m of 7 1/4 per cent Eurobonds due December 12, 1998. The maturity was pitched to tap demand for paper at that area of the yield curve.

A manager at NatWest Capital Markets, the lead manager, said that a little over half of the Credit Local paper was placed on the Continent. After the syndicate broke, the spread widened slightly by one basis point to 46 basis points above the 7 1/4 per cent UK gilt due in 1998. Syndicate managers said the bond was generously priced compared with a similar offering from Credit Foncier de France launched in mid-January with a yield spread of 40 basis points over comparable UK gilts.

Hambros Bank launched the first New Zealand dollar issue in the international market since last June. The NZDollars 50m offering for Primary Industry Bank Australia, due 2000, was more or less sold by midday, mainly to Benelux, German and Swiss investors.

The issue was bid at 99.55, within the total fees of two points. Further issues in the New Zealand dollar sector are likely, as some NZDollars 200m worth of paper is due to mature in the next two months.

World P6211 Security Brokers and Dealers MKTS Market data STATS Statistics P6211 The Financial Times London Page 29 552
International Company News: Standard Bank to lift payout after 22% rise Publication 930211FT Processed by FT 930211 By PHILIP GAWITH JOHANNESBURG

STANDARD Bank, one of South Africa's two largest banking groups, yesterday announced a 22 per cent increase in attributable income to R625m (Dollars 200m) for 1992 and said it plans to pay a higher dividend.

After taking account of a rights issue, scrip dividends and an acquisition issue, earnings per share were 17 per cent up at 593 cents. The overall dividend is going up by 17 per cent to 187 cents per share.

The bank said favourable interest margins and asset growth were the main reasons for the upturn.

Net interest income rose by 27 per cent to R2.58bn. This reflected improved margins - the high level of liquidity in the system caused the cost of funds to drop - and a 21.4 per cent increase in loans, advances and acceptances.

The increased level of advances was the main contributor to the 26.8 per cent increase in assets, to R63.9bn.

Mr Eddie Theron, managing director, said asset growth was strongest in home loans, which increased by 49 per cent to R11.9bn.

Standard Bank of South Africa lifted its net income by 31 per cent to R506m and Standard Merchant Bank increased profit by 21 per cent to R43m.

Bad debts remained at the high level of 1991 and operating costs rose by 29 per cent owing to spending on new foreign operations, staff training, product development and electronic systems.

Mr Theron said favourable interest margins in 1993 would allow increased earnings, but at a lower rate than in 1992.

Mr Bob Aldworth, the executive director of ABSA who was sacked earlier this week, has admitted in an affidavit that he owes the banking group R414,000.

Mr Aldworth had hoped ABSA share options he holds would rise in value sufficiently to allow him to repay the debt. This has not taken place.

ABSA Bank Standard Bank Group South Africa, Africa P602 Commercial Banks FIN Annual report PEOP Personnel News GOVT Legal issues Aldworth, B Former Executive Director ABSA Bank P602 The Financial Times London Page 28 358
International Company News: Commonwealth Bank climbs 5% on lower write-offs Publication 930211FT Processed by FT 930211 By BRUCE JACQUES

COMMONWEALTH Bank of Australia yesterday reported a 5 per cent improvement in operating profits for the six months ended December, confirming that it has managed to steer clear of the worst of the problems besetting some of Australia's big banks.

The bank, 70 per cent owned by the Federal government, is holding the interim dividend steady at 20 cents a share after an increase in operating profit from ADollars 225.1m to ADollars 236.4m (USDollars 158.2m) for the six months.

In contrast to rivals like Westpac and the ANZ Bank, Commonwealth got through the six months with reduced bad debt write-offs, no property provisions and slightly lower problem loans on its books.

The bank reduced its charge against profit for bad and doubtful debts by 14.5 per cent to ADollars 346.5m while gross non-accrual loans carried eased by 1 per cent to ADollars 3.69bn. A further less serious problem loan category, reflecting loans in arrears, fell from ADollars 1.23bn to ADollars 974.7m.

Mr David Murray, managing director, said valuations of the bank's commercial property portfolio, covering exposures of about ADollars 7.2bn, indicated that no further provisioning was necessary.

The performance allowed the bank to improve its risk weighted capital adequacy ratio from 10.02 to 10.66 per cent, comfortably exceeding the Reserve Bank's minimum 8 per cent requirement. The bank's total assets eased from ADollars 88.9bn to ADollars 88.3bn.

Mr Murray said a key reason for the bank's improved earnings performance was a a 3.6 per cent fall to ADollars 1.47bn in operating expenses. The bank reduced its staff by just over 5,000 to 44,174 in the half.

'Further falls in operating expenses will be achieved as the integration of the former State Bank of Victoria is completed,' he said. 'The banking industry is likely to experience continuing low demand for credit which, combined with the low household savings ratio, will maintain pressure on margins.

By far the biggest contribution to the bank's profit came from banking operations, up 1 per cent to ADollars 212.7m. Commonwealth's finance arm, CBFC, remained profitable, more than doubling its contribution to ADollars 23.7m.

Commonwealth Bank of Australia Australia P602 Commercial Banks FIN Interim results P602 The Financial Times London Page 28 384
International Company News: Toyota plunges 22% at halfway as sales improve Publication 930211FT Processed by FT 930211 By CHARLES LEADBEATER TOKYO

TOYOTA, Japan's leading vehicle manufacturer, yesterday reported a 22.3 per cent drop in pre-tax profits for the six months ended December, partly because of lower interest income and exchange rate losses.

Toyota's sales were Y4,564bn (Dollars 37bn), up just 2.9 per cent on the comparable six months of 1991. Pre-tax profits were Y46.5bn lower at Y162bn, operating profit was 24.4 per cent lower at Y58.2bn and net income was 30 per cent down at Y72.3bn. It was the third successive year of declining profits.

The deterioration in Toyota's finances has prompted a sharp rundown in cash reserves. These have fallen from Y1,482bn at the end of July, 1992 to Y943bn at the end of December. The company also sold about 37.5 per cent of its stock of marketable securities, which stood at Y104bn in August.

The fall seems likely to continue as about Y190bn of equity warrants falls due for redemption this June. The company, under the stewardship of chairman Mr Shoichiro Toyoda, said it was exploring a variety of ways to finance the redemption of the warrants.

Toyota blamed most of the 24 per cent fall in operating income on adverse foreign exchange movements worth Y30bn, rising personnel costs worth Y20bn and Y30bn due to the fall in sales. Interest and dividend income fell by Y34bn to Y89bn, largely because of the fall in Japanese interest rates and the sale of securities.

Although sales were up by 2.9 per cent, the cost of sales rose by 4.2 per cent to Y4,172bn.

Overseas operations are playing an increasingly important role in bolstering performance. Although vehicle sales were virtually flat at Y3,004bn, this was largely because a Y75bn fall in domestic sales to Y1,698bn was offset by a Y78bn increase in overseas sales.

Toyota Motor Corp Japan, Asia P3711 Motor Vehicles and Car Bodies FIN Interim results P3711 The Financial Times London Page 28 334
International Company News: Fourth-quarter advance at EDS Publication 930211FT Processed by FT 930211 By KAREN ZAGOR NEW YORK

ELECTRONIC Data Systems (EDS), the computer services subsidiary of General Motors, yesterday unveiled a 14 per cent rise in fourth-quarter net income to Dollars 178m from Dollars 155.9m a year earlier.

Earning's per share were 12 per cent higher at 37 cents against 33 cents, while revenues were up 2 per cent at Dollars 2.14bn from Dollars 2.09bn.

On Wall Street, shares in General Motors' class E stock, whose value is tied to EDS's performance, rose Dollars 3/4 to Dollars 39 1/4 at close of trading. The stock climbed above Dollars 35 earlier this year on rumours that British Telecom might be discussing buying a stake in the business.

The results met analysts' expectations.

For the whole of 1992, EDS earned Dollars 635.5m, or Dollars 1.33 a share. A year earlier, net income stood at Dollars 547.5m, or Dollars 1.14, including a charge of Dollars 15.5m, or 3 cents for accounting changes. Revenues reached a record Dollars 8.22bn from Dollars 7.1bn in 1991.

EDS, which was founded by Mr Ross Perot and acquired by General Motors in 1984, is relying less on business from its GM parent. EDS said revenues from non-GM sources grew to more than 59 per cent of its total revenues.

General Motors Acceptance Corporation (GMAC), General Motor's large financial services arm, posted net income of Dollars 936.1m for 1992, including charges on the adoption of new accounting standard SFAS Number 106.

In 1991, the company reported net income of Dollars 1.37bn, including Dollars 331.5m gains from the adoption of SFAS Number 109 and after-tax charges of Dollars 170.9m for a special wholesale loss provision.

Stripping out one-time items, Mr Robert O'Connell, GMAC's chairman, said 1992 net income stood at Dollars 1.24bn against Dollars 1.21bn in 1991 on a comparable basis. 'Importantly, GMAC's 1992 performance was achieved in a year of challenging events and significant change for the GMAC worldwide organisation,' he said.

Income from GMAC's financing operations was Dollars 1.03bn, down slightly from the Dollars 1.04bn earned a year earlier. During the year GMAC financed or leased 33 per cent of new GM vehicles sold in the US against 35 per cent in 1991. The number of new cars and trucks financed or leased by GMAC slipped to 1.6m from 1.7m last year in the US.

Electronic Data Systems General Motors Acceptance Corp United States of America P614 Personal Credit Institutions P737 Computer and Data Processing Services FIN Annual report COMP Company News P614 P737 The Financial Times London Page 27 433
International Company News: Air Canada forecasts deficit of CDollars 200m Publication 930211FT Processed by FT 930211 By ROBERT GIBBENS MONTREAL

GLOBAL recession, domestic overcapacity and heavy Canadian fuel taxes will bring a CDollars 200m (USDollars 158.7m) loss for Air Canada this year, Mr Hollis Harris, chairman, said yesterday.

The country's biggest airline, locked in a competitive struggle with rival Canadian Airlines and the small Nationair, will also reveal next week that 1992 will show a record deficit. In the first nine months a net loss of CDollars 307m was incurred after special charges, following losses of CDollars 218m for 1991.

Mr Harris told the Canadian Commons transportation committee his airline would break even on an operating basis in 1993 but this was before financial and special charges. It should return to overall profitability in 1994 with the full impact of manpower cuts and cost reduction programmes.

He said Air Canada had sufficient cash to complete its bid for 25 per cent of Continental Airlines of the US and he was confident the alliance would be approved by the US authorities. He said forming one Canadian carrier was the solution to the Canadian airline industry's woes and he held out the possibility again of a merger with PWA, parent of Canadian Airlines.

Air Canada Canada P451 Air Transportation, Scheduled COMP Company News FIN Company Finance P451 The Financial Times London Page 27 231
International Company News: Baby Bell agrees to buy two cable TV companies Publication 930211FT Processed by FT 930211 By MARTIN DICKSON NEW YORK

SOUTHWESTERN Bell, one of the seven Baby Bell regional telephone companies in the US, has agreed to buy two cable television systems in suburban Washington DC for Dollars 650m - a move which marks a dramatic escalation of the battle between telephone and cable industries to bring communications into the 21st century American home.

Southwestern Bell is the first US telephone company to try to buy control of a US cable television company and its move could set off a scramble by other telecommunications companies.

However, the purchase requires regulatory approval from the Justice Department, the Federal Communications Commission and Judge Harold Greene, who has overseen the Baby Bells since they were split off from American Telephone & Telegraph in a 1984 anti-trust court settlement. Clearing all these fences could take Southwestern Bell a very long time.

The seller of the two systems is Hauser Communications, a privately owned company.

Southwestern Bell provides local telephone services in Texas and other southwestern states. It is barred from owning a cable company there, under 1984 cable legislation which bars any local telephone company from owning a cable business in its core operating area.

Southwestern Bell already owns a cellular telephone franchise in the Washington area and could eventually try to link this into its cable system. This would mean a competitive challenge to the Baby Bell which provides normal, wired telephone services in this area, Bell Atlantic.

Southwestern Bell already has experience in the cable industry, since it owns and operates a system in Britain and has interests in others in Israel.

The US cable and telecommunications industries are jostling for position as America prepares for an explosion of information delivered to the home, ranging from movies-on-demand to video telephone calls.

Just a few weeks ago Time-Warner, one of the largest cable companies, announced plans for the most ambitious multi-media home service yet launched on a commercial basis, combining both entertainment and telephony, which it aims to introduce in Florida.

Mr Edward Whitacre, chairman of Southwestern Bell, said the Washington cable purchase was 'in the right industry, in the right place at the right time'.

Southwestern Bell Hauser Communications United States of America P4841 Cable and Other Pay Television Services COMP Company News COMP Acquisition P4841 The Financial Times London Page 27 403
International Company News: Molson held back by weak beer market Publication 930211FT Processed by FT 930211 By BERNARD SIMON TORONTO

MOLSON Companies, the diversified Canadian brewer, suffered a 24 per cent setback in its latest quarterly earnings, largely as a result of a weak beer market, retaliatory duties on beer imposed by the US and the costs of converting to a new beer bottle.

Net earnings fell to CDollars 25.3m (USDollars 20m), or 42 cents a share, in the three months to December 31, the third quarter of the company's fiscal year, from CDollars 33.4m, or 59 cents a share, a year earlier.

Revenues rose to CDollars 769.8m from CDollars 723.3m.

The negative factors were partially offset by CDollars 4.9m in fees received from the North American ice hockey league, one of whose teams is owned by Molson.

Nine-month earnings fell to CDollars 100.1m, or CDollars 1.68 a share, from CDollars A 110.4m, or CDollars 1.97 a share.

The company said yesterday that the decline in earnings for the year as a whole was likely to be 10 to 12 per cent.

Molson, whose non-brewing interests include cleaning services and a retail hardware chain in Canada, said that its businesses are still being hurt by the recession.

Operating earnings of Molson Breweries, a joint venture with Foster's Brewing of Australia, fell to CDollars 135.3m from CDollars 143m.

Total beer sales in Canada dipped by 3.6 per cent in the nine months to last December and Molson's market share slipped to 50.2 per cent from 51.9 per cent a year earlier.

Its share rallied to 50.4 per cent in the latest quarter.

Molson said its alliance with Miller Brewing of the US, announced last month, is expected to be finalised in early April.

Under the deal, Miller will acquire 20 per cent of Molson Breweries from the existing partners.

It will also gain marketing and distribution rights for Molson and Foster's brands in the US.

Molson expects to receive about CDollars 180m for its part of the sale.

Molson Companies Canada P6719 Holding Companies, NEC P2082 Malt Beverages P5211 Lumber and Other Building Materials P5231 Paint, Glass, and Wallpaper Stores P5251 Hardware Stores COMP Company News FIN Interim results MKTS Sales P6719 P2082 P5211 P5231 P5251 The Financial Times London Page 27 381
International Company News: US insurers report heavy losses Publication 930211FT Processed by FT 930211 By PATRICK HARVERSON NEW YORK

AETNA Life & Casualty and Travelers, two of the largest composite insurers in the US, yesterday reported heavy fourth-quarter losses, following a variety of special charges both companies had announced last week.

Travelers incurred the bigger loss for the final quarter of 1992 - Dollars 589m, compared with a profit of Dollars 69m a year earlier - in the wake of several charges, including: Dollars 485m to cover a Dollars 735m addition to property and mortgage loan reserves; Dollars 59m for costs linked to Hurricane Andrew; and Dollars 79m related to litigation and assesments for industry guarantee funds.

The large quarterly loss meant that Travelers reported a deficit of Dollars 658m for all of 1992, compared with a profit of Dollars 318m in 1991.

Apart from the charges outlined in the fourth quarter results, the insurer had taken other charges earlier in the year to cover the cost of meeting Hurricane Andrew claims and to pay for a corporate restructuring. Separately, Travelers last year booked a Dollars 170m one-off gain related to the adoption of two new accounting standards.

At Aetna, the fourth-quarter loss totalled Dollars 192m after the company took a Dollars 180m charge to boost reserves for asbestos and environmental claims. In the same quarter last year, Aetna recorded a net profit of Dollars 93m. For all of 1992, the insurer reported net income of only Dollars 56m, down sharply from the Dollars 505m profit made in 1991.

Aside from the charges, Aetna said its fourth-quarter and full-year results were affected by high catastrophe losses, poor workers compensation results, depressed commercial property values, and continued soft pricing conditions in its main domestic insurance markets.

The one bright spot was the company's health business, although even there Aetna's 1992 earnings were well down on the previous year.

Because the special charges and quarterly losses had been well flagged in advance, the stock markets displayed little reaction to the news from Travelers and Aetna.

Aetna Life and Casualty Travelers Corp United States of America P6311 Life Insurance P6411 Insurance Agents, Brokers, and Service P6211 Security Brokers and Dealers P6159 Miscellaneous Business Credit Institutions COMP Company News FIN Interim results P6311 P6411 P6211 P6159 The Financial Times London Page 27 388
International Company News: Chrysler raises Dollars 2bn from stock issue Publication 930211FT Processed by FT 930211 By KAREN ZAGOR

CHRYSLER, the US vehicle manufacturer, has raised more than Dollars 2bn after selling 52m shares at Dollars 38 3/4 each in the second biggest public common stock issue by a US company.

The company exercised a 'green shoe' option - or stabilisation provision - to buy an additional 6m shares, swelling the offer size by 30 per cent from the original plan of 40m shares.

On Wall Street, shares in Chrysler firmed Dollars 1/8 to Dollars 39 3/8 at midday yesterday.

The company has indicated it will use at least half the funds raised to cut its Dollars 3.9bn underfunded pension obligations.

Chrysler Corp United States of America P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories COMP Company News FIN Share issues P3711 P3714 The Financial Times London Page 27 153
International Company News: Nouvelles Frontieres up 42% Publication 930211FT Processed by FT 930211 By ALICE RAWSTHORN PARIS

NOUVELLES Frontieres, the French travel company, bucked the slump in the holiday industry by increasing its net profits 42 per cent to FFr161m (Dollars 30m) in its last full financial year.

The group is number two in the French holiday market after Club Med, having raised turnover by 12 per cent to just over FFr5bn in the year to September 30, from FFr4.46bn. Mr Jacques Maillot, chairman, said that sales had grown faster in the first four months of the current year.

Mr Maillot said the company had managed to overcome the financial pressures of the economic slowdown by keeping tight control of its interests.

Nouvelles Frontieres France, EC P4724 Travel Agencies FIN Annual report P4724 The Financial Times London Page 26 139
International Company News: Turnover up but Sunbop earnings fall to R136.5m Publication 930211FT Processed by FT 930211 By PHILLIP GAWITH JOHANNESBURG

SUN International Boph-uthatswana (Sunbop), the South African gaming and leisure group, yesterday announced a 3 per cent fall in taxable profits to R136.5m (Dollars 43.7m) in the six months to December, down from R141.4m a year earlier.

This was in spite of a 15 per cent increase in turnover by Sunbop, whose hotels are all located in the Bophuthatswana homeland, to R556.4m from R483.4m.

Mr Sol Kerzner, chairman, attributed the revenue performance, achieved in the face of an 'extremely poor economic environment', to having the benefit of its new Carousel resort for the full six months. The opening of the R830m Lost City project in December, amid saturation media coverage, also boosted turnover.

Average occupancies at the company's hotels, however, dropped to 72 per cent from 78 per cent the previous year, and this put pressure on margins, leading to the lower profits.

Earnings per share dropped to 93 cents per share, from 96 cents a year earlier, because of an increased number of shares in issue. The interim dividend was maintained at 64 cents a share.

Sun International Bophuthatswana South Africa, Africa P7011 Hotels and Motels FIN Interim results P7011 The Financial Times London Page 26 218
International Company News: Imasco extends its penetration of US Publication 930211FT Processed by FT 930211 By ROBERT GIBBENS MONTREAL

IMASCO'S financial services unit, through a US subsidiary, is buying USDollars 660m in deposits and 18 branches in the Rochester and Buffalo areas from two New York-based savings and loan companies.

The acquisitions, from Anchor Savings Bank and Dime Savings Bank, will raise the indirect Imasco subsidiary's network in the north-eastern US to 86 branches and an asset base of well over USDollars 5bn. Market share in the expanding Buffalo, NY, market will rise to 6 per cent.

Imasco owns Canada's largest trust company, Canada Trustco, through CT Financial Services, and the US subsidiary is First Federal Savings and Loan, based in Rochester and acquired by CT in 1991.

Imasco would not reveal the price paid for both deals but it said First Federal is not acquiring any loan portfolios.

The deals are part of Imasco's financial services expansion in the US north-east.

Abitibi Price, the big newsprint producer now owned by creditors of Olympia & York Developments, is raising CDollars 150m (USDollars 119m) with an issue of convertible debentures. The proceeds will be used to reduce long-term debt.

Anchor Savings Bank Dime Savings Bank CT Financial Services Imasco First Federal Savings and Loan Association of America United States of America Canada P6035 Federal Savings Institutions P2611 Pulp Mills COMP Acquisition FIN Share issues P6035 P2611 The Financial Times London Page 26 241
International Company News: Investor group plans to take stake in Banesto Publication 930211FT Processed by FT 930211 By TOM BURNS and PETER BRUCE MADRID

A GROUP of investors led by JP Morgan, the US investment bank, is to take a stake of between 7 per cent and 10 per cent in Banesto, Spain's third-largest bank, as part of a Pta53bn (Dollars 452m) rights issue being prepared by the Spanish bank.

JP Morgan's recently closed Dollars 1bn Corsair banking fund, and Mr Mario Conde, Banesto's chairman, will form the core of the investor group.

The US bank has guaranteed that its group will invest Dollars 200m in the rights issue.

Mr Conde's inclusion will raise his personal stake in Banesto from 2 per cent to up to 4.5 per cent.

If the rights issue, one of the largest in Spain, is fully taken up and if Banesto's efforts to sell its affiliate, Banco de Madrid, to Deutsche Bank of Germany, are successful, Banesto will have rid itself of a cloud under which it has been forced to operate for nearly three years.

The bank would then fall comfortably within the Bank of Spain's strict guidelines on the relationship between its capital and its exposure to industry.

'This is a lifesaver for the bank,' said Mr Juan Bastos, chief executive of the Madrid securities house, Gestemar.

The issue is viewed by some as a bid by Banesto to gain manoeuvrability at a time when it is reducing its profits and seeking to dispose of its industrial assets in a depressed market.

Under the terms of the three-for-one rights issue, JP Morgan will place shares with the investor group at Pta1,900 per share.

In all, 35.11m new shares are being offered at a premium of Pta800 per share.

In addition to the increased capital, Banesto would gain an important psychological lift through JP Morgan's endorsement of its business potential.

The investor group is understood to have committed itself to stay with the bank for at least five years, and JP Morgan is likely to be given a seat on the Banesto board.

JP Morgan issued a highly positive report on the Spanish bank before Christmas.

'Morgan is putting its money where its mouth is,' one Madrid analyst commented yesterday.

Banesto reported a 27 per cent fall in its net profits during 1992 to Pta45.6bn due to a sharp drop in extraordinary income from disposals.

It was nevertheless able to report a 17 per cent increase in the gross operating profit of its banking business, which totalled Pta119.6bn

Having sold its industrial assets in oil refining and cement in the past two years, Banesto is now seeking buyers for its holdings in Acerinox, the major domestic stainless steel producer, and in Union Carburos, its industrial gases group.

This strategy, which seeks a more reduced and flexible industrial portfolio, complements Banesto's attempts to improve income from its core financial sector.

Banco Espanol de Credito Spain, EC P602 Commercial Banks COMP Company News COMP Shareholding P602 The Financial Times London Page 25 506
International Company News: Ferruzzi tightens hold on Fondiaria Publication 930211FT Processed by FT 930211 By HAIG SIMONIAN

FERRUZZI, the Italian industrial group, yesterday tightened its management hold over Fondiaria, the Florentine insurer that it jointly controls.

At the same, Ferruzzi - which has debts of more than L10,700bn (Dollars 7bn) - responded to speculation that it would dispose of Fondiaria in order to reduce its borrowings by stressing that the company was not for sale.

The announcement followed a board meeting at the troubled insurance company, which saw the resignation of Mr Alfonso Scarpa, its long-standing managing director, and the appointment of Mr Carlo Sama, a senior Ferruzzi executive and husband of one of the Ferruzzi heiresses, as Fondiaria's new chairman.

Mr Sama replaces Mr Camillo De Benedetti, the Italian financier and cousin of Mr Carlo De Benedetti, who died last month. Mr Camillo De Benedetti shared control of Fondiaria with Ferruzzi through Gaic, a quoted holding company.

Ferruzzi's financial difficulties and Fondiaria's waning profitability have led to speculation that part or all of the insurance operation may be sold. However, Mr Sama said he considered Fondiaria 'Ferruzzi's life insurance, and . . . one doesn't sell life insurance'.

Fondiaria, which appointed Mr Arrigo Bianchi di Lavagna as its new managing director, gave no indication of how it planned to improve earnings. Its financial performance has deteriorated as a result of difficulties in the Italian insurance sector and setbacks in its own ambitious expansion policy.

Fondiaria's biggest problems have arisen in Germany, where it owns 20 per cent of Aachener und Munchener Beteiligungs, the big insurance group in which Assurances Generales de France is now the major shareholder.

Mr Bianchi di Lavagna, an experienced insurance and banking executive, was previously managing director of Unione di Riassicurazione, the reinsurance company owned by leading Italian insurers. No indication was given of Mr Scarpa's future plans.

Ferruzzi Finanziaria Fondiaria Italy, EC P6311 Life Insurance P2041 Flour and Other Grain Mill Products P2099 Food Preparations, NEC COMP Company News PEOP Personnel News Sama, C new chairman Fondiaria P6311 P2041 P2099 The Financial Times London Page 25 353
International Company News: Gardini and Vender form foods group Publication 930211FT Processed by FT 930211 By HAIG SIMONIAN MILAN

MR RAUL GARDINI, the former Ferruzzi chief and Mr Jody Vender, majority owner of Sopaf, the merchant bank, have joined forces to create Italy's third-largest frozen-foods group, writes Haig Simonian in Milan.

The new group, known as Argel, will comprise Finagel, the frozen-foods concern controlled by Sopaf's Invest subsidiary, and Sias, a frozen-foods company owned indirectly by the Grigolini family. It is also expected to work closely with Vital-Sogeviandes, a French meat company owned by Mr Gardini.

The new company could soon expand further with the possible purchase of assets from the state-owned SME foods and retailing concern.

In a complex deal, Invest and Garma, the fast-growing Italian food concern controlled by Mr Gardini and Mr Giulio Malgara, will take 35 per cent each in the new group. Sias will have a 20 per cent stake, while the remaining 10 per cent will be sold to unspecified institutional investors. Garma will have management control.

With sales of about L300bn (Dollars 197m), Argel will have around 15 per cent of the Italian frozen-foods market, on a par with the foods business of SME's Italgel subsidiary. Argel has made no secret of its interest in bidding for Italgel's food interests as part of the SME privatisation.

Argel Italy, EC P20 Food and Kindred Products P5142 Packaged Frozen Foods COMP Company News COMP Strategic links P20 P5142 The Financial Times London Page 25 249
International Company News: Schneider to sell components arm Publication 930211FT Processed by FT 930211 By ALICE RAWSTHORN PARIS

SCHNEIDER, the French electrical engineering and construction group, is in negotiations to sell Jeumont-Schneider, its electronic components subsidiary, to Framatome, the state-owned supplier of nuclear reactors.

The two companies yesterday confirmed that they were in discussions and were finalising the terms of the sale.

The Jeumont disposal is expected to be a complex deal, with Framatome retaining the company's nuclear activities but selling its non-nuclear interests to Alcatel Alsthom, the state-controlled electronics group.

Jeumont produces components for use in the nuclear industry and electrical engineering. It employs 2,000 and had sales of FFr1.6bn (Dollars 290m) in 1992. The group has been considerably scaled down since the mid-1980s, notably by the sale of its telephone interests to Bosch of Germany.

The Jeumont sale would include the disposal of its 47.5 per cent stake in Jeumont-Schneider Automation, which specialises in the motor sector. This company, with a workforce of 270, had turnover of FFr230m last year.

The deal would form part of the ongoing divestment programme at Schneider, which is trying to reduce the debt amassed by the acquisition of Square D, the US construction company. Schneider raised FFr1bn from disposals last year, leaving the present level of net debt at around FFr19bn.

However, debt-financing costs contributed to a sharp fall in Schneider's interim net profits to FFr193m in the first half of 1992, from FFr302m in the same period of 1991.

The group has also been affected by the cost of integrating Square D and the problems of Spie Batignolles, its French construction company. CS First Boston forecasts a more moderate fall in Schneider's net profits for the full 1992 year, to FFr272m from FFr275m in 1991.

Framatome has been trying to adjust to the decline in world demand for nuclear reactors. The decision to sell the non-nuclear part of Jeumont to Alcatel, which owns 44 per cent of Framatome, comes as a number of state-owned companies are reshuffling their interests in the run-up to the March elections, after which the next French government is expected to accelerate the privatisation programme.

Schneider Group Jeumont Schneider Framatome France, EC P361 Electric Distribution Equipment COMP Company News COMP Disposals FIN Company Finance P361 The Financial Times London Page 25 384
International Company News: Upbeat forecast from Parmalat sees 1993 sales ahead by 50% Publication 930211FT Processed by FT 930211 By HAIG SIMONIAN MILAN

PARMALAT, the Italian dairy foods group, expects sales to surge by about 50 per cent to L2,400bn (Dollars 1.6bn) this year on the back of buoyant internal growth and continuing acquisitions.

The company, which has made a strong recovery since its recapitalisation in 1990, said that turnover in 1992 rose by 21.5 per cent to L1,613bn.

Mr Domenico Barili, director general, said operating earnings had risen by 17.3 per cent to L203bn.

In 1991, Parmalat Finanziaria, the listed holding company, reported net earnings of L42bn. Full 1992 results will not be released until March. However, on the basis of yesterday's figures, analysts forecast net group profits in the range of L50bn-55bn.

Mr Barili said that operating profits should rise by a further 22 per cent to L248bn this year.

Parmalat, around 27 per cent of whose capital is held abroad, expects most of its growth to come outside Italy.

The group is expanding fast in eastern Europe, South America and the US.

In 1992, sales in Europe, excluding Italy, jumped 164 per cent to L66bn.

In south America - principally Brazil and Argentina - sales climbed by 28.7 per cent to L260bn, while US turnover reached L13bn.

All three areas are expected to surge this year, with growth rates of 263 per cent in Europe and 111 per cent in south America.

Sales in the US are forecast to climb almost 15-fold to L189bn.

The forecasts are based on acquisitions that have already been made - such as that of the Fejertej dairy group in Hungary - and two other transactions which have not yet been announced, but are virtually sealed, it said. Italian turnover is forecast to rise by 13 per cent.

Mr Barili stressed that the acquisition-led expansion would not involve a big rise in Parmalat's net debts, which stood at L465bn at the end of December 1992.

Interest charges in 1993 were forecast to edge up to L79bn from L71bn in 1992, while interest costs as a proportion of sales would fall to 3.3 per cent to 4.4 per cent in 1992.

Parmalat Italy, EC P202 Dairy Products COMP Company News FIN Company Finance P202 The Financial Times London Page 25 387
International Company News: Snecma says it made loss last year Publication 930211FT Processed by FT 930211 By ALICE RAWSTHORN PARIS

SNECMA, France's state-controlled aero-engine maker, yesterday said it had made a loss for 1992 but did not disclose the size, writes Alice Rawsthorn in Paris.

The company blamed the gloomy economic environment and delays in orders for civil and military aircraft. The group was also in the red in 1991, when it fell into a net loss of FFr67.8m (Dollars 12.6m) from net profits of FFr208m in 1990.

Its performance has since deteriorated with a fall in sales to around FFr23bn in 1992, against FFr23.9bn in 1991. Snecma also suffered a FFr3bn decline in the value of new orders from the previous year's total of FFr7.3bn.

The group has already announced plans to step up its cost-cutting programme. It proposes making additional annual savings of FFr500m by reducing stocks and accelerating its research cycle.

These cuts will involve the loss of 650 jobs and 20 days of temporary lay-offs this year.

Michelin, the world's largest tyre manufacturer, reported a 1.2 per cent decline in turnover to FFr66.8bn in 1992, from FFr66bn in 1991. The group said it had been affected by sluggish demand and exchange rate changes.

Michelin, which returned to the black with net profits of FFr820m in the first half of 1992, against a net loss of FFr1.06bn in the same period of 1991, is already implementing a long-term rationalisation programme.

Nationale d'Etude et de Construction de Moteurs d'Aviation France, EC P3011 Tires and Inner Tubes P3724 Aircraft Engines and Engine Parts P3728 Aircraft Parts and Equipment, NEC P3714 Motor Vehicle Parts and Accessories COMP Company News FIN Annual report P3011 P3724 P3728 P3714 The Financial Times London Page 25 292
UK Company News: Simon shares fall on contract warning Publication 930211FT Processed by FT 930211 By PETER PEARSE

THE SHARE price of Simon Engineering fell 20p to 119p yesterday on news that it would make a Pounds 5m loss on a Dollars 103m (Pounds 68.2m) contract.

Analysts yesterday lowered their forecasts for the engineering and environmental group from between Pounds 10m and Pounds 12m to between Pounds 6m and Pounds 7m.

They also believe the final dividend will be passed, leaving a total down from 15.7p to 5p.

Management was criticised because this was not the first time Simon had suffered cost over-runs on a paper mill contract. The latest problems relate to a contract to rebuild the world's largest liner board paper mill in Jacksonville, Florida. for Seminole Kraft, an arm of Stone Corporation.

On the previous occasion, Stone was also the client, though Mr Alan Jarvis, Simon's finance director, said the group took over the Hoya contract in Germany when it acquired Holder Pamac Group in 1989.

On the Jacksonville contract, Mr Jarvis said: 'We felt we had done all we could do to avoid this situation,' though he conceded that it had been 'poorly costed'.

He added that Simon had lodged a 'substantial' claim with Stone over 'unagreed contract variations' where specifications had been altered during the course of the work. He said that 'substantial' meant more than 10 per cent of the value of the contract and that the two companies were currently in negotiations.

Mr Jarvis said that as soon as a loss on a contract was recognised, it had to be written off, though he stressed that Simon was 'not in danger of breaching any of its banking covenants'.

Simon said the Pounds 260m factory contract in Armenia, had been completed successfully.

Simon Engineering United Kingdom, EC P6719 Holding Companies, NEC P1623 Water, Sewer and Utility Lines P1629 Heavy Construction, NEC P3556 Food Products Machinery P3559 Special Industry Machinery, NEC P516 Chemicals and Allied Products CMMT Comment & Analysis MKTS Contracts FIN Company Finance P6719 P1623 P1629 P3556 P3559 P516 The Financial Times London Page 24 352
UK Company News: Caledonia required to buy Ralston assets Publication 930211FT Processed by FT 930211

The Liquidators of Ralston Investment Trust have exercised their option to require Caledonia Investments, which owns 75 per cent of the trust, to acquire some of its assets.

The net asset value of Ralston was Pounds 15.7m.

There will be a cash distribution of 65.4p per share to shareholders other than Caledonia on February 11.

Ralston Investment Trust Caledonia Investments United Kingdom, EC P6719 Holding Companies, NEC P672 Investment Offices COMP Acquisition COMP Company News P6719 P672 The Financial Times London Page 24 98
UK Company News: Fleming Enterprise asset value ahead Publication 930211FT Processed by FT 930211

Fleming Enterprise Investment Trust had a net asset of 170.7p at December 31 1992.

This compared with 159.6p a year earlier.

Net revenue for the half year was sharply lower at Pounds 734,000 (Pounds 1.12m).

Earnings per share dipped from 2.79p to 1.83p.

The interim dividend is maintained at 1.3p.

Fleming Enterprise Investment Trust United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 24 84
UK Company News: Kleinwort Overseas net asset value rises Publication 930211FT Processed by FT 930211

Kleinwort Overseas Investment Trust had a net asset value of 224.64p at December 31, compared with a value of 185.39p some 12 months earlier.

Net revenue increased from Pounds 2.68m to Pounds 2.84m. This produced earnings per share of 3.54p (3.34p).

The proposed final dividend is lifted to 1.8p, bringing the total to 3.3p (3.2p).

Kleinwort Overseas Investment Trust United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 24 90
UK Company News: Saints net asset value up 16% Publication 930211FT Processed by FT 930211

Net asset value of Scottish American Investment rose some 16 per cent, from 131.7p to 152.2p, during 1992.

Attributable revenue for the year amounted to Pounds 10.6m (Pounds 9.71m), equivalent to earnings of 4.73p (4.34p) per share. A proposed final distribution of 1.11p brings the total to 4.35p (4.12p).

Scottish American Investment United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 24 83
UK Company News: Throgmorton 1000 net asset value falls Publication 930211FT Processed by FT 930211

In its first set of results, Throgmorton 1000 Smallest Companies Trust reported net asset value per share of 98.84p at the end of the half-year to December 31.

This compared with 99.4p at launch and 106.91p by January 31 1993.

The company was incorporated on April 6 last year, but did not begin trading until July 23, the day after acquiring Throgmorton USM.

Gross income amounted to Pounds 803,000 and net revenue was Pounds 452,000. Earnings per share came through at 1.34p. The board expects to recommend a dividend for the current year.

Throgmorton said it had identified positive sentiment towards small companies and it hoped this would benefit the second half.

Throgmorton 1000 Smaller Companies Trust United Kingdom, EC P672 Investment Offices FIN Interim results P672 The Financial Times London Page 24 148
UK Company News: Elbief deficit up to Pounds 244,000 Publication 930211FT Processed by FT 930211

Shares of Elbief yesterday fell 5p to 21p as the Birmingham-based manufacturer of photograph frames, clocks and mirrors accompanied news of an increased interim deficit with a gloomy trading statement.

Losses before tax for the six months to October 31 increased to Pounds 244,000 (Pounds 57,000). Mr Harry Prais, chairman, said: 'Overheads were pruned severely and employee numbers were drastically reduced, but this was negated by lower sales.' Turnover declined 17 per cent to Pounds 1.9m.

Mr Prais said he saw little sign of an end to recession and did not anticipate a return to profits in the current year.

Losses per share were 0.2p (0.04p).

Elbief United Kingdom, EC P3999 Manufacturing Industries, NEC P3965 Fasteners, Buttons, Needles, and Pins FIN Interim results P3999 P3965 The Financial Times London Page 24 146
UK Company News: US growth lifts Elan Publication 930211FT Processed by FT 930211

Third quarter profits of Elan Corporation, the Irish health care products group, improved from IPounds 3.06m to IPounds 5.17m (Pounds 5.38m) pre-tax. For the nine months to December 31, profits rose from IPounds 8.58m to IPounds 14.15m.

Mr Donald E Panoz, chairman, said the growth could be attributed to the success of Cardizem CD in the US market.

Although sales by Lederle of Prostep declined significantly in the US, that was partly offset by increased sales of the nicotine patch in international markets.

Turnover improved from IPounds 14.9m to IPounds 23.4m. Earnings per share rose to 0.15p (0.1p).

Elan Corp Ireland, EC P2834 Pharmaceutical Preparations P8071 Medical Laboratories FIN Interim results P2834 P8071 The Financial Times London Page 24 132
UK Company News: Share sale bolsters CH Bailey Publication 930211FT Processed by FT 930211

SALES OF investments, mainly the disposal of part of its stake in Bristol Channel Ship Repairers, produced a Pounds 1.24m credit for CH Bailey in the 28 weeks to October 9. The company returned to profit to the tune of Pounds 773,250. Sales rose some 12 per cent from Pounds 2.1m to Pounds 2.34m, but margins remained slim. The corresponding period saw a Pounds 305,600 loss.

Mr Christopher Bailey, chairman of both Bailey and Bristol Channel, in which CH Bailey retains an 8 per cent stake, also voiced his opposition to the Cardiff Bay barrage bill.

He said that if the scheme, which is being considered in the House of Lords, was sanctioned it would make shiprepairing at the Bute dry dock impossible.

CH Bailey United Kingdom, EC P6719 Holding Companies, NEC P7011 Hotels and Motels P7353 Heavy Construction Equipment Rental P871 Engineering and Architectural Services FIN Interim results P6719 P7011 P7353 P871 The Financial Times London Page 24 173
UK Company News: Lloyds Abbey rises to Pounds 298m Publication 930211FT Processed by FT 930211 By JOHN AUTHERS

LLOYDS ABBEY Life, the life assurance group, announced profits before tax of Pounds 297.6m for 1992, a rise of 4.2 per cent on the previous year's Pounds 285.5m, restated under new accounting standards.

The total dividend remains at 17.3p via a proposed maintained final of 11p, payable from earnings of 28p (29.1p) per share.

Black Horse Financial Services, a 'bankassurance' company which sells products only to customers of Lloyds Bank, registered a 23.5 per cent growth in pre-tax profits, from Pounds 89.5m to Pounds 110.5m.

However, profits at Abbey Life, its other UK life assurance division which sells mostly through a direct sales force, rose by only 2.4 per cent to Pounds 146.4m (Pounds 142.9m).

Abbey Life's relatively poor performance was attributed to expenses of new regulatory requirements on training and competence, which led to a reduction in the sales force from 3,507 to 3,200.

Lloyds Bank Insurance Services, which sells general insurance, increased pre-tax profits by 7.7 per cent to Pounds 58.8m (Pounds 54.6m).

Profits before tax at Lloyds Bowmaker, the finance company affected by a Pounds 100.5m bad debt write-off, dropped from Pounds 22.3m to Pounds 16.2m. Black Horse Agencies, the estate agency, saw losses reduced from Pounds 21.4m to Pounds 10.6m.

The worst results were suffered by Trans Leben, the group's German life subsidiary, which incurred a loss of Pounds 14.1m (profits of Pounds 7.5m). This reflected strict reserving requirements for its 'with-profits' business.

See Lex

Lloyds Abbey Life United Kingdom, EC P6311 Life Insurance FIN Annual report P6311 The Financial Times London Page 24 276
UK Company News: Benson reaches Pounds 0.8m as growth continues Publication 930211FT Processed by FT 930211 By PAUL CHEESERIGHT, Midlands Correspondent

GROWTH AT Benson Group, the Wolverhampton-based engineering company, continued during its first half to November 30.

Pre-tax profits jumped from Pounds 225,000 to Pounds 817,000 on turnover of Pounds 12.5m (Pounds 4.85m).

The profits growth marks an extension of last year's second-half trend and follows the absorption of five acquisitions. New management arrived in 1990 and undertook corporate surgery earlier in the recession than many of its peers. The group has disengaged from the difficult agricultural machinery markets.

Margins have been maintained at the levels of the last financial year in the three main lines of business - environmental controls, vehicle engineering and engineering components. 'We have been determined not to enter the fray of reducing prices,' said Mr Richard Phillips, chairman.

Earnings per share were 0.55p (0.39p) and the interim dividend is restored with a payment of 0.1p. For 1991-92, Benson paid a final, also of 0.1p.

Gearing rose from 30 to 50 per cent during the six months.

Benson Group United Kingdom, EC P6719 Holding Companies, NEC P3433 Heating Equipment, Ex Electric P3429 Hardware, NEC P3523 Farm Machinery and Equipment FIN Interim results P6719 P3433 P3429 P3523 The Financial Times London Page 24 216
UK Company News: A downturn reaching to the core - David Simon has had a baptism of fire at British Petroleum. Deborah Hargreaves reports on the expected losses Publication 930211FT Processed by FT 930211 By DEBORAH HARGREAVES

BRITISH Petroleum will today report a loss for last year and a sharp cut in its dividend as the company has seen a downturn in all of its main businesses.

The decline in core activities, such as refining and marketing, is even worse than can have been imagined by Mr David Simon, chief executive, when he took on the post after the ousting of Mr Bob Horton last June.

BP is expected to report a loss of between Pounds 350m and Pounds 400m on a replacement cost basis, which strips out the effects of stock losses and gains, but this figure could be clouded by changes in BP's accounting standards.

Investment analysts expect the company to pay a dividend of 2.1p for the final quarter, making a full year pay-out of 10.5p - down from 16.8p in 1991.

The company is continuing its programme of severe cost-cutting set in train by Mr Horton and stepped up by Mr Simon last August.

Mr Simon is believed to have curtailed capital expenditure in the second half of last year even more than he said he would as the scale of the downturn became clear to him.

Mr Nick Clayton, oil analyst at Smith New Court, expects BP to show that it has cut capital spending by Pounds 400m in the second half to leave a total of about Pounds 3.2bn for the full year.

'The company is doing all the right things in cutting costs, but it is getting absolutely no help from the external environment,' said Mr Clayton. Severe over-capacity in the chemicals sector had turned that market into a 'bloodbath'.

In addition, over-production by European oil refineries has cut margins to a level of about Dollars 1 (60p) a barrel this week which means no companies are making money. Oil companies need a margin of at least Dollars 3 a barrel to make a profit on refining.

Crude oil prices have remained low and this hurts BP which is more exposed to the oil price than rivals such as Royal Dutch Shell.

One bright spot for the company is the pound's fall against the dollar, translating into higher revenues from crude oil sales.

By the same token, BP's share price has performed strongly in the UK as US analysts have started to buy the stock.

A favourable exchange rate and the round of cost-cutting has turned into a slightly higher expected income for BP for the final quarter of last year in spite of the deteriorating fundamentals.

Analysts expect fourth quarter income to be between Pounds 150m and Pounds 200m on a replacement cost basis which is an improvement on the Pounds 72m earned in the last quarter of 1991.

However, few in the City expect the upturn to be sustained until there is a pick-up in the oil market.

BP also faces initial costs for part of its restructuring programme, which aims to reduce the workforce by 11 per cent. Redundancy payments could cost the company Pounds 300m in the next six months.

Cash is a key element for BP to get under control. Mr Clayton believes last year's results will point to a net outflow of Pounds 850m.

Mr Simon cannot let up on his cost-cutting initiative while the fundamentals of his businesses remain so poor.

British Petroleum United Kingdom, EC P6719 Holding Companies, NEC P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining CMMT Comment & Analysis FIN Annual report P6719 P1311 P2911 The Financial Times London Page 24 619
UK Company News: Airtours resumes attack in Owners bid Publication 930211FT Processed by FT 930211 By RICHARD GOURLAY

AIRTOURS yesterday returned to the attack in its bid to take over Owners Abroad, arguing that shareholders in the rival holiday group have been given inadequate explanations as to why their company has performed relatively so badly.

In a letter to shareholders, Mr David Crossland, Airtours chairman, said that contrary to Owners Abroad's claim that his company was 'running out of steam', Airtours' increases in bookings were gathering momentum.

Mr Howard Klein, Owners Abroad chairman, replied that in neither of Airtours' two offer documents had it supplied a convincing explanation of the strategy for the enlarged group. Airtours had also failed to quantify the benefits which it claimed would come from the merger.

Mr Crossland said that he was particularly upset by the claim that Airtours had chosen the wrong aircraft in the MD83. This older, but commercially proven, aircraft had been chosen because at the time the A320 had not been in operation for more than 4,000 flying hours a year.

Airtours had decided not to risk starting a new charter airline with a new aircraft.

Mr Crossland refuted Owners Abroad's claim that Airtours' 30 per cent expansion in capacity in 1991 had been 'risky'. Airtours had moved very rapidly - but according to a plan - in snapping up hotel beds and airline seats when ILG went bust.

As a result Airtours had been able to double its market share, adding five percentage points to take it up to about 12 per cent of the air inclusive tour market that year. Owners Abroad had only increased its market share by one percentage point in summer 1991.

Mr Crossland said that while his company had increased its market capitalisation by Pounds 186m in the five years to last September, Owners Abroad's worth had shrunk.

Twenty four MPs have signed an early day motion, calling on Mr Michael Heseltine, the trade and industry secretary, to refer Airtours' proposed takeover of Owners Abroad to the Monopolies and Mergers Commission. Already, Thomas Cook, the travel agency and financial services group, the Consumers' Association and the Association of Independent Tour Operators have called for a referral.

Airtours Owners Abroad Group United Kingdom, EC P4725 Tour Operators P451 Air Transportation, Scheduled P6719 Holding Companies, NEC P4724 Travel Agencies P9651 Regulation of Miscellaneous Commercial Sectors COMP Company News GOVT Government News P4725 P451 P6719 P4724 P9651 The Financial Times London Page 23 415
UK Company News: Legacy of a laid-back American - The leaner Storehouse left by its departing chief Publication 930211FT Processed by FT 930211 By NEIL BUCKLEY

THE DAY after his appointment as head of one of the largest department store chains in the US, Mr David Dworkin still lives up to his laid-back image.

He is toying with a late lunch of baked potato, beans and coleslaw at his desk, after a work-out at the gym.

But if exercise and healthy eating have helped Mr Dworkin shed quite a few pounds since he arrived from the US three years' ago to head BhS, the department store chain, a similar transformation has taken place at that company and the parent Storehouse group which he took over last summer.

Mr Dworkin characterises the change thus. Storehouse when he arrived was 'amorphous, and a bit chaotic. It was non-symmetrical, a portfolio of non-related business entities.'

Today, it is 'unified, focused, with the same philosophies governing the businesses.'

The City seems to agree with him, and credits him with the transformation.

Storehouse shares, which hit a low of 85p in December 1991, recently touched 219p. In the last two days, the jitters caused by the news of his departure have knocked almost 10 per cent off the shares, although analysts say the reaction may be overdone. Mr Dworkin, they say, has made the fundamental changes that were required, and set the company back on course.

The 49-year-old American has sometimes been ruthless. To cut costs, he sacked 900 people, and got rid of the 'legions and layers, all the fluff and the nonsense,' removing four layers of management.

Some functions were contracted out, old stock was sold off cheaply, and the image of BhS was rethought, with better use made of displays and space, and brighter stores.

There were mistakes, but the strategy worked. Year-on-year sales increases have run at about 8 per cent for the last 16 months, and margins have also improved.

Last summer, Mr Dworkin rose to head the Storehouse group. Officially, this was due to the failure of then chief executive Mr Michael Julien to throw off a lingering virus, but some accounts suggest Mr Dworkin may have been threatening a return to the US even then.

The slimming down of the business continued. The Habitat and Richards chains were sold, leaving Storehouse focused on BhS and Mothercare.

Mr Dworkin appointed Ms Ann Iverson, a colleague from his days at Bonwit Teller, the US stores group, to head Mothercare and introduce BhS-style reforms.

The process is far from complete. Mr Dworkin claims that while Storehouse's total floorspace is 7m sq ft, 3.6m of which is selling space, 1m sq ft are 'fallow', waiting to be 'recaptured' for trading.

He planned to stay at least another year. But two weeks' ago the call came from Carter Hawley Hale.

The stores chain, based in the western US, had been looking for a new chief executive since last October. It was too tempting to refuse.

'The set of circumstances that appealed to me when I arrived here exist at Carter Hawley,' Mr Dworkin says. 'It's the thrill, the challenge, the excitement of having something major to accomplish. It is a bit of an ego thing.'

There were also family reasons. Mr Dworkin wanted to be reunited with his two daughters in the US.

Carter Hawley's 83 department stores sell fashions to furniture and household goods, under the names The Broadway, The Broadway SouthWest, Emporium and Weinstocks.

The Broadway name, Mr Dworkin says, enjoys a similar reputation in California to Marks and Spencer in the UK.

Rising debts, however, led the group to seek chapter 11 bankruptcy protection in 1991. It began to reorganise and slim down, and emerged from chapter 11 last October with 16m sq ft of selling space, including many prime locations.

The group is already profitable and has a high turnover, but is rudderless.

'Dollars 2bn sales a year without a game plan is a lot of business,' remarks Mr Dworkin. He sees his role as similar to that at Storehouse: providing leadership, removing the fat and devising a strategy.

Storehouse, meanwhile, is looking in both the UK and the US for a replacement. It is stressing the need for continuity, but says the new chief is likely to come from outside the group.

Mr Dworkin looks back with some satisfaction. 'I would be less than honest if I said I wasn't proud. How many managements tried to turn around BhS? It was supposed to be the poison pill.'

Carter Hawley Hale Stores Inc Storehouse United States of America P5311 Department Stores P56 Apparel and Accessory Stores P5719 Miscellaneous Homefurnishings Stores P6719 Holding Companies, NEC COMP Company News PEOP Appointments Dworkin, D Head Carter Hawley Hale Stores Inc (US) P5311 P56 P5719 P6719 The Financial Times London Page 23 810
UK Company News: New Schroder Pounds 50m split trust Publication 930211FT Processed by FT 930211 By JOHN AUTHERS

Schroder Investment Management yesterday launched a new investment trust, the Schroder Split Trust, writes John Authers.

Schroders is hoping to raise Pounds 50m from the launch, which is aimed at retail investors and brokers. The trust, which has a planned life of some nine years, has not been pre-placed with institutions.

The share structure includes income, capital and zero dividend preference shares. Income shares are priced at 100p and capital at 20p. The zero dividend preference shares, priced at 100p, have first call on the fund's assets, and carry a final capital entitlement of 203p on January 31 2002.

Schroder Investment Management United Kingdom, EC P672 Investment Offices COMP Company News TECH Products P672 The Financial Times London Page 23 138
UK Company News: Chinese mount reverse takeover of Stonehill Publication 930211FT Processed by FT 930211 By PAUL TAYLOR

A PRIVATE Chinese-based property development company is coming to the London market through a Pounds 51.7m reverse takeover of Stonehill Holdings, the UK property management group which owns and manages Stonehill Business Park in north London.

Under the terms of the agreement, Stonehill will acquire Cathay International United Investments for Pounds 51.7m in new paper from Cathay International Investment, a company set up in 1988 and owned by Mr Wu Zhen Tao, a former Beijing government official.

Of the 517m new Stonehill shares which CII will receive, 117m will be placed with institutional and corporate investors in China, Hong Kong and the UK by Marshall Securities.

Stonehill, a furniture manufacturer until the late 1980s, has a market capitalisation of Pounds 2.31m and posted a reduced pre-tax loss of Pounds 170,000 (Pounds 290,000) in the six months to September 30.

The group's shares were suspended at its request early last month at 11p apiece.

Once the acquisition is completed Stonehill will become a subsidiary of CII with Mr Wu, who was born and educated in Beijing and has held a number of important positions in government scientific and financial institutions in China, as chief executive.

The company then plans a 2-for-1 rights issue of 42m shares to raise Pounds 4.2m which will be used to reduce borrowings and provide working capital for the new enlarged group.

In addition CII will make a general offer for the existing 21m shares to satisfy the City Code on takeovers and mergers. The transactions have been arranged so that CII will own not less than 69 per cent and not more than 74.3 per cent of the enlarged group.

CIU's main asset is the 346-room Landmark Hotel in Shenzhen, China, which represents the final phase of a mixed housing, retail and commercial development undertaken by CIU.

The hotel is due to open in June and will be managed under contract by a joint venture company between CII and the Hong Kong-based Koppen Yan Zimmermmann group.

Mr James Buchanan, Stonehill's chairman, said the deal will enable the enlarged group to pursue property opportunities in both China and the UK.

Despite closing its furniture operations the UK group has remained highly geared and loss-making and has lacked the resources to expand.

Stonehill Holdings Cathay International United Investments Cathay International Investment United Kingdom, EC China, Asia P6719 Holding Companies, NEC P65 Real Estate COMP Acquisition P6719 P65 The Financial Times London Page 23 423
UK Company News: PPI administrators begin proceedings against Citibank Publication 930211FT Processed by FT 930211 By PAUL TAYLOR

THE ADMINISTRATORS of Polly Peck International, the collapsed fruit and electronics group, began High Court proceedings in London yesterday against Citibank in an attempt to recover some Pounds 75m of missing funds.

The suit also names the New York-based banking group's Swiss banking subsidiary and Confidas Finance et Placement, a Luxembourg-based associate which provides the bank's customers with fiduciary and trust services.

The proceedings relate to about Pounds 75m of the Pounds 371m in Polly Peck funds which the company's administrators contend were misappropriated by Mr Asil Nadir, Polly Peck's former chairman and chief executive. Civil and criminal proceedings are already under way against Mr Nadir.

According to the administrators the Pounds 75m was transferred from Citibank in London to Zurich where it was used by Mr Nadir for personal purposes. They also claim that 'a substantial part' of the Pounds 75m was paid out through a web of offshore companies provided and managed for Mr Nadir by Confidas Finance.

The administrators, led in this action by Mr Christopher Morris of Touche Ross, claim that Citibank and the other defendants are liable because they knew or ought to have known of Mr Nadir's fraud.

Citibank said the suit would be 'vigorously defended.'

Polly Peck International Citibank Confidas Finance et Placement United Kingdom, EC P6719 Holding Companies, NEC P7389 Business Services, NEC P5148 Fresh Fruits and Vegetables P3651 Household Audio and Video Equipment P602 Commercial Banks P2335 Women's, Juniors', and Misses' Dresses COMP Company News GOVT Legal issues P6719 P7389 P5148 P3651 P602 P2335 The Financial Times London Page 23 277
UK Results Season: How the FT will use FRS 3 accounting rule Publication 930211FT Processed by FT 930211 By RODERICK ORAM

THE CHANGES to company accounts triggered by the new FRS 3 accounting standard will have an impact on companies' results and the way the Financial Times reports them.

For many companies, pre-tax profits and earnings per share will be more volatile. However, FRS 3's requirement on them to give more financial data will bring more detail and depth to our reporting and analysis.

Not all companies will switch to FRS 3 before the June 22 deadline. For those that do, we will report their results in the following way:

The main measure will remain pre-tax profits for the latest period compared with the previous year's figure. For a transitional period, we will show a second comparative figure based on the previous standard.

Any factors distorting pre-tax profits, such as the cost of rationalising or disposing of businesses, will be fully reported.

Our reports will carry all the figures needed to give a full review of a company's performance. The FRS 3 data will allow for example, a clearer picture to be given of the impact of acquisitions and the cost of disposals.

Thus, a more accurate assessment will be possible, for example, of the profitability of a company's on-going businesses.

Greater use will also be made ofcashflow statements introduced under FRS 1.

The FT will report the earnings per share derived under FRS 3, contrasted to the year earlier figure. We may also report any alternative earnings quoted by the company.

For analytical pieces, such as Company Comments and corporate profiles, we will draw on p/e ratios based on eps figures adjusted to remove anomalies and to give a guide to companies' on-going performance. Brokers' analysts have begun work on such adjusted figures; we will be following their efforts closely.

FT Statistics, the department which provides the London Share Service prices, is discussing the appropriate treatment of earnings for the p/e ratios shown on these pages. The policy to be adopted will be announced in due course.

----------------------------------------------------------------------- GRAND METROPOLITAN ----------------------------------------------------------------------- CONSOLIDATED PROFIT & LOSS ACCOUNT - FRS 3 BASIS for the year ended 30th September 1992 ----------------------------------------------------------------------- 1992 1991 Pounds m Pounds m Pounds m Pounds m ----------------------------------------------------------------------- Turnover Continuing operations 6,617 6,649 Acquisitions 428 7,045 Discontinued operations 868 2,099 Total turnover 7,913 8,748 Operating costs (6,964) (7,721) Operating profit Continuing operations 865 895 Acquisitions 37 902 Discontinued operations 47 132 Total operating profit 949 1,027 Shares of profits/(losses) of associates Inntrepreneur Estates Ltd (14) (11) Other 30 21 965 1,037 Continuing operations Disposal of fixed assets 13 29 Sale of termination of businesses 10 (1) Provisions for loss on sale or termination of businesses (43) - (20) 28

Discontinued operations Disposal of fixed assets 3 Sale of termination of businesses 66 (307) Utilisation of prior year Provisions 53 49 Provisions for loss on sale or termination of businesses (45) (191) 74 (446)

54 (418) Interest (94) (171) Profit before taxation 925 448 Taxation (295) (223) Profit before taxation 630 225 Minority interests (6) (7) Profit for year 624 218 Ordinary dividends (246) (218) Transferred to reserves 378 0 Earnings per share 30.6p 11.0p

----------------------------------------------------------------------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30th September 1992 ----------------------------------------------------------------------- 1992 1991 Pounds m Pounds m ----------------------------------------------------------------------- Profit for the financial year 624 218 Deficit on revaluation of investment properties in associate (117) - Unrealised profit on sale of tenanted pub estate - 23 Exchange adjustments on foreign currency net investments (19) (15) Total recognised gains and losses for the financial year 488 226 ----------------------------------------------------------------------- NOTE OF HISTORICAL COST PROFITS AND LOSSES for the year ended 30th September 1992 ----------------------------------------------------------------------- 1992 1991 Pounds m Pounds m -----------------------------------------------------------------------

Profit on ordinary activities before taxation 925 448 Realisation of property revaluation gains of prior years 76 392 Difference between the historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount 1 3 Asset provisions created/(utilised) not required on an historical cost basis (20) (33) Historical cost profit on ordinary activities before taxation 982 810 Historical cost profit for the year retained after taxation, minority interests and dividends 435 362 ----------------------------------------------------------------------- RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 30th September 1992 ----------------------------------------------------------------------- 1992 1991 Pounds m Pounds m -----------------------------------------------------------------------

Profit for the financial year 624 218 Ordinary dividends (246) (218) Other recognised gains and losses relating to the year (net) (136) 8 New share capital issued 151 77 Goodwill acquired during the year (182) (278) Goodwill transferred to the profit and loss account in respect of disposals of businesses 126 214 Net additions to shareholders' funds 337 21 Shareholders' funds at 30th September 1991 3,422 3,401 Shareholders' funds at 30th September 1992 3,759 3,422 -----------------------------------------------------------------------

Financial Times United Kingdom, EC P2711 Newspapers TECH Services P2711 The Financial Times London Page 22 866
UK Results Season: Effects as companies rally to a new standard Publication 930211FT Processed by FT 930211 By ANDREW JACK

MR DAVID TWEEDIE, chairman of the Accounting Standards Board, recently said there was a need to develop standards that the person in the street could understand. FRS 3, the new financial reporting standard on the profit and loss account, does not fall into that category.

But over the coming months, anyone examining companies' financial results will rapidly begin to see the effect of the standard and will have to learn to cope with its effects.

FRS 3 becomes mandatory for companies with financial year-ends after June 22 this year. The Accounting Standards Board has urged companies to begin complying before this time.

It is essentially a standard dealing with disclosure and presentation of financial information, rather than specifying new ways of treating the numbers. The most important changes are:

Extraordinary items - costs or realisations which are fundamentally different to a company's normal activities - will be virtually abolished. Any that remain will be placed above the bottom line, so they will be included in the pre-tax profits figure.

Pre-tax profits and earnings will become far more volatile from year-to-year as a result, forcing readers of accounts to examine the details rather than focusing on a single figure of financial performance.

Exceptional items - other large material items outside the company's continuing business operations - will be largely absorbed into other headings on the profit and loss account. Three will remain separately disclosed: profits or losses on sale or termination of an operation; costs of a fundamental reorganisation or restructuring; profits or losses on the sale of fixed assets.

Turnover and profits must be broken down between three separate categories: continuing operations, acquisitions as a component of these operations, and discontinued operations.

The proceeds on the disposal of revalued assets must be recorded with reference to the carrying value or revalued amount shown on the balance sheet, where previously it was left in reserves.

A new statement of total recognised gains and losses will show the effect of any changes to reserves such as revaluations, and of exchange adjustments, which were all previously buried in the notes to the accounts.

A note of historical cost profits and losses will reconcile the effects of any revaluations to the historical level at which they were shown in the balance sheet.

A reconciliation of movements in shareholders' funds shows changes such as goodwill on acquisitions and new share capital issued.

So far, only a handful of companies have complied. These include BOC, Blue Circle, Hanson and Trafalgar House. A larger number of companies are using the format of FRS 3 for their interim results. Others - such as Bass and MEPC - are beginning to make reference to it in their accounts.

The recently-released accounts of Grand Metropolitan for the year to September 30 1992 provide a useful illustration of the effects of FRS 3, which it has fully adopted.

The difference between the old and new profit and loss accounts is instantly shown by the different profits: under the old system, pre-tax profit was Pounds 902m; under FRS 3, the new pre-tax profit on ordinary activities is Pounds 925m. The principal difference is Pounds 12m in extraordinary items, which boosts earnings per share from 30.1p to 30.6p.

The effect of FRS 3 was even more dramatic on the restated 1991 accounts. Pre-tax profits fell from Pounds 950m to Pounds 448m and eps declined from 32.4p to 11p.

GrandMet discloses a contribution to turnover of Pounds 428m from ac-quisitions, separated from Pounds 6.6bn from existing, continuing oper-ations. This would have been impossible to calculate before. It splits out under the three categories of the remaining exceptional items: Pounds 13m in fixed asset disposals, Pounds 10m on sale or termination of businesses, and a Pounds 43m provision for loss on sale or termination of businesses.

The three notes show substantial changes in goodwill, share capital, foreign currency exchange adjustments, and revaluations, reconciled to the figures on the face of the profit and loss account.

In general, a danger of FRS 3 is that companies can use it to throw up a smokescreen. Some companies are reporting under the new standard, and blaming it for any drop in profits. Others are holding back from implementing FRS 3 because the old system gives them more flexibility to conceal damaging transactions.

Analysts are also noting variations in the ways companies comply with the new standard - particularly over how material items must be separately disclosed, and how businesses are divided between continuing and discontinued items.

United Kingdom, EC P99 Nonclassifiable Establishments TECH Standards COMP Company News CMMT Comment & Analysis P99 The Financial Times London Page 22 789
UK Results Season: Captains wary of another false dawn - Pessimists fear companies may cut the pay-outs they have struggled to maintain Publication 930211FT Processed by FT 930211 By MAGGIE URRY

THE STOCK MARKET could face a testing time as companies report results over the next few weeks, or it could be about to see the turning point from recession to recovery.

Optimists hope that when company chairmen publish profit figures for 1992 - which in aggregate will be poor - they will signal a brighter outlook for 1993. Pessimists are more concerned that some companies will cut dividends they have struggled to maintain through the longest recession since the 1930s.

There is broad agreement that industrial companies' profits in aggregate will have shown no growth, or even a slight decline, in 1992. Profits fell 6 per cent in 1991. The market's concern will be what the results say about the outlook for the current year.

Analysts will use the results to rework their profit forecasts for the coming year, setting the tone for the stock market.

Chairmen's statements and companies' dividend decisions will be studied carefully for hints that the famous green shoots are at last starting to appear or that captains of industry see no recovery on the horizon. And chairmen may be nervous about being over-optimistic having witnessed false dawns before.

Estimates for current year profits growth vary widely, not only between stockbroking firms, but also between strategists, who take a 'top-down' approach, and the 'bottom-up' aggregation of analysts' forecasts. In most cases, the analysts' number is higher than the strategists', even the more bearish of whom look for double-digit percentage profits growth from industrial companies in 1993.

Even without much help from the economy, cost-cutting, lower interest rates and the benefit of the fall in the pound, if only on translation of overseas profits, should be sufficient to boost profits by 10 per cent or more.

Mr Mark Brown, chief UK strategist at UBS Phillips & Drew, is forecasting a 12 per cent rise in industrial profits, while his analysts are going for 21 per cent. He says the gap is not unusual at this stage, but worrying since he feels if his forecast is right analysts will bring down their estimates over the next few weeks which could hit the market.

Mr Brown is concerned that an economic recovery will be slow, particularly as many companies are still trying to cut stock levels, and says that 'one company's reduction in stocks is another's cut in output'.

The most optimistic strategists, such as Nomura Research Institute, have a forecast of 30 per cent for industrial earnings growth in 1993. Although admitting some of this may be deferred to 1994, Nomura's analysts are closer to other firms' forecasts with 22 per cent growth predicted. Nomura believes that analysts lag behind strategists at turning points.

While most market commentators expect 1992 dividends to be little changed in total, there could be surprises from individual companies. Many are leaving the decision until the last moment so that the dividend can reflect the up-to-the-minute trading situation.

One such is Pilkington, the glass company, which has a March year-end and reports in June. It cut its final dividend last year, but maintained its interim in December paying it from reserves, saying it would decide on the total payment for the year in June. If positive signs of recovery appear by then, investors hope Pilkington will decide not to cut again.

Dividend increases in 1993, forecast at about 3 or 4 per cent across the market, are expected to lag behind earnings growth as companies attempt to rebuild cover.

Although the hope that the UK has become a low-inflation economy means dividend cover need not be as high as it was in, say, the 1970s, companies and investors generally still feel uncomfortable if cover is below 2.

An additional problem for companies with surplus advance corporation tax, is that a dividend increase adds to the tax charge, thus reducing cover more severely.

Many companies will be keen to retain earnings to help finance extra working capital which they will need when recovery comes. Mr Brown said dividend cuts were still made after the last recovery had started.

United Kingdom, EC P99 Nonclassifiable Establishments COMP Company News CMMT Comment & Analysis P99 The Financial Times London Page 22 724
UK Results Season: Change in rulings will devalue p/e ratios Publication 930211FT Processed by FT 930211 By MAGGIE URRY

IS THE p/e ratio dead? The introduction of Financial Reporting Standard 3 will make fundamental changes to the way earnings per share are calculated, and will therefore affect the p/e, often regarded as the most important investment ratio.

Once items formerly treated as extraordinary, and therefore not included in eps calculations, are moved above the line, the FRS 3 eps number is likely to be more volatile than in the past.

The Accounting Standards Board's main aim in producing FRS 3 was to reduce the importance of the single eps number - which has become less meaningful as companies have found ways to fudge the figure. Under FRS 3 investors will be given, and indeed forced to look at, more information on which to base their valuations of companies.

Mr David Tweedie, chairman of the ASB, says that, 'in a way it should be easier for analysts because they will be given all the numbers to work with.' He points out that US companies and analysts have worked with a similar accounting system to FRS 3 for years. While 53 per cent of UK companies are likely to have an extraordinary item in any one year, only 5 per cent of US companies do.

Analysts are fairly sanguine about the changes, although they admit that there will be discontinuity and confusion to start with. Many claim that they were already adjusting published eps numbers for items which they regarded as not part of the continuing business.

Further they stress that the p/e is only one measure of a company, and most analysts also look at yield, cash flow, asset value, balance sheet strength and make more subjective judgments such as on the quality of management.

The Institute of Investment Management and Research, the investment analysts' industry body, is working on a report expected to produce a recommended method of producing a 'normalised' eps figure showing what a company has earned from its continuing operations. Analysts could use this as a base for making earnings forecasts.

This method could become an industry standard, and companies might even come to produce an IIMR eps figure. Meanwhile, many stockbroking firms are working on their own versions of normalised or ongoing eps figures.

Mr David Gray, of brokers James Capel, agrees that the p/e has in the past been emphasised because it provides a simple message to put across to investors. He, like others, does not expect a move to a ratio based on cash flow, but says people will be pushed to use a wider range of yardsticks.

At UBS Phillips & Drew, Mr Richard Hannah agrees that the arrival of FRS 3 will 'force analysis beyond the eps level'. However, he is concerned that analysts may latch on to an 'ongoing' p/e.

That is likely to be a flattering number if losses from discontinued activities, for example, are excluded. And it is often a reflection on a company's management if a subsidiary has to be closed, and relevant to its dividend paying ability if a loss on an investment has been sustained.

If not dead, the p/e will at least be devalued with FRS 3, but that may not be a bad thing.

United Kingdom, EC P99 Nonclassifiable Establishments TECH Standards CMMT Comment & Analysis P99 The Financial Times London Page 22 568
UK Results Season: Goodwill factor catches many out Publication 930211FT Processed by FT 930211 By ANDREW JACK

USERS OF accounts can expect to see a growing number of references by companies to new standards and rulings in the next few months.

Probably the most important change - and the one that caught many finance directors by surprise - comes from the Accounting Standards Board's urgent issues task force, a unit designed to quickly clamp down on ambiguities or abuses in existing standards.

The unit's ruling in December 1991 dealt with the treatment in the p and l account of any acquired businesses of which a company subsequently disposed.

The ruling says that any goodwill - the difference between the net assets of the acquired company and the purchase price paid - should be included in the calculation of profit or loss upon its sale.

In the past, a company might have paid Pounds 100m for a business with assets of Pounds 80m, and then sold it for Pounds 90m. By writing off to reserves the goodwill of Pounds 20m and recording it in its balance sheet at Pounds 80m, it could have reported a profit of Pounds 10m from the sale. Now it must record a loss of Pounds 20m.

Other rulings which will come into effect soon include one requiring the disclosure of post-retirement benefits such as healthcare, and another on the treatment of costs when a company repurchases debt.

FRS 1, the accounting standard on cash flow, and FRS 2, on unconsolidated subsidiaries, are already in effect. More important will be FRS 4, which deals with capital instruments and may be released late this year.

The standard will require companies to treat virtually all 'hybrid' instruments, such as convertible bonds, as debt rather than equity. All remaining equity other than ordinary shares will be classified as non-equity shareholders' funds.

United Kingdom, EC P99 Nonclassifiable Establishments TECH Standards COMP Company News P99 The Financial Times London Page 22 328
UK Results Season: Reuters dividend likely to be beacon in a dark season Publication 930211FT Processed by FT 930211 By JANE FULLER

REUTERS' near 25 per cent increase in its 1992 dividend, announced on Tuesday, is likely to be a beacon in an otherwise dark season.

Little change is expected for 1992 payments across the market. Some analysts are forecasting a small fall, especially outside the utilities and blue chip companies.

The drag factors are obvious: a small minority of companies are expected to cut their final dividends and a rather larger number will maintain, in some cases for the third year running. To offset these dampeners, there is likely to be only a smattering of 10 per cent-plus increases.

Some of the likely cutters marked themselves out at the interim stage. British Aerospace had to reshuffle its reserves to enable it to pay a much reduced interim dividend late.

Rolls-Royce, on the other hand, held its interim, but doubts have surfaced about the final. After twice holding it at 7.25p - once uncovered - the prospect of brazening out a lack of cover for three years altogether may sway the argument for a cut. The doubts are reflected in a historic yield of nearly 8 per cent, almost double the market rate.

Among the maintainers, ICI seems to be heading for a hat-trick of three years at the same level. Once it splits in two, the more immediate hopes for growth focus on Zeneca, the pharmaceutical spin-off.

A profile of prolonged flat dividends is also presented by the motor components groups GKN and T&N. The latter's vulnerability in a second year of inadequate cover is suggested by an 8 per cent yield. However, both returned to profits growth in the first half of the year.

GKN is a good example of the industrial groups which have improved cash flow and reduced gearing, and so can justify holding dividends even when earnings cover is a problem.

On the brighter side, Lloyds Bank is expected to announce a 10 per cent dividend increase tomorrow but its gesture would make far fewer waves than a cut from bad-debt-ridden Barclays. Its dividend prospects have been the subject of considerable debate.

Among the insurers, Commercial Union's 3 per cent dividend increase yesterday, alongside its Pounds 428m rights issue, may well be the best of the big five composites. Royal, which passed its final last time and slashed the 1992 interim, is forecast to make the annual total up to 5p. Losses on domestic mortgage indemnity policies have hit its ability to pay more.

Looking ahead, dividend growth is forecast to resume this year, although recovering at a slower pace than earnings. A couple of years of modest dividend rises - say 4-5 per cent in line with inflation - should enable companies to rebuild dividend cover, which has fallen below 1.8 times.

Analysts are questioning the need to restore cover to historic levels of 2.5 times or more because of lower inflation and the downward pressure exerted on the average by privatised utilities.

A lower target would bring forward the point at which real dividend growth can resume. As long as prospects are sluggish, the attractiveness of equities diminishes compared with gilts.

United Kingdom, EC P99 Nonclassifiable Establishments COMP Company News CMMT Comment & Analysis P99 The Financial Times London Page 22 557
Taking on fewer risks to enjoy a healthier future Publication 930211FT Processed by FT 930211

Five years ago anyone suggesting that Commercial Union might become the strongest and most profitable UK insurance company would have provoked wry smiles in the City.

In the mid-1980s CU was one of the first UK insurance companies ever to report losses and for much of the 1980s was regarded as the 'sick man' of the UK insurance sector.

Yet after yesterday's Pounds 428m rights issue Commercial Union has emerged as the strongest and best capitalised of the UK's large insurance companies.

Capital and reserves of Pounds 1.9bn exceed those of its rivals, including the erstwhile leader Sun Alliance.

Pre-tax profits of Pounds 31.4m for 1992 should comfortably exceed its rivals.

'It is a remarkable turnaround in seven or eight years,' says Mr Steven Bird, analyst with Smith New Court, the securities house.

Mr Tony Wyand, executive director, who orchestrated yesterday's rights issue, said: 'We've managed to rehabilitate the company in the eyes of its shareholders.'

CU's success reflects the difficulties of its rivals, whose management has been ill-prepared to face one of the deepest downturns in the history of the UK insurance industry. Claims from mortgage indemnity policies will exceed Pounds 2bn, hindering the ability of those companies most affected to take advantage of the current upturn in insurance rates.

But equally the company's recent success is also a result of a more cautious management style, which has taken root as the company moved to tackle the disastrous results of a period of aggressive expansion in the US in the early 1980s.

Mr Tony Brend - along with three other executives, Mr Wyand, Mr John Carter and Mr Peter Ward - based their recovery strategy on reducing exposure to higher risk and more volatile lines of business such as commercial insurance.

'We always started at the liability end of the balance sheet. We aimed to limit risk and reduce the volatility of the business,' said Mr Wyand. Instead CU has focused on building less risky life assurance business, especially in mainland Europe where many businesses have been started from scratch. Life premiums now account for 36 per cent of premium income compared with 17 per cent 10 years ago. CU has also reduced its exposure in the US, which now accounts for only 27 per cent of its premiums compared with 50 per cent in 1982.

Mr Wyand, who worked his way up through CU becoming an executive director in 1985, took advantage of 'time and distance policies' - financial reinsurance policies similar to banking deals - to extend the timescale of heavy US liabilities from asbestosis and pollution-related claims.

In the UK the group scaled back its motor insurance book, when many rivals were cutting their rates to win market share. In 1986 Mr Peter Ward, who directs UK business, opted to cut exposure to mortgage indemnity business on the grounds that returns were inadequate. In contrast three companies - Royal Insurance, Sun Alliance and Eagle Star - were blase about the risks of domestic mortgage indemnity and have been crippled by losses stemming from the crisis in the housing market.

By 1990 when the heavy European storms in January heralded heavy losses across the industry, CU was better prepared to face the downturn. Its 1991 losses of Pounds 69m were a fraction of those sustained by its rivals. Last year while many of its rivals shrank their business, premium income at CU grew by about Pounds 1bn, increasing (without taking into account exchange-rate movements) from Pounds 4.11bn to Pounds 5.57bn.

Expansion has been rapid in life business - premiums rose from Pounds 384.1m to Pounds 705.8m in the UK in 1992 - especially in the market for single premium with-profit bonds. New life insurance operations have been launched in Italy (where CU has a joint venture with a local bank, Credito Italiano), France, Spain, and more recently in Poland and Turkey, where the company sees excellent prospects for long-term growth.

But the group has also taken advantage of the hardening in market conditions in UK general business, where premium rates rose strongly last year. Mr Wyand estimates CU increased its share of the UK motor insurance market by 2 per cent last year, with premium income rising from Pounds 145m to Pounds 213.7m.

This rapid increase in business - especially in the last quarter of 1992 when income from home and motor insurance rose more than 50 per cent - has strained the company's capital base.

Growth accelerated in the fourth quarter, making fresh capital a necessity. 'The speculation would have been so strong. Market speculation about the need for fresh capital would have disturbed the share price,' said Mr Wyand.

'We have added the equivalent of a medium-sized insurance company to the group in only 12 months. That kind of expansion is not something you can expect any company to finance from its own resources,' he added.

The withdrawal of some smaller companies from the market - Municipal Mutual, the ninth biggest company, was one of a number that withdrew from many lines - means bigger companies are now better able to push through rate increases.

Heavily burdened by their mortgage indemnity exposure, CU's main competitors are less well positioned to take advantage of the upturn in rates.

'We are now fully capitalised to take advantage of a once-in-a-generation opportunity in the UK market,' says Mr Wyand.

Commercial Union United Kingdom, EC P6311 Life Insurance P6321 Accident and Health Insurance P6324 Hospital and Medical Service Plans P6331 Fire, Marine, and Casualty Insurance P6351 Surety Insurance COMP Company profile P6311 P6321 P6324 P6331 P6351 The Financial Times London Page 21 948
Companies in this issue Publication 930211FT Processed by FT 930211

----------------------------------------- UK ----------------------------------------- Airtours 23 Bailey (CH) 24 Benson Group 24 Bristol Channel Ship 24 British Petroleum 24 Brooke Tool Eng 24 Caledonia Invs 24 Cardinal Broach 24 Commercial Union 40, 21, 20 Elan 24 Elbief 24 Fisons 40 Fleming Enterprise 24 General Accident 40 Kleinwort Overseas 24 Lloyds Abbey Life 24, 20 Lonrho 21 National Home Loans 24 Owners Abroad 23

Polly Peck Intl 23 Queens Moat Houses 15 Ralston Inv Trust 24 Reuters Holdings 40 Schroder Split Trust 23 Scottish American 24 Simon Engineering 24 Stonehill 23 Storehouse 23, 20 Thames TV 7 Throgmorton 1000 24 ----------------------------------------- Overseas ----------------------------------------- AGF 26 AT&T 27 Aetna Life 27 Air Canada 27 Axa 26 Banesto 25 CBS 27

Canon 21 Cathay Intl 23 Chrysler 26 Citibank 23 Commonwealth Bank 28 Daf 8 EDS 27 Ferruzzi 25 Fondiaria 25 Ford 21 Ford of Europe 26 Framatome 25 GAN 26 GMac 27 Gillette 23 Imasco 26 JP Morgan 25 Kraft 26 Metallgesellschaft 26 Millicom 8 Molson 27

Nabisco 26 Next Computer 21 Nouvelles Frontieres 26 Parmalat 25 Schneider 25 Sears, Roebuck 27 Snecma 25 Southwestern Bell 27 Standard Bank 28 Sunbop 26 TRW 26 Thomson-CSF 25 Toyota 28 Travelers 27 UAP 26 Westpac Banking 28 Woolworth 27 -----------------------------------------

World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 21 228
Lonrho makes Bock joint chief executive Publication 930211FT Processed by FT 930211 By ROLAND RUDD

MR DIETER BOCK, the German financier with an 18.8 per cent stake in Lonrho, the international trading conglomerate, was yesterday appointed as joint chief executive and managing director with Mr Tiny Rowland.

Mr Rowland, who has effectively run the company for the past 31 years, said Mr Bock would have no separate duties or responsibilities. However, Mr Rowland said Mr Bock's appointment would allow him to spend more time in Africa while Mr Bock said his expertise would enable him to deal with 'questions relating to (Lonrho's) financing'.

Mr Paul Spicer, deputy chairman, said: 'It should not be misunderstood, there is no division. There is no split, no potential for conflict. With a telephone call both will know what the other is doing.'

While the joint chief executives stressed there would be no significant changes in the running of the company, Mr Bock revealed that the group had changed its mind over the appointment of non-executive directors.

After discussing the implications of the Cadbury Report, which recommends that companies should appoint independent non-executive directors, Mr Bock said Lonrho's board was now looking for 'reputable non-executive directors'.

Although Mr Rowland named Mr Bock as his successor he said he intended to continue as joint chief executive for at least three years.

Mr Bock said the group's main aim was to continue to reduce borrowings - which recently rose to Pounds 947m - through minor disposals. With the exception of the Ashanti Goldfields Corporation in Ghana, Lonrho's investments in companies it does not control are up for sale.

By way of an example, Mr Rowland said Lonrho may dispose of its minority stakes in Anglo-American's Leeuwbosch and Eastern Gold mines in South Africa.

Lonrho's core businesses, which Mr Rowland identified as mining, hotels, agriculture and trading, would not be sold. However, he explained that Lonrho did not have to own 100 per cent of a core business. 'The minimum holding level is 51 per cent.'

Mr Rowland said he would consider allowing Gencor, South Africa's biggest mining house, to increase its 27 per cent stake in Lonrho's three platinum mines.

Lonrho United Kingdom, EC P6719 Holding Companies, NEC P5511 New and Used Car Dealers P2211 Broadwoven Fabric Mills, Cotton P2085 Distilled and Blended Liquors P2082 Malt Beverages P1041 Gold Ores PEOP Appointments COMP Disposals Bock, D Joint Chief Executive and Managing Director Lonhro Rowland, T Joint Chief Executive and Managing Director Lonhro P6719 P5511 P2211 P2085 P2082 P1041 The Financial Times London Page 21 428
Commercial Union launches Pounds 428m rights issue: UK insurer plans further expansion as profits return to the black Publication 930211FT Processed by FT 930211 By RICHARD LAPPER

COMMERCIAL Union, the UK insurance company, yesterday signalled its intention to pursue further expansion in the UK and international general and life markets by launching a Pounds 428m rights issue.

The group also announced a pre-tax profit of Pounds 31.4m, compared with a loss of Pounds 68.8m, after bringing forward the announcement of its 1992 results by three weeks.

CU declared a final dividend of 15.1p per share, giving a full dividend for the year of 24.35p, a rise of 3 per cent.

Shareholders were offered one new share for every five ordinary shares at a price of 490p per share. The issue was underwritten by Kleinwort Benson and Morgan Stanley International. Brokers were Cazenove and Hoare Govett Corporate Finance.

Mr Tony Wyand, executive director, said the recent increases in premium rates in the UK general insurance market had produced an 'unprecedented opportunity' for the company.

Many of CU's competitors were hampered by losses from domestic mortgage indemnity insurance, a market in which CU has scaled down its exposure since the mid-1980s.

The company had begun to expand in 1991 said Mr Wyand, but expansion has accelerated during 1992, especially in the fourth quarter.

Overall life premiums rose 31 per cent to Pounds 2.01bn and general premiums were up 13 per cent to Pounds 3.57bn. Life profits increased from Pounds 114.3m to Pounds 118m, offsetting losses of Pounds 86.6m on non-life business, down from losses of Pounds 182.9m in 1991.

Non-life business was helped by a strong performance in the UK, where premium income rose 27 per cent to Pounds 1.54bn. Operating profits were Pounds 12.8m, compared with a loss of Pounds 85.1m in 1991.

In the UK, CU achieved underwriting profits in domestic and private motor business (compared with a Pounds 50.7m loss last year) - largely as a result of increases in rates. Motor underwriting profits amounted to Pounds 5m, in spite of a 47.3 per cent increase in premiums to Pounds 213.7m.

CU's shares, which had lost ground recently, were boosted by the better than expected results, rising 12p to close at 610p.

Lex, Page 20; Observer, Page 19

Commercial Union United Kingdom, EC P6311 Life Insurance P6321 Accident and Health Insurance P6324 Hospital and Medical Service Plans P6331 Fire, Marine, and Casualty Insurance P6351 Surety Insurance FIN Share issues FIN Annual report P6311 P6321 P6324 P6331 P6351 The Financial Times London Page 21 424
Italy's Socialist justice minister quits Publication 930211FT Processed by FT 930211 By ROBERT GRAHAM ROME

ITALY'S fragile coalition government yesterday suffered its most serious blow when Mr Claudio Martelli, the Socialist justice minister, announced his resignation after becoming the latest casualty in the country's growing corruption scandal.

Mr Martelli's resignation came after he was told that he was under investigation for corruption related to a secret Swiss bank account alleged to have been used to siphon bribes paid to the ruling Socialist party.

The party, which now has only six ministers left in the 24-strong coalition government, is due to open a special two-day assembly today to find a successor to Mr Bettino Craxi, whose job Mr Martelli was eager to secure.

Last night magistrates issued a sixth warrant against Mr Craxi. Earlier, Milan magistrates said they had prepared a fifth warrant advising him he was under investigation for alleged corruption and illicit party financing.

The latest warrant against the Socialist party chief in the unfolding scandal which broke last February is connected with similar allegations made against Mr Martelli. These relate to the fraudulent bankruptcy in 1982 of the Banco Ambrosiano.

Both the Socialists and the Christian Democrats, which dominate the coalition, last night appeared determined to prevent the crisis leading to the downfall of the six-month-old government.

Mr Martelli, 49, was deputy head of the previous government and one of the most ambitious of the younger generation of politicians. His resignation knocks one further nail in the coffin of the existing political parties, whose discredit grows almost daily as magistrates carry out new arrests and make fresh charges in their investigations into corruption.

Mr Martelli resigned as he was about to be served with a warrant by Milan magistrates which said he was under investigation for allegations made by witnesses who confessed to collecting illicit party funds in the municipal corruption scandal.

Mr Martelli has consistently denied newspaper allegations of involvement in the corruption scandal and links to an account at the Lugano branch of the Union de Banques Suisses held by the Socialist party.

Although three ministers in the current government have been served with notice of being under investigation by magistrates for a variety of alleged offences, Mr Martelli is the first to resign.

World Stock Markets, Page 37

Italy, EC P91 Executive, Legislative and General Government PEOP Appointments GOVT Legal issues Martelli, C justice minister (Italy) P91 The Financial Times London Page 20 408
Brussels may set steel production targets in move to rescue industry Publication 930211FT Processed by FT 930211 By LIONEL BARBER and ANDREW HILL BRUSSELS

THE European Commission is considering a new role as EC steel market supervisor, setting guidelines on future production levels.

The plan, aimed at tackling Europe's steel industry crisis, is under review in Brussels. But the Commission will stop short of dictating prices and production levels to individual companies, like the 'crisis cartel' set up by Viscount Etienne Davignon, then industry commissioner, during the early 1980s, EC officials stressed yesterday.

Under the proposals, Brussels would lay down recommendations on production and delivery levels within the EC for each quarter. EC officials maintained yesterday this would not encourage a cartel. Another measure under review is for the steel industry to pool 'crisis funds' for the restructuring of each individual sector.

The Commission is anxious to place the burden of decisions about restructuring on the steelmakers, and avoid being accused of manipulating the market. But Brussels believes it has a vital role to play as broker between steelmakers and governments.

EC officials said the Commission would make clear it was willing to support an industry-wide restructuring plan only if Europe's steelmakers produced a 'definite' closure programme by the end of September which could be carried out by end-1994.

A rescue plan is also dependent on the support of EC member states which would have to bear a portion of the EC funding of up to Ecu900m (Pounds 730m) to cover redundancy costs. The overall cost of restructuring could be more than Ecu6bn, according to a report by Mr Fernand Braun, the EC's special steel envoy.

The Braun report warns that, without a rescue plan involving some early price rises, some of Europe's largest steelmakers will see their cashflow dry up or turn negative by year-end.

The report includes a range of potential cuts in capacity suggested by some 70 managing directors of EC steel companies in the past four months.

Mr Martin Bangemann, EC industry commissioner, has begun canvassing fellow Commissioners' support and will present formal proposals next Wednesday. The EC will discuss the steel industry crisis at a special meeting on February 25.

European Economic Community (EC) P331 Blast Furnace and Basic Steel Products P9611 Administration of General Economic Programs GOVT Government News P331 P9611 The Financial Times London Page 20 392
The Lex Column: Lloyds Abbey Publication 930211FT Processed by FT 930211

Yesterday's full-year results will do little to encourage Lloyds Abbey Life's biggest shareholder to increase its stake. Selling life assurance products to Lloyds Bank customers has proved far from recession-proof. New business figures are generally better than achieved by competitors without the benefit of a captive audience. The long-term argument in favour of bankassurance remains intact. But the slower rate of growth suggests bank customers are not all lining up to buy insurance. Lloyds Abbey faces a hard slog reaching customers in the numbers talked about when the alliance was first hatched.

With its exposure to estate agencies and mortgage lending, Lloyds Abbey's earnings might be expected to recover smartly once the housing market turns. Economic revival will equally help sales of profitable regular premium life products. But that may not mean sharply higher dividends. This year's unchanged pay-out is only just covered by distributable profit. Higher sales of life assurance will have to be backed by additional capital. Some will have to come from retained earnings. While interest rates are low, a 5.2 per cent yield will doubtless provide some support for the shares. But the market is likely to remain sceptical until the growth prospects are clear.

Lloyds Abbey Life United Kingdom, EC P6311 Life Insurance COMP Company News CMMT Comment & Analysis P6311 The Financial Times London Page 20 233
The Lex Column: Storehouse Publication 930211FT Processed by FT 930211

A 10 per cent fall in Storehouse's shares over the past two days seems a rather extreme response to its chief executive's departure. Shareholders presumably took the view that if Mr David Dworkin had decided to take the money and run they should perhaps do likewise. Their nervousness is understandable. Since Storehouse had previously been trading on a prospective multiple in the high 20s, there was little room for any trading wobbles. Although there is no hint of any boardroom rancour, Mr Dworkin's departure is abrupt and leaves a considerable void. As the inspirational force behind BhS's renaissance, Mr Dworkin was as much the symbol of change as its architect. The fear is Storehouse will lose momentum unless an energetic successor is appointed quickly.

Storehouse has no financial worries after disposing of Habitat and Richards. Its two main trading companies are operationally sound. BhS has decisively turned the corner and Mothercare appears to be on the mend. Ms Ann Iverson, who followed Mr Dworkin from Bonwit Teller to BhS and now has a critical role in rejuvenating Mothercare, has signalled her determination to stick with the challenge.

Even so, Storehouse's shares seem likely to drift until the top slot is filled. Worryingly, there are no obvious candidates in sight. The longer the wait, the more jittery the market will become.

Storehouse United Kingdom, EC P5311 Department Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5719 Miscellaneous Homefurnishings Stores P6719 Holding Companies, NEC COSTS Equity prices CMMT Comment & Analysis P5311 P5611 P5621 P5719 P6719 The Financial Times London Page 20 273
The Lex Column: Germany Publication 930211FT Processed by FT 930211

Foreign exchange markets had been primed to expect so little from yesterday's German money market repurchase operation that a 7 basis point cut in the rate to 8.5 per cent actually came as something of a relief. Yet it is a sign of the Bundesbank's extraordinary reluctance to relax monetary policy that it has not allowed the money markets to adjust fully even to last week's quarter point cut in the discount rate. On the surface, that looks a singularly hard-hearted reaction to the latest government report, which gloomily forecasts a decline of up to 1 per cent in economic output this year.

So what is holding the Bundesbank back? Perhaps it is partly the conviction that the downturn in the economy as a whole is not as bad as the high-profile troubles in manufacturing suggest. Perhaps, too, it believes that only a credible anti-inflation policy will produce the low long-term interest rates needed to finance the budget deficit at reasonable cost. The bank must also be worried that lower short-term interest rates could spark a surge in the dollar, pushing up prices at home.

If the Bundesbank is clinging to these beliefs in the face of a such a sharp rise in unemployment, it is difficult to see it letting them fade entirely into oblivion as soon as the money supply numbers improve. There is little ground to believe that rate cuts will be as aggressive as in 1982-83 when the discount rate was cut by 3.5 points in the space of six months. Sooner or later the exchange markets will cease to be distracted by tiny rate cuts and strains in the ERM will reappear with a vengeance. If that leads to the break-up of the system, other European economies will be spared the worst of what promises to be a pretty nasty recession. Either way it hardly bodes well for Germany itself.

Deutsche Bundesbank Germany, EC P6231 Security and Commodity Exchanges P601 Central Reserve Depositories ECON Balance of payments CMMT Comment & Analysis P6231 P601 The Financial Times London Page 20 354
The Lex Column: CU's growth policy Publication 930211FT Processed by FT 930211

Insurance companies have a poor record of managing expansion. The market might therefore wonder whether Commercial Union can deliver a decent return on the Pounds 428m raised yesterday. Having taken on an additional Pounds 1bn premium income last year, the company is moving at speed. Yesterday's full-year figures show the early benefits of the premium increases which have been implemented both in the UK and abroad. The danger is that capital committed to the market from here on will arrive just in time to catch the next down-swing in the insurance cycle.

CU might argue that competitive pressures will be slow to re-emerge this time around. Composite insurers have raised over Pounds 1bn either from rich parents or, in the manner of Sun Alliance's convertible bond on Tuesday, from the capital markets in the last year. But that replaces only a fraction of the capital sucked out by losses since the late 1980s. There is certainly no sign yet of UK rates starting to soften. With so many of the opposition disabled by mortgage indemnity losses, the opportunity to snatch UK market share must look too good to pass up. Although expanding life assurance sales in relatively unknown markets like Spain and Italy carries risks, it might provide valuable balance to the more violent swings in general insurance.

Judging by the 2 per cent rise in the shares yesterday, the market is willing to give the company the benefit of the doubt. But the competition is unlikely to just sit back and watch. By bringing its results forward to launch the rights issue, CU was keen to be at the front of the queue for funds. Too many more cash calls from insurers will be a signal to clear out of the sector.

Commercial Union United Kingdom, EC P63 Insurance Carriers CMMT Comment & Analysis COMP Company News P63 The Financial Times London Page 20 327
The FT500 (12): Preparing for the big asset sell-off - Robert Graham discusses the biggest and most concentrated disposal of state assets in banking and industry planned by any country in continental Europe during the next two years / Privatisation in Italy Publication 930210FT Processed by FT 930304 By ROBERT GRAHAM

PRIVATISATION in Italy over the next three years is set to change not only the nature of corporate ownership but considerably expand activity on the Milan stock exchange.

The Amato government's plans for privatisation envisage total sales close to L40,000bn by 1995, if the timetable is followed. In any event Italy will witness the biggest and most concentrated sell-off of state assets in banking and industry of any country in continental Europe.

This in turn will have a significant impact on the Italian corporate presence in the FT500. Until now this has been limited largely because of the dominant state presence through entities such as IRI, the holding group, and ENI, the state oil concern, which were not joint stock companies. Italy's public enterprises are larger than any other EC member.

At the same time, the private sector has been dominated by a handful of companies such as Fiat, Ferruzzi-Montedison, Olivetti and Pirelli, with little between them and the myriad of small companies - the traditional motor of economic growth. Almost two thirds of all Italian companies employ fewer than 100 people compared to only 20 per cent in France, Germany and the UK. Through privatisation and changes in the fiscal treatment of mergers, the government believes it can create a core of some 15 industrial groups of international stature.

On another level, the privatisation process will determine the extent to which Italian companies are willing to embrace foreign ownership. Apart from Japan, Italy is the one large industrialised nation with the least penetration by foreign capital. This reflects both the lack of incentives for foreign capital and the underdeveloped state of the stock market. The Milan bourse has proved so far able to raise money on average only the equivalent of 5 per cent of total market capitalisation in one year or under L10,000bn.

The change in attitudes to state ownership began with the Amato government and was set in motion last August when IRI, ENI along with INA, the insurance institute, and ENEL, the electricity authority, were transformed into publicly quoted companies. The treasury became the sole shareholder.

The disastrous state of public finances with a budget deficit equivalent to nearly 11 per cent of GDP, and EC restrictions on state transfers, have in effect forced privatisation on Italy. The treasury as shareholder cannot pump in any more funds into state companies. Yet IRI and ENI alone will require at least L12,000bn over the next two years for investment, recapitalisation of subsidiaries and debt restructuring; thus they will have to raise funds through divestment and flotation.

Undercapitalisation has been a large problem, partially concealed by state ownership and the ability to rely on special transfers from the treasury. The ratio of debts to turnover in Italian companies in key sectors has generally been much higher than their European counterparts. For instance, in the case of Ilva, the state steel group, financial charges represent 11.3 per cent of turnover, compared to 1 per cent with British Steel and for Finmeccanica, IRI's main industrial subsidiary, they represent 12.6 per cent against 1.6 per cent in Siemens.

Analysts are split on the value of these state-held assets. While many companies in the state portfolio have been conservatively valued at historic cost, the precise nature of debts and potential losses has been poorly assessed and often underestimated. The latter point was made in a special treasury analysis accompanying the government's privatisation proposals in November.

IRI is starting with the sale of its banking interests. It holds 67 per cent of ordinary stock of Credito Italiano capitalised at L800bn, 37 per cent of Banca Commerciale Italiana capitalised at lire L1,050bn and nearly 35 per cent of Banca di Roma capitalised at L1,600bn. The first to be sold off will be Credito, whose sale was announced in September.

IRI is also expected to press ahead with the flotation of its principal industrial portfolio held through Finmeccanica, capitalised at L675bn. Finmeccanica has been chosen to become IRI's high-tech group with mixed public and private capital. Although the state will continue to exercise control of high technology through Finmeccanica and some transport and defence-related companies, other industrial holdings could be fully divested. This could be the case with parts of Ilva. A piece of Alitalia, the national carrier, is also scheduled to come on the market.

The most appetising industrial asset in IRI's portfolio is probably the telephone business grouped round STET. The latter is already partially quoted; but with a re-organisation of the entire sector and the proposed creation of a telecom authority on similar lines to BT both the size and nature of STET will be transformed. The re-organisation of telecoms is unlikely to be completed by 1993 but the opening up of the STET with an expanded capital and international partners (BT is interested in acquiring a stake) could make this company one of the largest within the FT500. STET is capitalised at L4,600bn, and is by far the largest of any company within IRI (which holds 38 per cent of ordinary stock) and is 138th in the FT500.

Another IRI divestment in an advanced state of preparation is that of SME, its foodstuffs, frozen foods and retail business. Capitalised at L434bn, IRI wants to sell off its entire 62 per cent holding.

The ENI empire is also set for a radical shake-up. ENI was built up in the post-war period to become a principal rival to the 'Seven Sisters' oil companies by the late entrepreneur Enrico Mattei. The state is set to remain a controlling shareholder but with a capitalisation of L7,999bn, ENI envisages floating some of its stock and reducing stakes in its subsidiaries. The principal quoted companies in the group are likely to be Agip, the exploration arm, and SNAM its gas production/supply company.

The first ENI subsidiary to be sold off will be Savio, one of the four world leaders in textile machinery, and this will be followed by Nuovo Pignone, its gas turbine manufacturer. ENI's main problem in privatisation is going to be how to tackle its loss-making chemicals and fertiliser divisions, part of which will have to be maintained because of their location in depressed areas with limited employment.

Another company expected to enter the next FT500 will be INA, the insurance institute. INA is capitalised at L3,635bn and the treasury is due to sell off a substantial stake. According to analysts, INA is one of the few companies which may even be over-capitalised. Further down the line in 1994-95, ENEL, the electricity authority, is due to be privatised. ENEL is capitalised at L12,126bn and 1992 profits were expected to be L673bn. Its flotation will be conditioned in large measure by the speed with which the government restructures electricity tariffs.

Istituto per la Ricostruzione Industriale Ente Nazionale Idrocarburi Ente Nazionale per l'Energia Elettrica STET Societe Finanziara Telefonica Snam Societa Meridionale Finanziaria Italy, EC P96 Administration of Economic Programs P6719 Holding Companies, NEC CMMT Comment & Analysis COMP Disposals P96 P6719 The Financial Times London Page XIII 1219
International Company News: Noranda to sell 49% stake in forest group Publication 930210FT Processed by FT 930304 By BERNARD SIMON TORONTO

NORANDA, the Canadian resources group controlled by Toronto's Bronfman family, is insulating itself from the turmoil in other parts of the Bronfman empire by selling its 49 per cent stake in MacMillan Bloedel, the Vancouver-based forestry group.

Noranda Forest, which holds Noranda's pulp and paper interests, will raise CDollars 971m (USDollars 764.5m) from the sale. Its 55.5m shares will be offered to institutional and retail investors in Europe and Canada at CDollars 17.50 per share through a group of securities dealers led by RBC Dominion Securities and Burns Fry.

Besides being western Canada's biggest forestry company, Macblo is to emerge as a significant minority shareholder in the large Dutch paper and packaging group being created by the merger of KNP, Buhrmann-Tetterode and VRG.

Macblo owns 30 per cent of KNP. It said yesterday that it would have a 16 per cent stake in the enlarged company, with an option to raise its shareholding to 20 per cent through newly-issued shares.

Mr Alf Powis, Noranda chairman, said yesterday that the sale of Macblo had 'bullet-proofed' Noranda from concerns in investment and banking circles about the health of other parts of the Bronfman industrial and financial services empire.

Shares of companies in the Bronfman orbit have plummeted in recent weeks amid fears that troubles at Bramalea, a property developer under bankruptcy protection, and Royal Trust, which is seeking an infusion of capital, might spill over into the rest of the group.

The Macblo sale will cut Noranda's debt-to-capital ratio from 45 per cent to 25 per cent. Mr Powis said that proceeds would remain with Noranda Forest, which has sharply cut back its capital spending to conserve cash.

News of the deal pushed Noranda's share price up by CDollars 1.50 to CDollars 18.88 on the Toronto stock exchange yesterday. Shares of other Bronfman-controlled companies also advanced.

Macblo, which has been hit by the slump in North American pulp and paper markets, separately announced that losses narrowed last year to CDollars 48.8m, or 52 cents a share, from CDollars 93.4m, or 98 cents a share, in 1991. Revenues rose to CDollars 3bn from CDollars 2.7bn.

Noranda Forest Inc MacMillan Bloedel Canada P2611 Pulp Mills P2621 Paper Mills P2421 Sawmills and Planing Mills, General COMP Company News COMP Disposals FIN Company Finance P2611 P2621 P2421 The Financial Times London Page 23 410
International Company News: Increased printing activity lifts Quebecor Publication 930210FT Processed by FT 930218 By ROBERT GIBBENS

QUEBECOR, the publishing, commercial printing and forest products group, posted a 78 per cent gain in operating net profit for 1992 and reduced consolidated debt by CDollars 413m (USDollars 344m) to lower its debt-equity ratio to 31:69.

Earnings were CDollars 56.2m, or 92 cents a share, up from CDollars 31.5m, or 66 cents a share, a year earlier, on revenue of CDollars 2.54bn, up almost 7 per cent. After special items, final 1992 profit was CDollars 87.3m, or CDollars 1.43 a share, against CDollars 18.5m, or 39 cents a share, in 1991.

Publishing and distribution was up 13 per cent, while printing, the company's biggest activity, gained 18 per cent. Forest products turned round to break even.

Quebecor is North America's second biggest commercial printer through affiliated Quebecor Printing, which is also publicly-held.

It plans further printing acquisitions in the US and possibly Europe.

Quebecor Inc CA Canada P2711 Newspapers P2721 Periodicals P2752 Commercial Printing, Lithographic P5199 Nondurable Goods, NEC P5099 Durable Goods, NEC COMP Company News FIN Annual report P2711 P2721 P2752 P5199 P5099 The Financial Times London Page 26 197
UK Company News in Brief Publication 930210FT Processed by FT 930218

CABLE AND Wireless has acquired a 40 per cent stake in Belcel, a joint venture set up to build and operate a cellular telephone network in Belarus. C and W's initial investment amounts to some Dollars 7m (Pounds 4.6m).

*****

CULVER HOLDINGS received acceptances for 5.45m shares (27.3 per cent) in respect of its offer for all the ordinary shares in DG Durham.

*****

ECCLESIASTICAL INSURANCE Office's revised offer for St Andrew Trust received valid acceptances of 3.92m shares (about 11.42 per cent). In aggregate, Ecclesiastical now has about 58.15 per cent of St Andrew Trust's equity capital. The revised offer is now closed.

*****

MERGER CLEARANCE has been received in respect of DCC's Ochil subsidiary's cash offer for Printech, which has become unconditional. Clearance has also been received in respect of DCC's subsidiary Oare's offer for Wardell Roberts, which has also been declared unconditional.

*****

OLIVER RESOURCES has received irrevocable acceptances from Kirkland shareholders in respect of 1.42m Kirkland shares (36.8 per cent). Oliver has an interest in a total of 1.53m Kirkland shares (approximately 39.8 per cent).

*****

REDLAND: The disposal of the Steetley brick plant to Cranleigh Brick and Tile Company has been approved by Sir Bryan Carsberg, the Director General of Fair Trading.

*****

TRAVIS PERKINS has acquired the assets of Rockinghams Garden Centre from the receiver for Pounds 1.35m. The company's garden centre subsidiary, Kennedys, has 11 centres. Anticipated sales for 1993 are in excess of Pounds 10m.

*****

TRIO HOLDINGS: Rights issue taken up or placed as to 19.9m shares (92.3 per cent). The remaining 1.6m shares have been sold in the market.

Cable and Wireless Culver Holdings DG Durham Ecclesiastical Insurance Office St Andrew Trust Printech International DCC Wardell Roberts Oliver Resources Kirkland Redland Steetley Cranleigh Brick and Tile Company Travis Perkins Rockingham Garden and Leisure Centres Trio Holdings Belcel IE Ireland, EC GB United Kingdom, EC P481 Telephone Communications P6719 Holding Companies, NEC P672 Investment Offices P3272 Concrete Products, NEC P5039 Construction Materials, NEC P3255 Clay Refractories P5052 Coal and Other Minerals and Ores P5172 Petroleum Products, NEC P5031 Lumber, Plywood and Millwork P5261 Retail Nurseries and Garden Stores P6531 Real Estate Agents and Managers P2721 Periodicals P1311 Crude Petroleum and Natural Gas P1099 Metal Ores, NEC P325 Structural Clay Products COMP Company News COMP Shareholding FIN Share issues RES Facilities COMP Acquisition COMP Merger P481 P6719 P672 P3272 P5039 P3255 P5052 P5172 P5031 P5261 P6531 P2721 P1311 P1099 P325. The Financial Times London Page 21 425
Minister eases threat to more than 3,000 Nuclear Electric jobs Publication 930210FT Processed by FT 930218 By MICHAEL SMITH

THE THREAT to more than 3,000 jobs at Nuclear Electric diminished yesterday when Mr Tim Eggar, energy minister, said the closure of any Magnox stations before the end of their planned lives would be difficult to justify economically.

He was speaking after a report by Ernst & Young, the accountants, commissioned as part of the government's coal inquiry, backed Nuclear Electric's analysis of potential savings from closure.

The nuclear industry's critics say the savings would be considerably higher than Nuclear Electric has estimated. They have used this to back arguments that the Magnox stations should be closed earlier than planned to make way for more coal to be burned for the electricity market.

Publication of the report in parliament came as leaders of 11 of the 12 regional electricity companies met in London to try to meet government demands on purchases of coal-fired electricity.

The regional companies have agreed in principle to buy the electricity which the generators will produce from outline contracts with British Coal to buy 40m tonnes and 30m in the following four years. However, there is friction among them about how the electricity will be apportioned.

Some are under pressure from the government to withdraw from contracts for nuclear-generated electricity so they can take up more coal-fired power.

In separate talks the generators indicated they could not take more than 65m tonnes of extra coal over five years, even at subsidised prices unless the government cleared a significant amount of room in the market by cutting supplies of other fuels. The government is reluctant to do this.

Nuclear Electric British Coal Corp United Kingdom, EC P4911 Electric Services P12 Coal Mining P9631 Regulation, Administration of Utilities PEOP Labour GOVT Government News P4911 P12 P9631 The Financial Times London Page 7 312
International Company News: Bouygues takes 26% holding in Basil Read Publication 930210FT Processed by FT 930214 By WILLIAM DAWKINS

BOUYGUES, the leading French construction group, has taken a 26 per cent stake in Basil Read, South Africa's sixth largest construction company, its first investment of this type in a foreign group.

Basil Read has a R500m (Dollars 160m) annual turnover in building, civil engineering, roads, tunnel and mine digging, and waste disposal. The investment, the amount of which is undisclosed, will help Basil Read develop in South Africa and adjacent countries. Thomson-CSF, the defence electronics arm of the French state-owned Thomson electronics group, has revealed a 2.4 per cent fall in sales last year. Turnover declined to FFr34.44bn in 1992, from FFr35.2bn a year earlier.

Bouygues Basil Read Thomson CSF South Africa, Africa France, EC P15 General Building Contractors P16 Heavy Construction, Ex Building P36 Electronic and Other Electric Equipment P3812 Search and Navigation Equipment P17 Special Trade Contractors COMP Shareholding FIN Annual report P15 P16 P36 P3812 P17 The Financial Times International Page 16 174
(CORRECTED) The FT500 (3): Barometer of business Publication 930210FT Processed by FT 930214

Correction (Published 11th February 1993) appended to this article.

THE FT500, in its eleventh year of publication, has come to be recognised as Europe's principal barometer of business. The main table ranks the 500 biggest European companies by market capitalisation.

A second table ranks the top 500 UK companies on the London Stock Exchange. A company's capitalisation is the number of its shares multiplied by the price of its shares, and therefore measures the value of a company in the eyes of investors.

Capitalisation is chosen as a yardstick because it has a number of advantages over other methods. It is a good guide to performance over time; it gives a proper weighting to banks, whose positions are distorted in tables based on turnover; and it takes proper account of loss-making companies, which disappear

from lists based on profits.

The stock market is particularly important in the UK, whereas in Germany the banks play a larger role in corporate finance, and in France and Italy many of the biggest groups are state-owned.

Rankings: The rankings of the European and UK 500 tables are based on market capitalisation at the end of September 1992. Preference capital has been excluded for this calculation. Companies that have 75 per cent or more of equity held by one other concern, or that have only a minimal proportion of their capital openly traded on the market, have been excluded. The main source for the capitalisation figures was FT Analysis, with additional information from Datastream International, local stock exchanges, and the FT World Actuaries Index. The ranking of companies having the same capitalisation has been determined by reference to their turnover or, where necessary, their profit. Figures in the European tables are in dollars, using October 1992 average exchange rates. For ease of comparison, turnover and profit figures for last year are also shown at October 1992

average exchange rates. UK 500 figures are in sterling.

Accounts: Consolidated accounts have been used wherever possible. When parent company accounts only have been reported, these figures have been used and annotated.

Turnover is shown net of sales taxes and inter-group sales. A ranking based on the latest year's figure is also given.

Profit is disclosed profit before tax and minority interest. For the UK companies, it is also before extraordinary items. Return on capital employed (ROCE) is based on pre-tax profit plus interest divided by capital employed at the beginning of the financial year. For banks, capital employed equals shareholders' funds.

UK Investment Trusts: The rankings are based on market capitalisation at the end of September 1992.

The shareholders' funds figure is based on the number of shares in issue and the stated net asset value. This table has been compiled with the assistance of County Natwest Wood Mackenzie.

----------------------------------------------------------------------- BIGGEST PROFIT INCREASES: EUROPE ----------------------------------------------------------------------- % Profit Company Cntry. Sec Rank increase ----------------------------------------------------------------------- 1 Swissair Swi 301 461 1700.0 2 Codan Group Den 151 415 1106.2 3 Hapag Lloyd Ger 303 497 457.8 4 Volvo Swe 401 129 440.4 5 Racal Electronics UK 551 289 354.7 6 Printemps (Au) Fra 491 394 260.1 7 Den Danske Bank Den 112 204 212.7 8 Procordia Swe 433 67 197.1 9 Burton Group UK 495 496 170.1 10 Storehouse UK 491 397 154.8 11 Philips Net 541 101 138.7 12 MFI Furniture Group UK 406 362 136.4 13 Pentland Group UK 171 454 123.9 14 British Airways UK 301 126 119.2 15 KLM Net 301 441 115.5 16 Groupe Andre Fra 495 404 114.6 17 Investor Swe 131 196 113.4 18 Roche Holding Swi 622 6 113.1 19 HSBC Holdings UK 112 19 107.1 20 Institut Merieux Fra 433 253 104.8 21 DBV Ger 151 450 101.3 22 Norweb UK 221 338 96.2 23 Iberdrola I Spa 221 91 91.4 24 EVN Aus 221 495 83.9 25 Bon Marche Fra 495 378 79.9

----------------------------------------------------------------------- BIGGEST PROFIT DECREASES: EUROPE* ----------------------------------------------------------------------- % Profit Company Cntry. Sec Rank decrease ----------------------------------------------------------------------- 1 Commercial Union UK 151 115 -4673.3 2 Deutsche Lufthansa Ger 301 251 -731.8 3 Nobel Industries Swe 622 426 -596.9 4 Pirelli Spa Ita 574 356 -329.5 5 Asda Group UK 493 337 -316.8 6 Repola Fin 591 387 -293.4 7 Kymmene Fin 651 381 -235.9 8 Continental Ger 574 331 -180.1 9 British Steel UK 633 229 -121.7 10 British Aerospace UK 523 464 -121.5 11 TSB Group UK 112 145 -115.1 12 SKF Swe 566 278 -112.6 13 Burton Group UK 491 496 -110.1 14 Norsk Hydro Nor 214 93 -108.0 15 Trelleborg Swe 566 466 -95.0 16 BET UK 171 271 -91.5 17 Tarmac UK 613 439 -89.0 18 Allied-Lyons UK 421 46 -87.3 19 Club Mediterranee Fra 464 473 -85.9 20 Pirelli Internationale Swi 481 297 -83.8 21 Legal & General Group UK 141 167 -83.5 22 National Westminster Bank UK 112 41 -78.2 23 Royal Bank of Scotland Group UK 112 216 -78.0 24 Asko Deutsche Kaufhaus Ger 491 372 -76.0 25 Paribas Fra 112 78 -74.0 ----------------------------------------------------------------------- * Where percentage profit decreases exceed 100 per cent, these represent a change from profit to loss ----------------------------------------------------------------------- Note Symbols for The FT European Top 500 and UK Companies *** ROCE based on shareholders' funds after charging interest on loan capital not stated separately. + ROCE based on capital employed at year-end. - Previous year's figures adjusted for accounting changes. ** Parent company accountsy Employees at year-end * See footnotes ----------------------------------------------------------------------- Reprints ----------------------------------------------------------------------- The FT500 will be available in booklet form and will include names of chief executives and company addresses.

Cheques for Pounds 22 made payable to The Financial Times Limited should be sent to: Lorraine Baker, The Financial Times Marketing Department, Number One Southwark Bridge, London SE1 9HL -----------------------------------------------------------------------

CORRECTION

Allied-Lyons' pre-tax profit for its 1991-92 financial year was Pounds 610m, a rise of 28 per cent on the previous year. Yesterday's FT 500 survey wrongly indicated a profits decline.

Europe P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page IV 997
International Company News: Volksbank hit by bad loan provisions Publication 930210FT Processed by FT 930214 By IAN RODGER ZURICH

SWISS VOLKSBANK, the object of an agreed SFr1.6bn (Dollars 1bn) takeover bid from the parent company of rival Credit Suisse, has reported a loss of SFr68m in 1992 compared with a SFr68m net profit in 1991 because of nearly doubled provisions for bad loans.

The actual loss was much higher, but was softened by the release of the remaining SFr292m in hidden reserves. The directors have recommended that the dividend be passed.

Volksbank said CS Holding had completed its examination of the bank and confirmed its takeover offer, on the basis of three registered shares of CS for 10 Volksbank registered shares.

Volksbank will seek the approval of its shareholders on March 11 to transform itself from a co-operative into a joint stock company, converting each of its co-operative shares into 10 registered shares.

Mr Werner Sigg, a director of Volksbank, said the rationalisation plan agreed between the two banks called for the elimination of between 100 and 150 of their combined 400 branches in Switzerland and the loss of 2,000 jobs.

While the two would maintain separate identities in Switzerland, the Volksbank international network would be folded into that of CS.

Swiss Volksbank CS Holding Switzerland, West Europe P602 Commercial Banks FIN Annual report COMP Acquisition P602 The Financial Times London Page 26 233
International Company News: Depressed prices drive Kaiser down to Dollars 2.6m Publication 930210FT Processed by FT 930214 By LAURIE MORSE CHICAGO

KAISER Aluminum, the Texas-based aluminium processor, yesterday reported fourth-quarter earnings of Dollars 2.6m, or 5 cents a share, down from Dollars 27.1m, or 47 cents, in the same period a year earlier.

Full-year earnings fell to Dollars 27.9m, or 47 cents a share, down from Dollars 108.4m, or Dollars 2.03. The sharp drop was due to depressed prices for alumina, primary aluminium and fabricated products, Kaiser said.

Fourth-quarter results included a pre-tax charge of Dollars 29m for the write-down of inventory. Kaiser said the company was able to remain marginally profitable in the quarter, in spite of aluminium industry overcapacity, because of cost-cutting and shipments of value-added products.

Fourth-quarter sales were Dollars 496m, up from Dollars 471.3m, and full-year 1992 sales totalled Dollars 1.9bn, down from Dollars 2.0bn.

Maxxam, the US natural resources group that owns 87.2 per cent of Kaiser, yesterday reported a net loss for the fourth quarter and year. Forest products showed a profit for the quarter and the year, but property activities recorded a loss and Kaiser's earnings slump limited profitability.

The fourth-quarter net loss came to Dollars 10.3m, or Dollars 1.09 a share, compared with profits of Dollars 9.8m, or Dollars 1.04, a year earlier. For the year, the group incurred a net loss of Dollars 7.3m, or 77 cents a share, against a 1991 profit of Dollars 57.5m, or Dollars 6.08.

Kaiser Aluminium and Chemical Corp Maxxam Inc United States of America P3334 Primary Aluminum P242 Sawmills and Planing Mills P1094 Uranium-Radium-Vanadium Ores FIN Annual report P3334 P242 P1094 The Financial Times London Page 25 282
People: John West resigns Publication 930210FT Processed by FT 930214

John West has resigned as non-executive chairman of Dalgety, the food group, and of Bridon, maker of wire rope and engineered products, having just suffered a stroke.

Dalgety has appointed Maurice Warren, chief executive, to succeed West, 65, who became chairman of Dalgety only last September. Richard Clothier, who had been due to become chief executive when Warren turns 60 in June, will now do so on April 1.

Warren has agreed to remain chairman for the indefinite future and says the appointment will not affect his plans to become non-executive chairman of the South West Electricity Board in June.

Bridon yesterday named Derek Edwards, a non-executive director of the company for the past eight years, as chairman, and Brian Clayton as chief executive.

Clayton has been responsible for day-to-day executive decisions since David Allday resigned as chief executive in September.

*****

John Hogan has been appointed chief operating officer of Lasmo, the independent oil exploration and production company. He replaces Joe Darby who recently became chief executive after Chris Greentree decided to step down.

John Hogan has been managing director of Lasmo's North Sea operations for the past four years. At 39, he is generally regarded as one of the industry's younger generation of pragmatic managers who have to weigh more keenly the financial risks and rewards of oil exploration in a climate of persistently low oil prices.

He is a qualified geologist and has worked in the industry since leaving university. With previous positions at Shell UK, Britoil and Elf, he joined Lasmo in 1981. As chief operating officer, he will have responsibility for the day-to-day management of Lasmo's worldwide operations.

Hogan is succeeded as managing director of Lasmo North Sea by Russell Harvey, currently production and operations director.

*****

National Home Loans, the centralised mortgage lender, has reinforced its senior management to cope with the task of administering its Pounds 2.62bn of mortgage assets and restoring its fortunes by repaying its Pounds 700m on-balance sheet debt.

NHL, which came close to collapse last year because of losses on lending, has appointed two executives who left Nationwide Building Society last year.

Christopher French, who was at Nationwide for 22 years, has been appointed chief operating officer of NHL. He will take over the running of NHL's operations in Solihull from Jonathan Perry, the company's executive chairman.

Brian Murkin, a chartered accountant who joined Nationwide in 1979, and was divisional director of management services there before leaving last year, has become the divisional director for finance, also based in Solihull. He will back up Nigel Terrington, the finance director who now splits his time between Solihull and the treasury operations in London.

NHL says the change of management does not necessarily augur a change in plans for the future of the group after it has managed to restructure and repay debt and work out bad loans in its National Mortgage Bank subsidiary.

National Home Loans lost Pounds 146.4m last year after making provisions of Pounds 138.5m to cover possible bad debts.

Dalgety Bridon LASMO National Home Loans Holdings United Kingdom, EC P6719 Holding Companies, NEC P5148 Fresh Fruits and Vegetables P5211 Lumber and Other Building Materials P0212 Beef Cattle, Ex Feedlots P0111 Wheat P5199 Nondurable Goods, NEC P1311 Crude Petroleum and Natural Gas P1321 Natural Gas Liquids P6111 Federal and Federally-Sponsored Credit Agencies P735 Miscellaneous Equipment Rental and Leasing P602 Commercial Banks P3315 Steel Wire and Related Products P3496 Miscellaneous Fabricated Wire Products P2298 Cordage and Twine P3699 Electrical Equipment and Supplies, NEC PEOP Personnel News PEOP Appointments West, J non executive Chairman Bridon P6719 P5148 P5211 P0212 P0111 P5199 P1311 P1321 P6111 P735 P602 P3315 P3496 P2298 P3699. The Financial Times London Page 13 627
Parliament and Politics: Cross-party deal on Maastricht threatens Major Publication 930210FT Processed by FT 930214 By ALISON SMITH

TORY REBELS and Liberal Demo-crats joined Labour yesterday in a cross-party alliance in support of the social chapter of the Maastricht treaty that could overturn the government's majority.

Since the Liberal Democrats and the minor parties say that they intend to vote for the Labour amendment, a full turnout of MPs would need only 11 Tory rebels to defeat the government's 21 overall majority and put ratification of the treaty in doubt. So far, the government has not been defeated on the Maastricht bill because no issue has united the full range of opposition parties with Tory Euro-sceptics.

However, there is now serious concern among government business managers that the amendment might be carried. If it were, the government could be left with the humiliating task of having to negotiate on the social chapter with its 11 European partners.

Until now, ministers have been adamant that the workplace rights included in the treaty's social chapter are wholly unacceptable to Britain. Mr Tristan Garel-Jones, the foreign office minister, has already warned MPs that passing the Labour amendment would wreck the treaty because the UK would be unable to ratify it.

The recent confirmation by Mr John Smith, the Labour leader, of his party's determination to force a vote on the issue, has raised the stakes at Westminster over the vote, although it will not take place for four to six weeks.

The opposition parties believe that approving the amendment would force the UK to negotiate with other EC countries, with the prospect of British adoption of the social chapter as the outcome.

Tory Euro-sceptics have, however, begun a campaign to make clear that if their colleagues support the amendment they are not voting for the social chapter.

They say that it does not introduce the social chapter into the Maastricht bill, but would simply remove the protocol saying that the other 11 EC countries will implement the social chapter.

In any negotiations with the other EC countries, the Euro-sceptics say, the UK would not be forced into accepting the social chapter.

Sir Teddy Taylor, secretary of the European Reform Group, said yesterday: 'The amendment simply makes it more difficult for the 11 other European countries to implement the social chapter. Anything we can do to make it more difficult to go ahead with Maastricht is well worthwhile.'

Another Euro-sceptic, Mr James Cran, said that he and his colleagues were determined to try to find a way to amend the Maastricht bill, but many other potential rebels are keeping a low profile. The intense pressure from the whips in the run-up to the Maastricht debate last November shook some potential rebels, and they are wary of committing themselves to revolt so far in advance.

Concerted efforts by the Foreign Office and the whips will begin nearer the vote, and will be at least as tough as in the previous exercise.

Labour Party (UK) Conservative Party (UK) Liberal Democrats (UK) United Kingdom, EC P8651 Political Organizations P91 Executive, Legislative and General Government GOVT International affairs P8651 P91 The Financial Times London Page 8 527
Taiwan plans oil privatisation Publication 930210FT Processed by FT 930214 By REUTER TAIPEI

Taiwan is drawing up plans to privatise its national oil company, the government's Commission of National Corporations said yesterday, Reuter reports from Taipei. It plans to sell a majority stake in Chinese Petroleum, which has a monopoly on oil imports and processing, a commission spokesman said. The government has also decided to privatise Taiwan Power, the state-run electricity supplier, Taiwan Fertiliser and Taiwan Salt Works, he added.

Chinese Petroleum Corp Taiwan Power Taiwan Fertiliser Taiwan Salt Works Taiwan, Asia P1311 Crude Petroleum and Natural Gas P9611 Administration of General Economic Programs P4911 Electric Services P287 Agricultural Chemicals P1479 Chemical and Fertilizer Mining, NEC GOVT Government News P1311 P9611 P4911 P287 P1479 The Financial Times London Page 3 129
International Company News: South African steel group cuts dividend Publication 930210FT Processed by FT 930214 By PHILIP GAWITH

HIGHVELD Steel and Vanadium, the South African steel producer which is part of the Anglo American group, reported steeply lower profits for 1992 and is to cut its dividend.

Mr Leslie Boyd, chairman, said demand for all products had deteriorated. He did not make a specific profit forecast for 1993 but said he expected the bottom of the cycle would be reached during the current year.

Although 1992 turnover rose by 8 per cent to R1.49bn (Dollars 477m), pre-tax income declined by 32 per cent to R74.4m.

A sharp fall in the tax bill to R3.6m, from R13.6m, limited the decline in attributable income to R70.8m from R95.6m.

An increase in the number of shares in issue, however, saw earnings per share fall to 80.1 cents from 130 cents.

The overall dividend was cut to 45 cents from 70 cents per share.

On the steel side, Mr Boyd said the group had faced poor export conditions owing to oversupply, while a weak local economy and destocking by merchants had caused a significant decline in local sales.

Vanadium consumption - Highveld is the world's largest producer - remained weak, and Mr Boyd noted that the Vantra division operated at only 25 per cent of capacity.

Mr Boyd said the R3.5bn Columbus stainless steel project, in which Highveld is a one-third partner, offered 'significant' future benefits for Highveld's profits. When completed, it will be the world's sixth-largest producer of stainless steel.

Highveld Steel and Vanadium South Africa, Africa P1094 Uranium-Radium-Vanadium Ores P331 Blast Furnace and Basic Steel Products FIN Annual report P1094 P331 The Financial Times London Page 24 285
International Company News: Income falls at Fischer Publication 930210FT Processed by FT 930214 By IAN RODGER

GEORG FISCHER, the Swiss foundries and engineering group, said consolidated net income in 1992 was 'significantly below' the SFr42m (Dollars 27.4m) recorded in 1991, reversing a forecast of profit growth made at the interim stage. The group said its results were affected by 'serious recession' in the second half, particularly in Germany.

Consolidated sales at SFr2.49bn were slightly below the 1991 level, in spite of a 4 per cent positive effect from exchange rate fluctuations.

The closure of steel foundries at Schaffhausen and Worms, the sale of the steel piping business in the UK and the discontinuation of other activities reduced sales by about 2 per cent.

Georg Fischer Switzerland, West Europe P3559 Special Industry Machinery, NEC FIN Annual report P3559 The Financial Times London Page 24 143
International Company News: EVN wins new Austrian power deal Publication 930210FT Processed by FT 930214 By IAN RODGER

ENERGIE-Versorgung Niederosterreich, one of Austria's largest utilities, has been authorised by the government of Lower Austria to take on electricity distribution in the part of the province surrounding Vienna.

Acquisition of this territory would boost EVN's annual revenues by about 25 per cent to Sch12.5bn (Dollars 1.07bn) and significantly reduce its unit distribution costs.

The city of Vienna, which operates Wiener Stadtwerke, a utility which now supplies the area, said it would appeal against the decision, a process which could take up to two years.

EVN has long sought to serve the territory, which is the most densely populated part of Lower Austria. It claims it could provide services at lower cost than Wiener Stadtwerke. 'We know that the city of Vienna uses electricity tariffs to subsidise other things,' EVN said recently.

Mr Rudolf Gruber, chairman, said he would now invite Wiener Stadtwerke to begin negotiations on the transfer. 'I think the decision is very positive and will put us in a very good position if they appeal,' Mr Gruber said.

EVN shares gained Sch14 to Sch795 on the Vienna Borse yesterday.

Energie Versorgung Niederoesterreich Austria, West Europe P4911 Electric Services TECH Licences MKTS Distribution P4911 The Financial Times London Page 24 220
UK Company News: Boustead sale for Pounds 4.5m Publication 930210FT Processed by FT 930214

Boustead, the industrial trading group ultimately controlled by Jack Chia-MPH, the Singapore-based trading company, is selling the holding company of Aircraft Furnishing to BE Aerospace for some Pounds 4.5m cash.

Included in the consideration is Pounds 531,000 in respect of an inter-company loan.

AFL makes, refurbishes and sells aircraft seats. In 1991 it made pre-tax profits of Pounds 44,000 on turnover of Pounds 4.7m.

For 1992 unaudited accounts show profits of Pounds 541,000 before tax and turnover of Pounds 6.59m. Unaudited net assets at December 31 1992 were Pounds 1.14m.

The proceeds will be used to reduce borrowings.

Boustead Aircraft Furnishing BE Aerospace United Kingdom, EC P2531 Public Building and Related Furniture COMP Company News COMP Disposals FIN Annual report P2531 The Financial Times London Page 21 141
UK Company News: Changes for an extended family - Anglo American's reshuffle Publication 930210FT Processed by FT 930214 By PHILIP GAWITH and KENNETH GOODING

NOT EVERY member of the Anglo American Corporation of South Africa's extended 'family' was entirely happy with the outcome of the latest reshuffle of the group's international assets. But the reorganisation pleased most of those directly involved as well as long-time Anglo observers.

The reshuffle involved no less than four companies perceived to be in Anglo's orbit: Charter Consolidated sold its 38.3 per cent shareholding in Johnson Matthey for Pounds 342m. A new company jointly owned by Minorco and Johannesburg Consolidated Investment acquired 20 per cent of JM and the rest of the shares went to London-based institutions.

Mr Jeff Herbert, managing director of Charter, a UK industrial company, was wearing a huge smile yesterday because Charter started the ball rolling some time ago by deciding the stake in JM, the world's biggest platinum marketing company, simply had to go. It represented about half Charter's market value but Charter had limited management influence and no direct access to JM's cash flow. By putting the cash received on deposit Charter can double its income from the Pounds 6m collected in JM dividends to Pounds 12m in interest.

If Mr Herbert's joy was not entirely unconfined yesterday, it was because a leak about the JM share sale forced Charter to shelve the second element in its strategy - cutting Charter completely adrift from Anglo's influence by buying back the near-36 per cent of Charter owned by Minorco, Anglo's Luxembourg-based overseas investment arm.

Nevertheless, most analysts expect that will be Mr Herbert's next step and he confirmed yesterday that was one of his options.

Mr Herbert said Anglo had exerted no pressure on him as he reshaped Charter during the past five years. Minorco was always supportive and helpful, not least over the decision to sell the JM shareholding.

Nevertheless, some close to the deal suggested Anglo was called on to mediate about which family member should buy the JM shares. Johannesburg Consolidated Investment approached Charter to buy 20 per cent of JM last November. JCI, which has a 33 per cent shareholding and manages Rustenburg, the world's biggest platinum producer, had heard that the JM stake was up for sale and had strategic reasons for making sure it did not fall into unfriendly hands.

However, Minorco did not want JCI to take more than 10 per cent of JM. Minorco has a direct 30 per cent shareholding in Engelhard, the US platinum market group and one of JM's rivals. One day Minorco might want to increase that stake but its soundings among anti-trust regulators in Europe and the US suggested that this might not be possible if 20 per cent of JM was held by any one member of the Anglo family.

So a last-minute compromise was worked out for Minorco and JCI to share 20 per cent of JM, insiders suggest. From Minorco's point of view this enabled it to keep a strategic shareholding in JM, even if that stake was reduced from about 14 to 10 per cent, and still equity account its interest in the platinum company.

Any threat that the reshuffle would attract the unwelcome attention of anti-trust authorities was further lessened by the sale of 18.3 per cent of JM to institutional investors, thus widening the ownership base. Barclays de Zoete Wedd and UBS Phillips & Drew placed the shares at 456p each with institutions in London.

Mr David Davies, chairman of JM, pointed out that once the deal was completed, JM would be 'a truly independent company.' The effective control exerted by Charter's stake would be removed and trading liquidity in JM's shares should improve - an important consideration for a company with realistic ambitions to join the FT-SE 100 index.

Mr Davies also pointed out that the reshuffle would provide a direct link between JCI, manager of Rustenburg, and JM, which for 60 years has had exclusive marketing rights to Rustenburg's platinum output. This could lead to some important commercial benefits. For example, fuel cells to propel vehicles could be most important for the platinum business in 10 to 15 years time but would be extremely expensive to develop. 'So when you have JCI-Rustenburg, interested in new uses for platinum, and JM at the forefront of fuel cell technology, the two together become a potent force.'

Many on the outside looking in at the complexities of the deals, agreed with Mr Rob Weinberg, analyst at Societe Generale Strauss Turnbull, who suggested that 'the deal appears to have been well-structured for the benefit of all parties. Charter has disposed of its interest in JM at an attractive price, Minorco has retained its strategic interest, JCI has moved downstream in the platinum industry and strengthened its links with the company which markets its products. And the market has picked up a good line of JM stock at a 7 per cent discount to Monday's market close.'

Anglo American Corporation of South Africa Charter Consolidated Johnson Matthey Minorco Johannesburg Consolidated Investment South Africa, Africa United Kingdom, EC Belgium, EC P10 Metal Mining P6719 Holding Companies, NEC P391 Jewelry, Silverware, and Plated Ware P2865 Cyclic Crudes and Intermediates P3341 Secondary Nonferrous Metals COMP Company News COMP Shareholding P10 P6719 P391 P2865 P3341 The Financial Times London Page 20 893
The FT500 (4): A - Z list of the European top 500 Publication 930210FT Processed by FT 930210

------------------------------------------ A ------------------------------------------ A/S D/S Svendborg 173 ABB Asea Brown Boveri 40 Abbey National 66 ABN Amro Bank 55 Accor 181 Aegon 117 AGA 203 AGF 110 AGIV 402 Aguas de Barcelona 448 Ahold 189 Akzo 124 Alcatel Alsthom 17 Alleanza 133 Allianz Holding 7 Allianz Lebensversicherungs 120 Allied Colloids Group 447 Allied Irish Banks 244 Allied-Lyons 46 Almanij 333 Altana 353 Alusuisse-Lonza Holding 350 AMB Aachener & Muenchener Beteil 201 Anglian Water 208 Argos 344 Argyll Group 73 Arjo Wiggins Appleton 202 Asda Group 337 Asko Deutsche Kaufhaus 372 Associated British Foods 148 Associated British Ports 424 Astra 32 Atlas Copco 292 Audiofina 484 Autopistas 270 AVA 364 Axa 95 ------------------------------------------ B ------------------------------------------ BAA 74 Baden-Wuerttembergische Bank 330 Badenwerk 275 Baloise Holding 322 Banca Commerciale Italiana 250 Banca Popolare di Bergamo CV 444 Bancaire (Compagnie) 281 Banco Ambrosiano Veneto 348 Banco Bilbao Vizcaya 98 Banco Central Hispanoamericano 92 Banco Comercial Portugues 314 Banco de Santander 125 Banco Exterior 139 Banco Lariano 481 Banco Popular Espanol 183 Banco Totta & Accores 499 Banesto Group 243 Bank of Ireland 368 Bank of Scotland 205 Bankinter 418 Banque Bruxelles Lambert 199 Barclays 44

BASF 56 Bass 57 BAT Industries 9 Bayer 34 Bayerische Hypo. & Wechsel Bk 88 Bayerische Motoren Werke 86 Bayerische Vereinsbank 90 Beiersdorf 240 Bekaert 435 Berendsen (Sophus) 339 Bergesen dy Group 500 Berliner Bank 290 Berliner Kraft und Licht 422 BET 271 BHF Bank 255 BIC 363 BICC 295 Bilfinger & Berger 267 Blenheim Group 469 Blue Circle Industries 287 BOC Group 80 Bols 482 Bon Marche 378 Bongrain 346 Booker 327 Boots Company 53 Bouygues 237 Bowater Industries 157 BPB Industries 335 Britannic Assurance 396 British Aerospace 464 British Airways 126 British Gas 14 British Petroleum 12 British Steel 229 British Vita 446 BSN Groupe 30 BT 3 BTR 21 Buhrmann-Tetterode 487 Burmah Castrol 224 Burton Group 496 ------------------------------------------ C ------------------------------------------ CGIP 374 Cable & Wireless 39 Cadbury Schweppes 82 Canal + 102 Cap Gemini Sogeti 286 Carlsberg 158 Carlton Commu nications 209 CarnaudMetalbox 154 Carrefour 81 Casino 341 Castorama Dubois 407 Centros Comerciales Pryca 191 CEP Communications 492 Cetelem 277 Chargeurs 262 Charter Consolidated 405 Christian Dior 257 Ciba-Geigy 24 Cimenteries CBR 361 Clarins 376

Club Mediterranee 473 Coats Viyella 242 Cobepa 342 Codan Group 415 Colas 468 Commercial Union 115 Commerzbank 99 Compania Espanola de Pet. 214 Comptoirs Modernes 400 Continental 331 Cookson Group 371 Courtaulds 156 Courtaulds Textiles 467 Credit Comm de France 207 Credit Foncier de France 273 Credit Local de France 226 Credit National Group 412 Creditanstalt-Bankverein 260 Credito Italiano 261 CRH 392 CS Holding 68 ------------------------------------------ D ------------------------------------------ D/S af 1912 171 Daily Mail and General Trust 373 Daimler-Benz 13 Dalgety 284 Danisco 345 DBV 450 De La Rue 217 Degussa 309 Delhaize 176 Delta 413 Den Danske Bank 204 Deutsche Bank 10 Deutsche Lufthansa 251 Deutsche Pfandbrief-und HypoBanK 411 Deutsche SB-Kauf 219 Dixons Group 313 Docks de France 430 Douglas Holdings 453 Dresdner Bank 49 DSM 218 Dunhill Holdings 347 ------------------------------------------ E ------------------------------------------ East Midlands Electricity 316 Eastern Electricity 279 Electrabel 50 Electrafina 236 Electrocomponents 393 Electrolux 195 Electrowatt 326 Elf Aquitaine 18 Elf Gabon 458 Elf Sanofi 112 Elsevier 100 Emap 455 Ems-Chemie 445 Endesa 64 English China Clays 235 Enterprise Oil 147 Ericsson LM 103

Eridania Beghin-Say 170 Euro Disney 184 Eurotunnel Group 123 EVN 495 ------------------------------------------ F ------------------------------------------ Fecsa 351 Ferruzzi Finanziaria 389 Fiat 94 Finanziaria Agroindustriale 437 First Leisure Corporation 485 Fisons 215 Flughafen Wien 432 Fomento de Construcciones 440 Forte 248 Fortis 104 Fougerolle 427 Freia Marabou 317 Fromageries Bel 406 ------------------------------------------ G ------------------------------------------ Gambro 375 GAN 162 Gas Natural 200 Gehe 328 Gemina 398 General Accident 119 General Electric Company 33 Generale Bank 140 Generale des Eaux 42 Generali (Assicurazioni) 23 GIB Group 300 Gist-Brocades 498 GKN 274 Glaxo Holdings 2 Glynwed International 472 Goldschmidt 471 Granada Group 247 Grand Metropolitan 27 Great Universal Stores 71 Greenalls Group 420 Groupe Andre 404 Groupe Bruxelles Lambert 249 Guardian Royal Exchange 206 Guinness 15 ------------------------------------------ H ------------------------------------------ Hafslund Nycomed 194 Hanson 16 Hapag Lloyd 497 Harrisons & Crosfield 291 Havas (Agence) 128 Hays 334 Heidelberger Zement 269 Heineken 109 Helvetia Schweiz. Versicherung 428 Hepworth 486 HEW 359 Hillsdown Holdings 403 Hochtief 150 Hoechst 45 Hoesch 377

Holderbank Management 241 Holzmann (Philipp) 283 HSBC Holdings 19 ------------------------------------------ I ------------------------------------------ Iberdrola I 91 Iceland Frozen Foods Hldgs 483 IFIL 457 IFINT 272 IKB Deutsche Industriebank 336 Imetal 480 IMI 325 Imperial Chemical Industries 28 Incentive 268 Inchcape 111 Industrivarden 477 Institut Merieux 253 Internationale Nederlanden Group 60 Investor 196 Irish Life 431 Isar Amperwerke 177 Italgas 360 ------------------------------------------ J ------------------------------------------ Johnson Matthey 298 ------------------------------------------ K ------------------------------------------ Karstadt 172 Kaufhof 198 Kingfisher 106 KLM 441 KNP 384 Korsnas 493 Kredietbank 193 Kvaerner 395 Kwik Save Group 266 Kymmene 381 ------------------------------------------ L ------------------------------------------ L'Air Liquide 52 L'Oreal 36 Ladbroke Group 151 Lafarge Coppee 153 Lahmeyer 370 Land Securities 136 Laporte 306 Lasmo 221 Lauritzen 340 Legal & General Group 167 Legrand 276 Leu Holding 419 Linde 144 Lloyds Abbey Life 114 Lloyds Bank 43 London Electricity 304 Lonrho 478 Lucas Industries 385 LVMH 31 Lyonnaise des Eaux-Dumez 89 ------------------------------------------ M

------------------------------------------ MAI 491 Man 232 Mannesmann 96 Manweb 433 Marks and Spencer 22 Matra 452 MB-Caradon Group 238 Mediobanca 186 MEPC 299 Mercury Asset Management 421 Metallgesellschaft 246 MFI Furniture Group 362 Michelin 107 Midlands Electricity 308 Minorco 252 Montedison 234 Morgan Crucible 383 Morrison (Wm) Supermarkets 302 Moulinex 423 Muenchener Ruckversicherungs 37 ------------------------------------------ N ------------------------------------------ National Power 77 National Westminster Bank 41 Navigation Mixte 230 Nestle 5 NFC 188 Nobel Industries 426 Norsk Hydro 93 North West Water 174 Northern Electric 438 Northern Foods 179 Norweb 338 Novo Nordisk 165 Nurnberger Beteiligung 451 Nutricia 474 ------------------------------------------ O ------------------------------------------ OeMV 280 Orkla 414 ------------------------------------------ P ------------------------------------------ P & O Steam Navigation 127 Pargesa Holding 358 Paribas 78 Pearson 132 Pechiney International 152 Pentland Group 454 Pernod Ricard 105 Petrofina 70 Peugeot 84 Philips 101 Pilkington 357 Pinault 305 Pirelli Internationale 297 Pirelli Spa 356 Poliet 365 Powerfin 264 Powergen 121 Preussag 146 Primagaz 462

Printemps (Au) 394 Procordia 67 Promodes 239 Prudential Corporation 51 PWA 490 ------------------------------------------ R ------------------------------------------ Racal Electronics 289 Rank Organisation 163 Ranks Hovis McDougall 410 RAS 282 Reckitt & Colman 122 Redland 166 Redoute (La) 307 Reed International 83 Remy Cointreau 408 Rentokil Group 168 Repola 387 Repsol 72 Reuters Holdings 48 Rheinelektra 288 Richemont (Compagnie Financiere) 97 RMC Group 318 Roche Holding 6 Rodamco 130 Rolls-Royce 210 Rothmans International 76 Royal Bank of Scotland Group 216 Royal Dutch/Shell 1 Royal Insurance Holdings 303 Royale Belge 233 RTZ Corporation 38 Rugby Group 388 RWE 58 ------------------------------------------ S ------------------------------------------ Safra Republic Holdings 401 Saga Petroleum 332 SAI 417 Sainsbury J 26 Saint Louis Group 324 Saint-Gobain 61 Salvesen (Christian) 310 Sandoz 20 Sandvik 141 Schering 155 Schmalbach-Lubeca 476 Schneider (Groupe) 180 Schroders 329 Scottish & Newcastle 160 Scottish Hydro-Electric 258 Scottish Power 182 Sears 231 SEB 352 Securicor Group 479 Security Services 463 Sedgwick Group 442 Seeboard 436 Sefimeg 343 Severn Trent 187 Sevillana de Electricidad 349 Siebe 197 Siemens 8

Simco 369 SIP 149 Sirti 456 Skanska 391 SKF 278 SME 323 SMH 143 Smith & Nephew 190 Smith (WH) Group 222 Smithkline Beecham 11 Smiths Industries 294 Smurfit, Jefferson 245 Societe Gen. de Surveillance 223 Societe Generale 54 Societe Generale de Belgique 116 Sodexho 416 Sofina 475 Solvay et Cie 142 South Wales Electricity 470 South West Water 425 South Western Electricity 460 Southern Electric 263 Southern Water 355 Spring Ram Corporation 459 Springer (Axel) 320 Standard Chartered 259 STET 138 Stora 213 Storehouse 397 Suedzucker 315 Suez (Compagnie Financiere de) 65 Sulzer 319 Sun Alliance Group 113 Svenska Cellulosa 185 Svenska Handelsbanken 465 Swiss Bank Corporation 62 Swiss Reinsurance Group 108 Swiss Volksbank 494 Swissair 461 Sydkraft 225 Synthelabo 228 ------------------------------------------ T ------------------------------------------ T & N 386 Tabacalera 367 Tarmac 439 Tate & Lyle 220 Telefonica 47 Tesco 63 TF1 265 Thames Water 164 Thomson-CSF 169 Thorn Emi 85 Thyssen 131 TI Group 212 Tomkins 192 Toro (Assicurazioni) 429 Total 59 Tractebel 137 Transatlantic Holdings 449 Trelleborg 466 TSB Group 145 ------------------------------------------ U

------------------------------------------ UAP. 69 UCB 379 Unidanmark 443 Unigate 409 Unilever plc/NV 4 Union Bank of Switzerland 25 Union Electrica-Fenosa 390 United Biscuits (Holdings) 178 United Newspapers 311 ------------------------------------------ V ------------------------------------------ VNU 489 Valeo 254 Veba 35 Vereins- und Westbank 434 VEW 161 Viag 118 Victoria Holding 227 Vodafone 79 Volksfuersorge 382 Volkswagen 87 Volvo 129 ------------------------------------------ W ------------------------------------------ Warburg SG Group 256 Weir Group 488 Wellcome 29 Welsh Water 366 Wessanen 399 Wessex Water 380 Whitbread 135 Wienerberger Baustoffindustrie 354 Williams Holdings 211 Willis Corroon Group 321 Winterthur Versicherung 134 Wolseley 312 Wolters Kluwer 159 Worms et Cie 301 Wuerttembergische AG Versich 293 ------------------------------------------ Y ------------------------------------------ Yorkshire Electricity 296 Yorkshire Water 285 ------------------------------------------ Z ------------------------------------------ Z-Landerbank Bank Austria 175 Zurich Insurance 75 ------------------------------------------

XG Europe P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page IV 1514
International Company News: A&P target of corporate analysis Publication 930210FT Processed by FT 930210 By MARTIN DICKSON

THE Great Atlantic & Pacific Tea Company, the US supermarket group majority owned by Germany's Tengelmann retailing group, is to be the first company targeted by New York state's large pension fund in a campaign against poorly performing management.

New York's move represents a significant advance by the US movement for better corporate governance, which seeks to give shareholders a greater say in the affairs of companies with weak results.

Until now, action by institutional investors against such companies has been led most vociferously by the Dollars 71bn California Public Employee Retirement System. New York, is becoming more publicly aggressive as it has developed a computer-based system to track the financial performance of top US companies.

Mr Edward Regan, Comptroller of New York state, said yesterday the Dollars 56bn pension fund would vote against the election of A&P's slate of directors at its annual meeting in July.

It would also seek the support of other shareholders for an amendment to the company's by-laws which would force it to include in its annual proxy or shareholder voting material statements from large shareholders wishing to comment on the group's performance. The fund owns 260,000 of A&P's 38.2m shares outstanding.

Tengelmann's 53 per cent ownership of the chain means New York's campaign cannot succeed without the support of the German company, and this seems unlikely. But the state's stance, if followed by other institutions, could send a powerful message of shareholder dissatisfaction.

It is an accident of timing that A&P is the first company to be targeted under the state's recently-completed corporate performance analysis system, which has compiled data on 900 of the largest US companies.

However, Mr Regan said A&P was not only 'an underperformer, but its response to deal with its problems and improve its long-term outlook is anaemic and unacceptable.'

Great Atlantic and Pacific Tea Co US United States of America P9651 Regulation of Miscellaneous Commercial Sectors P6371 Pension, Health, and Welfare Funds P5399 Miscellaneous General Merchandise Stores P5499 Miscellaneous Food Stores MGMT Management COMP Company News P9651 P6371 P5399 P5499 The Financial Times London Page 26 364
International Company News: Warner plans global retail chain Publication 930210FT Processed by FT 930210 By ALAN FRIEDMAN LOS ANGELES

WARNER BROTHERS, the Hollywood studio subsidiary of the Time-Warner group, will announce plans today to launch an international chain of retail merchandise shops, to be known as the Warner Brothers Studio Store.

Warner, which already has 21 such shops in the US, will open a further 35 new outlets, including five in the UK next autumn.

If the British shops prove successful it is expected more could be opened next year elsewhere in Europe and in the Far East.

The company, which could achieve more than Dollars 100m of annual revenues by year-end, is presently negotiating to open a flagship shop in Regent Street, central London.

Warner is also looking at two locations in London suburbs as well as possible sites in Manchester, Newcastle, Sheffield and Birmingham.

The shops will sell a variety of entertainment and retail items based on Warner Brothers characters, from Batman to Bugs Bunny.

At present Walt Disney is the only other Hollywood studio with significant retail merchandising interests.

Planners at Warner Brothers are considering the possibility of an even more ambitious international network than the 56 outlets that will exist by year-end.

As many as 30 new shops could be opened in 1994.

The flagship shop will be opened on New York's Fifth Avenue as a 30,000 sq ft emporium on three floors.

Mr Peter Starrett, president of Warner Brothers' worldwide retail division, said that from April other US shops will open in Chicago, California, Connecticut and Boston.

Warner Brothers is the leading studio in Hollywood, having earned Dollars 410m last year on revenues of Dollars 3.5bn.

Warner Brothers US United States of America GB United Kingdom, EC P5999 Miscellaneous Retail Stores, NEC COMP Company News RES Facilities P5999 The Financial Times London Page 26 309
World Trade News: Japanese venture for Stefanel Publication 930210FT Processed by FT 930211 By HAIG SIMONIAN MILAN

STEFANEL, the Italian casual clothing group, has become the first European apparel maker to set up a manufacturing joint venture in Japan.

The new company, Onward Stefanel, marks an extension of the Italian group's clothes retailing joint venture, signed in 1989, with the Onward Kashiyama group, which has led to the opening of 40 Stefanel stores in Japan.

Mr Giorgio Stefanel, chairman of the Italian company, said the new company would produce between 30 per cent and 40 per cent of Stefanel's sales in Japan.

The remainder would continue to be made in Italy. Stefanel intended to extend its Japanese retail coverage, and open more stores in China and Korea, where it already has a presence, he said.

Elsag Bailey, the Italian precision engineering group which is part of the IRI state holding company, has won a L35bn (Dollars 23.7m) order from the Spanish postal authorities for automatic letter-sorting equipment for Madrid and Barcelona.

The equipment includes electronic address recognition systems which will enable fully automatic letter sorting, as well as manual coding where necessary.

Elsag Bailey has already supplied letter sorting equipment to the six automated letter sorting centres on which the Spanish postal system is currently based.

Stefanel Onward Stefanel Elsag Bailey Italy, EC Japan, Asia Spain, EC P23 Apparel and Other Textile Products P35 Industrial Machinery and Equipment COMP Joint venture MKTS Market data P23 P35 The Financial Times International Page 4 252
Poland agrees to take back refugees Publication 930210FT Processed by FT 930211 By JUDY DEMPSEY BERLIN

POLAND yesterday agreed to take back refugees rejected by Germany, but both countries failed to decide how Warsaw could deal with tens of thousands of refugees once the German parliament amends its liberal asylum laws.

Mr Jerzy Zimowski, Polish deputy interior minister, said in Bonn Poland needed financial aid and advice on improving border security while Polish government officials accused Germany of 'exporting' its refugee problem.

But Mr Johannes Vocking, Germany's state secretary at the Interior Ministry, hailed the agreement as a 'crucial step' towards pushing through the constitutional amendments to the asylum law, agreed in principle by the country's main political parties last December. The amendments would allow Germany to send back refugees who are not genuine asylum-seekers to a safe third country.

However, the opposition Social Democratic party and the United Nations High Commissioner for Refugees have said Poland, the Czechs and Slovaks have no infrastructure to deal with refugees.

Poland, East Europe Germany, EC P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 2 185
Russian bank and government squabble as inflation soars Publication 930210FT Processed by FT 930211 By LEYLA BOULTON MOSCOW

RUSSIA'S government and its central bank are engaged in a fierce war of words over who is responsible for the economic deterioration, as the country teeters on the brink of hyperinflation.

Mr Anatoly Chubais, vice-premier for privatisation, yesterday hinted that President Boris Yeltsin would take action against the central bank after accusing it of 'adventurism'. Mr Viktor Gerashchenko, the central bank chairman, retorted in parliament - to which he is officially accountable - that he had only created money at the government's request.

At the heart of the dispute is the question of central bank independence.

Mr Boris Fyodorov, deputy prime minister for economics and finance, would like the central bank to perform its prime function of defending the currency, even if it means cutting off funds to the government and stopping the flow of cheap credits to industry.

He says 'a balancing act' against hyperinflation has 'no chance' unless Mr Gerashchenko sets targets that are in line with the government's anti-inflationary goals. He also wants it to increase its discount rate, now at 80 per cent, to a 'market rate'.

'The central bank should be renamed development bank. . . . they do not want to act like central bankers,' he told the Financial Times. 'They should be prodding me to cut the budget deficit, not me telling them what the discount rate should be.'

But there would be severe social and political consequences of such a tough policy, and the central bank does not want to take the blame.

'Somebody will have to take the responsibility,' Mr Alexander Khandruyev, a deputy governor of the central bank, said in an interview yesterday. 'If we don't give credit to the Moscow power station to pay salaries, the lights will go off in this office tomorrow.'

The government, whose various ministries have sanctioned many of the credits to enterprises, must also keep good its promises to start structural reform of the economy.

While he does not believe it is realistic to expect lots of inefficient enterprises to close, Mr Fyodorov is determined to do his share. He wants to restrict state spending, increase revenues and force enterprises to make efficient use of state help.

Russia, East Europe P9611 Administration of General Economic Programs P601 Central Reserve Depositories GOVT Government News P9611 P601 The Financial Times International Page 2 404
The FT500 (18): Looking forward to a healthy future / Profile of Gambro Publication 930210FT Processed by FT 930210 By ROBERT TAYLOR

GAMBRO is one of the few continuing success stories in slump-hit corporate Sweden. As one of the world's leading health care companies, its range of products on global markets have hardly been affected by the prevailing Nordic economic gloom.

The company's inexorable climb up the FT500 from 454 in 1991 to 375 this year reflects a consistently strong performance which shows no signs of coming to an end.

In the first half of 1992 Gambro recorded a 24 per cent increase in its pre-tax earnings to SKr396m and a 9 per cent improvement in group sales to SKr3.054bn. Analysts believe Gambro should go on improving its profits by an average of 12 to 15 per cent a year through the early 1990s.

The company itself expects to see strong growth in all of its five designated business areas of renal care, cardiovascular surgery, intensive care and anaesthesia, blood component technology and preventive health services.

The ageing of the baby boom generation in the western world promises to increase the demand for most of Gambro's products in global markets for the foreseeable future.

Forecasts up to 1996 suggest an 8 per cent annual growth rate in global demand for renal care products, with a 6 per cent rise in cardiovascular surgery, 7 per cent in intensive care and anaesthesia and as much as 20 per cent in blood component technology.

Mr Berthold Lindqvist, the company's president, argues Gambro's present success first began with its aggressive acquisition offensive launched in 1987, when the company strengthened its share of the European dialysis market to nearly half through the Dollars 187m purchase of Sopamed, the Swiss parent company of the Hospal group. 'It was sensible to maintain two sales organisations for Gambro and Hospal,' explains Mr Lindqvist. This helped to boost the company's performance.

Three years later Gambro extended its penetration of the vital US market with the Dollars 253m acquisition of Cobe Laboratories. As a result of that strategic move Gambro strengthened its interest in cardiovascular surgery and blood component technology. 'We had been struggling in the US before then,' says Mr Lindqvist. 'Buying Cobe gave us a critical mass and enabled us to operate there much more effectively.'

In October last year Gambro became majority shareholder with a 51 per cent stake in the US dialysis clinic chain, REN Corporation, in a Dollars 78m deal. A new business area - health care services - is being created to absorb this latest acquisition.

Founded in 1964 as a Swedish company in Lund in the south-west of the country, today Gambro is truly international with 99 per cent of its business conducted in foreign currencies. It now employs four times as many employees in the US as it does in Sweden.

Mr Lindqvist estimates the company has up to 30 per cent of the world market share in renal care products, about a quarter of that in cardiovascular surgery and up to a third in blood component technology.

At present renal care accounts for an estimated 73 per cent of group sales but Mr Lindqvist points to the large growth opportunities in other parts of Gambro's product range.

His main task at present is to improve the return on capital employed in its intensive care and anaesthesia which is not up to the company's target. Overall, however, Gambro can look forward to a healthy future in an industry which seems for the moment immune from the impact of global recession.

Gambro Sweden, West Europe P3841 Surgical and Medical Instruments COMP Company profile P3841 The Financial Times London Page XVII 617
The FT500 (17): Recession hits corporate scene hard - Fourteen companies left the FT500 while 28 slipped down the table / Nordic region Publication 930210FT Processed by FT 930210 By ROBERT TAYLOR

THE recession hit the Nordic corporate scene hard during 1992. Fourteen companies in the region departed from the FT500 last year as a result and there were only three new arrivals.

The severity with which the slump affected market capitalisation was underlined by the fact that 28 of the 40 Nordic-owned companies appearing in the 1992 FT500 dropped down the table from their rating in the previous year.

By far the most successful sector turned out to be - as in 1991 - pharmaceuticals and health care. In overall 32nd place Astra, the Swedish company, easily topped the other Nordic entries in the FT500 with a market capitalisation of Dollars 11.70bn plus a 32 per cent improvement in turnover to Dollars 1.681bn and a 40.2 per cent jump in profits to Dollars 608.6m.

It was followed by Swedish food and health care conglomerate Procordia with a Dollars 6.77bn valuation in overall 67th place. It recorded a 197 per cent profits increase to Dollars 590.8m though only a 4.1 per cent growth in turnover to Dollars 6.79bn.

Novo-Nordisk, the Danish health care product company also performed well during 1992 with a rise up the FT500 table to 165th place from 209. It recorded a 28.2 per cent improvement in its profitability to Dollars 254.7m and a 16.2 per cent growth in turnover to Dollars 1.407bn.

However, it was Gambro, the Swedish pharmaceutical group, which enjoyed the largest leap in the table of Nordic companies - up from 454 to 375 - with a 30.7 per cent growth in turnover and a 36.4 per cent profits increase.

But the Swedish investment company Investor also achieved a clear improvement moving from 260th position to 196, mainly as a result of its merger with Providentia.

Freia Marabou was a new entrant in 317th position as was the Norwegian shipping group Lauritzen coming in at number 340. The Swedish defence group Nobel Industries returned after an absence from the table in 1990 to 426th position.

The largest drop down the FT500 table was suffered by Svenska Handelsbanken - a fall from 183rd to 465 - followed by Skanska, Sweden's biggest construction group, which dropped from 169th position to 391 with a 12.6 per cent decline in its turnover and a modest 8.7 per cent profit improvement.

Other notable setbacks were suffered by Norway's Saga Petroleum (down to 332 from 242); Danisco, the Danish food product conglomerate (a fall to 345 from 286) and Unidanmark, the Danish insurance group (down to 443 from 234).

The most striking failure in 1992 came from the crisis-ridden Nordic financial sector. Of the 15 companies which dropped out of the FT500 in 1992, all but three of them (the Swedish forestry group MoDo, the Danish engineering company FLS and Nokia, the Finnish industrial conglomerate) were either in banking or insurance.

Finland's two largest private commercial banks - Unitas and Kansallis-Osake-Pankki - both failed to stay in the table. So did Skandinaviska Enskilda Banken and Nordbanken in Sweden as well as the Swedish finance companies Hufvudstaden and Lundberg.

Most of the leading Nordic insurance companies have also vanished from the top FT500. Both Sweden's Skandia and Trygg-Hansa SPP have dropped out as have Baltica Holding and Hafnia in Denmark.

Among the Nordic countries Sweden has suffered the most significant loss of companies in the FT500. As many as eight went in 1992, reducing the number to only 21, a drop of nearly a third.

By contrast Denmark performed more strongly. There are 10 Danish companies in the list, more than Finland and Norway put together. Carlsberg, the brewers, were the top Danish company in 158th position, a drop of 15 from its 1991 placing but it suffered a 6.3 per cent drop in its turnover to Dollars 1,634.5m and only a modest 8 per cent profits growth to Dollars 198.7m after a loss the previous year.

A P Moeller, the Danish merchant shipping company that is made up of two parent companies - D/S af 1912 and A/S D/S Svenborg - secured 171st and 173rd places. Den Danske Bank returned to profitability but dropped from 184th to 204th.

Finland's representation in the FT500 fell to a mere two companies - both from the paper and pulp sector - Kymmene and Repola. The picture was more stable in Norway with the Bergesen shipping group only just squeezing in at 500, having dropped 177 places. This left eight Norwegian companies in the FT500 headed by Norsk Hydro in overall 93rd position followed by the pharmaceutical company Hafslund Nycomed, Freia Marabou and Saga Petroleum.

Sweden, West Europe Denmark, EC Norway, West Europe Finland, West Europe P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page XVII 815
The FT500 (16): Weak borsa points the way for a fall - David Lane digs deep to discover why Europe's third largest economy has only 23 representatives in this year's FT500 and why most companies have dropped in the rankings / Italy Publication 930210FT Processed by FT 930210 By DAVID LANE

UNCOVERING Italian entries in this year's FT500 takes patience and a sharp eye. It is necessary to dig deep to find the first, insurer Generali Assicurazioni at 23rd place. And the second is much further down, Turin automobile group Fiat scraping into the leading 100 at 94.

With only Generali and Fiat earning places among the first 100, notwithstanding its position as Europe's third largest economy behind Germany and France (measured by GDP), Italy is under-represented among the biggest companies.

This under-representation is, however, a feature from top to bottom of the FT500. Italian names are even harder to find in 1992's listing than in previous years. Only 23 companies win places, compared to last year's 34. Just one third of the Italian contingent makes the first half of 1992's FT500, while another third falls into the bottom 100 with rankings lying between 400 and 500.

Excluding Italy's one new entry, only four Italian names moved upwards, none making dramatic leaps. On the other hand, there were some noteworthy falls in the generally downward movement, with six entries dropping more than 100 places.

An important factor behind Italy's poor showing was the weak performance of the stock market. Last year continued the run of disappointing years for investors in Italian stocks. When the market closed at the end of September 1992, the Comit general index (1972 base 100) registered 364. A year earlier it stood at 539.

Between September and year-end 1991 the slide had been limited, the Comit general index closing 1991 at 508. But a heavy reversal wiped nearly 30 per cent off the total capitalisation of quoted companies in the first nine months of 1992. (Reset to 1000 at the start of every calendar year, the MIB index stood at 706 on September 30.)

From L5,200 Fiat ordinary shares fell to L3,460 in the year to September 30, 1992, a drop of 33.5 per cent. Shares in Olivetti suffered even more. Their price dropped from L2,920 to L1,681, a 42.4 per cent fall that helped take one of Italy's leading industrial names out of the FT500. (Olivetti had held 375th place in 1991's Top 500.)

The sharp fall in the share prices of both Fiat, badly hit by a declining share of its home automobile market and facing difficult times in the commercial vehicle sector, and Olivetti, suffering as much as any leading computer maker, reflects the heavy impact of adverse economic conditions on profits. And expectations for the short and medium term are not bright in much of Italian manufacturing.

Shares in financial and service sector companies were not faring much better. The share price of Italmobiliare, the holding company of the Pesenti family which controls cement leader Italcementi, crashed in the year to September 30, 1992, from L73,000 to L28,350, and the company dropped out of the FT500. It was 107th in 1991.

Banca Nazionale dell'Agricoltura also left the FT500, having previously been ranked 327th. Indeed, all the banks in 1991's listing have lower positions this year. The ranking of Milan investment bank Mediobanca fell from 117 to 186, reflecting the drop in share price from L15,020 to L9,400. And Italy's largest private sector bank, Banco Ambrosiano Veneto (BAV), suffered a similar fall from 279 to 348. BAV's share price fell from L4,510 to L3,095 during the year.

Both Banca Commerciale Italiana (Comit) and Credito Italiano, controlled by the IRI state holding corporation and now subjects for privatisation, slipped back. Comit's position worsened from 166 to 250 and Credito Italiano's from 190 to 261. Over the year their share prices fell from L4,440 to L2,838 and from L2,440 to L1,743 respectively. (Privatisation prospects have since provided a boost, and at year-end 1992 Comit's shares stood at L4,677 and Credito Italiano's at L3,160.)

The positions of two of Italy's leading commercial banks spotlight another key factor causing Italian under-representation in the FT500: Italy lacks large companies.

Comit and Credito Italiano stand above their national competitors in a banking sector with about 1,100 different banks, but they are small by international standards. Scottish, Irish and Danish banks, as well as Dutch and Belgian, rank higher in the FT500. Only a process of concentration will remedy this situation and lift Italian banks to the levels of the European leaders.

A factor that tells against a higher-ranked Italian contingent in the FT500 is the practice of quoting more than one company of the same group. Comit, for example, controls two banks that have stock market quotation, the Banco di Chiavari and the Banca di Legnano.

Equally, industrial groups are characterised by cascades of holdings and operating companies, or fragmented structures. IFI, the quoted holding company of the Agnelli family, controls Fiat, IFIL and Unicem, all of which are quoted. And the Fiat Group's consolidated accounts include quoted companies like La Rinascente (retailing), Toro (insurance), Gilardini and Marelli (engineering). Ravenna-based Ferruzzi is similar in having several quoted companies.

The Italian 'borsa' (stock market) is, in any case, very small. There were only 376 quoted securities at the end of September 1992, an increase of 10 on the previous year. Moreover, companies often have more than one type of security listed, their ordinary shares being flanked by convertible or non-convertible savings shares.

The 1991 year book of the Milan stockbrokers' executive committee records that only 224 different companies enjoyed stock market listings at the year end. Only a handful have joined their ranks since then.

An inclement economic and financial climate has been a disincentive to Italian companies to seek quotation. And the borsa's reputation for non-transparency and as a market for speculators rather than serious investors has also been a deterrent. But while legislation enacted during recent years has helped to improve the borsa's image, adverse conditions have worked against enlargement.

Attilio Ventura, chairman of the Milan stockbrokers' executive committee, says that the Italian stock market has made gigantic strides over the past decade, and that these have brought it into line with principal foreign markets. 'But this renewal has only partly been matched by revitalisation of the board,' said Mr Ventura.

Yet the potential exists. A study commissioned by the executive committee, and published in May last year (1992), found 851 quotable companies outside groups with companies that are already quoted.

The study showed that the number of companies quoted on Milan's borsa at the end of October 1991 was much smaller than London, Frankfurt, Paris and Luxembourg. Moreover, the number was half of that in Amsterdam, Madrid and Zurich, and was smaller than Brussels and Copenhagen. In terms of capitalisation, Milan ranked sixth, but was closely pressed by Madrid in seventh place.

Against continental standards, the Italian stock market fails to box the country's economic weight. To do so, there must be a substantial enlargement of the borsa, with a large increase in the number of listed companies. And the companies themselves need to be bigger.

Mr Ventura, in common with his colleagues in Italy's securities dealing companies, believes that privatisation ought to make a valuable contribution to enlargement. And there are considerable expectations of the stimulus of long-awaited legislation on pension funds. But bad old practices, of which examples were still evident last year, will have to be abandoned.

Such developments offer prospects for the Italian stock market to outgrow its pygmy stature. Only then will the Italian contingent in the FT500 be consistent with Italy's position as a leading industrial economy.

Italy, EC P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page XVI 1300
The FT500 (15): The sweet smell of success / Profile of L'Oreal Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN

WHENEVER you flick through the pages of a glossy fashion magazine you are almost certain to see at least one advertisement bearing the image of the soignee actress, Isabella Rossellini.

Ms Rossellini is the 'face' of Lancome, one of the world's most famous cosmetics brands. She is also one of the most potent weapons of Lancome and L'Oreal, its French parent company, in the increasingly competitive international cosmetics industry.

L'Oreal is one of the handful of multinational manufacturers which, in recent years, has turned the beauty business into a high stakes game of expensive advertising campaigns, ambitious product development programmes and soaring research budgets.

So far L'Oreal has held a winning hand. The competitive state of the industry has put intense pressure on the smaller players and made it very difficult for the big industrial groups which recently expanded in cosmetics, such as Unilever and Procter & Gamble, to integrate their acquisitions.

L'Oreal, by contrast, is not only the world's largest cosmetics company, but, thanks to 80 years of experience, is also one of the longest established forces in the industry. As a result it has had the advantage of being one of the few players with the resources needed to remain competitive and the flexible management structure required to respond to fast-changing markets such as make-up and fragrances.

At a time when the global cosmetics market has been sluggish and other French companies have been hit by the economic slowdown, L'Oreal has continued to grow. It was the highest riser among the top 50 companies in the 1992 FT500, moving from 67th to 36th place during the year.

L'Oreal, led by Mr Lindsay Owen-Jones, who became chairman five years ago, achieved this through a 19.7 per cent increase in net profits to FFr2.02bn in 1991, from FFr1.69bn in 1990, on sales which rose by 10.2 per cent to FFr33.44bn. Analysts expect further growth in profits, albeit at a slower pace, this year. Mr Loic Morvan, an analyst at James Capel in Paris, predicts net profits of FFr2.2bn to FFr2.3bn for 1992.

Ostensibly L'Oreal seems well-placed to reap the rewards of its years of investment in management systems, marketing and product development in spite of the difficult state of its markets.

But there is a cloud on the horizon. So far L'Oreal has had the benefit of stable ownership. It is still controlled by its founding family, the Bettencourts, and has thus been free from the threat of a takeover bid. Ms Liliane Bettencourt, the founder's daughter, owns 51 per cent of the company that controls two thirds of L'Oreal. The other 49 per cent has, since 1974, been held by Nestle, the Swiss food group, which has pre-emptive rights over the rest.

Ms Bettencourt has promised to retain control for as long as she lives. But Nestle's agreement not to bid for control expires at the end of this year. Even after that Nestle would need to secure the French government's permission to win control of L'Oreal.

However, Nestle already has significant interests in France, thanks to its success last spring in the bitter bid battle for Perrier mineral water. Mr Helmut Maucher, its indomitable chairman has made no secret of the fact that he would like to control L'Oreal. And, as the Perrier affair proved, Mr Maucher always tries very, very hard to get whatever he wants.

L'Oreal France, EC P2844 Toilet Preparations COMP Company profile P2844 The Financial Times London Page XV 596
The FT500 (14): Great expectations begin to cool - Alice Rawsthorn takes the temperature and finds that while industry warmed to good economic conditions the financial sector had to operate in a chilly climate / France Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN

THIS TIME last year 1992 seemed set to be, at the very least, a prosperous year for France and its largest companies.

The French economy had, after all, seen no sign of slipping into recession and was poised for faster growth than most of its European competitors.

France's leading industrial and financial groups were in strong shape, with relatively little debt, and were well placed to benefit from the legacy of years of low inflation and win back export markets.

A year later, as a glance at the FT500, shows it is clear that 1992 was not quite as good a year for the French as they originally expected.

The Paris stock market raced away in the opening months of 1992, but the CAC-40 Index reached its peak of 2,077 in the second week of May, and has since fallen fairly steadily.

The CAC-40 ended the year at 1,858, little more than 5 per cent higher than on the last day of 1991. The overall performance of French companies in the FT500 reflects the same pedestrian pattern, but it also illustrates the division between the performance of the industrial and financial sectors.

French industry fared fairly well in 1992 with some companies showing significant increases in market capitalisation. Alcatel Alsthom, the telecommunications and engineering group, improved its ranking as did BSN in food, L'Oreal in cosmetics, L'Air Liquide in gases and Saint-Gobain in glass.

The scenario for the financial sector was far less sanguine. Societe Generale, one of the largest private sector banks, made gains, but it was an exception. The competitive state of the French banking and insurance market, combined with the impact of the economic slowdown on investment portfolios, created a chilly climate.

Some of France's leading financial institutions - Paribas in banking, Union des Assurances de Paris (UAP) and Axa in insurance - slipped down the FT500.

The contrast between the two sectors is borne out by the earnings pattern in 1992. James Capel, the Paris stockbroker, estimates that the CAC-40 companies suffered a decline in earnings of just over 12 per cent last year compared with 1991. But finance was hit far harder than industry. If the banks are removed from the Index, James Capel calculates the earnings reduction of the remaining stocks at just 5 per cent.

Similarly there are clear lessons to be drawn from the lists of French companies which did particularly well, or badly, in 1992. The winners are all principal players in their particular fields, with a wide spread of international interests and, in general, low levels of debt.

Alcatel Alsthom, the biggest French company in the FT500, has devoted most of its energy over the past five years to expanding its international activities. After a stream of acquisitions it has built up a business that now has 70 per cent of its sales outside France, against just 30 per cent five years ago.

Where necessary it has formed joint ventures, notably with GEC of the UK to create GEC-Alsthom, to secure the strong positions it needs to survive as a long-term player in highly competitive international markets.

BSN has been no less active in establishing itself as a force in the European food industry. It has introduced its indigenous French brands to other markets and bought up businesses in other countries, notably in Italy. BSN has even been willing to join forces with its archenemies to secure the critical mass needed to survive as it demonstrated last spring by backing Nestle of Switzerland, one of its chief competitors, in the bitter battle over Perrier mineral water.

L'Oreal has had the advantage of being a long-established international business in its strategy of consolidating its position as the world's largest cosmetics company. This has proved invaluable at a time when its competitors have struggled to adapt to life in an increasingly consolidated and competitive industry.

All these companies benefited in 1992 from extensive international interests that enabled them to counter the sluggish state of the French market. The high level of real interest rates, coupled with concern about rising unemployment, has depressed consumer demand in France for the past year or so. The industrial sector has been similarly sluggish, forcing French companies to look for growth in other countries.

They have had some success in doing so. French exports enjoyed rapid growth for much of the year and the trading account swung from deficit in 1991 to credit in 1992.

The export effort was helped by the legacy of years of low inflation, which gave French companies a considerable cost advantage over many of their competitors.

But that advantage disappeared when the September currency crisis left the franc at a high level against other key currencies.

This has not only made it more difficult for the French to compete in their export markets, but has also reduced the contribution from their international operations.

Even the winners in the 1992 FT500 have felt the effects of the strong franc. For the losers, it has come as a bitter blow after a year spent struggling against sluggish domestic demand and the financial impact of a weak stock market.

Paribas, for instance, saw its market capitalisation slide last year when it announced its first-ever loss and was then beset by other problems, culminating in its involvement in the scandal over the off-balance sheet losses of Ciments Francais, the French cement company that it controlled until recently.

The big French insurers - UAP, Axa and Assurances Generales de France (AGF) - all slipped down the FT500 when the competitive state of the French insurance market was aggravated by the writedowns on their industrial investments and property portfolios.

A similar pattern seems set to be repeated in 1993. James Capel does expect some improvement in earnings, however. It forecasts that the CAC-40 companies will achieve growth of 15 per cent, this would still leave them 8 per cent below the level reached in 1989.

Despite the French government's bullish comments about the strong franc and low inflation, the latest surveys still show low levels of confidence among industrialists and consumers, suggesting that there is unlikely to be an improvement in domestic demand this year.

France, EC P60 Depository Institutions P61 Nondepository Institutions P62 Security and Commodity Brokers P67 Holding and Other Investment Offices P99 Nonclassifiable Establishments COMP Company News CMMT Comment & Analysis P60 P61 P62 P67 P99 The Financial Times London Page XV 1111
The FT500 (13): Pride dented as corrections accelerate - Europe's top employers must come to grips with the need to cut costs if they are to retain their competitiveness and high rankings in the league tables / Germany Publication 930210FT Processed by FT 930210 By CHRISTOPHER PARKES

GERMAN industry's high ranking among the world's leading employers has long been viewed as a source of pride. The creation of new jobs has traditionally been seen as an affirmation that the unwritten social contract between capital, people and government - cornerstone of national economic success - is still working in time-honoured fashion.

But times and attitudes are changing. Massive corrections are under way. All eight of the German groups featured in the list of Europe's top 25 employers have in the past few months announced or accelerated unprecedented job-cutting programmes. Daimler-Benz provided the most telling instance: 12,000 jobs lost last year and a further 28,000 to go by the end of 1994. Similar projects are planned across the the manufacturing sector, where, according to the Arthur D. Little consultancy, there is ample scope for a 10 per cent overall reduction in payrolls.

One reason for the cuts, which is expected to boost unemployment by 400,000 this year, lies in the relatively short-term aim of moderating the impact of recession on company results. Other recent reactions to the economic downturn, which has idled almost 20 per cent of west German manufacturing capacity and sent business confidence to its lowest level since 1982, include cuts in planned capital spending of 7 per cent for 1993.

Longer-term, however, German industry at all levels appears to be coming to grips with the realisation that if it is to retain its competitiveness and its high rankings in the overall international league tables, it has to do more to reduce its costs and keep them down. If there were any remaining doubts, they were dispelled towards the end of the year when Klockner-Werke, a high-cost, under-sized steel and engineering group laden with DM2.7bn debts, was driven to seek protection from its creditors in the bankruptcy courts.

Arguably the most constructive step in long-term savings strategies last year was the laboured but ultimately successful takeover of Hoesch by Krupp. The merger of two of Germany's grandest steel and engineering companies, according to Mr Gerhard Cromme, head of Krupp, will unleash synergistic savings running into hundreds of millions of D-Marks a year. The international steel industry has since tumbled into a cyclical-recessionary slump but this is more likely to delay rather than diminish the benefits foreseen by Mr Cromme.

Similar changes are being wrought lower down the corporate scale. Independent machine tool manufacturers such as Gildemeister, Maho, Deckel and Taub, although so far fighting shy of mergers, have pooled their international sales, distribution and service networks in an effort to cut losses. Meanwhile, the number of business insolvencies rose last year for the first time since 1985 to 9,500 and is forecast to hit 12,000 in 1993.

This latter tendency has not gone unnoticed by Germany's banks. Most of the larger operators improved profits and their standing in the European league last year, as they enjoyed the last months of the unification boom, but all remarked that the risks from bad debts were mounting. A senior executive at BHF Bank, which enjoyed a 17 per cent increase in 10-month profits, spoke of a 'sword of Damocles'. Deutsche Bank, which reported a disappointing 5 per cent fall in 10-month operating earnings after a 3.2 per cent decline after six months, had already warned that because it was by far the biggest bank in Germany its results would show the effects of the economic downturn sooner than the rest.

But it fell to Daimler-Benz to illustrate just how dramatic and how sudden the slump was. The group, which encompasses flagship brands Mercedes-Benz, Deutsche Aerospace and AEG, announced out of the blue in November (after the cut-off date for compilation of the FT500) that due to unexpected circumstances, 1992 profits would fall by around 25 per cent.

Since then short-range expectations for most sectors' performance have been downgraded accordingly. Deutsche Bank Research, for example, recently revised its forecast of an average fall of 0.5 per cent in corporate earnings this year to more than 3 per cent - a figure which concealed a decline of 9 per cent among manufacturers.

Yet in spite of the gathering gloom, there are still voices to be heard which insist that the present mood among business leaders does not properly reflect actual conditions. They say that while confidence has been hit by the threat of recession, it was unjustifiably high in the first place. Optimism had been inflated by the early surge in demand which followed unification and the related hopes that the collapse of the communist empires further east would bring immediate and incalculable benefits to German business.

These voices of reason talk of a 'correction' and 'normalisation' of market conditions and corporate expectations. Although companies are reducing their spending plans and their workforces, they are cutting from an extraordinarily high levels. Total capital investment in Germany this year is still expected to reach a new nominal record of DM300bn: high by any standards at just under 10 per cent of gross domestic product. This compares with an annual average of 8 per cent of GDP in the second half of the 1980s, a period when German companies were enthralled by the prospect of the European single market, and when more than 3m new jobs were created. Despite current weaknesses, most businesses are well equipped with new plant and ready to feed the economic recovery expected later this year in its key export markets. As a recent analysis from the Bayerische Hypo Bank said: 'After almost a decade of relative prosperity, the recession looming on the horizon will not be a serious disaster for most German companies'.

Even though it was slow to focus on the true picture, business is coming to grips with the painful and awkward process of 'correction', and there are some signs that the other parties to Germany's social contract are making the necessary adjustments. Overshadowed by the real threat of even more job losses, recent pay negotiations and settlements have been calm, swift and modest in marked contrast to last year's upheavals and inflationary pay-offs.

Government has so far been less successful. With no signs of self-generating economic recovery in the former GDR, Bonn confronts the prospect of multi-billion D-Mark transfers for years to come. But Chancellor Helmut Kohl has yet to convince the electorate that his cost-sharing 'solidarity pact' between state, regions, business and unions is needed if unification is to succeed.

As the Bayerische Hypo Bank report noted: 'The financial consequences of . . . German unification could prove even more onerous than they have been until now. It will be necessary to bring about a conciliation of interests between social groups, and for these groups to adjust their demands to the economy's real capacity, as moderation is the best guarantee of an early return to the growth path.'

Realisation of a solidarity pact will demand sacrifices and concessions far greater than those so far extracted by companies from their workers. But without them there is a danger that as the rest of the world makes its way back on to the track of economic growth, Germany could be left floundering in a social, political and economic mess entirely of its own making.

------------------------------------------------------------------------ EUROPE'S BIGGEST EMPLOYERS ------------------------------------------------------------------------ Rank Top 500 1992 1991 Company Cntry Sec Rank Employees ------------------------------------------------------------------------ 1 2 Siemens Ger 541 8 402000 2 1 Daimler-Benz Ger 401 13 381511 3 4 Unilever plc/NV Nuk 451 4 298000 4 3 Fiat Ita 401 94 287957 5 6 Volkswagen Ger 401 87 267009 6 5 Philips Net 541 101 240001 7 7 BT UK 223 3 219000 8 9 ABB Asea Brown Boveri Swe/i 541 40 214399 9 10 Alcatel Alsthom Fra 533 17 213100 10 8 BAT Industries UK 171 9 212316 11 11 Nestle Swi 451 5 201139 12 12 Generale des Eaux Fra 221 42 198550 13 13 Hoechst Ger 622 45 179332 14 14 Bayer Ger 622 34 166325 15 15 Peugeot Fra 401 84 156800 16 16 Thyssen Ger 633 131 148557 17 18 Michelin Fra 574 107 135610 18 20 Royal Dutch/Shell Nuk 212 1 135000

19 17 Electrolux Swe 402 195 134229 20 24 STET Ita 171 138 129936 21 22 Imperial Chemical Industries UK 622 28 128600 22 21 BASF Ger 622 56 128105 23 23 British Aerospace UK 523 464 123200 24 Lyonnaise des Eaux-Dumez Fra 221 89 122929 25 25 Mannesmann Ger 566 96 122305 ------------------------------------------------------------------------

Germany, EC P99 Nonclassifiable Establishments COMP Company News COSTS Costs & Prices STATS Statistics P99 The Financial Times London Page XIV 1469
The FT500 (11): Going gets tough for the bellwethers - It has been a mixed year for the big groups. However, those quick enough on their feet have had a rich year snapping up suitable opportunities / Conglomerates Publication 930210FT Processed by FT 930210 By WILLIAM DAWKINS

RARELY can conglomerates across Europe have been through such a year of tests and opportunities as in 1992.

These bellwethers of the general economy have all had to face tough conditions, varying from a full recession in Britain, to a near recession in France and the beginnings of a downturn in Germany.

Earnings in some of their core businesses have been under pressure, reflected in a fall in rankings from some of the biggest groups. Yet at the same time it has been a buyers' market for conglomerates seeking to make acquisitions, so those quick enough on their feet to snap up suitable opportunities have had a rich year and increased their market capitalisations as a result.

'There has been a trend towards concentration. What propels this is a maturing core business, with little growth but plenty of cash. This is what has been happening over the past year,' says Mr Arend Dikkers, director of equity research at Credit Suisse First Boston in London. Cases in point include BTR's takeover of Hawker Siddeley group at the end of 1991, following which the buyer rose one place in the rankings to 21 last year, or Tomkins's purchase of Ranks Hovis McDougall, the food group, in a year in which Tomkins climbed 57 places to 192.

For similar reasons, this has also been a year in which two important new conglomerates have been formed, in Sweden with Volvo's acquisition of a minority stake in Procordia, the food and pharmaceuticals group, and in France, with the controversial merger between Mr Jean-Luc Lagardere's two business empires, Matra, the telecommunications to transport and defence group, and Hachette, the publishing company.

Volvo slipped 20 places to 129, hit by losses in its car making division and the disappointment over being prevented by the Swedish government from taking full control of Procordia.

Matra and Hachette only sealed the knot at the end of the year, so the new group does not appear in the listings. The thinking behind this new creation is slightly different from other conglomerates' acquisition strategies. The aim, says Matra-Hachette, is to give the merged group the new freedom to channel cash between different activities. Yet as with some other conglomerates, the logic is financial rather than industrial.

Broadly, conglomerates in the list come in two distinct models. First, there is the Anglo-Saxon-style diversified industrial or financial holding group, a collection of fully- or majority-owned businesses to which central management seeks to add some kind of value. Hanson, BTR and Tomkins are the classic examples, but this category also includes such as Alcatel-Alsthom, the French telecommunications to engineering and publishing giant, or Mannesmann, the German capital goods to mobile phones conglomerate.

Second, there is the continental European model of a financial holding company, sometimes grouped around a bank, which holds a large number of minority or majority stakes as investments, to which it provides little daily management input. Classic examples include Societe Generale de Belgique, the Belgian holding group, or Suez and Paribas the French financial and industrial holding companies.

If Anglo-Saxon-style conglomerates like BTR and Tomkins have been hot on the acquisition trail this year, their continental counterparts have tended to do the reverse. Paribas and Suez have been selling non-strategic assets, to tidy up their complex portfolios, so as to make themselves more attractive to institutional investors, but also to raise cash to bolster their banking businesses' capital adequacy ratios. In the process, they are becoming less continental and more Anglo Saxon in structure.

It has been a tough year for them. Paribas and Suez both slipped 14 places down the rankings, the former down to 78 and the latter down to 65, both hit by intense competition in French banking as well as by provisions on their extensive property interests.

That said, analysts see no clear trend in the performances of the two main kinds of conglomerates over the past year. Changes in their market capitalisations appear to be linked more to the sectors in which individual conglomerates have invested and the individual qualities of their management than on whether they are organised like pension funds or industrial groups.

The worst performing company in the list, for example, is none other than Lonrho, an Anglo-Saxon-style conglomerate down 301 places to 478, reflecting worries over the succession to the ageing Mr Tiny Rowland, after his retirement in three years' time, and the group's heavy debt service burden.

Hanson, the classic model of an Anglo-Saxon conglomerate, has had a particularly difficult year. It dropped five places in the FT500 ranking to 16th, after a year in which Hanson gave up its attempt to 'unbundle'. ICI, the UK chemicals group, reported its first ever decline in annual profits and lost the battle for Ranks Hovis McDougall to Tomkins, run by one of Lord Hanson's own star pupils.

Also on the list of the poorest performers is Navigation Mixte, a continental-style financial services to foods conglomerate, down 70 places to 230, hit by the poor performance of its insurance and banking investments.

None of the classic conglomerates, on the other hand, can be found in the top 60 performers, though Valeo, the car components maker which is the main investment held by Cerus, Carlo De Benedetti's French holding company, did rise 127 places to 254, thanks to its uncanny ability to increase profits in the depressed automotive industry.

Europe P99 Nonclassifiable Establishments CMMT Comment & Analysis COMP Company News P99 The Financial Times London Page XIII 957
The FT500 (9): When 1+1 does not always make 2 - Andrew Jack finds many discordant notes in the move towards harmony in financial reporting across Europe during the past few years / Divergence accounting Publication 930210FT Processed by FT 930210 By ANDREW JACK

THE ACCOUNTS of companies in the different European countries have one thing in common: they contain numbers giving some indication of financial performance. Some critics believe the similarities stop there.

While there has been substantial progress towards harmonisation in financial reporting across Europe in the past few years, wide divergences in disclosure and treatment remain.

Mr Geoffrey Fitchew, director-general of the EC commission on financial institutions and the law, is relatively optimistic. In a preface to a survey of the accounts of larger European companies in 1991, he wrote that the quality of financial reporting had improved considerably. He said there were also many similarities between the accounts of companies in different EC and Efta countries.

Nevertheless, the survey showed considerable continued variation in issues such as fixed assets, pension provisions, foreign currencies, off-balance sheet commitments and complex financial instruments.

Mr Christopher Nobes, professor of accounting at Reading University, adds a further proviso even where comparability appears to exist. 'A lot of the larger European companies depart from their national characteristics,' he says. 'The accounts of the top companies are extremely atypical.' Mr Nobes says that many of the discrepancies can be explained - and that changes continue to be resisted - because of the widely-differing characteristics and justifications for accounts in different EC states.

He highlights two types of accounts. On the one hand, those prepared under the Anglo-Saxon system, which are oriented towards shareholders, focused on disclosure, prepared in countries with a strong, long-established accountancy profession, and stress substance over form.

On the other, continental accounts are rooted in Roman law, are oriented towards creditors, geared around secrecy, guided by government rules and dominated by the requirements of the tax authorities.

There is no doubt that greater harmonisation has taken place in the EC, driven particularly by the fourth and seventh directives which codify the contents and format of company and consolidated accounts.

These are now all but implemented in member states, while detailed regulations for insurance companies and banks are well advanced.

Mr Nobes sees improvements in consistency in the last five years with significant changes taking place in countries such as France and Spain.

But he believes further progress will be difficult. 'German accounts are perhaps the most resistant to change,' he says. 'The companies are being very political, saying that standardisation is too difficult.'

Some are providing greater information in their annual reports, but most, he argues, are still adhering firmly to German rather than international accounting practices in doing so. The result is profit figures which are to say the least opaque.

Some prospects for increasing comparability may still come through the International Accounting Standards Committee. In the past two years, the body has been embarking on a simplification programme which reduces the number of alternative options it judges acceptable in its standards.

But so far the results are inconclusive. The IASC's latest annual report last summer showed that just 94 companies had made reference to its standards in their annual reports, including one from the UK. Many national standards-setters and companies still question the organisation's legitimacy.

Equally, there is little future in additional legislation from the EC to foster greater harmonisation. The Commission said in 1990 that it had no intention of introducing new standards. That has been welcomed by some standards-setters, particularly in the UK, who have found their hands tied and flexibility reduced by requirements for compliance with rigid laws.

Among the leading European companies, the most powerful incentive for future harmonisation or comparability will come in the drive for new sources of capital which take companies beyond their own borders.

That may force them to compromise - especially if they need to seek equity outside the EC.

Companies such as BASF, Siemens and Daimler Benz are calling for wider application of the mutual recognition of accounts in other countries. That now exists between the stock exchanges in the different EC states such as between Germany and the UK.

But while the New York Stock Exchange might be willing to consider taking a similar, sympathetic approach, there is little sign that it will be permitted by the US Securities and Exchange Commission which takes a tough line with domestic companies.

No surprise, therefore, that no German companies are quoted in the US.

The result is likely to be a system of 'double reporting', with companies producing one set of accounts to meet national, legal purposes in their own country, and a separate set for international purposes. The additional costs could well be worth the new sources of funds which result.

That is unlikely to have much effect on the vast majority of European companies, which do not seek international funding, do not have shareholders and do not even file publicly-available accounts.

But that was never the original point of the drive to harmonisation, which was fuelled by a desire to protect shareholders. 'Who cares whether grocery shops in Frankfurt and Manchester use the same accounting system?' says Mr Nobes.

At the moment, it sometimes seems that calls by the accounting profession to improve harmonisation and comparability are moving well ahead of the perceived need for such changes among companies and investors.

But as these needs increasingly overlap and cause tensions, change will almost inevitably follow.

Europe P9721 International Affairs TECH Standards CMMT Comment & Analysis GOVT Regulations P9721 The Financial Times London Page XI 936
The FT500 (2): It's been a moving experience for many - Tony Jackson discusses the performance of companies as they prepared for the single market and suggests the most worrying aspect has been the lay-offs of staff by the giants / European industry Publication 930210FT Processed by FT 930210 By TONY JACKSON

THIS year's FT500 rankings show European industry on the brink of entry to the single market. It is thus tempting to scan the lists for clues on how companies have been preparing themselves for this brave new world. Sure enough, last year saw some significant mergers and takeovers. But most of the big moves in the rankings can be put down to more humdrum causes: recession, industry trends or the actions (often blunders) of the companies themselves.

One big takeover which legitimately belongs in a single market context is that of Perrier by Nestle. Like its rival food giant Unilever, Nestle has been particularly active in adapting and extending itself to cope with the more competitive conditions of the wider market. The takeover, which brought together the 8th and 226th ranking companies from 1991, cost Nestle Pounds 1.6bn.

Another big Euro-merger has yet to show up in the tables, since it had not been formally concluded at the FT500 cut-off date. The publishing houses Reed International of the UK and Elsevier of Holland, ranking around 80th and 100th respectively, announced their intention to merge their operations in September. The two parent companies will continue as separately listed quoted companies. Their combined market value would rank them in the low 40s, above Lloyds Bank or Barclays.

Another merged company to rank above Lloyds is HSBC, the product of last year's takeover of Midland Bank (ranking 140 in 1991) by the Hongkong & Shanghai Bank. This must be particularly vexing for Lloyds, which fought HSBC for control of Midland and lost. HSBC, which qualifies for the rankings by virtue of being UK-based, is now the second biggest European bank after Deutsche Bank.

Mergers apart, a worrying aspect of the single market is recalled by the table on Europe's biggest employers. Most of the top names have been in the news lately because of massive lay-offs. BT made 33,000 staff redundant last year alone. Daimler-Benz is to lose 40,000 jobs by the end of next year. The other big car makers are not far behind. Some of this is the result of recession. Another important cause is the increased efficiency resulting from operating in a wider market, and the need to reduce overheads to cope with the more competitive conditions which result.

Within manufacturing industry, the sector which stood out in the rankings last year - not for the first time - was pharmaceuticals. The largest rise within the 500 came from Institut Merieux, the French vaccine manufacturer, which rose more than 200 places. Not far behind was Gehe, the German pharmaceutical wholesaler. Roche of Switzerland, best known as the manufacturer of Valium, shot up from 18th place into the top 10. Glaxo maintained its position in the top three, jostling with BT.

On the face of it, this is surprising. The financial press throughout the year was full of tales about cash-strapped governments around the world trying to force down drug prices. But these are recessionary times; and as investors are acutely aware, pharmaceuticals are the classically recession-proof industry. In good times or bad, people still get sick.

The dominance of the drug industry within manufacturing can be illustrated in another way. As might be expected in the mature economies of Europe, the top 50 companies are heavily weighted towards services and consumer goods such as food and drink. Only 16 of this year's top 50 are in industrial manufacturing, including electronics, engineering, motors and so forth. Of these 16, seven are drug companies.

But if the drug companies stood out within manufacturing, they still had to give place last year to services. The sectors showing the fastest average rise in the tables were business services and software, publishing, broadcasting and food retailing. Conversely, the biggest average falls came in aerospace and defence, construction and office equipment. This will be partly the effect of recession, since falls in demand are most acutely felt in capital intensive industries with high operational gearing. But it may perhaps reflect a longer trend towards European manufacturing losing ground relative to the European economy, and by implication to the growth economies of the Far East.

One company of which that cannot be said is SMH, the Swiss company which makes Swatch and Longines watches. SMH has just rounded off the first decade of its existence by challenging Citizen of Japan for the title of the world's biggest watchmaker. Last year it rose some 170 places. Some other fast-rising companies similarly represented one-off success. De La Rue of the UK, the bank note printer, which has been a darling of the London stock market for some time, rose by some 170 places as well. Sophus Berendsen of Denmark, which controls another UK stock market darling, the diversified service company Rentokil, rose 144 places.

Among the year's losers, one of the most striking was Italmobiliare of Italy. This company illustrated to perfection the general truth that ambitious acquirers can go down as well as up. In May an Italmobiliare subsidiary, the cement producer Italcementi, paid FFr6bn for a controlling stake in its French opposite number Ciments Francais. It then emerged that the French company had lost FFr665m in off-balance sheet dealings in shares. Italmobiliare was ranked 107th in the 1991 FT500. It has now vanished from the rankings.

Disastrous dabbling in the financial markets was something of a speciality of the building trade last year. One of the biggest falls in the rankings was that of Skanska, Scandinavia's biggest construction group. It emerged in September that a Skanska executive had been engaged in unauthorised speculation in the foreign exchange markets. The company lost SKr1.2bn (Dollars 222m), the boss resigned and Skanska fell more than 200 places.

----------------------------------------------------------------------- EUROPEAN SECTOR PROFITABILITY ----------------------------------------------------------------------- No of % Sector cos chge ----------------------------------------------------------------------- Auto parts tyre & rubber 6 357.7 Electrical equipment 9 102.9 Investment companies 2 46.1 Retail-speciality 7 23.7 Drugs 15 22.0 Transport/storage & warehousing 17 20.3 Electronics/instrumentation 4 17.1 Electric & water utilities 47 13.4 Broadcasting media 4 13.0 Commercial banks 58 12.0 Retail-dept store/gen merchandise 15 7.5 Food processors 23 6.6

Heavy shipbuilding & engineering 1 5.4 Apparel/textile producers 2 5.3 Health care/cosmetics 6 5.3 Telephone companies 4 3.0 Financial services 6 1.7 Business servs & computer software 6 -0.6 Insurance/life/agents & brokers 6 -1.7 Chemicals 4 -2.1 Beverages & tobacco 15 -2.3 Household durables & consumer goods 9 -2.5 Advertising 1 -2.6 Fabricated metal prods & containers 5 -2.8 Property 5 -3.0 Financial institutions 8 -3.9 Publishers inc newspapers 11 -3.9 Retail-grocery chains 15 -5.1 Communications & office equipment 4 -5.2 Insurance/multiline/property 31 -5.9 Natural gas utilities 2 -6.4 Paper & paper products 5 -13.6 Diversified holding companies 22 -14.1 Chemicals-diversified 22 -18.4 Diversified industrial manu 10 -18.7 Construction & building materials 17 -19.2 Entertainment & leisure 7 -19.9

Automobiles 6 -27.0 Oil-Internationals/crude producers 12 -28.2 Construction 10 -30.1 Aerospace/defence/aircraft manu 3 -30.7 Machinery (composite) 14 -32.3 Mining & extractive industries 12 -36.2 Wholesale-nondurables 2 -36.8 Restaurants & hotels 3 -45.3 Forestry products 4 -65.1 Oil-petroleum products 3 -65.2

----------------------------------------------------------------------- EUROPE'S MOST PROFITABLE COMPANIES ----------------------------------------------------------------------- Top 500 Company Cntry Sec. Rank ROCE ----------------------------------------------------------------------- 1 Bankinter Spa 112 418 263.6 2 Emap UK 473 455 186.7 3 Schneider (Groupe) Fra 541 180 115.5 4 Printemps (Au) Fra 491 394 106.0 5 Wolters Kluwer Net 472 159 93.2 6 Rentokil Group UK 622 168 70.8 7 Elf Gabon Fra 212 458 64.4 8 Vodafone UK 223 79 64.1 9 Williams Holdings UK 591 211 63.8 10 Mercury Asset Management UK 122 421 62.6 11 Svenska Handelsbanken Swe 112 465 60.5 12 Clarins Fra 432 376 56.5 13 Canal + Fra 474 102 55.6 14 Reuters Holdings UK 474 48 55.1 15 Richemont (Compagnie Financiere) Swi 171 97 53.4 16 Elsevier Net 472 100 51.6 17 Reckitt & Colman UK 431 122 50.6 18 Reed International UK 472 83 50.0 19 Hays UK 481 334 48.3 20 Smithkline Beecham UK 433 11 45.7 -----------------------------------------------------------------------

Europe P99 Nonclassifiable Establishments P9721 International Affairs COMP Company News STATS Statistics P99 P9721 The Financial Times London Page III 1393
The FT500 (1): Swings in currency the deciding factor - Peter Martin, Financial Editor, looks at the winners and losers in this year's FT500 Publication 930210FT Processed by FT 930210 By PETER MARTIN, Financial Editor

RARELY are sweeping statements so speedily disproved as in the case of last year's introduction to the FT500. Hailing the 1992 ranking as a 'historic' one, the article explained that most of Europe's currencies were now firmly tied, formally or informally, to the ERM structure.

As a result, it proclaimed, 'the factors which decide whether companies move up and down the rankings largely exclude the currency factor which has been such an overwhelming influence in the past'.

That 'historic' change lasted less than a year. There was a sweeping pattern of devaluations during 1992 - involving Britain, Italy, Spain, Portugal, Finland, Sweden and Norway.

That restored the traditional threefold pattern of influences on the rankings: the underlying performance of the companies; the movement of individual national bourses; and the changes in the values of the currencies in which a company's shares are quoted.

The result can clearly be seen in this year's rankings. Companies from countries which had devalued by the time the ranking was drawn up - at September 30, 1992 - slide down the list. For example, 28 of the 30 companies which suffered the largest drops in rank came from Britain, Sweden or Italy.

Similarly, 28 of the 30 companies which achieved the largest rises in rank came from hard-currency countries, such as France and Germany.

Currency moves apart, investors' valuations of companies and industries changed during the year. The FT500 ranks companies by stock market value (that is, shares outstanding times share price). It therefore avoids the differences between national accounting standards that bedevil rankings based on profitability and avoids the inconsistencies between industries that undermine rankings by revenues. Instead, it reflects the changing judgments of international and domestic investors on the likely performance of companies and industries.

Their view of the companies at the top of the table remains relatively stable: seven of the top 10 had also been there in each of the preceding two years.

There were a few significant moves among the top group, nevertheless. Glaxo Holdings, which was ranked 10th in 1990 and leapt to third in 1991 edged up again in 1992, to second. It is unlikely to be able to make much more upward progress, in the near term at least, since its market capitalisation of Dollars 38bn is almost exactly half that of the undisputed leader, Royal Dutch/Shell.

Another pharmaceuticals company was the biggest gainer at the top of the table. Roche Holding leapt from 18th to 6th, leapfrogging SmithKline Beecham (in 11th place this year). All three big Swiss pharmaceuticals groups did well - Sandoz moved up nine places to 20th and Ciba-Geigy rose two to 24th - but Roche was the clear winner.

It was helped up the table by a doubling of profits in dollar terms and a string of optimistic trading forecasts. It also benefited from the growing interest of foreign investors, reacting to the company's decision to simplify its share structure and conform to internationally accepted accounting standards.

Another new arrival in the top 10 was BAT Industries, the UK tobacco and financial services group. In rising six places to ninth, BAT managed to shrug off the effect of the UK's devaluation, a task made the easier because so much of its profits come from abroad. As a group, Europe's 10 biggest companies by market capitalisation now consist of three British concerns, three German ones, two Swiss and one dual-nationality Netherlands-UK company.

As usual, French and Italian companies are under-represented in the FT500 because so many big businesses in these countries are still in the hands of the state. The highest French company, Alcatel-Alsthom, is 17th; the highest Italian one, the insurer Generali, is 23rd. Italy's ambitious plans for privatisation will increase the Italian presence, and may push up the rankings some state-controlled companies already listed, once their managers obtain greater freedom to run them in shareholders' interests.

The biggest gainer in the table was yet another pharmaceutical company, France's Institut Merieux, which rose 216 places to 253th place. Other big gainers were Germany's Badenwerk, which rose 196 places to 275th; and Britain's De la Rue, up 174 places to 217th. Badenwerk, the electricity utility based in Karlsruhe, has been discussing a merger with EVS, another power generator. De La Rue, which specialises in banknote printing and payments handling systems, is one of the London market's big recovery stories of recent years. It benefited from sharply rising profits and the acquisition of a competitor.

For one other big gainer, Banque Bruxelles Lambert, the honour must be a mixed blessing. It leapt 164 places to 199th, thanks to a takeover bid during the summer from ING, the Dutch group that straddles banking and insurance. But after the cut-off date for the FT500, the bid fell apart in a dispute over the price to be paid, and the bank's chief executive resigned.

Had the ING takeover gone ahead, it would have joined two other big mergers among banking sector constituents of the FT500. The UK's Midland Bank was bought by HSBC Holdings, the parent of Hongkong and Shanghai Banking Corporation, and the merged company was ranked 19th, compared with Midland's 140th place the year before. In Spain, Banco Central merged with Banco Hispanoamericano to form Banco Central Hispanoamericano, ranked 92nd, the fifth-highest ranking among Spanish companies.

One striking feature of the list of new entries was the large French contingent, many of them famous names. Christian Dior, floated in December 1991, entered in 257th place, joining LVMH Moet Hennessy Louis Vuitton, Richemont and L'Oreal among the small group of 'luxury' companies in the FT500. Other well-known French additions to the list included Remy Cointreau, Moulinex and Fromageries Bel.

Among those companies that fell sharply there was one common theme: the European property slump. This took a string of British property companies - including Slough Estates, British Land and Taylor Woodrow - out of the FT500, and it also played a part in the decline of such proud Swedish banking names as Skandinaviska Enskilda Banken and Handelsbanken. A year ago, these ranked 193rd and 183rd respectively. This time around, loan losses had pushed S-E Banken out of the ranking altogether, and Handelsbanken - traditionally regarded as one of Europe's best-managed banks - narrrowly escaped the same fate, falling to 467th.

The two companies run by Italy's Carlo De Benedetti also did badly. Both Olivetti and Compagnie Industriali Riuniti left the FT500. In the 1990 ranking, Olivetti was 178th, valued at Dollars 2.8bn and CIR was not far behind at 207th, valued at Dollars 2.4bn. This year, neither was valued highly enough by investors to get into the FT500. Olivetti's market capitalisation had slid to Dollars 673m and CIR's to Dollars 376m.

Another prominent entrepreneur, the UK's Tiny Rowland, was also one of the year's big losers. Lonrho, the conglomerate of which he is chief executive, dropped from 177th to 478th this year; its market capitalisation fell from Dollars 2.8bn to Dollars 753m.

This year's list throws up the usual collection of surprising comparisons. Abbey National, the UK retail bank that was until recently a humble building society, is ranked 66th, two places higher than CS Holding, the much more glamorous holding company for Credit Suisse. Canal Plus, the French pay-TV channel, is ranked 102nd, ahead of such stalwarts of global manufacturing as LM Ericsson (103rd), Michelin (107th) and Akzo (124th).

Thanks to its rapid rise, Institut Merieux, with only Dollars 1.1bn of turnover, is ranked only two places below Lufthansa (251st), which has a turnover nearly 10 times higher, at Dollars 10.8bn.

Saddest of all, perhaps, is British Aerospace, ranked 464th, surpassed in market capitalisation by Spring Ram, the UK kitchen furniture supplier and by Elf Gabon, the Gabon subsidiary of Elf Aquitaine.

------------------------------------------ 500 CAPITALISATION BY COUNTRY ------------------------------------------ Dollars m United Kingdom 711,564.3 Germany 263,539.8 France 259,067.1 Switzerland 147,188.9 Netherlands/UK 107,639.3 Spain 62,774.7 Sweden 53,562.1 Netherlands 53,118.1 Belgium 51,225.1 Italy 50,578.2 Denmark 18,843.8

Norway 12,268.2 Sweden/Switzerland 9,967.3 Austria 8,727.7 Ireland 6,697.0 Luxembourg 5,194.6 Belgium/Netherlands 4,206.4 United Kingdom/France 3,775.1 Portugal 2,089.4 Finland 2,081.4 ------------------------------------------

-------------------------------------------------- EXCHANGE RATES AGAINST USDOLLARS -------------------------------------------------- (monthly averages Oct 1992 & Sept 1991) -------------------------------------------------- Currency 1992 1991 % change -------------------------------------------------- Austrian schilling 10.454 11.924 12.33 Belgian franc 30.6 34.91 12.35 Danish kroner 5.7323 6.5465 12.44 Finnish markka 4.7137 4.1285 -14.17 French franc 5.0408 5.7668 12.59 German mark 1.486 1.6944 12.30 Irish punt 0.56527 0.6338 10.81 Italian lira 1310.73 1267.28 -3.43 Luxembourg franc 30.6 34.91 12.35 Netherlands guilder 1.6727 1.9095 12.40 Norwegian kroner 6.0597 6.6301 8.60 Portuguese escudo 132.21 145.08 8.87 Spanish peseta 105.85 106.32 0.44 Swedish kronor 5.6028 6.1685 9.17 Swiss franc 1.3192 1.4809 10.92 UK sterling 0.6051 0.5795 -4.42 --------------------------------------------------

Europe P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page II 1487
Devonport and Rosyth dockyards to be kept open: Rifkind postpones submarine decision Publication 930210FT Processed by FT 930210 By RICHARD EVANS, IVO DAWNAY and JAMES BUXTON

THE government yesterday pledged that both the Rosyth and Devonport Royal Dockyards would be kept open, but postponed a decision on the vital question of which will win the contract to refit Britain's nuclear submarine fleet.

Its indecision after months of speculation immediately provoked opposition taunts that ministers are in tactical retreat and paralysed by fears of a new public uproar over job losses.

Coming after the furore over pit closures and the U-turn on infantry cuts, senior ministers are acutely aware that the ferocious battle over the submarine contract will have wide-ranging political ramifications.

Rosyth in Fife is Scotland's largest single industrial employer while the future of Devonport, in Plymouth, is regarded as equally vital to the economic health of the south-west. A final verdict had been expected early in the new year despite continuous lobbying by MPs and commercial interest groups from both towns.

Justifying the postponement in a parliamentary written answer, Mr Malcolm Rifkind, the defence secretary, claimed that tenders submitted for the multi-million pound scheme 'may significantly understate the likely eventual cost of the work'.

He added that the yards would now be asked to re-evaluate the likely costs and that the government would also study 'other related matters further' before coming to a final decision.

Downing Street officials said later it was feared that both yards had underestimated the costs of building submarine servicing facilities in order to secure a contract that would save thousands of threatened jobs. No date was given for a final verdict.

The decision angered Devonport, the favourite to win the contract, but was a relief to Rosyth.

Opposition politicians were quick to seize on the retreat as fresh evidence of indecision and uncertainty at the highest levels of government. Mrs Margaret Ewing, speaker on defence for the Scottish National party, said the announcement did nothing to end the uncertainty and left workers 'dangling at the end of a string'.

Both Devonport and Rosyth, which have been under separate private sector management since 1987, regard the submarine work as vital for their survival.

Mr Rifkind confirmed that the scope and nature of nuclear refitting work meant it must be allocated to one dockyard. But he explained that the government's intention was to keep both royal dockyards functioning as necessary to promote competition in the refitting of the surface fleet.

For the nuclear submarine contract, ministers had already decided against the initial bid from Rosyth, which was for a new yard costing Pounds 267m. Devonport put in a Pounds 162m bid to rebuild an existing facility, and Rosyth responded with a bid of Pounds 147m to restore old docks for four new Trident nuclear submarines. Devonport said it could do the equivalent work for Pounds 131m.

The refitting contract would mean work for the next 30 years for the chosen docks, and support Devonport's workforce of 5,000 or Rosyth's of 4,000.

Mr Mike Leece, managing director of DML, the consortium which runs Devonport, said the yard was 'seriously disappointed' by the delay.

Babcock Thorn, which manages Rosyth, said the decision was 'as good as far as it goes', but the battle to win the Trident contract would continue.

Army cuts row Page 8

Editorial Comment Page 17

United Kingdom, EC P4491 Marine Cargo Handling P3731 Ship Building and Repairing GOVT Government News P4491 P3731 The Financial Times London Page 1 583
Germany urged to restore 40-hour week Publication 930210FT Processed by FT 930210 By QUENTIN PEEL BONN

A LEADING German industrialist sought yesterday to reverse the trend to shorter working hours and called for the return of the 40-hour week.

Mr Hans-Peter Stihl, president of the German chambers of industry and commerce, said Germany had the shortest working times, the longest holidays and the youngest pensioners.

Moves to shorten the German working week are still taking place despite growing unemployment. Engineering workers, for example, are due this year to cut their working week from 37 to 36 hours.

Mr Stihl conceded that unions would probably block a return to a 40-hour week, but said there was more chance that of getting Germans to retire later.

'Retirement under 60 must become a thing of the past. Otherwise Germany will be sent into retirement in terms of international competition,' Mr Stihl added.

Meanwhile, the German government yesterday told employers that its solidarity pact for east Germany was on course, with a supplementary budget and savings package ready to become law by the middle of the year.

Mr Friedrich Bohl, minister of state in Chancellor Helmut Kohl's office, sought to reassure members of the German employers' federation (BDA) that negotiations with the 16 federal states could produce a deal on sharing the burden of subsidies to the east by the middle of March.

The financial agreement between the central government and the federal states is the most complex item still to be finalised in the proposed solidarity pact. The other major element where agreement is outstanding is a deal with trade unions to slow down the growth of wages in east Germany.

Germany, EC P9651 Regulation of Miscellaneous Commercial Sectors P9611 Administration of General Economic Programs PEOP Labour GOVT Government News P9651 P9611 The Financial Times London Page 2 304
London Stock Exchange: Equity futures and options trading Publication 930210FT Processed by FT 930210 By JOEL KIBAZO

CONTINUED speculation about a big rights issue, coupled with a poor outlook for the UK economy, led to consistent selling in the futures, writes Joel kibazo.

Signs of what lay in store for the rest of the session were much in evidence when trading in the March contract on the FT-SE opened 5 points below Monday's close of 2,874.

Independent traders started selling the contract right at the start of business as the talk of an impending rights issue intensified. They were later joined by two of London's leading securities houses. The continued weakness of sterling and a mixed set of economic data not only sent March falling further but also helped to pull the underlying cash market lower.

The afternoon only brought more selling as dealers focused on a poor Wall Street opening, and the contract fell to the day's low point of 2,813 half-an-hour before the close.

It was then that short covering by several traders led to a turnround in the fortunes of March and it recovered some of the earlier drop. It ended at 2,833, a fall of 41 from Monday's close. Strong arbitrage activity throughout the session resulted in good turnover of 12,092 lots.

The traded options saw volume of 35,247 contracts, of which 11,292 were dealt in the FT-SE 100 option contract and 2,783 lots in the Euro-FT-SE 100 contract. British Steel was the most active stock option.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 38 268
The FT500 (30): Drop-outs show change in fortunes - High real interest rates, a fall-off in demand and an increase in supply have taken their toll in one of the worst hit sectors / Property Publication 930210FT Processed by FT 930210 By VANESSA HOULDER

PROPERTY is one of the worst hit sectors in the latest survey of Europe's top 500 companies, reflecting the industry's sharp reversal of fortunes since 1991.

In the 12 months to last September, the number of property companies in the FT500 fell from 14 to just five, as high real interest rates, a fall-off in demand and an increase in supply took their toll.

Deflation has followed a decade of soaring values. In the five years to 1990, rapidly increasing occupier demand and low vacancy rates drove average office rents in Europe up by an average of 14 per cent a year and capital values up by 18 per cent a year, according to Jones Lang Wootton, property consultants.

After peaking in the first quarter of 1991, Europe's office rents fell by an average of 11 per cent from their peak; capital values fell by an average of 23 per cent.

But the timing of the decline has varied significantly between cities. Starting in London in late 1989, the property recession has rolled its way around Europe, and has now reached Germany, hitherto the strongest of Europe's large property markets. Only a handful of markets, such as Brussels and Hamburg, bucked the trend and increased office rents in 1992.

A casual glance at FT500 ratings can provide only a partial guide to the strengths and weaknesses of Europe's property markets.

For example, Germany, one of Europe's most important property markets, has no representation, as property is largely in private hands.

Moreover, the UK and France, two of the worst hit markets in Europe, are still the best represented countries in the FT500, each with two property companies. The French companies, which are in the relatively robust residential sector, actually improved their rankings. Likewise, Rodamco, the Dutch property concern which is the largest property company in Europe, has gone up in the rankings from 132 to 130. Even though it has large exposures to some of the worst affected property markets in the world such as the US, the UK and France, its large cash reserves lent it some resilience.

As well as difficulties in comparing Europe's property companies, generalising about Europe's property markets is complicated by the different structures of each countries' property markets and the predominantly local factors that govern them.

Nonetheless, there are several common causes of the escalation of property prices across Europe, and their later collapse.

One of the factors influencing the rise in rents in most European capitals was the rapid expansion of corporate activity ahead of the creation of a barrier-free European market in 1993. At a time when the expansion of international companies has slowed, markets are driven by mainly domestic companies which are looking carefully at their costs.

Likewise, there was a sharp upturn in international investment at the end of the 1980s, as funds flowed into the European Community, particularly from Japan and Sweden, and investment restrictions were lifted within EC countries. But international investors largely retreated as recession bit and they became burdened with problems in their home markets.

The surge in rents and investment triggered an upturn in construction, encouraged in several cities by a relaxation of planning rules. Across Europe, office vacancies rose to 6 per cent and are expected to rise further during 1993, according to Jones Lang Wootton.

The UK commercial property market, which has experienced one of the longest and deepest recessions in Europe, has seen the greatest decline of any country in its representation in the FT500. Three companies, Hammerson, Slough Estates and British Land, have left. Only the UK's two largest property companies, Land Securities and MEPC still make the grade.

Most UK property companies are heavily exposed to offices, the worst-affected market, which has seen values halve in the past three years. As they mostly entered the downturn with relatively high gearing, their market capitalisations have fallen drastically over the past three years. That said, sterling's departure from the exchange rate mechanism, which lowered interest rates and heralded potentially higher inflation pushed property shares up by 30 per cent.

Whereas the London office market may be over the worst of its decline, concern about Paris is intensifying. Rents have fallen sharply and are likely to continue to do so as the supply of office space coming on to the market peaks next year.

Now the government has been asked to put forward some measures to support the market, by the insurance companies and banks, which have been forced to make heavy provisions on their loans to property developers.

The ravaged state of the French commercial property market is not evident from the performance of its largest property companies. The only French company to drop out is Unibail, which has four-fifths of its portfolio in the office sector.

The remaining French companies went up in the rankings. Sefimeg, for which residential property accounts for three quarters of its portfolio, went up from 369 to 343.

Europe P6512 Nonresidential Buildings Operators P6531 Real Estate Agents and Managers P6541 Title Abstract Offices IND Industry profile P6512 P6531 P6541 The Financial Times London Page XXVII 892
The FT500 (31): Improvement in 1993 unlikely - Overcapacity has been the main villain in a story of falling prices and reduced profits / Paper and pulp Publication 930210FT Processed by FT 930210 By CHRISTOPHER BROWN-HUMES

FOR Europe's leading paper and pulp groups 1992 was a tale of overcapacity, falling prices and reduced profits. Small wonder that so few of them managed to improve their position in the FT500 and that most of them slipped further down the table.

Indeed, the fact that only nine paper and pulp groups even make the FT500 is a clear enough indication of an industry going through difficult times. There were no new entrants to the table in 1992, while one company, the Swedish group Mo och Domsjo (MoDo), fell out of the rankings. Judging by the fact that a further two companies, Germany's PWA and Sweden's Korsnas, only scrape in at 490 and 493 respectively, the list could be even shorter next year.

So why are things so bad? Overcapacity, following the big investment programmes of the late 1980s, has been the main villain of the piece. Added to this have been weak conditions in many key European markets and a weak dollar that brought an increased flow of North American imports into Europe. Finally, there has been the impact of high interest rates on balance sheets groaning under the weight of past investments and acquisitions.

None suffered more than the Swedes, though with three pulp and paper companies in the FT500 they still boast more than any other country. For much of the year they carried the additional burden of a strong krona, which meant they were uncompetitive against rival Finnish and North American groups.

All three of the Swedish groups slid down the table - Stora from 162 to 213, Svenska Cellulosa Aktiebolag (SCA) from 175 to 185 and Korsnas from 453 to 493. The changes pushed SCA ahead of Stora as Sweden's leading forestry group in terms of market capitalisation even though the latter, in output terms, is regarded as Europe's leading pulp and paper company.

The irony is that their prospects have been transformed as a result of the devaluation which has followed Sweden's decision to float the krona on November 19, a factor reflected in the strong performance of pulp and paper shares on the Stockholm Stock Exchange since then. This has had an immediate impact. SCA, which had been expecting a break-even result when it published its eight-month figures, said in December it expected a 1992 profit of some SKr300-400m, partly because of the favourable currency movement.

Stora, which posted a SKr380m loss in the first eight months, will still make a loss for the full year, but the devaluation effect and its extensive rationalisation programme holds it in good stead for 1993. Reflecting this confidence, the group announced new investments of some SKr1.4bn in the autumn.

The Finnish pulp and paper groups did not fare much better in 1992, even though the markka was first devalued in November 1991 and then floated in September last year to give an overall devaluation of 25 per cent. Only one Finnish forestry group, Kymmene, actually made the top 500, coming in at a lowly 381, down just one notch from last year. It was lucky to fare as well as that, given that it slumped from profits of Dollars 81.7m to a loss of Dollars 111m year on year.

Elsewhere, the UK's Bowater Industries, the packaging and printing group (which no longer sits particularly comfortably alongside the other pulp and paper companies), was conspicuous, simply because it advanced more than 100 places from 266 to 157 with a capitalisation approaching the Dollars 3bn mark. Profits eased slightly, but this was still considered a resilient performance in a recession. At the same time the company launched a share issue to help fund two acquisitions, DRG Packaging and Cope Allman Packaging.

The other leading UK paper group, Arjo Wiggins Appleton, saw its ranking slip from 124 to 202, as profits fell back to Dollars 382.6m. The group parted company with its chief executive, Stephen Walls, and it cut its interim dividend. The company's main paper types, carbonless and coated wood free, both struggled in the general paper market downturn.

The year was characterised by subdued mergers and acquisitions activity after the binge of the late 1980s. The most significant move came in December when the three Dutch groups, KNP, Buhrmann-Tetterode and VRG joined forces to create a company with annual sales of about Fl 13bn and a market capitalisation of more than Fl 2.3bn.

KNP was the only one of the three with an FT500 ranking, which stood at 384 in 1992. However, the merged entity will be the second largest paper and packaging group in Europe, by total group turnover - smaller than Stora but larger than SCA and Arjo Wiggins Appleton.

Otherwise, stretched balance sheets and depressed share prices restricted the funding possibilities for those anxious to go on the corporate expansion trail.

Next year may be little different, given that there is no sign of a recovery. The first six months of 1993 do not promise much respite because demand will continue to be weak in many European markets. 'The optimists are looking at the second half of 1993 for some improvement, while the pessimists think 1993 may be as bad as 1992,' says David Clark, managing director of the Confederation of European Paper Industries (CEPI).

Europe P26 Paper and Allied Products IND Industry profile P26 The Financial Times London Page XXVII 923
The FT500 (28): Rough ride for car makers - Overcapacity is being exacerbated by the development of new plants by Japanese and traditional European producers / Motor industry Publication 930210FT Processed by FT 930210 By KEVIN DONE

EUROPEAN car makers suffered a tough ride in the equity markets in the second half of 1992 as investors began to focus on the difficult outlook for car sales in 1993. The share prices of the quoted volume car makers Volkswagen of Germany, Peugeot of France and Fiat of Italy all plunged in the final months of 1992, as industry forecasts of declining new car demand in western Europe became widespread.

By 1993 most vehicle makers were facing extended periods of short-time working, profit margins were being squeezed and several car producers from Volvo and Saab in Sweden to Jaguar, Ford of Europe and Porsche, as well as truck makers such as Daf, Volvo, Iveco (Fiat) and Renault Vehicules Industriels were in loss.

The problem of overcapacity is being exacerbated by the development of several new plants by Japanese car makers and by the traditional European producers.

The generally bearish sentiments towards the volume car makers have also served to depress the share prices of the leading executive and luxury car makers Daimler-Benz and BMW, although BMW's much stronger performance in the market-place has helped to cushion the fall in its share price. In 1992, BMW outsold Mercedes-Benz in western Europe and in the US for the first time in its history. Mercedes-Benz is also facing a steep fall in orders for new commercial vehicles in Germany.

All the leading quoted European car makers have lost ground in the FT500. Fiat was the most notable casualty dropping from 53rd to 94th in 1992, but Volkswagen has also fallen nine places to end up only slightly above Fiat at 87 in the list.

Three of the leading volume car makers in Europe do not appear in the FT500. GM Europe and Ford of Europe are both wholly-owned by the US car makers, while the ownership of Renault is still dominated by the French state, which holds an 80 per cent stake. The remaining 20 per cent is held by Volvo of Sweden, Renault's partner in the far-reaching Franco-Swedish alliance.

Renault has been actively cultivating the financial markets during the past year, however, and part of its equity could be floated eventually in the wake of the French general election in March. Mr Louis Schweitzer, Renault chairman and chief executive, is keen to deepen the existing alliance with Volvo, possibly into a full merger.

While the vehicle makers have fallen from favour among investors, the automotive components suppliers have generally fared much better, although Pirelli and Continental, the Italian and German tyre makers, suffered a fall in their share prices in the last three months of 1992.

By contrast Michelin, the French tyre maker, has held on to the impressive gains it made in the 18 months to the summer of 1992. Its share price has since marked time, but after the powerful recovery from a low of FFr58 in October 1990, Michelin has climbed more than 100 places in the FT500 to reach 107 in the list from 211 a year earlier.

Valeo, the leading French automotive components maker, has also emerged strongly ahead of the pack during the past two years. It has jumped to 254 in the FT500 from 381 a year earlier, and analysts forecast that Valeo should continue to have more resilient earnings than most components suppliers in Europe in 1993.

According to Mr Nick Snee, automotive analyst at SG Warburg in London, Valeo has market share leadership in many of its products, which should give it some ability to resist pricing pressures, as the vehicle assemblers squeeze prices in the face of declining volumes.

At the same time Valeo 'took the decision at an early stage to cut costs, which is why its margins have risen over the last 18 months, while other suppliers have seen margins fall', says Mr Snee. Valeo is also in a phase of reducing its indebtedness after heavy investments in earlier years, which should also help to cushion its profits against the impact of falling sales volumes.

New car sales staged an unexpected rally in December in several of the main volume markets in western Europe confounding leading car makers' more pessimistic forecasts. As a result new car sales in western Europe for the whole of 1992 were virtually unchanged from the previous year at 13.5m.

The industry remains pessimistic about the outlook for new car sales in 1993, however, with most forecasts suggesting a decline of around 4 per cent.

New car sales in western Europe have remained stable around 13.5m for the past four years to 1992, although the fortunes of individual markets - and therefore of individual car makers - have fluctuated greatly. Sales have only been kept at this record level, however, by the expansion of the western European market to include eastern Germany since mid-1990, as a result of reunification, which has helped to compensate for falls elsewhere.

The starkest contrast in the fortunes of individual markets has been between the UK and Germany. New car sales have fallen by nearly a third in the UK in the face of the deep recession from the peak of 2.3m units in 1989 to only 1.59m in both 1991 and 1992. In Germany, where demand received an unprecedented boost from reunification, sales jumped by 46.9 per cent from 2.83m in West Germany in 1989 to 4.16m in unified Germany in 1991.

The Volkswagen group of Germany, which includes Audi, Seat and Skoda, has established a convincing lead in the western European new car sales league. It was the best-selling car maker in western Europe in 1992 for the eighth year in succession. It boosted its market share to a record 17.5 per cent from 16.4 per cent a year earlier and established a commanding lead ahead of its nearest rival General Motors of the US.

As the German market weakens this year VW's deep-rooted cost problems are becoming more apparent, however. According to a recent SG Warburg report on the world auto industry unit productivity at Volkswagen's domestic plants is no better than that achieved by its leading European rivals such as Peugeot and Renault in France, but its hourly labour costs are substantially higher and still rising.

VW is finding it increasingly difficult to secure premium prices, and SG Warburg warns that 'unless VW can cut its cost-base, it faces a protracted period of inferior operating returns, at a time when its ambitious expansion programme has reduced financial income'.

Fiat of Italy, which includes Lancia, Alfa Romeo and Ferrari, has been the main loser among the big six volume car makers in western Europe, however. It has slipped from second to fourth place behind VW, GM and the Peugeot group of France, which includes Citroen.

Fiat's sales volume in western Europe fell by an estimated 7.4 per cent to 1.6m last year following an 8.1 per cent decline in 1991 and a 6 per cent fall in 1990. Its market share fell to only 11.9 per cent from 12.8 per cent in 1991, 14.2 per cent in 1990 and 14.9 per cent in 1989.

In the market for executive and luxury cars in western Europe BMW of Germany outsold its arch domestic rival Mercedes-Benz for the first time in its history. BMW increased its sales by 7.2 per cent to around 443,000, while Mercedes-Benz was among the biggest losers last year with an estimated 8.6 per cent drop in sales to 413,000.

With the market in western Europe weakening in 1993 Europe's hard-pressed luxury car makers can expect some relief from North America this year, however, where sales are beginning to recover from recession. In a virtually flat US car market last last year BMW increased its sales by 23.1 per cent to 65,691, while Mercedes-Benz raised its sales by 7.5 per cent to 63,312.

Europe P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories IND Industry profile P3711 P3713 P3714 The Financial Times London Page XXVI 1364
The FT500 (29): Wonder stocks lose a little glamour - Paul Abrahams ponders whether the charmed status enjoyed until now by pharmaceuticals groups may be coming to an end / Chemicals and pharmaceuticals Publication 930210FT Processed by FT 930210 By PAUL ABRAHAMS

EUROPEAN drugs companies, wonder stocks of 1991, had rather more mixed experiences last year. While some groups - such as Glaxo and SmithKline Beecham of the UK and Astra of Sweden - enjoyed a successful year, others - such as Fisons and Wellcome of the UK - had a more turbulent 12 months.

Meanwhile, most European chemicals groups had a difficult time, slipping down the rankings as the industry suffered from overcapacity and sliding profits. A few were protected by their speciality chemicals or drugs operations.

Glaxo, Europe's largest drugs group, moved from third to second in the FT500, as its profits rose 11 per cent to Dollars 2.358bn on turnover up 20 per cent at Dollars 6.76bn. Two years ago it was 10th.

Astra, which competes directly against Glaxo's best-selling drug, the ulcer treatment Zantac, rose from 37 to 32. Its ulcer medicine and respiratory drugs helped the Swedish group drive its profits up 36 per cent to Dollars 608m, on turnover up 32 per cent at Dollars 2.2bn.

Other pharmaceuticals groups that did well included Novo Nordisk of Denmark which moved from 209 to 165; Synthelabo of France which entered the FT500 at 228 thanks to its acquisitions of two laboratories, Delalande and Delagrange; and Institut Merieux, which moved from 469 to 253, thanks to strong growth in its vaccine business.

The drugs companies that performed poorly did so thanks to special circumstances. Fisons, fell from 80 to 215, as its profits fell 17 per cent from Dollars 380m to Dollars 314m on turnover up 5 per cent at Dollars 2bn. The company has lost substantial revenues from the withdrawal of two products in the US because of quality control problems. Efforts to reinstate one has led to significant costs. A substantial management shakeout has taken place.

The other company that suffered was Wellcome, although the reason was nothing to do with the quality of the company. Wellcome Trust, a medical charity which owned about 74 per cent of Wellcome, decided in March to sell off a significant part of its stake. However, the company's shares suffered a long-drawn-out bear raid by institutions which drove the price down from Pounds 11.26p to under 800p by the time of the issue in July. By the end of the year, the shares had recovered to well over 950p.

Most chemicals groups suffered from the malaise in European industry caused by overcapacity and cheap imports from the US which were assisted by the cheap dollar. Imperial Chemical Industries, the UK's largest manufacturer, slipped from 16 to 28. It was also hit by a slowdown in pharmaceuticals earnings as its best-selling drug, a hypertension treatment called Tenormin, lost more than half its sales in the US, the world's largest market, following the expiry of its patents.

Two of the three German giants slipped down the list, Bayer falling from 28 to 34 and BASF from 46 to 56. The third of the trio, Hoechst remained static at 45. The Germans' ratings were helped by the weakness of the dollar and strength of the D-Mark. The realisation of the full extent of the slowdown of the German economy has hit the stocks, as have fears about dividends. Both Hoechst and BASF cut their pay-outs last year, and all three are expected to cut further when full-year results are announced in March.

Some chemicals companies outperformed the sector and the market. BOC of the UK and L'Air Liquide, both industrial gases groups, improved their ratings, the former from 93 to 80 and the latter from 70 to 52. Industrial gas companies are strong defensive stocks during recession. Their contracts are long-term and less vulnerable to the economic swings that hit commodity chemical products.

Other chemical companies did well because of their pharmaceuticals or speciality operations. Roche, the Swiss group with strong drugs interests, had a spectacular year, climbing from 18 to 6 in the FT500, while its profits soared 113 per cent from Dollars 724m to Dollars 1.54bn on turnover up 18 per cent at Dollars 8.68bn.

Roche's dramatic rise up the table was partly due to acquisitions - such as Sara Lee's European over-the-counter business - but was mostly driven by organic growth of the pharmaceuticals operations. Mr Peter Smith, European pharmaceuticals analyst at broker James Capel, says Roche has no single successful product, but enjoys a broad range of medicines that are growing strongly. The company also benefited from a change in accounting standards that added to profits.

Sandoz, Roche's competitor and neighbour in Basle, also did well, rising from 29 to 20 as all of the Swiss pharmaceuticals stocks were re-rated. The shares have also been driven up in anticipation of the group publishing its 1992 figures according to international accounting standards rather than the conservative Swiss ones. This could add up to 20 per cent to profits.

The third of the Swiss giants, Ciba-Geigy, had a rather less successful year, advancing only two positions to 24. The stock suffered from concerns about the impact of reforms of the EC's common agricultural policy on the agrochemicals industry in which Ciba-Geigy is the world leader. The dramatic success of the group's nicotine patch in the US during the first half of the year was not sustained. And the upturn in the US, which might have helped its cyclical dyes and polymers businesses, proved slower than expected.

Akzo, the Dutch group, moved from 179 to 124. Although its profits and turnover were down, the group is partly protected from the slowdown in the European economies because of its portfolio of speciality businesses. It has some pharmaceuticals operations and is less exposed to petrochemicals than its German counterparts, according to Ms Jackie Ashurst, European chemicals analyst at James Capel.

Chemicals groups that left the UK FT500 included MTM, the speciality chemicals company, ranked at 290 last year. MTM suffered a catastrophic collapse in its share price from 189p to under 15p after a profits shortfall and the subsequent resignation of its founder and chairman.

If the US recovery accelerates and the slowdown on the European continent looks like it is bottoming out, then the unfashionable chemicals stocks could come back into fashion. At the same time, the charmed status of pharmaceuticals groups looks like coming to an end, as investors begin to switch into cyclical stocks and drugs profits growth slows due to world-wide efforts by governments to control healthcare spending.

Europe P28 Chemicals and Allied Products P2834 Pharmaceutical Preparations IND Industry profile P28 P2834 The Financial Times London Page XXVI 1128
The FT500 (26): German giant strengthens position - Once Britain led the world but now mainland companies are dominant. But, the gap between UK insurers and their continental rivals has not increased in real terms / Insurance Publication 930210FT Processed by FT 930210 By RICHARD LAPPER

LARGE mainland European insurance companies continue to dominate an industry in which Britain historically has been a world leader.

Seven leading general insurance companies are from Germany (Allianz, Muenchener Ruck), Italy (Generali), Switzerland (Swiss Re and Zurich) and France (Union des Assurances de Paris and Assurances Generales de France).

Despite a weakening in its share price over the 15 months to September 30, 1992, Allianz, Europe's biggest insurer and now the seventh biggest company in Europe, dwarfs its competitors.

The German company, which has spent the past two years quietly digesting big acquisitions in eastern Germany and the US, is still nearly twice as big in market capitalisation terms as its nearest rival, Generali of Italy, and, strikingly, nearly 50 per cent bigger than the combined capitalisation of Britain's five composite insurance companies (Sun Alliance, Commercial Union, General Accident, Guardian Royal Exchange and Royal Insurance).

UK insurers can at least be relieved, however, that the gap between them and their rivals on mainland Europe has not increased in real terms, with currency factors playing a part in the improved ratings of the German companies. Six of the 17 companies which improved their ratings were German - Muenchener Ruck, AMB, Victoria, Wuerttembergische, Volksfuersorge and Nurnberger.

During the year to September 30, 1992, the mark appreciated by more than 15 per cent against the US dollar, greater than the corresponding increases in most other European currencies.

Germany's Nurnberger - which entered the rankings for the first time as the 451st biggest company - also strengthened its position with a rights issue.

Other companies moving up the rankings included Aegon, the well-managed and highly profitable Dutch company which benefited by a 10 per cent rise in its 1991 profits, rising 64 places to 117. Belgium's Royal Belge climbed 44 places to 233rd. Fortis, formed in 1990 by the merger of Amev of the Netherlands and AG of Belgium, has also risen strongly with its capitalisation increasing to Dollars 4,206.4m from Dollars 2,942.7m, taking it from 167 to 104 in the rankings.

Generali (whose capitalisation increased from Dollars 11.87bn to Dollars 13.81bn over the period and rose one place in the rankings to 23rd) also made rights issues over the period, and also benefited from the fact that more of its assets are located in Germany and Austria than rival Italian companies. The original domestic market of the Trieste-based insurer was the Austro-Hungarian empire.

Irish Life, Ireland's biggest life insurance company, also came into the rankings for the first time following its privatisation in July 1991.

Britain's Britannic rose by 11 places to 396, after reporting improved profitability in 1991 (profits up 38 per cent to Dollars 40.8m) with a performance which reflected the buoyancy - in spite of the recession - of traditional door-to-door sales of life insurance policies in the UK.

Scandinavia's four largest companies - Skandia and Trygg Hansa SPP Holding of Sweden and Baltica and Hafnia of Denmark - were the biggest losers. All the companies suffered from a deterioration in trading conditions across Scandinavia, but uncertainty stemming from bungled acquisitions and merger efforts was the most serious factor undermining investor sentiment towards the sector.

Skandia, the 206th biggest company in Europe by market capitalisation in 1991, was particularly hard hit. Its share price plummeted during the first half of 1992, after Norway's Uni Storebrand and Denmark's Hafnia borrowed heavily to fund an ambitious - and ultimately disastrous - takeover plan. The group's capitalisation sank from SKr14,586m to SKr3,684m. Uni and Hafnia - the 498th biggest European company in 1991 - were forced to suspend payments to creditors in August and by the end of the year the break-up of both companies appeared to be on the cards.

The capitalisation of Italian, Spanish, French and British companies were all hit by a downturn in market sentiment, following a series of poor results in 1991 and falling returns from investments. Two Italian companies - Fondiaria and Assitalia (part of the state-owned INA empire) left the FT500 (Fondiaria ranked 214 in 1992), while RAS - down from 244 to 282 - and SAI - down from 304 to 417 - also saw their rankings fall.

Alleanza, the life insurer in which Generali has a majority stake, increased its profits to Dollars 120.3m (Dollars 100,1m), but fell 15 places in the rankings to 133.

Spain's Mapfre, which entered the FT500 last year, has quickly dropped out with its share prices dragged down amid a sluggish performance by the Spanish market as a whole.

France's large state-controlled insurers, which figured in the FT500 for the first time in 1991, fell back. Investor confidence has been adversely affected by the prospect of poorer results in 1992 (the figures shown reflect 1991 performance) as well as the problems of the Paris property market, in which each of the companies is a significant investor.

Union des Assurances de Paris (UAP) fell 17 places to 69, Assurances Generales de France (AGF) fell 15 places to 110, while Groupe des Assurances Nationales (GAN) slumped 99 places to 162.

UK composite insurers, which dropped down the table in 1991, registered further falls in 1992, even though investor confidence in the sector has recovered in the expectation of better results in 1992.

The combined pre-tax losses in 1991 of the UK's five leading companies - Sun Alliance, Commercial Union, General Accident, Guardian Royal Exchange and Royal Insurance - amounted to more than Dollars 2bn.

CU improved its ranking by 10 places (to 115 from 125), but each of the other companies lost ground, with Royal (down to 303 from 159) worst hit. Legal & General, a life company which also has greater exposure to non-life business, also fell (down to 167 from 137).

The UK's biggest listed-life company, Prudential Corporation slipped in the rankings (down to 51 from 48), in spite of increasing its 1991 profits to Dollars 441.2m (Dollars 403.2m). Lloyds Abbey Life - the UK's biggest bank insurance business - saw its capitalisation fall in dollar terms, sinking 24 places as a result to 114th.

Finally, Sun Life, which was taken over by Rockleigh Corporation, the investment vehicle jointly owned by Liberty Life of South Africa and UAP of France, lost its London listing and left the FT500.

Europe P6311 Life Insurance P6411 Insurance Agents, Brokers, and Service IND Industry profile COMP Company News P6311 P6411 The Financial Times London Page XXV 1108
The FT500 (27): Takeover creates a powerful new force - As bad debts continued to affect the industry, management strategies were largely focused on improving profitability. This has resulted in drastic cuts in staff numbers / Banking Publication 930210FT Processed by FT 930210 By ROBERT PESTON

THE MOST important event in the European banking industry during 1992 was probably the acquisition of the UK's Midland Bank by HSBC Holdings, the Hongkong banking group.

The Pounds 3.9bn takeover created a powerful new force in European banking. In particular, Midland under HSBC's ownership is likely to pose a stiff competitive threat to the UK's other big banks. The deal also introduced a high-ranking new member to the FT500, since HSBC has moved its domicile to London. At a stroke, HSBC has become the second biggest European bank, after Germany's Deutsche Bank, and the 19th biggest European company.

The remarkably strong performance of HSBC's shares during the year was also responsible in part for an impressive rise in the stock market index of UK banks, which performed 20 per cent better than the FT all-share index.

On Europe's three other main stock markets - in France, Germany and Switzerland - no other banking industry performed as well. German banks outperformed the Frankfurt market by 10 per cent, but the French banks underperformed by 2 per cent and the Swiss underperformed by 5 per cent.

UK bank shares, even without HSBC, performed well in the year. The rise was remarkable because UK banks continued to suffer from record losses on bad and doubtful loans.

Investors bought their shares in the hope that profit recovery will be strong, once the UK emerges from recession. Despite the bad debts, UK banks retained their above-average capital ratios, a key measure of balance sheet strength.

Nonetheless one big UK bank, Barclays, fell sharply in the FT500 ranking, from 21st place (and second place among the banks) to 44th (and sixth among the banks). Barclays' loan losses in 1992 have been significantly worse than its peers - and its share price has also suffered as a result of persistent reports that shareholders are unhappy about a board reorganisation.

Having gone into recession before other European countries, analysts expect the UK to emerge earlier as well. So analysts are forecasting that loans losses suffered by banks in France, Spain and Germany will rise, as their economies continue to slow down. Like the UK banks, much of their bad debt charge is attributable to imprudent commercial property lending.

In one region, Scandinavia, bad debts have come close to wiping out the local banking industry. There are no Norwegian or Finnish banks in the FT500 - and only one representative from Denmark, Den Danske Bank, and one from Sweden, Svenska Handelsbanken.

Sweden's SE Banken and Nordbanken departed from the league table, as did Unitas Bank and Kansallis Osake Pankki, both from Finland. Norway's big banks remained under the intensive care of the Norwegian government and were therefore ineligible for inclusion in the list.

The volatility of currencies within the European exchange rate mechanism affected most banks. Many of their foreign exchange departments made big profits from selling the ERM's more vulnerable currencies, such as sterling.

However, French banks' interest rate margins were squeezed in the autumn when they kept down their loan rates for small businesses and personal customers, in spite of a rise in money market rates which the French government had engineered to protect the franc.

The management strategies of most European banks in the year were primarily focused on improving the profitability of domestic operations. Throughout Europe, banks attempted to cut staff numbers - with the most dramatic reductions being made by UK banks.

Preparations for the single European market, which came into effect at the beginning of 1993, were low key. Cross-border takeover attempts by banks within the EC were few and far between.

Internationale Nederland Group of the Netherlands tried in the autumn to buy Banque Bruxelles Lambert, Belgium's second biggest bank. However, in November ING abandoned its takeover plans, because of disagreement with BBL on the value of assets held by the Belgian bank.

On the other hand, France's Credit Lyonnais was poised at the end of the year to acquire control of a majority stake in BfG Bank, Germany's sixth largest bank.

Another Dutch bank, ABN Amro, expanded its investment banking operations by purchasing the UK stockbroker, Hoare Govett, from Bank of America of the US (which had in turn bought Hoare's previous owner, Security Pacific).

Meanwhile, Royal Bank of Scotland experienced difficulty in attempts to sell its merchant banking subsidiary, Charterhouse. However, at the end of the year it remained hopeful that a sale would take place in January to a consortium consisting of Germany's BHF and Credit Commercial de France.

Banks on the whole have abandoned plans to establish pan-European branch networks and are instead purchasing operations in specific markets which they feel they understand. Bank encroachment into the sale of life insurance - known as Allfinanz or BancAssurance - continued, though there were no big acquisitions of insurance companies by banks or vice versa.

There was continuing interest among banks about forming transnational co-operation agreements, sometimes involving the exchange of shares. One of the most imaginative initiatives in the year was the Royal Bank of Scotland's establishment of IBOS, an electronic system for linking its branches with those of Credit Commercial de France, Spain's Banco Santander and Banco de Comercio e Industria in Portugal.

Although the EC single market programme has abolished many legal obstacles to cross-border expansion, a range of cultural, tax and regulatory obstacles remain. These obstacles on the whole affect retail banking aimed at small businesses and individuals rather than business between banks themselves or the provision of services to big companies.

The most graphic example of these obstacles in the year was a French government prohibition on an attempt by Barclays to introduce a new banking product to France which was in effect an interest-paying current account.

An assortment of European Community banking directives which came into effect on January 1 did nothing to remove such barriers to competition. They relate mainly to the levels of capital which EC banks must have to continue in business (The Own Funds and Solvency Ratio directives) and the way in which banks are supervised (the Second Consolidated Supervision Directive and the Second Banking Directive).

The Second Banking Directive is the most important of the new EC banking legislation. It creates a 'passport' for EC banks, which allows any bank authorised to do business in an EC country to set up branches in another EC country, without the need to get the permission of the supervisor in that other country.

Europe P602 Commercial Banks IND Industry profile COMP Company News P602 The Financial Times London Page XXV 1134
The FT500 (21): Travelling hopefully rather than arriving - There was a brief flurry of enthusiasm when the Conservatives won the general election, but thereafter corporate Britain found it difficult to find the path to recovery / United Kingdom Publication 930210FT Processed by FT 930210 By RICHARD GOURLAY

FOR THE top British companies, 1992 will be remembered as the year when recovery did not arrive. Not only did the domestic economy remain stubbornly dormant, notwithstanding early sightings of recovery's green shoots, but there was also a growing realisation within corporate Britain that recovery when it did come would be slow and undramatic.

After a brief flurry of enthusiasm once the Conservative government had secured another term in office in April, companies were again travelling hopefully rather than arriving at the start of the recovery path.

By the time sterling left the exchange rate mechanism of the European Monetary System on 'Black Wednesday' - two weeks before the end of September cut-off date for the FT 500 table - the FT-SE 100 index had drifted 10 per cent to a little above 2350, close to an 18-month low. Even with the benefit of the post-Black Wednesday recovery, September ended with the FT-SE 100 down 2.7 per cent.

Against this gloomy backdrop, it was not surprising that UK-based property and construction companies, two of the hardest hit sectors in 1991, were again some of the worst performers within the FT500.

Trafalgar House, the hotels, shipping, construction and engineering group, had the most dramatic fall, tumbling out of the list from its position in the top 200, after the company's profits evaporated and the previous year's profits had to be restated as a loss. The shares regained some of the lost ground after Hongkong Land made a tender offer in October.

Other companies in the sector fared little better; Hammerson Property, Taylor Woodrow and George Wimpey, were hit to varying degrees by what is turning out to be one of the longest recessions in that sector.

All of these companies, committed the sin of cutting their dividend - a sin, that is, in the eyes of investors even if the surgery was essential for the patients' health. Similar dividend reductions by Sedgwick, the insurance broker, Pilkington, the glass makers, and British Petroleum, received similarly rough treatment by investors and they all lost ground in the table over the year.

Departing the list following sharp changes in sentiment, were Body Shop, the cosmetics group, and Albert Fisher, the food retailer, two 1980s companies which demonstrated that what goes up quickly can fall just as quickly.

Also in the down-but-not-out category was BET, the business services group that has been a victim of over-zealous expansion in the 1980s. With the dividend in doubt and the core companies still in some unexciting service areas, the shares fell in spite of a balance sheet largely refurbished through a rights issue.

Lonrho, the international trading group headed by Mr Tiny Rowland, was another to fall from grace, as profits ran out of steam and investors started to see concentration of power as a liability and not an asset.

While growth remained elusive, stocks with limited recovery potential but which are considered resilient to recession were again in demand. Glaxo, the pharmaceutical giant that has in its stable the hugely successful anti-ulcer drug Zantac, consolidated its 1991 rise by jumping over BT to become the UK's largest company and the second largest in Europe. Also a beneficiary of enthusiasm for pharmaceutical stocks was Smithkline Beecham which leapt ahead of BP, British Gas, Hanson, ICI and BAT Industries.

On the other hand, Fisons, the pharmaceuticals group, slid to number 215 (80), as it ran into registration difficulties in the US - partially resolved since the year-end. The marked contrast with the fortunes of Glaxo demonstrate perhaps that in the search for new drugs, there is room only for the extremely large.

While corporate merger and acquisition activity was limited in 1992, the year's most successful takeover saw the departure of one of the oldest names in British banking - Midland. After a battle with rival Lloyds Bank, HSBC (the Hongkong and Shanghai Banking Corp) swallowed Midland.

Fuelled by the euphoria in the Hong Kong market - at least until Governor Chris Patten unsettled things by picking a fight with the authorities in Beijing - HSBC entered the FT500 chart at number 19 and immediately bounded further ahead to become the FT-SE 100's strongest performer of the year.

Other newcomers to the FT500 made less spectacular entrances. But MFI Furniture Group, which had laboured for years under a mountain of debt that financed its management buy-out, made it to the market in the early summer. Like many of the other post-election flotations, MFI suffered from the public's lack of interest in the new issues and its shares fell following flotation before perking up after Black Wednesday.

Bouncing back after losing their way in the late 1980s were two former forces in high street retailing - Burton Group and Storehouse. The latter which owns the Mothercare and BHS (formerly British Home Stores) chains, was another group reversing the move towards creation of conglomerates. Storehouse began a robust recovery, and announced it was selling its Habitat stores and Conran's Habitat in the US and the Richards fashion shops in the UK to focus on its core.

Food retailers, the other great force in the high street and a sector that has traditionally done well in recession, had a mixed year. J Sainsbury edged higher in the table, as did Argyll, owner of the Safeway chain, which began to close the gap between its rating and that of its larger rival. Tesco, on the other hand, slipped under pressure from Sainsbury which appeared to be tightening its grip on the number one slot in the sector.

The real winners in the sector were Kwik Save, the budget retailer where a budget shopping formula struck a chord with consumers; and Iceland Frozen Foods Holdings which made its debut in the FT500.

Perhaps the most interesting changes in the FT500 this year will be among the conglomerates, which had mixed fortunes in the year to September. BTR edged ahead in the table, but has outperformed since the September cut-off date after a rapid and apparently trouble-free integration of Hawker Siddeley, the aerospace company. Hanson, on the other hand, slipped and is now seen to be under some pressure to do a deal.

Tomkins was one of the sector's largest risers. Its purchase of Ranks Hovis McDougall, the milling and baking company after a head-to-head contest with Hanson, should continue that momentum.

United Kingdom, EC P99 Nonclassifiable Establishments COMP Company News STATS Statistics P99 The Financial Times London Page XIX 1122
The FT500 (22): Shaping up for a split decision / Profile of Imperial Chemical Industries Publication 930210FT Processed by FT 930210 By RICHARD GOURLAY

ONE OF the most exciting events of 1993 is the likely reshaping of Imperial Chemical Industries, the giant corporation which started life as a defensive cartel to supply the British Empire.

This month ICI is to decide whether to split the bulk chemicals business from the bioscience side, which would include the pharmaceuticals, agrochemicals and speciality businesses.

If the split goes ahead, the European chemicals industry would undergo one of the largest restructurings since the end of the Second World War when the Allies broke up I G Farben.

The plan was announced in July after Hanson had already sold a 2.8 per cent stake in ICI and was designed to release hidden value in the two businesses.

Reversing the 1980s trend towards the creation of conglomerates, it would follow demergers of Vodafone and Chubb Security from Racal, and Courtaulds Textiles' separation from Courtaulds.

After a split both ICI and its bioscience side would remain quoted companies. But the bio side, which has been called Zeneca, could go straight on to the acquisition trail - to gain critical mass in its markets - for which it is likely to require a rights issue.

As for the bulk chemicals side, ICI will still be operating within a world recession and a highly cyclical industry.

While the new ICI might have great recovery potential, it could have diff-iculty generating enough earnings to cover the dividend this year, a factor that could affect the timing of the demerger.

The market, certainly, has been less than convinced that the ICI alchemy will make two halves worth more than the whole and the group has slipped within the FT500.

Imperial Chemical Industries United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P2879 Agricultural Chemicals, NEC COMP Company profile P2819 P2869 P2879 The Financial Times London Page XIX 330
The FT500 (20): Household names among the fallen - Tom Burns discusses the poor showing of a country that has grown faster than the European Community's average for the better part of a decade / Spain Publication 930210FT Processed by FT 930210 By TOM BURNS

THE SPANISH presence in the FT500 gives an adequate representation of the domestic corporate profile. There are few big Spanish companies and they are uniformly orientated towards the services sector.

The FT500 includes just 21 companies in 1992, 10 fewer than in the previous year. It is a poor showing for a society that has one of the larger GDPs in western Europe as well as one that has grown faster than the European Community's average for the better part of a decade.

Of the 21 companies present all save three - the state-controlled electrical utility Endesa, the similarly publicly-owned Banco Exterior and energy group Compania Espanola de Petroleos, Cepsa, - are lower in the rankings than they were in the 1991 FT500.

Only six companies appear in the first 100, with the national telecommunications company Telefonica heading the list and ranked 47, and eight appear in the second half of the list.

There are 13 departures from the list of which three make a reappearance as part of a merged group. This is the case of Banco Central and Banco Hispanoamericano which have come together as the Banco Central Hispanoamericano, BCH, to form Spain's largest banking institution. It says a good deal about the size of domestic banks that the BCH should be ranked 92 in the FT500.

The Barcelona-based natural gas distributor Catalana de Gas also drops out of the list but it reappears as part of Gas Natural.

This company, significantly ranked a lowly 200, is the result of the merger between the gas divisions of the state-owned energy group Repsol, of Gas Madrid and of Catalana de Gas.

The only Spanish entrant to the FT500 that can be properly considered a new one is the retail group Centros Comerciales Pryca which is ranked 191. Pryca, which has a market capitalisation of Dollars 2.3bn, is, however, Spanish only up to a somewhat marginal point. More than 70 per cent of its stock is controlled by the French hypermarket giant Carrefour.

Departures from the list include a string of companies that are household names in Spain. This is the case with the largest national insurance group Mapfre and with the twin giants of the domestic real estate market, Vallehermoso, which is controlled by BCH, and of Metrovacesa which is a subsidiary of the rival big bank, Banco Bilbao Vizcaya, BBV.

Also out of the 1992 FT500 was Corporacin Financiera Alba, Spain's biggest private holding company which is owned by the March family. One of Alba's main income earners is the 10 per cent stake it holds in the Pryca hypermarket venture. Likewise squeezed out was Ebro Agricolas, the sugar and rice producer that has been one of the few profitable investments undertaken by the Kuwait Investment Office, KIO, in Spain and which is the largest domestic agri-business company.

Aside from their comparatively small size and their lowered weighting, the main distinctive feature of the Spanish companies in the FT500 is that with the exception of the state-owned tobacco producer Tabacalera not one of them is involved in a non-energy manufacturing process. The business of the big Spanish corporations has to do with finance, with utilities and with services in general.

Seven of the Spanish companies that appear on the list, a full third of the total domestic contingent, are in fact banks. A further five are electrical utilities and three are energy-based corporations. The others are Telefonica, Tabacalera, Pryca, the construction company Fomento de Construcciones, the Barcelona-based water utility holding Aguas de Barcelona and the highway toll-concession holder Autopistas, Acesa.

An additional feature is that seven of the 21 companies on the list are state-controlled and a trio of publicly-owned companies, Telefonica, the electrical utility Endesa and the Repsol energy corporation are the highest ranked Spain representatives on the FT500.

The poor Spanish showing is a reflection of the huge foreign penetration of domestic business. Non-Spanish companies, for example, control all the domestic car sector and some 75 per cent of the large components and accessories business that has grown up around it, eight of the top 10 domestic chemical companies and some 60 per cent of the domestic cement sector.

Some of those Spanish companies that appear in the FT500 are likely in the future to see their weighting reduced. This could be the case with Telefonica for in 1991 just 1 per cent of its revenues came from business that was open to competition while by 1994 this proportion will have risen to 34 per cent due to deregulation. It could also be the case for the electrical utilities, likewise blue-chip Spanish companies, which have in the past weeks been nursing the impact of the peseta's devaluation on their borrowings.

--------------------------------------------------------------------- BIGGEST PROFIT INCREASES: UK --------------------------------------------------------------------- UK500 % Profit Company Sr Rank increase --------------------------------------------------------------------- 1 Hartstone Group 512 272 874.1 2 Howden Group 561 379 505.7 3 Racal Electronics 551 109 354.7 4 Airtours 301 257 336.2 5 St James's Place Capital 122 262 327.9 6 Medeva 433 198 316.8 7 Peel Holdings 161 344 182.6 8 Burton Group 491 185 170.1 9 Storehouse 491 150 154.8 10 Frogmore Estates 161 402 147.1 11 Kleinwort Benson Group 121 201 141.0 12 MFI Furniture Group 406 139 136.4 13 Next 491 203 130.2 14 Tiphook 303 229 129.9 15 Pentland Group 171 168 123.9 16 British Airways 301 49 119.2 17 Property Sec Invst Tst 161 377 118.0 18 Barratt Developments 614 351 110.7 19 HSBC Holdings 112 10 107.1 20 Owners Abroad Group 406 392 106.7 21 Bryant Group 614 255 97.1 22 Norweb 221 134 96.2 23 Logica 551 380 92.1 24 Transfer Technology Group 552 458 87.2 25 Hogg Robinson 306 358 85.9

--------------------------------------------------------------------- BIGGEST PROFIT DECREASES: UK* --------------------------------------------------------------------- UK500 % Profit Company Sr Rank decrease --------------------------------------------------------------------- 1 Commercial Union 151 45 -4673.3 2 Costain Group 613 495 -1358.2 3 Amstrad 551 317 -451.9 4 Ansbacher (Henry) Holdings 121 499 -434.6 5 Laing (John) 613 319 -424.9 6 Asda Group 493 133 -316.8 7 Stakis 461 451 -254.8 8 Astec (BSR) 551 425 -220.7 9 Wimpey (George) 613 227 -137.2 10 British Steel 633 90 -121.7 11 British Aerospace 523 173 -121.5 12 Amec 613 333 -115.6 13 TSB Group 112 54 -115.1 14 Vickers 566 248 -112.8 15 Taylor Woodrow 613 245 -103.2 16 Lex Service 571 289 -94.5 17 BET 171 103 -91.5 18 Mowlem (John) 613 478 -91.2 19 Avon Rubber 574 413 -90.9 20 Tarmac 613 163 -89.0 21 Allied-Lyons 421 24 -87.3

22 Christies International 495 300 -85.2 23 Legal & General Group 141 64 -83.5 24 National Westminster Bank 112 21 -78.2 25 Royal Bank of Scotland Group 112 84 -78.0 --------------------------------------------------------------------- * Where percentage profit decreases exceed 100 per cent, these represent a change from profit to loss ---------------------------------------------------------------------

Spain, EC P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page XVIII 1191
The FT500 (19): On the trail of new potential markets / A look east and discovers that American companies were the biggest investors last year in the 28 countries which have emerged from the wreckage of the former Soviet bloc - Eastern Europe Publication 930210FT Processed by FT 930210 By ANTHONY ROBINSON

FAITH and endurance have been the main requirements for companies doing business with eastern Europe and beyond during the first three years of the post-communist age. The macro-economic picture still looks dire for much of Russia and the former Soviet Union. But for central Europe the awaited turnaround from steep economic decline to the beginning of steady economic growth looks attainable in 1993.

Much depends on the depth of the German recession and its knock-on effects throughout the rest of the European Community to which more than 50 per cent of central Europe's rising exports are now directed. But some economists believe that the combination of an over-valued mark and over-paid workers, especially in former east Germany, means that central European companies offering cheap labour, and the ability to produce low-cost components, construction materials, foodstuffs and other goods, will be increasingly attractive to recession-hit western companies desperately seeking to reduce their cost base.

The lure of new potential markets and low-cost production sites has begun to exert an increasingly powerful attraction for western companies, including the US companies and corporations which were also quicker than many European companies to spot the potential of the Common Market 30 years ago. According to data compiled by the East European Investment Magazine, US corporations were the biggest investors last year in the 28 countries which have emerged from the wreckage of the former Soviet bloc.

In the 12 months to the end of September 1992, US companies made 219 acquisitions, joint ventures and greenfield investments worth Dollars 8bn, around 30 per cent of the total Dollars 28bn invested in the area over this period. The US share was equivalent to the entire private investment in the region in 1991, reflecting the fact that, in spite of the manifold difficulties of doing business in the region, overall investment tripled in 1992.

The attraction is mutual. Governments in Poland, Hungary and the Czech Republic in particular welcome US investment for politico-strategic as much as economic and financial reasons. President Lech Walesa of Poland, for example, made clear that having General Motors invest in Poland was equivalent to having a US division on Polish soil.

US food and consumer goods companies have been quick to capitalise on the attraction of famous brands, from Big Macs, to Levi-Strauss jeans and Coca-Cola, and to see the advantage of selling to west European markets from low cost bases in the east. General Electric was one of the first to take the plunge with its acquisition of Tungsram in Hungary. To its chagrin profitability has been hit by the failure of the Hungarian forint to depreciate as expected. But the realisation that Hungary is a cheap place to do research and development work has partially compensated.

The lengthening list of US consumer companies, including Procter and Gamble and Sara Lee, is accompanied by US telecommunications, chemical and energy companies. The latter are increasingly interested in oil and gas exploration and development in Kazakhstan and Azerbaijan, rather than Russia, where delays in formulating appropriate legislation continue to raise frustration levels.

Despite the mounting US interest, however, European companies remain the most committed to investment and expansion in the post-communist countries of Europe and Eurasia while Japanese companies, with rare exceptions, remain on the sidelines.

Volkswagen's commitment to invest a scaled down DM7bn on modernising and expanding output at Skoda Automobilova in the Czech republic, where it is building up to a 70 per cent stake, remains the biggest single investment project in the region. Fiat, battling to keep up in the FT500, has committed Dollars 2bn to Poland, in spite of a damaging strike at its new Cinquecento plant in southern Poland.

Companies in France, Italy, Benelux, and to a much lesser extent in Britain, realise that unless they move to establish strategic positions in the former communist states while they are still relatively cheap and available, the region will become increasingly dominated by German companies moving back into what is a traditional sphere of trade and influence.

German investment at present is concentrated in former east Germany, but the big German companies and banks, as well as thousands of small and medium-sized companies from Germany and Austria, have used the advantage of proximity and their tradition of long-term thinking to establish or re-establish themselves.

With global profits under pressure and the German domestic market in recession, however, it is proving increasingly difficult for some German companies to justify their faith in the long-term prospects for growth, especially in many parts of the former Soviet Union. BASF, the Ludwigshafen-based chemical company, for example, has subsidiaries in central Europe and expensive representative offices in many parts of the former Soviet Union, including five in Russia from which it imports gas, naphtha and basic chemicals. But the costs of doing business in the less centralised new environment are rising sharply while demand for chemicals is only 55 per cent of 1989 levels.

Some industries are clearly longer term than others. But some strategic investors have already shown impressive results from quite modest initial investments in the region and are well placed to gain from the long-awaited upturn expected in Poland, the Czech Republic and Hungary this year.

ABB Asea Brown Boveri, which announced the first big investment deal of 1993 by taking a 67 per cent stake in the Czech republic's biggest boiler, turbine and power plant company, Prvni Brnenska Strjirna (PBS), is a classic strategic investor. Over the past three years it has taken a controlling stake in 26 east and central European power and engineering companies. The Swiss-Swedish company is convinced that modernising the energy sector to raise generating efficiency and reduce pollution will be a top priority throughout the region.

Its main Polish company, ABB Zamech, has achieved rapid productivity increases and won export orders worth Dollars 150m, and the injection of new management skills and technology has helped weld a powerful new industrial force in central Europe which should generate 4 to 5 per cent of ABB's global revenues in three years' time.

East Europe P9611 Administration of General Economic Programs P99 Nonclassifiable Establishments COMP Company News P9611 P99 The Financial Times London Page XVIII 1077
London Stock Exchange: Charter deal welcomed Publication 930210FT Processed by FT 930210 By CHRISTOPHER PRICE, JOEL KIBAZO, PETER JOHN and STEVE THOMPSON

IN A POOR session in the market, the spotlight fell on the day's biggest deal, in which industrial group Charter Consolidated finally offloaded its 38.3 per cent holding in metals refiner Johnson Matthey.

The deal was executed in two parts. A 20 per cent stake was sold to a company jointly owned by Johannesburg Consolidated Investment and Minorco. In an unexpected move, the remaining 18.3 per cent was quickly placed in the market with institutions by BZW and UBS Phillips & Drew. The two securities houses were reported to have paid 455p a share and passed the stake on at 456p.

Turnover in Johnson Matthey jumped to 66m as the stock dropped 19 to 473p, while Charter followed the market lower and closed 28 down at 656p.

Mr Rob Davies at Lehman Brothers said: 'This is a good deal for Charter. In addition, it not only removes the uncertainty over Johnson Matthey but also increases the liquidity in the stock.'

Following the sale, speculation about how Charter was to use the proceeds of the deal did the rounds. One view was that it may buy out the 35.8 per cent stake in Charter held by Minorco. Another view was that it may bid for engineering group Vickers, 2 firmer at 124p.

Storehouse falls

Hints that the chief executive of Storehouse might be about to leave the group sent the shares into swift retreat amid unusually heavy turnover of 8.9m.

The rumours in the UK market appeared to centre on an article in a US trade magazine which suggested that Mr David Dworkin had been approached by Carter Hawley Hale, the Los Angeles-based store chain. Storehouse refused to comment although a statement is expected today.

The shares fell heavily, slipping 17 before recovering to close 11 off at 194p. Stores specialists said that, if true, the news would spell an uncertain time for the shares, which have staged a dramatic recovery, climbing from 85p in January last year.

Mr Dworkin is credited with having turned Storehouse around and analysts said finding a comparable executive replacement would be difficult.

Wellcome firm

Pharmaceuticals group Wellcome was one of the rare bright spots in a depressed FT-SE 100 Index as two securities houses recommended the stock. The shares held firm all day and closed 10 higher at 895p.

Mr Robin Gilbert of broking house Panmure Gordon issued a 16-page analysis highlighting Wellcome as the key buy in the sector.

He said Zovirax, the group's anti-herpes drug, and Retrovir, its anti-Aids treatment, were the only two headline drugs in the sector which were cheaper in the US than in Europe. Consequently, they were less likely to come under pressure from the Clinton administration, which has promised to attack the whole area of drug pricing.

Also, US house Lehman Brothers was advising its clients to switch out of SmithKline Beecham, arguing that Wellcome was cheaper in price/earnings terms. SmithKline 'A' fell 15 1/2 to 448 1/2 p and the Units 15 to 389p.

Waters wanted

The water sector moved sharply higher just before the close after suggestions that Ofwat, the water industry watchdog, is about to tell the water companies that increased efficiency in their core businesses could be passed on to shareholders via dividend payments. But, utilities specialists pointed out, inefficient companies would have their dividend payouts restricted.

Talk that letters confirming Ofwat's efficiency/dividend strategy will be received by the water companies today saw the sector substantially outperform the wider market.

Welsh Water was seen as a prime beneficiary of the move and raced up 11 to 552p, closely followed by Wessex Water, which settled 7 better at 597p; Wessex nil-paid closed 6 firmer at 113p. Other good performances in the sector came from Southern, 5 ahead at 492p, and Northumbrian, 4 harder at 566p.

US sells Reuters

US analysts took a harder view on the full-year figures from Reuters Holdings than their UK colleagues and early firmness in the stock was undermined when Wall Street opened. Reuters profit of Pounds 382.2m was so close to UK analysts' forecasts that the share price gave virtually no response.

The chief executive's statement, traditionally cautious, was relatively upbeat and the market liked the near 25 per cent rise in the dividend. Early indications suggested forecasts for this year would rise to between Pounds 430m and Pounds 440m. The shares were marginally higher at one stage but US analysts had been expecting more from the results and US selling took the London price to a close of 15 off at 1382p.

The financial areas of the market remained among the market's favourities to provide the next heavy rights issue. Lloyds Bank assumed the role of the bank most likely to ask shareholders for cash and dipped 17 to 517p.

Sun Alliance's Pounds 155m convertible bond issue lifted lingering fears of a rights issue but did not prevent the shares declining 9 to 333p. Commercial Union remained the sector favourite to launch a fund-raising attempt and the shares lost 22 more to 598p. Specialists said the 11 1/2 per cent and 8 3/4 per cent yields on CU's two tranches of preference stock issued last year were looking demanding and could be replaced with equity capital.

The prospect of a broad agreement on output cuts at this weekend's Opec meeting prompted another strong performance from an oil sector boosted by a further slide in sterling.

British Gas receded 6 1/2 to 283 1/2 p, unsettled by the Ofgas annual report, and profits downgrades instigated by Hoare Govett, the company's broker. Hoare cut its 1992 net income estimate to Pounds 865m and its 1993 figure to Pounds 980m, in spite of emphasising its positive stance on the stock.

Aran Energy was the market's second most heavily traded stock with more than 14m shares changing hands. Smith New Court was responsible for most of the buying after publishing a strong buy recommendation. Aran closed 2 1/2 up at 23 1/2 p.

Tobacco and insurance group BAT Industries led the downward trend as SG Warburg Securities nudged back its stance on the shares. The stock hit 967p before rallying to close 18 off at 976p.

Further speculation over the terms and conditions of the Kingfisher bid for Darty, the French electrical retailer, left the market none the wiser. Yesterday's focus was again on the level of the rights issue that will be required to finance any offer, with a variety of rumours circulating. The strongest suggested an announcement was imminent over a one-for-12 call at 480p. All combined to weaken the shares, which had performed well in recent sessions as fears of a Pounds 1bn issue were scaled down. The shares closed 5 adrift at 526p.

Another bid target, Clifford Foods, added 2 at 515p, while one of its rumoured predators, Unigate, put on 4 at 331p. A line of 5m shares in Albert Fisher was said to have unsettled the stock, off 6 at 66p.

Hunting jumped 13 to 233p after the company announced the sale of its protective coatings subsidiary to Williams Holdings. Mr Clive Forrestier-Walker at Charterhouse Tilney said the deal would enhance profits at Hunting substantially over the next two years. Williams closed 2 lighter at 342p. British Steel remained active and turnover rose to 9.4m as the shares lost 2 to 75p.

NEW HIGHS AND LOWS FOR 1992/93

NEW HIGHS (225).

BRITISH FUNDS (6) Exch. 3pc Gas 1990-95, Tr. 2 1/2 pc I-L 2001, Tr. 2 1/2 pc I-L 2003, Tr. 2pc I-L 2006, Tr. 2 1/2 pc I-L 2009, Tr. 2 1/2 pc I-L 2011, AMERICANS (23) Amer. Express, Amer. T & T, BankAmerica, Bankers NY, Bowater, Chase Manhattan, Chrysler, Contl. Bank, Dana, Eaton, FPL, Ford Motor, Gen. Elec., Gen. Host, Honeywell, Lowe's, Morgan (JP), Pennzoil, Rep. NY, Rockwell, Sun Co., Texaco, Whirlpool, CANADIANS (5) Amer. Barrick Res., Bank of Nova Scotia, Imperial Oil, Nova Corp of Alberta, Rio Algom, BANKS (6) Asahi, Dai Ichi, Deutsche, Mitsubishi, Natl. Aust., Sumitomo, BREWERS (2) Boddington, Seagram, BLDG MATLS (5) Lafarge, Marshalls 6 1/2 pc Pf., St. Gobain, Sheffield Insulations, Titon, BUSINESS SERVS (3) Htchsn Whampoa, Johnson Cleaners, Manpower, CHEMS (6) Akzo, BASF, BTR Nylex, Bayer, Hoechst, Sutcliffe Speakman, CONGLOMERATES (1) Wassall, CONTG & CONSTRCN (2) Bellway, Eve, ELECTRICALS (9) Critchley, Ericsson, Johnson Electric, Mitsubishi Elec., Pifco, Do. A, Sony, TDK, Toshiba, ELECTRICITY (1) China Light, ELECTRONICS (7) Admiral, Cray, Diploma, Eurotherm, Learmonth & B, Misys, Siemans, ENG AERO (1) Hunting, ENG GEN (2) Barry Wehmiller, Powerscreen, FOOD MANUF (3) Acatos & Htchsn., Goodman Fielder W, Unilever, FOOD RETAILING (2) Ashley Pf., Iceland, HEALTH & HSEHOLD (3) Bespak, Paterson Zochonis, Takare, HOTELS & LEIS (1) Boosey & Hawkes, INSCE BROKERS (1) Marsh & McLennan, INSCE COMPOSITE (1) Aon, INSCE LIFE (1) Lincoln Natl., INV TRUSTS (63) MEDIA (11) GWR, Headline Book, LWT 5 29/32 pc Pf., MMI, Do. Warrants, News Corp., News Intl., Scot. TV, TVS Ent., Ulster TV, United News., MERCHANT BANKS (4) Barings 8pc Pf., Schroders, Do. N/V, Warburg 6pc Pf., MTL & MTL FORMING (1) Downiebrae, MISC (5) Bluebird Toys, Lambert Howarth, Laser-Scan, Portmeirion Potts., Ricardo, MOTORS (3) Avon Rubber, Davenport Vernon, Gen. Motors Units, OIL & GAS (13) Aran Energy, Calor, Chevron, Enterprise, Exxon, Mobil, Monument, Norsk Hydro, Occidental, Ohio Res., Royal Dutch, Santos, Shell Trans., OTHER FINCL (5) AAF, Cattle's, Govett, Oceana Cons., Secure Tst., OTHER INDLS (5) BH Prop., Harris (Ph), Hewitt, Pacific Dunlop, Vinten, PACKG, PAPER & PRINTG (4) Carnaud Metalbox, Enso-Gutzeit, Filofax, Hunters Armley, PROP (3) Brit. Land 8 5/8 pc Bds., Slough Ests. 6pc Bd. 2003, Town Centre, STORES (3) Courts, Essex Furn., Menzies, TELE NETWORKS (1) Telefonica, TEXTS (2) Albion, Celestion, TRANSPORT (1) GATX, WATER (6) Anglian, Cheam A, Severn Trent, Southern, Welsh, Wessex, SOUTH AFRICANS (1) Tiger Oats, MINES (3) Anglo Pacific Res., De Beers 40pc Pf, Navan Res. 5pc Ln. Nts.

NEW LOWS (7).

BLDG MATLS (1) Chieftain, CONTG & CONSTRCN (1) Ball (AH), FOOD RETAILING (1) Appleby Westward, HOTELS & LEIS (1) Courtyard Leis., INV TRUSTS (1) Japanese Warrant Fd., PROP (2) Bolton, Jermyn Inv.

Other market statistics, Page 27

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 38 1713
London Stock Exchange: Cash call fears return to haunt shares Publication 930210FT Processed by FT 930210 By TERRY BYLAND, UK Stock Market Editor

A LONDON stock market badly unsettled by weakness in sterling and a host of corporate deals suffered a further setback in late trading yesterday on renewed fears that a large rights issue was about to hit the trading desks. Several of Britain's biggest companies, all due to report profits shortly, were named as possible raisers of equity in the Pounds 1bn-plus range.

Confidence in prospects for a further cut in UK base rates at Budget time were challenged by the continued weakness in sterling. Fears that the pound's fall implies renewed inflationary pressure were fuelled by the announcement yesterday that UK producer input prices had jumped by 1.5 per cent in the month to January, significantly more than predicted in the market.

A firm opening in equities was reversed when two UK investment houses began to sell the FT-SE March futures contract heavily. At worst the stock market showed a loss of 47 points on the Footsie scale.

The Dow Average fell 13 Dow points in UK hours and any benefits for UK equities from a very modest rally in sterling were blotted out by the rights issue rumours.

The FT-SE 100 Index closed 38.7 points down at 2,831.3 with selling pressure increasing at the end of the day. The FT-SE Mid 250 lost 31.6 to 3,019.8. Seaq volume increased smartly to 694.9m shares from the 545.7m of the previous session, when retail business remained brisk at a worth of Pounds 1.03bn. Non-Footsie business made up 61 per cent of Seaq trading yesterday.

Fund managers' caution on rights issue fears was heightened by the prospect of trading statements from virtually all the big Footsie names over the next few weeks. Yesterday brought further calls on institutional cash holdings in the shape of a placing of Johnson Matthey shares following sale of part of the stake held by Charter Consolidated, and a Pounds 155m Euro convertible issue from Sun Alliance; European institutions faced a French franc convertible from Axa, the insurance group.

Taking in rights issues already announced, some Pounds 1.2bn has now been taken out of the equity market since Christmas, and managers fear that impending rights issues alone could mean a drain of Pounds 5bn to Pounds 6bn.

Only the oils and the water stocks stood out against the general rout in share prices. Oil shares benefited from hopes that the Opec countries will agree on production cuts, while water stocks responded to hints of favourable regulatory developments.

But across the rest of the market, there were few safe havens from the profit-takers. Property, building construction and stores shares, all boosted recently on interest rate hopes, turned down smartly.

The banking sector, which opens its reporting season this week, shied away from rights issue worries. Food retailers suffered yet further selling on taxation concern and brewery stocks ran into sellers.

The outlook for this morning's opening appeared unfavourable, with the only comfort coming from the stock index futures market, where the March contract on the Footsie bounced in late trading. Much will depend on whether the stock market is spared a rights issue announcement in the first half of the trading session.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 38 563
World Stock Markets (America): Weak foreign bourses undermine equities Publication 930210FT Processed by FT 930210 By PATRICK HARVERSON NEW YORK

Wall Street

LOSSES ON overseas equity markets, weaker domestic bond prices and continued consolidation of recent gains left US stocks lower across the board yesterday, writes Patrick Harverson in New York.

At the close the Dow Jones Industrial Average was down 22.96 at 3,414.58. The more broadly based Standard & Poor's 500 declined 2.52 to 445.33, the American SE composite receded 2.16 to 415.00 and the Nasdaq composite retreated 6.23 to 692.21. Trading volume on the New York SE came to 240m shares.

Picking up where they left off late on Monday, US investors began selling stocks yesterday. News of weakness in foreign markets, including Tokyo, Frankfurt and, especially, London, set the tone for a downbeat opening.

Lower US Treasury prices - a nervous reaction ahead of the week's big auctions of government securities - and some profit-taking in the wake of last week's record-setting gains only exacerbated the downward trend.

Among individual stocks, the last batch of fourth-quarter earnings reports trickled in. Whirlpool moved ahead Dollars 2 7/8 to Dollars 51 5/8 in busy trading after the company unveiled final quarter 1992 net income of Dollars 62m, up from Dollars 40m a year ago, in spite of a pre-tax restructuring charge of Dollars 18m. Whirlpool also announced that its financial unit would be withdrawing from its aerospace and most of its commercial financing activities.

Goodyear Tire & Rubber slipped Dollars 1 3/8 to Dollars 70 3/8 after news of a small improvement to Dollars 102.8m in fourth-quarter income, before extraordinary items. After accounting for the early retirement of debt, however, Goodyear's net income dropped from Dollars 105m seen a year ago to Dollars 87.5m - in line with market expectations.

Sears Roebuck firmed Dollars 1/8 to Dollars 49 1/2 in solid two-way trade after the retailing group reported a net loss of Dollars 1.8bn in the fourth quarter in the wake of a number of significant special items. If the impact of those items was ignored, Sears' income from continuing operations rose from Dollars 433.6m posted a year ago to Dollars 504.2m.

News Corporation advanced Dollars 1 1/2 to Dollars 39 7/8 on news that the multinational media and entertainment group's operating income for the second fiscal quarter had risen from the 67 cents a share recorded a year earlier to 91 cents a share.

IBM bucked the trend, rising Dollars 1/2 to Dollars 53 3/8 in volume of 3.6m shares. Other big computer stocks were also firmer. Canada

TORONTO moved higher in heavy trading as a surge in gold stocks helped to extend the market's February rally.

The TSE 300 index ended 19.3 ahead at 3,414.1 and rises outnumbered declines by 337 to 303 after volume of 53m shares valued at CDollars 479m.

Eight of the 14 stock groups gained ground, led by the golds sector, up 3.7 per cent. The spot price for gold in New York rose 40 cents to USDollars 328.45 an ounce, but the day's excitement among precious metals came from a surge in platinum, USDollars 5.50 stronger at USDollars 366 an ounce.

American Barrick rose CDollars 1 3/8 to CDollars 40 7/8 to lead the gold group. On Monday the company declared a two-for-one stock split and lifted its dividend by about 23 per cent.

United States of America Canada P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 581
World Stock Markets (Asia Pacific): Japanese exporters sold after rise in yen Publication 930210FT Processed by FT 930210 By EMIKO TERAZONO TOKYO

A SHARP rise in the yen against the dollar prompted selling in export-related issues and share prices lost ground as cautious investors refrained from activity, writes Emiko Terazono in Tokyo.

The Nikkei average shed 259.46 to 17,022.27, having opened at the day's high of 17,261.56. The index recorded the day's low of 16,976.72 on investment trust and arbitrage selling in the afternoon before recovering to the 17,000 level on buying by corporate investors at the end of the session.

Volume declined to 190m shares from 203m. Losers led gainers by 769 to 183, with 165 issues unchanged. The Topix index of all first section stocks lost 13.49 to 1,296.10 and, in London, the ISE/Nikkei 50 index eased 0.92 to 1,046.93.

Equities initially met selling from investment trusts and arbitrageurs, before the yen jumped against the dollar on reports that Mr Fred Bergsten, director of the Institute for International Economics, of the US, had said at a seminar in Kyoto that the desirable range for the yen was Y100 to Y110 against the dollar. Reports that European Community leaders were calling for a reduction in Japan's trade surplus also accelerated buying of the yen.

The currency rose to an intraday high of Y121.95 against the dollar, before closing at Y122.35. The dollar fell below the Y122 level for the first time since October 28 last year.

Isuzu Motors, the day's most active issue, slipped Y7 to Y374 on profit-taking by dealers, while shares bought on the 'restructuring theme' also declined as investors took profits: Oki Electric receded Y15 to Y395 and Nissan Chemical retreated Y5 to Y750.

High-technology exporters lost ground on earnings worries due to the higher yen. Fujitsu weakened Y12 to Y547, NEC Y15 to Y637 and Hitachi Y14 to Y707.

Uni-Charm, leading diaper maker, appreciated Y20 to Y1,780 on hopes of a 40 per cent rise in pre-tax profits for the current year to March.

Dainippon Screen, a precision machinery maker, posted its third consecutive advance, rising Y13 to Y653. Individual investors sought the issue on hopes of strong sales for its semiconductor manufacturing equipment and liquid crystal displays.

In Osaka, the OSE average dipped 164.97 to 18,496.56 in volume of 59.5m shares.

Roundup

TRADING was quiet throughout much of the region, although Sydney provided a bright spot.

AUSTRALIA moved sharply higher after Prime Minister Paul Keating announced plans to cut company tax from 39 per cent to 33 per cent; subsequent profit-taking pared the gains.

The All Ordinaries index, which rose 50 points to a six-month intraday high of 1,609 on the government's statement, ended 24.5 up at 1,583.9 in heavy turnover of ADollars 486.6m.

The other highlight of trade was an ADollars 1.20 rise by News Corporation at ADollars 29.90 after touching a record ADollars 31.18 on announcing interim net profits up 27.5 per cent.

HONG KONG saw some early excitement which took the Hang Seng index more than 20 points higher on reports, subsequently denied, that China and Britain would resume talks on the colony's future next month.

Later trading lacked impetus and the index eased back to end just 2.87 ahead at 5,789.52 in thin volume of HKDollars 1.57bn.

SINGAPORE was modestly firmer after a quiet day as investors awaited details of the government's proposed goods and services tax, announced after the market closed.

The Straits Times Industrial index gained 8.79 at 1,624.52 as late bargain hunting reversed early losses.

KUALA LUMPUR edged lower on profit-taking after the recent surge. The composite index lost 1.63 to 639.97.

A two-day meeting of Malaysia's hereditary rulers, beginning today, over constitutional amendments to remove their legal immunity also made investors cautious.

Technology Resources rose 30 cents to MDollars 2.09 in turnover of 35.4m shares after news that it will distribute shares in its Malaysian Helicopter unit free to shareholders.

BOMBAY climbed again on speculative pre-budget buying, the BSE index finishing 59.53 stronger at 2,771.68.

Japan, Asia Australia Hong Kong, Asia Singapore, Asia Malaysia, Asia India, Asia P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 695
World Stock Markets (Europe): Stockholm takes comfort from Ericsson Publication 930210FT Processed by FT 930210 By Our Markets Staf

ERICSSON gained 9.4 per cent yesterday after releasing 1992 results which exceeded most analysts' forecasts, writes Our Markets Staff.

STOCKHOLM took new life after the Ericsson results, lifting the B shares by SKr18 to SKr209 and the Affarsvarlden General index by 4.2 to 948.9. Turnover was SKr1bn after SKr1.2bn on Monday, with Ericsson accounting for some SKr341m.

Profit-taking affected some other issues after recent gains: Volvo B lost SKr1 to SKr385 and Skanska B fell SKr3 at SKr88. Electrolux B improved SKr6 to SKr224.

OSLO rose 3.1 per cent to its highest close of the year as investors were encouraged by lower interest rates . The all-share index rose 12.23 to 401.86 in turnover of NKr456.8m.

Hafslund, which reported good 1992 earnings on Monday, advanced NKr6.50 in the B shares to NKr151.00.

COPENHAGEN extended its slide, depressed by high interest rates, the KFX index losing another 1.36 to 82.10. Den Danske Bank fell DKr6.27 to DKr285 after solid gains in recent weeks and Sophus Berendsen was DKr13 lower at DKr416, affected by the fall in sterling. HELSINKI closed higher on a fall in domestic interest rates, the Hex index rising 11.8 to 911.0.

FRANKFURT eased, but chemicals improved as the DAX index closed 5.58 lower at 1,641.58 in turnover down from DM6.4bn to DM5.8bn.

BASF, the neglected stock among the big three over the past year or two, led the sector yesterday with a rise of DM2.40 to DM227, Bayer adding DM1.10 to DM275.60 and Hoechst a modest 30 pfg to DM264.30.

Hoare Govett said this week that BASF had 'considerable potential' for a positive dividend surprise, and cyclical recovery prospects but that Hoechst, even with its large US operations, was overvalued after a long run of relative strength on the dollar.

Meanwhile, AMB defied the ebb in financials with a rise of DM15 to DM885 taking its gain to DM100 this month. Mr Bob Yates at Fox Pitt said that speculation about AMB's ownership structure, 29 per cent with AGF of France ('in the driving seat') and 20 per cent with Fondiaria in Italy, ignored the perils of being in a German minority.

PARIS weakened further with Eurotunnel, down FFr1.15 to FFr37.70 on profit-taking, continuing to be the most active stock. The CAC-40 index finished down 10.68 at 1,894.05 in turnover of FFr2.8bn.

Havas rose FFr9.50 to FFr439.00 with two large blocks totalling 250,000 shares going through the market: there was speculation that Lyonnaise-Dumez, down FFr4.90 at FFr425.20, might have been selling part of its stake.

Chargeurs improved FFr7 to FFr1,369 on news that it might increase its stake in BSkyB, the UK satellite operator, and Bouygues shed FFr6 to FFr634 on taking a 26 per cent shareholding in a South African building group.

Axa, which fell sharply after it announced a FFr3.6bn convertible bond issue after the Monday's close, lost FFr28 to FFr1,114, while Total slipped FFr3.70 to FFr235.60 on 1992 figures which were generally in line with expectations.

ZURICH consolidated after last week's gains and the SMI index eased 1.5 to 2,135.7.

Nestle bearers were unchanged at SFr1,085 as it announced the sale of parts of its Perrier mineral water operations to SAI, French parent company of the Castel group.

MILAN marked time after its recent strong run as trading fell off ahead of the close of the monthly trading account next Monday. The Comit index fell 9.44 to 499.68. Fiat set the tone, fixing L163 lower at L4,686 and falling to L4,615 after hours.

Banco di Roma, L44 higher on Monday, rose another L39 to fix at L2,049 before trading up to L2,060 amid renewed speculation about the bank's privatisation.

AMSTERDAM saw currency sensitive stocks fall back as the CBS General index closed down 0.1 at 97.9. Elsevier and Unilever were affected by weaker sterling, declining byFl 2.10 and Fl 1.20 respectively to Fl 126.00 and Fl 195.40.

Akzo and DSM reversed the trend with gains of Fl 1.20 and Fl 1.50 respectively to Fl 144.20 and Fl 74.90.

MADRID dropped on gloomy economic news and futures-related selling. The general index lost 4.14 to 235.03, reflecting profit-taking after last week's gains, and higher unemployment and lower economic growth.

ATHENS put on another 6 per cent with the banking sector leading the way, mainly on strong domestic buying. The index rose 48.44 to 882.07 in turnover estimated at some Dr5-6bn, up from Monday's Dr3bn and well ahead of the average daily figure of Dr1bn.

TEL AVIV closed sharply lower in active trading in reaction to comments by the Bank of Israel governor, Mr Jacob Frenkel, warning that the market was a 'bubble'. The blue chip index fell 4.8, or 2.2 per cent to 213.37, its first loss after seven consecutive gains.

----------------------------------------------------------------------- FT-SE ACTUARIES SHARE INDICES ----------------------------------------------------------------------- February 9 THE EUROPEAN SERIES ----------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1125.86 1126.30 1126.32 1124.99 FT-SE Eurotrack 200 1180.11 1179.78 1179.10 1177.43 ----------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close -----------------------------------------------------------------------

FT-SE Eurotrack 100 1126.04 1125.99 1124.93 1124.14 FT-SE Eurotrack 200 1177.97 1177.46 1176.17 1177.40 ----------------------------------------------------------------------- Feb 8 Feb 5 Feb 4 Feb 3 Feb 2 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1131.12 1129.52 1113.35 1097.03 1089.43 FT-SE Eurotrack 200 1190.15 1189.21 1183.60 1171.25 1155.59 ----------------------------------------------------------------------- Base value 1000 (26/10/90) High/day: 100 - 1126.58; 200 - 1181.19 Low/day: 100 - 1123.73 200 - 1173.84. -----------------------------------------------------------------------

Sweden, West Europe Norway, West Europe Denmark, EC Finland, West Europe Germany, EC France, EC Switzerland, West Europe Spain, EC Netherlands, EC Italy, EC Greece, EC Israel, Middle East P6231 Security and Commodity Exchanges COSTS Equity prices CMMT Comment & Analysis P6231 The Financial Times London Page 35 953
World Stock Markets: Seoul awaits new stimuli after late rally in 1992 - The recent recovery in South Korea Publication 930210FT Processed by FT 930210 By JOHN BURTON

The recent cut in South Korea's official interest rates is expected to have mixed effects on the Seoul equity market this year.

Most analysts believe that the cut will lay the foundation for a recovery in the second half of the year as economic conditions improve, although it will not match the gains which the market has achieved in the past six months.

The immediate result has been profit-taking, and a fall in the Korea composite index from a January 9 high of 709.77 to yesterday's 675.33. The market had already anticipated the interest rate cut,

rising by 55 per cent from last year's low.

The rise in share prices also reflected investor confidence in the country's political stability following the mid-December election of Mr Kim Young-sam of the ruling Democratic Liberal Party as the country's next president. Expectations that the economy will rebound this year after a dismal 1992 was another reason for the advance.

There are predictions that the market will reach the 800-point level later this year after a sluggish first half. 'The recent downturn in share prices is natural given the highly speculative nature of the Seoul market,' says Mr Andrew Holland, research director for Barclays de Zoete Wedd in South Korea, but falling interest rates are expected to encourage the placing of more funds in the liquidity-driven equity market, as bonds become less lucrative.

More foreign money is also expected to flow into the Seoul bourse if the government keeps its promise of increasing the foreign investor ceiling from the current 10 per cent to 15 or 20 per cent later this year. The foreign shareholding limit has been filled for about 10 per cent of the 691 companies listed on the exchange.

Foreigners made a net investment of Dollars 2.07bn in the market in 1992, the first year the bourse was open to direct investment from abroad. Foreign investment could double this year due to the expanded foreign shareholding quota; in January, at Dollars 476m, it reached its highest ever monthly total.

The relaxation on foreign investment controls should coincide with an improvement in earnings, as lower interest rates reduce the financial costs of Korea's overleveraged companies. The Ministry of Finance estimates that falling interest rates will reduce total corporate financial expenses by Won3,000bn (Dollars 3.7bn); analysts predict that earnings will increase by 10 to 20 per cent.

The interest rate cut is considered a preliminary step to several stimulative measures the new government will take this year to boost economic growth. Officials hope to achieve GNP growth of 6 per cent in 1993, against an estimated 4.5 per cent last year, the worst economic performance since the 1980 recession.

Several large infrastructure projects could boost the share price of construction stocks, while lower interest rates may benefit financial shares.

Investor interest in small and medium-sized companies is expected to recover: the state plans to provide more credit to these concerns to prevent a further wave of the bankruptcies which reached a near-record level last year.

Bank shares may also be bolstered as the government unveils proposals in mid-year about a restructuring of the financial industry, which could include plans for bank mergers.

Analysts warn, however, that the bourse is likely to peak at around 800, as institutional investors sell a large overhang of securities which they acquired in 1990 when the market was last at that level.

An administrative guideline introduced last August - requiring institutional investors to buy more stock than they sell - has so far prevented them from disposing of their share surplus. But this market-boosting measure is unlikely to be extended by the government past May or June.

An expected increase in share offerings to take advantage of an expiring corporate tax deduction could also soak up liquidity and depress prices.

Another possible adverse factor is interest rate deregulation. Most lending and deposit rates are scheduled to be freed this year, which is expected to drive up interest rates in the short term. Although industry generally considers interest rate reform essential to its future prosperity, the immediate effect may be to curb the market's climb.

South Korea, Asia P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6231 The Financial Times London Page 35 732
World Stock Markets: South Africa Publication 930210FT Processed by FT 930210

CONTINUED foreign demand for gold shares helped to underpin a broad Johannnesburg advance and the golds index climbed 23 to 891. The overall index rose 22 to 3,474 and industrials moved ahead 27 to 4,609.

South Africa, Africa P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 35 63
Money Markets: Few hopes for repo Publication 930210FT Processed by FT 930210 By JAMES BLITZ

SENTIMENT IN both the French and German money markets remained dull yesterday as dealers assumed that another cut in German interest rates might still be some way off, writes James Blitz.

The Bundesbank announced that tomorrow's weekly intervention in the German money markets will be by means of variable rate repos for 14 and 28 days.

But call money yesterday hovered around the level of 8.60 per cent, suggesting that few dealers expected the lowest accepted bid for funds to fall below the current level of 8.57 per cent.

'There may be a few points off the repo rate,' said one London based dealer, 'but I would be very surprised if it were much more than that.'

Last Thursday, the Bundesbank's announcement that it would be holding a press conference after its fortnightly council meeting brought out the rate cut bulls, forcing three-month D-Marks below 8 per cent and the March Euromark contract as high as 92.30.

But yesterday, both instruments were back to where they were before the rate cut announcement. Three-month money closed at 8.32 per cent and the March contract finished at 92.02, suggesting that three-month money next month will be at 7.98 per cent. A dealer suggested that this was proving to be a stable level for the contract.

Sentiment in the French market remained dull. One-month French francs crept up to 11.75 per cent on the bid side in the early morning, and stayed there for the rest of the day. Three-month rates were also at that level for most of the day.

The March French franc contract continued to be sold heavily, dropping 34 basis points before recovering to a close of 88.87.

Three-month sterling cash firmed to 6 3/16 per cent from 6 1/8 per cent as the pound slipped on the foreign exchanges.

The March sterling contract fell 7 basis points to a low for the day of 94.10 before ending back at 94.17. At this level, it assumes that three-month money at UK Budget time will be at 5.83 per cent.

Conditions in the discount market were a great deal easier after a sticky day on Tuesday. The Bank of England forecast a shortage of Pounds 1.1bn at the start of the day, which was completely removed. The overnight rate was seen as low as 2 per cent at around 10am.

Germany, EC France, EC United Kingdom, EC P6231 Security and Commodity Exchanges COSTS Costs & Prices P6231 The Financial Times London Page 29 427
Foreign Exchanges: The yen returns to the stage Publication 930210FT Processed by FT 930210 By JAMES BLITZ

THE Japanese yen enjoyed a remarkable rally against both the D-Mark and the dollar yesterday after months of almost dormant trading, writes James Blitz.

The cause of the rally was growing speculation that G7 policy-makers might call for a stronger yen to try and reduce Japan's huge trade surplus vis-a-vis the US.

Two specific incidents triggered the flight into the Japanese currency. The first was a Japanese newspaper report, which could not be substantiated, suggesting that the European parliament had expressed concern that the yen was undervalued against the dollar.

Reports that Mr Lloyd Bentsen, the US treasury secretary, would have a weekend meeting with Mr Yoshiro Hayashi, the Japanese finance minister, also raised speculation that the Clinton administration would like to see a stronger yen.

The currency finished at Y73.42 against the D-Mark after a previous close of Y74.91. Against the dollar, it ended at Y121.35, up from a previous Y124.0; and later in New York closed at Y121.17.

In Europe, sterling continued to dominate events, falling to an historic low against the Exchange Rate Index and testing the all-time low against the D-Mark of DM2.3470.

For the second day running, the UK currency was the victim of a heavy sell-off in the morning, only part of which was retraced in the afternoon.

At about 7.45am in London yesterday, the pound was trading at about DM2.3775. Over the following two hours its exchange rate against the D-Mark suffered a sharp fall, bottoming out at DM2.3480 at around 9.30am.

The currency recovered around a pfennig over the next hour, but was again hit by the release of the January input prices data. This showed that the cost of raw materials purchased by manufacturers rose by a seasonally adjusted 1.5 per cent between December and January.

Sterling closed in London at DM2.3625, down 2 pfennigs on the day and 3.25 pfennigs on the week so far. In trading yesterday, the pound hit its lowest level against the dollar this year, Dollars 1.4150, before finishing at Dollars 1.4305, off nearly a cent on the day. In New York it ended trading also at Dollars 1.4305.

Some said the pound's loss of value was exaggerated by the thinness of the market, although there were signs of heavy selling by institutions from the US and Middle East. Few dealers could make a firm bet on how the currency would move in the next few days.

Sterling's fall was partly triggered by a perception that German rates were unlikely to come down by much at today's weekly Bundesbank intervention.

'We can expect a lowest accepted repo of 8.50 per cent at the very best,' said one dealer, recalling that last week's rate was 8.57 per cent.

The duller sentiment was felt by the French franc, which closed at FFr3.3850 per D-Mark, down from FFr3.3810.

Japan, Asia Germany, EC United States of America United Kingdom, EC P6231 Security and Commodity Exchanges COSTS Costs & Prices P6231 The Financial Times London Page 29 512
Commodities and Agriculture: Minority group may block banana plan Publication 930210FT Processed by FT 930210 By DAVID GARDNER BRUSSELS

THE EUROPEAN Commission was bracing itself for a potentially embarrassing upset last night, as signs emerged that a minority of European Community member states led by Germany might block the controversial agreement reached last December setting quotas and tariffs on banana imports from Latin America.

Germany and Denmark held out against the agreement in December, when it was passed by qualified majority vote. Since then, however, new objections have been raised by the Benelux countries. If all five countries combined, they would have enough strength under the EC's weighted voting system to block the measure.

The new regime, which is scheduled to be agreed by the end of this month and to start operating on July 1, fixes a 2m tonnes quota for Latin American so-called 'dollar bananas', at a reduced duty of Ecu100 (Pounds 82) a tonne, and imposes an Ecu850 tariff - about 170 per cent - on imports above this level.

Eight Latin American governments immediately expressed their 'absolute rejection' of December's agreement in principle, and said they would challenge it through the General Agreement on Tariffs and Trade.

The EC move is intended to unify the community's disparate banana regime in line with the principles of its single market; protect high-cost 'Euro-banana' producers from former colonies and outlying territories like Spain's Canary Islands and French Martinique; and bring its system of protection into line with the Gatt's Uruguay Round trade reform negotiations, which require tariffs on all farm produce, that subsequently can be reduced.

The EC countries hostile to the plan consume the bigger and cheaper Latin American bananas, but had been expected to go along with the plan in the light of these three exigencies.

'We hope the political commitments entered into in December still stand,' said a senior official from the UK, which was then holding the presidency of the EC and so brokered last December's deal.

As community farm ministers met yesterday, the odds were nevertheless perceived to be slightly against a blocking minority coalescing.

Denmark, as current president of the EC, was expected to stay out of the dispute, since the presidency's primary goal is to conciliate. Mr Rene Steichen, the new farm commissioner, may have some influence in restraining his native Luxembourg, whose agriculture minister he was until January.

Germany, moreover, senior commission officials argue, appears to have the impression that the 2m tonnes quota is semi-fixed, whereas the commission's intention is to adjust it on at least a monthly basis in line with demand.

Germany, its allies, and the Latin Americans complain, however, that the quota is well below the 2.4m tonnes of dollar fruit the EC imported in 1991, equivalent to two thirds of total consumption. There is further controversy about plans to allocate a third of dollar fruit licences to traditional Eurobanana importers, enabling them thereby to cross-subsidise their own operations.

However, Latin American imports surged by a third between 1988 and 1991, in what the commission describes as 'speculative imports' by exporters positioning themselves for the EC single market, which started up last month.

Ministers were not expected to vote on the controversy until today.

Benelux, EC Germany, EC Denmark, EC European Economic Community (EC) Latin America P0179 Fruits and Tree Nuts, NEC P9641 Regulation of Agricultural Marketing MKTS Foreign trade GOVT International affairs P0179 P9641 The Financial Times London Page 28 573
Commodities and Agriculture: Holding the line on farm reform - Tough challenges facing the new EC commissioner Publication 930210FT Processed by FT 930210 By DAVID GARDNER

MR RENE Steichen of Luxembourg, the European Community's new farm commissioner, has taken over the most powerful job in European agriculture at a peculiarly difficult time.

Farmers across Europe are blaming their declining incomes and the continuing exodus from the land on the reform of the Common Agricultural Policy, as well as agreements with the US within the General Agreement on Tariffs and Trade's Uruguay Round world trade negotiations, to cut food export subsidies.

Mr Steichen's predicament is easily summed up. Farmers are up in arms about measures - CAP reform and the Gatt settlement - which have not yet been applied. His predecessor, Mr Ray MacSharry of Ireland, won plaudits for the most radical overhaul of the CAP in its 30-year history and for averting a trade war with the US within an overall farm trade settlement which was arguably beyond the best the EC could have hoped for.

The new commissioner has none of the glory for these achievements; he merely has to implement them.

He can look forward to brickbats from the farmers for so doing, and sniping from agriculture economists and pundits if he appears to cede any ground to farmers under either the reform or the Gatt trade talks.

As one agriculture official at the European Commission puts it: 'After last year things are as tight as they ever could be, and anything that happens under Steichen will only loosen them.'

Mr Steichen is alive to this danger. 'They say I'm a Trojan Horse for France,' he remarks with certain amusement. It is France's militant farmers and its unpopular Socialist government, which is desperate to placate them, who have proved most determined to block a Gatt deal and pick away at the CAP reform.

Certainly France, the EC's agricultural superpower, was uncomfortable with the abrasive Mr MacSharry.

The Irishman took a firm hold on Directorate-General VI - the powerful Brussels agriculture department previously considered an outpost of the Paris farm ministry - and ruthlessly faced down a succession of French agriculture ministers who were convinced they would get their way until the moment of defeat.

'It's not clear,' one senior commission official says, 'whether Steichen can make his own views DG VI's views.' He adds that despite the new commissioner's own agricultural policy background, his personal staff is top-heavy with generalists - although headed as chef de cabinet by Mr Jim Cloos, the highly-regarded former Luxembourg ambassador to the EC.

Mr Steichen, a 50-year old French-educated solicitor and Christian Democrat, looks as though he will be more emollient. He joined the Luxembourg cabinet in 1984 as state secretary for agriculture, taking over as minister from 1989. He comes across as relaxed, with a light touch, and quick to smile. He chaired the farm council with ease during the stormy first half of 1991, when Mr MacSharry presented his reform to universal vituperation. From France's point of view, it is a welcome change that he speaks French. One of his top aides says that if Mr MacSharry was the man needed to bludgeon reform through, Mr Steichen is more the sort of man needed to put reform to work.

The commissioner insists he will be in regular contact with all EC national farm organisations; last Friday he left officials from Britain's National Farmers' Union with the impression he was more accessible and receptive than Mr MacSharry.

But in presenting this year's farm price package, Mr Steichen has already signalled that he is no soft touch. His underlining that there would be no extra money to buy off national farm interests could almost have been designed for France, which is still pushing for bigger off-sets to the price, output and export cuts in the CAP and Gatt packages.

A running sore for months to come will be the commission's efforts to demonstrate, over protestations led by France and Ireland, that the cuts required under the Gatt deal are compatible with the CAP reform.

Mr Steichen nailed his colours to the mast in a keynote speech last month. 'The figures I have show that, overall, the concessions made by the EC (within the Gatt) - and the ones made to us as well, which we too often forget - are within the framework of the reform and guarantee the security of the CAP.'

Like Mr MacSharry, he believes the EC-US deal on farm trade means international recognition of the CAP. He is anxious to wrap up the oilseeds agreement with the US quickly, and for an early conclusion to the Uruguay Round of Gatt negotiations, in order to shore up these agreements. For without that recognition, all the community's main commodity regimes would be vulnerable to challenge through the Gatt. And that, in the longer run, could mean curtains for the CAP, reformed or unreformed.

European Economic Community (EC) P9641 Regulation of Agricultural Marketing P9721 International Affairs PEOP Personnel News CMMT Comment & Analysis P9641 P9721 The Financial Times London Page 28 849
Commodities and Agriculture: Minor metals prices Publication 930210FT Processed by FT 930210

Prices from Metal Bulletin (last week's in brackets).

ANTIMONY: European free market 99.6 per cent, Dollars per tonne, in warehouse, 1,665-1,710 (1,670-1,710).

BISMUTH: European free market, min. 99.99 per cent, Dollars per lb, tonne lots in warehouse, 2.20-2.40 (same).

CADMIUM: European free market, min. 99.5 per cent, Dollars per lb, in warehouse, 0.40-0.50 (same).

COBALT: European free market, 99.5 per cent, Dollars per lb, in warehouse, 15.50-16.00 (14.90-15.50).

MERCURY: European free market, min. 99.99 per cent, Dollars per 76 lb flask, in warehouse, 120-145 (same).

MOLYBDENUM: European free market, drummed molybdic oxide, Dollars per lb Mo, in warehouse, 1.85-1.95 (same).

SELENIUM: European free market, min 99.5 per cent, Dollars per lb, in warehouse, 4.70-5.40 (same).

TUNGSTEN ORE: European free market, standard min. 65 per cent, Dollars per tonne unit (10 kg) WO, cif, 38-48 (40-50).

VANADIUM: European free market, min. 98 per cent, Dollars a lb VO, cif, 1.65-1.70 (1.70-1.80).

URANIUM: Nuexco exchange value, Dollars per lb, UO, 7.65 (7.85).

------------------------------------- LME WAREHOUSE STOCKS (As at Monday's close) ------------------------------------- Tonnes ------------------------------------- Aluminium +7,250 to 1,635,625 Copper +1,900 to 317,375 Lead +50 to 233,800 Nickel +480 to 79,818 Zinc -450 to 532,325 Tin -50 to 16,955 -------------------------------------

World P3339 Primary Nonferrous Metals, NEC COSTS Commodity prices STATS Statistics MKTS Market data P3339 The Financial Times London Page 28 228
Commodities and Agriculture: NZ polishes apples for Japanese sales drive Publication 930210FT Processed by FT 930210 By TERRY HALL WELLINGTON

NEW ZEALAND'S apple growers are in a buoyant mood as they pick the new season's fruit. Thanks to the Japanese the export outlook has never been rosier.

From June New Zealand looks set to be the first major apple producer in the world to be able to export its fruit to Japan, which has a keen appetite for the fruit. This depends on final acceptance by the Japanese that New Zealand can effectively control various moth parasites.

New Zealand exporters acknowledge, however, that gaining a sizeable share of this market will not be easy: for a start the Japanese prefer larger rosy coloured apples of a type they do not now produce, and the condition must be superb. Luckily New Zealand, which has been pioneering new varieties for world markets, believes it could have the answer in an unnamed variety, still known as GS2085. In the meantime exporters hope the Japanese might be persuaded to eat Granny Smiths, Royal Gala, and some other export varieties.

The optimism follows the agreement in principle reached late last year on the treatment of New Zealand apple pests. Mr Joe Pope, chief executive of the Apple and Pear Marketing Board, says he is 'very confident' that the agreement will soon be formalised. 'But it represents a huge challenge. Japan is the most demanding market in the world, and our success there depends only on our ability to perform.'

He says that apples are at present a high-priced luxury in Japan. The large blemish-free fruit produced domestically are virtually hand reared: as each apple is grown it is put into a succession of paper bags to protect it. Apples are sold individually, with a family dividing one up between them.

Mr Pope says New Zealand will have to develop varieties for this market, although Royal Gala would seem suitable, as would the new variety GS2085. 'That will have considerable potential there,' he says.

At present only Korea is permitted to export tiny quantities of apples to Japan so New Zealand has scored something of a coup, Mr Pope claims. He warns, however, that the US is also working hard at securing a similar agreement with Japan and might be as little as six months behind New Zealand.

New Zealand Japan, Asia P0175 Deciduous Tree Fruits P9721 International Affairs MKTS Foreign trade TECH Products TECH Standards P0175 P9721 The Financial Times London Page 28 417
Commodities and Agriculture: India sanctions more cotton sales Publication 930210FT Processed by FT 930210 By KUNAL BOSE CALCUTTA

THE INDIAN federal government has sanctioned an additional cotton export quota of 500,000 bales (170 kg each) for the cotton season which began in September 1992.

Earlier, anticipating a bumper cotton crop and, consequently, a domestic price collapse, the government released 1m bales for export.

Officials say that the only way domestic cotton prices can be maintained at above the recommended minimum level is by stepping up exports. World prices for cotton are higher than Indian prices by at least 10 per cent at present.

In 1991-92 India imported 300,000 bales of cotton.

India, Asia P0131 Cotton MKTS Foreign trade GOVT Government News P0131 The Financial Times London Page 28 127
Commodities and Agriculture: Norwegian oil reserves estimate raised by 12% Publication 930210FT Processed by FT 930210 By KAREN FOSSLI OSLO

THE NORWEGIAN Petroleum Directorate, the industry watchdog, has upgraded its estimate of recoverable reserves from the country's continental shelf by 12 per cent to 10bn tonnes of oil equivalent

The previous assessment, released in 1988, was by far the most pessimistic prognosis on Norway's future prospects as a leading petroleum nation ever issued. But it has proved far off the mark.

The directorate then predicted that there was limited sales potential for Norway's vast natural gas resources. But it now seems that Norway's gas sales to the European continent could more than double from the present annual level of 25bn cubic metres to about 60bn-70bn cu m by the turn of the century.

About 11 per cent, or 1.13bn tonnes of the resources have been produced and sold, the directorate says, and existing production technology will allow for about 4.5bn tonnes of remaining discovered resources to be extracted. Of this, 40 per cent is thought to be oil and 60 per cent gas.

At the current annual extraction rate of 80m tonnes, oil resources will last another 45 years while gas resources will last for about two centuries at an annual production rate of 25m tonnes.

Norway, West Europe P1311 Crude Petroleum and Natural Gas RES Natural resources MKTS Market data P1311 The Financial Times London Page 28 237
Commodities and Agriculture: Grass roots opposition threatens exchange merger Publication 930210FT Processed by FT 930210 By LAURIE MORSE CHICAGO

THE CHICAGO Board of Trade's proposed take-over of the New York Commodity Exchange (Comex) is on the verge of being derailed by belligerent Comex floor traders who believe the deal unfairly benefits the CBoT.

While clearing firms at both exchanges favour the plan for the cost savings it will provide, floor traders are angry that they have been asked to give up their membership equity and voting rights for yet-to-be determined benefits of sharing the CBoT name and an alliance with the world's largest futures exchange.

Despite the increasingly institutional nature of futures trading, floor traders still wield the clout in exchange politics and their approval is crucial for the success of the merger plan.

'I think the offer is insulting, it annoys me,' says Mr Vince Zuccarelli, a Comex floor trader and one of the take-over's more vocal opponents. 'The CBoT wants to buy the Comex without putting up any funds. In fact, they want to buy the Comex with Comex funds. What is it the Board of Trade is bringing to the party?'

The CBoT has proposed to employ its marketing and administrative expertise to boost Comex trading volume and use funds saved from combining operations to form a trust fund to buy out Comex seats. At a packed member meeting at Comex last week, Mr Patrick Arbor, the CBoT Chairman, was pressed for a financial commitment to the Comex, which he proved reluctant to give.

Mr Arbor has since described that meeting as 'emotionally charged' and has stuck to his position. 'Nothing in this deal is carved in granite,' he said, 'but there are some things that are deal breakers.' Specifically, he said the CBOT was not prepared to cover any potential Comex losses or cost overruns. 'Quite frankly, we're businessmen,' he said.

The CBoT has sent the plan to a committee of attorneys and accountants. Mr Arbor says it could take 18 months to complete the contract. In the meantime officials at both exchanges will attempt to soft-sell the plan to Comex members.

Mr Richard Sandor, a derivatives executive at Kidder Peabody and the architect of the takeover proposal, will pitch the benefits of the plan to Comex traders at a meeting this afternoon. He is likely to encounter traders who share Mr Zuccarelli's belief that a merger with a New York exchange is preferable to a long-distance marriage with the CBoT.

New York's five futures exchanges have a history of squabbling with one another. However, the CBoT's take-over bid could force local consolidation even if it fails. If the CBoT plan is refused, another suitor will emerge, predicts Mr Lou Guttman, chairman of the New York Mercantile Exchange and a Comex member. 'Comex cannot continue independently as it has the last several years,' he said. Any exchange in the country would be willing to take Comex on the terms proposed by the CBoT, Mr Guttman added.

Chicago Board of Trade (US) New York Commodity Exchange (US) United States of America P6231 Security and Commodity Exchanges COMP Merger P6231 The Financial Times London Page 28 528
World Commodities Prices: Market Report Publication 930210FT Processed by FT 930210 By REUTER

Robusta COFFEE prices closed down heavily at the London Future's and Options Exchange in the wake of Monday night's late 5 cent fall in the New York arabica market. London continued to be less volatile than New York, partly because of lower fund participation. New York prices fell further in early trading on renewed technical selling, but later were recovering some of the losses. London dealers said the market remained very edgy. Technical factors were still driving prices, with fundamental influences pushed firmly into the background. On the LME ALUMINIUM and NICKEL prices, which touched respective five and four-week highs, gave up some of the gains by the close as the higher levels attracted profit-taking. Dealers said the strength of both metals appeared to be technically motivated, with little news or physical activity to justify advances. On Nymex PALLADIUM futures were hovering near life-of-contract highs at midday as widespread worries over near-term supplies remained the dominant factor.

Compiled from Reuters

United Kingdom, EC P0179 Fruits and Tree Nuts, NEC P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices MKTS Market data P0179 P3339 P6231 The Financial Times London Page 28 206
Government Bonds: Gilts suffer jitters on fears of rising UK inflation Publication 930210FT Processed by FT 930210 By SARA WEBB and PATRICK HARVERSON LONDON, NEW YORK

INFLATION worries depressed the UK government bond market and pushed gilt prices down by as much as half a point, but the market later recovered most of the losses as investors bought on weakness.

The release of worse-than-expected producer input prices for January heightened fears of rising inflation. Input prices for manufacturing jumped 1.5 per cent in January - giving a year-on-year rise of 7.2 per cent - whereas the market had expected to see a 0.5 per cent rise on the month.

The news helped to push the March Liffe gilt futures contract down from its opening level of 101.08 to a low of 100.27, but the futures contract later recovered to reach 101.05 by late afternoon. In the cash market, prices were depressed across the curve, but picked up as investors bought on weakness.

BELGIAN government bonds were marked down around a point, with dealers pointing to the recent easing of the Belgian franc against the D-Mark and concern about the country's heavy borrowing requirement.

The Belgian franc came under pressure last week before the German Bundesbank cut its key interest rates. 'The recent easing of tensions within the ERM and return of confidence to the French franc has killed off interest in the Belgian bond market,' said one dealer. 'Belgium was seen before as one of the hard core currencies in the D-Mark bloc, but now yields on French and Belgian 10-year paper are the same,' he added.

JAPANESE government bonds continued to rally strongly, helped by the combination of a sharp rise in the yen against the dollar, stock market weakness and another round of bond-buying by the finance ministry.

The yen strengthened from Y124.35 to the dollar, to Y121.75 yesterday spurred by market talk that Japan's trade partners were stepping up pressure for a stronger yen. The Nikkei index fell below the psychologically important 17,000 level, but ended the day 259.46 lower at 17,022.27.

The yield on the benchmark No 145 opened at 4.29 per cent, corresponding to the low price of the day, and moved to 4.23 per cent before ending at 4.245 per cent. The June futures contract, which took over as the new benchmark yesterday, rose from 109.14 to a high of 109.54 before closing at 109.50.

THE AUSTRALIAN government bond market closed firmer as prime minister Mr Paul Keating yesterday unveiled proposals to cut corporate tax in an attempt to spur investment and employment growth. Mr Keating promised that a re-elected Labour government would cut the company tax rate to 33 per cent from 39 per cent, and would give an immediate 10 per cent taxation allowance for business investment.

In addition, he announced that the government now expects a budget deficit of ADollars 15.9bn in the year ending June 30, against an original targeted deficit of ADollars 13.39bn. Most of the difference will be funded through extra bond sales. Bond prices edged up as the market had already discounted the financial package and participants covered short positions.

US Treasury prices were flat to lower yesterday after a successful, if uneventful, afternoon auction of Dollars 15.5bn in three-year notes.

In late trading the benchmark 30-year government bond was down 1/16 at 105 5/32 , yielding 7.196 per cent. At the short end of the market, the two-year note was also slightly weaker, down 3/32 at 100 1/16 , to yield 4.199 per cent.

In the absence of important economic data, all eyes were on the note and bond auctions. In early trading prices eased, primarily because given the recent strength in Treasuries, market participants were reluctant to bid up prices before the first tranche of the refunding programme for fear of scaring away potential retail buyers of the new issue.

The three-year sale was subsequently completed at an average yield of 4.73 per cent, much as expected. Prices recovered some of their lost ground after the auction, but news of a strong store sales from the Johnson Redbook report ensured the market's bias remained on the downward side.

United Kingdom, EC Belgium, EC Japan, Asia Australia United States of America P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 27 721
International Capital Markets: Investors seek advice in United Newspapers row Publication 930210FT Processed by FT 930210 By TRACY CORRIGAN

A ROW has erupted over the treatment of investors in a United Newspapers issue of convertible preference shares. Some investors, who lost payment of the annual dividend on the shares, are currently taking legal advice on the matter.

The Pounds 105m issue, which was exchangeable into ordinary shares in Reuters Holdings, was called for early redemption by the issuer last December. The decision to call the issue forced investors still holding the preference shares to convert into Reuters shares. By doing so, they forfeited payment of the fixed 8 per cent dividend due on the preference shares, but, because of the timing, they also missed receiving payment of the Reuters share dividend.

There are just seven days each year when the issuer can take advantage of the documentation to redeem the bonds without paying the dividend. Investors claim that this is a loophole which has saved United Newspapers an estimated Pounds 8.1m in dividend payments at their expense.

'We believe that this sort of action is bad market practice, misleading investors who do not read the small print,' said one investor in the issue.

However, an official at United Newspapers said that the company had taken every care to follow correct procedure. 'Before we called the issue, we made sure we understood the the terms of the issue required, and then followed the terms of the issue precisely,' he said.

There is similar wording on an Pounds 80m Smith & Nephew issue of convertible preference shares due 2004. Officials at Smith & Nephew declined to comment on the issue.

United Newspapers Reuters Holdings United Kingdom, EC P6719 Holding Companies, NEC P2711 Newspapers P2721 Periodicals P5112 Stationery and Office Supplies P5111 Printing and Writing Paper P2752 Commercial Printing, Lithographic P735 Miscellaneous Equipment Rental and Leasing COMP Company News FIN Share issues P6719 P2711 P2721 P5112 P5111 P2752 P735 The Financial Times London Page 27 332
International Bonds: Eurodollar sector attracts most activity on quiet day Publication 930210FT Processed by FT 930210 By ANTONIA SHARPE

THE Eurodollar sector attracted most of the activity in a quiet day for new issues yesterday, as syndicate managers kept their vigil for a widely-expected dollar deal from Denmark.

Separately, the World Bank confirmed market talk of an imminent global yen bond issue, which it plans to launch in late February. The underwriting group will be led by IBJ International, Morgan Stanley and Nikko Securities. Syndicate managers said the World Bank's third global bond offering in yen was likely to raise Y200bn and to have a maturity of between seven to 10 years.

There were reports that the Danish deal was still waiting for ministerial approval but syndicate managers hoped that it would be launched by the end of the week. One syndicate manager said that any further delay would result in less favourable terms for Denmark, since the US Treasury's quarterly refunding auctions this week were likely to temper investor demand.

Among yesterday's Eurodollar deals, the Dollars 300m seven-year offering from Sandoz Overseas Finance arranged by CSFB was said to be the most successful. Although the Swiss chemicals company has no rating and the maturity of the bond exceeded the current preference among Swiss investors for maturities of five years or less, the deal went in 'two minutes,' according to one manager involved in the deal, reflecting the company's good name in the market. The bond was priced at 38 basis points above comparable US Treasuries, and after the syndicate was broken, the spread tightened to less than 35 points.

By contrast, distribution of the Dollars 200m 10-year bond for Norddeutsche Landesbank was 'slow,' according to an official at the lead manager, Salomon Brothers International.

Several convertible issues in various currencies were launched yesterday. Sun Alliance, the composite insurer, was the second UK company in less than a week to bring a sterling subordinated Euroconvertible issue. On February 2, Northern Foods, the dairy and convenience food company, raised Pounds 91.28m through a similar issue, also arranged by NM Rothschild.

As with Northern Foods, demand among investors for high-yielding instruments enabled Sun Alliance to increase the size of its issue to Pounds 155m from Pounds 140m. The issue has a 15-year maturity but may be redeemed after five years.

The semi-annual coupon was set at 7 1/4 per cent, at the lower end of the indicated range of 7 1/4 -7 1/2 per cent, and the conversion price at 390p represented a premium of 15.38 per cent over the ordinary share price at the time of pricing, at the high end of the indicated range of 14-16 per cent.

European Economic Community (EC) United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 27 471
International Capital Markets: Globex system gains approval for Japan trade Publication 930210FT Processed by FT 930210 By LAURIE MORSE CHICAGO

GLOBEX, the Chicago-based electronic derivatives trading system, has received formal approval to begin trading in Japan. This will help the system fulfil its initial objective to be a round-the-clock vehicle for futures trading.

The lack of terminals in Japan has hampered Globex since its launch last summer, according to Mr Leo Melamed, chairman. The system was designed to allow traders to pass their derivatives 'book' around the globe, around the clock.

Japan's absence interrupted the flow of that trading, leaving a gap in the Asian time zone, Mr Melamed said. Globex volume has been averaging just 3,000 contracts a day and negotiations to add non-US futures exchanges to the system have lagged.

Globex is jointly owned by the Chicago Mercantile Exchange, the Chicago Board of Trade and Reuters Holdings. So far about 80 per cent of the around 200 active Globex terminals are installed in the US, with the remainder in London and Paris.

Globex officials said 28 terminals will be installed in the offices of CME and CBOT member firms in Tokyo, and that trading on those terminals should begin soon. They said additional terminals would be activated in Hong Kong during March, and in Geneva later this spring.

Notional principal amount of foreign currency and interest rate swaps exceeded Dollars 1,470bn in the six months ended June, 1992, up 44 per cent, according to the International Swap Dealers Association. However, despite the overall gain, foreign currency swap volume declined. Interest rate swaps accounted for Dollars 1,320bn (up 53 per cent) and currency swaps Dollars 156bn (down 7 per cent), ISDA said.

Chicago Mercantile Exchange (US) Chicago Board of Trade (US) Japan, Asia United States of America P6231 Security and Commodity Exchanges TECH Services MKTS Market data P6231 The Financial Times London Page 27 315
International Company News: Blackstone may acquire Univa in CDollars 1bn venture Publication 930210FT Processed by FT 930210 By ROBERT GIBBENS MONTREAL

BLACKSTONE, the New York-based investment group, may acquire Univa, Canada's second largest food distributor, in a deal worth just over CDollars 1bn (USDollars 793m).

Univa, with annual sales of CDollars 6.5bn, is a wholesale and retail food distributor with subsidiaries across Canada and in California, and is second to the Toronto-based Loblaw.

In the nine months to October 31 Univa's net profits were CDollars 29.4m, or 34 cents a share, on sales of CDollars 5.1bn. The figures reflected vicious competition, particularly in eastern Canada.

Mr Bertin Nadeau, who for the past 11 years has controlled 26 per cent of Univa through a holding company, Unigesco, plans a joint venture with Blackstone to offer CDollars 11 a share cash for all Univa's 94m common shares outstanding on a fully diluted basis. This would be about 45 per cent above the average Univa market price over the past three weeks. Thus the value of the bid is CDollars 1.03bn.

Univa's next biggest shareholder is the Sobey family of Halifax, Novia Scotia, with 25 per cent. The family usually votes with Mr Nadeau. The Caisse de Depot, the Quebec Pension Plan's investment arm, holds about 12 per cent including conversion rights.

If the deal goes through the joint venture is structured so that Univa will be owned 80 per cent by Blackstone and undisclosed private international investors and 20 per cent by Unigesco.

Mr Stephen Schwarzman, president of Blackstone, said his investment group would sell its Univa shares over a three to seven-year period via public offerings and Unigesco would buy back control of Univa. After seven years the joint venture would be dissolved.

He said that Univa management would continue unchanged and Univa would get full financial backing for a three-year CDollars 230m modernisation programme in the highly competitive eastern Canada market.

Unigesco, which owns a hardware retailing group and food service units, would sell its 26 per cent of Univa into the joint venture for CDollars 246m, which would be used to reduce its own heavy debt.

Blackstone will provide CDollars 375m for the bid, with the balance borrowed partly from Canadian and US banks.

Univa will set up a committee of independent directors to evaluate the bid and report to shareholders.

Blackstone Group Unigesco Inc Canada P6211 Security Brokers and Dealers P514 Groceries and Related Products COMP Acquisition COMP Joint venture P6211 P514 The Financial Times London Page 26 420
International Company News: Goodyear net income slips to Dollars 88m Publication 930210FT Processed by FT 930210 By KAREN ZAGOR NEW YORK

GOODYEAR Tire & Rubber, the only surviving US-owned tyre company, yesterday said its board had approved a two-for-one stock split and a 20 per cent hike in its quarterly dividend payment to 30 cents a share on a pre-split basis.

The company recorded underlying fourth-quarter earnings of Dollars 102.8m, or Dollars 1.43 a share, excluding extraordinary items and accounting changes. This compares with Dollars 99.3m, or Dollars 1.55, a year earlier, when the company had fewer shares outstanding.

Including one-time items, Goodyear's net income stood at Dollars 87.5m, or Dollars 1.22, in the fourth quarter against Dollars 105.1m, or Dollars 1.65, last year. Sales rose 5 per cent to Dollars 2.93bn from Dollars 2.78bn.

The results were in line with Goodyear's earlier fourth-quarter predictions and its shares eased Dollars 1 3/8 to Dollars 70 3/8 at close of trading in New York.

The proposed stock split and dividend increase will be put to a shareholder vote at Goodyear's annual meeting on April 5. During 1992, Goodyear took a one-time net charge of Dollars 1.01bn on the adoption of two non-cash accounting changes. As a result, Goodyear posted a net loss of Dollars 658.6m, or Dollars 9.22 a share, in 1992, compared with net income of Dollars 96.6m, or Dollars 1.61.

Stripping out the charges and other one-time items, Goodyear earned Dollars 367.3m, or Dollars 5.14, in the year compared with Dollars 74.5m, or Dollars 1.24, in 1991. Sales advanced 8 per cent to Dollars 11.78bn from Dollars 10.91bn.

During the fourth quarter, Goodyear had gains of Dollars 75.9m from the sale of its polyester resin assets which was partly offset by charges of Dollars 39.6m for workforce restructuring and charges of Dollars 15.8m for the planned sale of its roofing busi ness and other items.

Goodyear's debt stood at Dollars 1.9bn at the end of 1992, compared with Dollars 2.6bn at the end of 1991 and Dollars 3.7bn in mid-1991. As a result, the company's interest expense fell to Dollars 232.9m at the end of the year from Dollars 217.8m a year earlier.

Selling, administrative and general expenses rose to Dollars 8.97bn at the year end from Dollars 8.41bn a year earlier, reflecting higher advertising spending. Goodyear's tyre sales rose 6 per cent in the fourth quarter to Dollars 2.4bn, but operating income dropped 39 per cent to Dollars 125.9m. The oil transportation segment had operating income of Dollars 347,000 in the fourth quarter compared with a loss of Dollars 5.4m a year earlier.

Goodyear Tire and Rubber United States of America P3011 Tires and Inner Tubes P3069 Fabricated Rubber Products, NEC P2822 Synthetic Rubber P2821 Plastics Materials and Resins P3714 Motor Vehicle Parts and Accessories FIN Annual report P3011 P3069 P2822 P2821 P3714 The Financial Times London Page 26 481
International Company News: Whirlpool improves 55% to Dollars 62m Publication 930210FT Processed by FT 930210 By KAREN ZAGOR

WHIRLPOOL, the world's biggest maker of large domestic appliances, yesterday posted an unexpectedly strong 55 per cent improvement in fourth-quarter net profits to Dollars 62m, or 87 cents a share, from Dollars 40m, or 58 cents, in 1991.

The company, which fully owns the former Philips appliance business in Europe, saw revenues rise 8 per cent to Dollars 1.84bn from Dollars 1.71bn.

Whirlpool's earnings before taxes and other items were 39 per cent higher at Dollars 104m against Dollars 75m. Shares in Whirlpool climbed Dollars 2 7/8 to Dollars 51 5/8 , a 52-week high. For the full year, Whirlpool net income rose 20 per cent to Dollars 205m, or Dollars 2.90, on revenues which grew 8 per cent to Dollars 7.3bn.

In 1991, the company earned Dollars 170m, or Dollars 2.45, on revenues of Dollars 6.76bn.

Mr David Whitwam, chair man and chief executive, said all three of the company's regional home-appliance seg ments had a record year in 1992. In North America, revenues, operating margin and earnings increased significantly, helped by a 7 per cent rise in industry-wide shipments in the region. Industry shipments are expected to rise another 3 per cent to 4 per cent this year.

Analysts were impressed by the company's performance in a difficult European market. Whirlpool said its shipments in Europe improved, in spite of industry trends towards lower shipments.

Whirlpool's overseas divi sion, posted profits in Latin America in spite of an equity loss of 14 cents a share in Brazil, against earnings of 4 cents a share in 1991. The company realised a small equity profit in the second half of 1992 from its Brazilian affiliates through cuts in operating costs and a rise in market share.

Whirlpool Corp United States of America P3633 Household Laundry Equipment P3632 Household Refrigerators and Freezers P3585 Refrigeration and Heating Equipment P3639 Household Appliances, NEC P3635 Household Vacuum Cleaners FIN Annual report P3633 P3632 P3585 P3639 P3635 The Financial Times London Page 26 346
International Company News: Setback for GM over assembly plant ruling Publication 930210FT Processed by FT 930210 By MARTIN DICKSON NEW YORK

GENERAL Motors, the US car group, yesterday suffered an unusual setback in its efforts to slash its North American production costs when a Michigan court ordered it to keep open an assembly plant scheduled for closure.

The plant involved is Willow Run, at Ypsilanti, west of Detroit. GM announced a year ago that the works would be shut in 1993 and its output consolidated at a plant in Arlington, Texas.

Yesterday, however, a Michigan circuit court judge enjoined GM from moving production of its Caprice station wagon from Ypsilanti to Arlington.

The judge supported a challenge by Ypsilanti Township, which argued GM had violated provisions of tax breaks given in the 1980s in the hope of keeping the plant open.

Mr Lee Schutzman, an attorney for GM, said the ruling was unprecedented and the company would appeal. GM has already started transferring workers from the plant to Arlington.

When the judge's ruling was announced, members of the United Auto Workers union filled the court room with cheers.

The UAW has reacted particularly bitterly to the closing of Ypsilanti and accused GM of 'whip-sawing' - playing the Michigan and Texas plants off against one another in the hope of extracting maximum concessions from the union.

Mr Doug Winters, an attorney for the township, said: 'GM for years has asked for a level playing field in terms of global competition, and all we ever asked for was a level playing field to present our case. Fortunately, we had a judge with enough courage to give us that.'

The closure is part of GM's plan to shut 21 assembly and parts plants by the mid-1990s in an attempt to return its loss-making North American operations to profit.

General Motors Corp United States of America P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories RES Facilities GOVT Legal issues P3711 P3714 The Financial Times London Page 26 337
International Company News: Volksbank hit by bad loan provisions Publication 930210FT Processed by FT 930210 By IAN RODGER ZURICH

SWISS VOLKSBANK, the object of an agreed SFr1.6bn (Dollars 1bn) takeover bid from the parent company of rival Credit Suisse, has reported a loss of SFr68m in 1992 compared with a SFr68m net profit in 1991 because of nearly doubled provisions for bad loans.

The actual loss was much higher, but was softened by the release of the remaining SFr292m in hidden reserves. The directors have recommended that the dividend be passed.

Volksbank said CS Holding had completed its examination of the bank and confirmed its takeover offer, on the basis of three registered shares of CS for 10 Volksbank registered shares.

Volksbank will seek the approval of its shareholders on March 11 to transform itself from a co-operative into a joint stock company, converting each of its co-operative shares into 10 registered shares.

Mr Werner Sigg, a director of Volksbank, said the rationalisation plan agreed between the two banks called for the elimination of between 100 and 150 of their combined 400 branches in Switzerland and the loss of 2,000 jobs. While the two would maintain separate identities in Switzerland, the Volksbank international network would be folded into that of CS.

Mr Sigg said the resulting savings would be of the order of SFr250m a year by 1995, roughly 8.5 per cent of the operating costs of the two banks in 1991.

Mr Erwin Sigrist, executive vice-president of Volksbank, said the large growth in loan loss provisions last year from SFr394m to SFr720m was due mainly to the negative impact of the recession in Switzerland on small and medium-sized businesses.

At December 31, 1992, the bank had total assets of SFr46.1bn compared with SFr46.5bn a year earlier.

Capital was unchanged at SFr2.2bn.

Whirlpool Corp Switzerland, West Europe P602 Commercial Banks FIN Annual report COMP Acquisition P602 The Financial Times London Page 26 322
International Company News: Air Canada postpones BWIA stake talks Publication 930210FT Processed by FT 930210 By CANUTE JAMES KINGSTON

AIR Canada has suspended talks with Trinidad and Tobago Airways to acquire a stake in the Caribbean operator of the BWIA International airline. The move leaves the state-owned Trinidadian company continuing its two-year search for a partnership with an international carrier.

The negotiations with Air Canada followed the failure of talks with other airlines, including British Airways and Delta Airlines, to buy into BWIA.

Government officials said Air Canada's decision had nothing to do with BWIA's financial performance, but because Air Canada's management resources were too thin.

BWIA had a net loss of USDollars 15.6m last year, following a loss of Dollars 24.2m in 1991.

Air Canada Trinidad and Tobago Airways BWIA International Jamaica, Caribbean P4512 Air Transportation, Scheduled COMP Shareholding P4512 The Financial Times London Page 26 147
International Company News: News Corp lifts dividend 20% as earnings surge Publication 930210FT Processed by FT 930210 By BRUCE JACQUES SYDNEY

NEWS Corporation, the international media group controlled by Mr Rupert Murdoch, has announced a 20 per cent increase in its dividend following continued earnings resurgence for the six months ended December 1992.

Net earnings before abnormals almost doubled, to ADollars 490.1m (USDollars 328.7m) from ADollars 252.2m on turnover little changed at ADollars 5.33bn, against ADollars 5.27bn in the same six months a year earlier.

News Corp also plans a three-for-one bonus issue and has declared a 1.5 cent a share interim dividend, payable on the bonus shares. That represents a 20 per cent increase on the 5 cents a share interim paid on pre-bonus capital last year.

Central to the profits performance was a 22 per cent reduction in interest expenses to ADollars 387.4m and a ADollars 155.8m turnround to a surplus in the contribution from equity investments.

Equity-accounted investments - principally British Sky Broadcasting, the UK satellite television venture; Ansett, the Australian airline; and Pacific Magazines and Printing - turned a ADollars 62.7m loss into a ADollars 93.1m profit.

News Corp earned higher profits from its newspaper, magazine and inserts and television businesses, but contributions from both film and book publishing operations were weaker.

Newspapers remained the largest contributor, with operating income rising 21.7 per cent to ADollars 349.1m.

Magazines and inserts lifted income from ADollars 170.7m to ADollars 208.4m, while television rose 29.6 per cent from ADollars 124.4m to ADollars 161.2m.

However, income from films more than halved from ADollars 67.7m to ADollars 33.3m and book publishing was down 27.5 per cent at ADollars 113.6m.

On a geographic basis, the US remained the company's biggest earnings centre, lifting operating income 4.4 per cent to ADollars 492.7m. News said profits from Fox Broadcasting and Fox Television rose almost 20 per cent, but earnings at Twentieth Century Fox fell 55 per cent.

In the UK, operating income rose by 19.1 per cent from Dollars A471.8m to ADollars 207.2m following newspaper cost reductions and circulation increases. Weekly revenues of BSkyB's 50 per cent-owned satellite company were up by 79 per cent.

Operating income from Australia and the Pacific Basin region fell by 16.8 per cent to ADollars 167.5m, but operating profits rose 15 per cent at the Hong Kong-based South China Morning Post and 28 per cent in Australian metropolitan newspapers.

The group's six-month net earnings are arrived at after tax of ADollars 53.5m (against ADollars 12.5m) and depreciation of ADollars 115.1m (ADollars 115.2m). This excluded an abnormal loss of ADollars 37.3m (Dollars 103.1m profit).

News Corp Australia P2711 Newspapers P2721 Periodicals P2731 Book Publishing P275 Commercial Printing P6719 Holding Companies, NEC FIN Interim results P2711 P2721 P2731 P275 P6719 The Financial Times London Page 25 466
International Company News: Sell-off plans feature in Australian election Publication 930210FT Processed by FT 930210 By BRUCE JACQUES

AUSTRALIA'S federal election campaign yesterday produced variations in plans to privatise two of the country's biggest government-controlled companies, the Commonwealth Bank and Qantas.

Mr Paul Keating, the Australian prime minister, announced plans to float a further 19 per cent of the Commonwealth Bank, which is due to release interim results today.

But the planned float of the government's 75 per cent interest in Qantas, the Australian international airline, originally scheduled for June, is now unlikely to take place before October.

Mr Keating said he hoped to raise more than ADollars 1bn (USDollars 670m) from the flotation of 19 per cent of Commonwealth Bank in 1994-95.

This would leave the bank majority government-owned, as ADollars 1.3bn was raised in 1991 through a 30 per cent float.

The government is hoping to raise about ADollars 2bn through the Qantas float, following the recent sale of 25 per cent of the airline to British Airways for ADollars 665m.

The minister for finance, Mr Ralph Willis, said the delay in the Qantas float would also allow the airline to obtain an independent credit rating before severing its links with the government.

Commonwealth Bank of Australia Qantas Airways Australia P9611 Administration of General Economic Programs P45 Transportation by Air P6011 Federal Reserve Banks GOVT Government News P9611 P45 P6011 The Financial Times London Page 25 238
International Company News: Cash crunch threatens to clip Ansett's wings - The airline's financial position remains parlous Publication 930210FT Processed by FT 930210 By KEVIN BROWN

IS time running out for Ansett, the Australian airline jointly owned by Mr Rupert Murdoch's News Corporation and TNT, the transport conglomerate?

Nobody disputes that Ansett's star has fallen a long way over the past three years, beginning with a year-long pilots' strike in 1989-90 which disrupted schedules and scared away passengers.

A few months after the strike ended, domestic aviation was deregulated, triggering a three-way fares battle between Ansett, government-owned Australian Airlines and Compass, an independent carrier which collapsed under the competitive pressure but has since been relaunched.

At the same time, Ansett was trying to cope with a two-year recession which further depressed fares and trading margins, leading to net losses of ADollars 336m (USDollars 225.3m)in the two years to last June.

When the airline was making big profits - it reported net earnings of ADollars 184m in 1987-88 - its critics used to say that it was being given an easy ride by the government, which allowed only Ansett and Australian Airlines to offer national services.

That era ended with deregulation. But the government twisted the sword last year when it suddenly decided, contrary to earlier undertakings, to merge Australian Airlines with Qantas, and to sell both to the private sector.

The privatisation process, which began in December with the sale of 25 per cent of the merged airline to British Airways, is expected to be completed later this year with a public float of the remaining capital. But the damage to Ansett is already clear.

Not only does the airline's main competitor now have a strong parent and reduced debt, it will also increase its market share at Ansett's expense through booking arrangements with BA and Qantas, which account for more than 45 per cent of in-bound passengers. Both Qantas and BA formerly had alliances with Ansett.

In addition, Ansett faces further encroachment on its domestic market share by Air New Zealand, following an inter-governmental agreement last year on the creation of a single aviation market in Australia and New Zealand. Air NZ is already flying from Brisbane to Thailand and Taiwan, and may begin Australian domestic flights later this year.

News Corp and TNT have remained supportive of Ansett, even though both have faced serious problems of their own. However, Mr Murdoch has said that News Corp's 50 per cent stake is for sale if a buyer can be found.

Mr David Mortimer, who last year replaced the long-serving Sir Peter Abeles as TNT managing director, is preoccupied with the group's struggle against recession. But he has also made clear that part of TNT's stake is for sale.

Ansett has a well-equipped fleet of modern aircraft, and about 55 per cent of the domestic market - including associated regional airlines. It has also applied for rights to compete with Qantas on international routes. Permission to fly to Malaysia and Indonesia has already been granted, and applications for flights to Japan and other Asian countries are being considered.

So far, however, the search for fresh equity has failed. Singapore International Airlines (SIA), which bid unsuccessfully for a minority stake in Qantas, has said publicly it was not interested, and so has Cathay Pacific, the Hong Kong-based carrier.

Ansett is still talking to SIA, Malaysian Airlines and Air NZ, which was also an early bidder for a stake in Qantas. Air NZ is viewed by many analysts as the most likely partner because an alliance would increase its access to international routes commencing in Australia.

However, an investment in Ansett by Air NZ would be frowned upon by Qantas, which holds a 19.9 per cent stake in the NZ airline. The NZ commerce commission might also seek to block such an alliance because of concerns that it could lessen competition in New Zealand, where Ansett is the only domestic competitor to Air NZ.

Ansett has been trying hard to get back on an even keel. It has signed marketing agreements with a raft of foreign airlines, including Lufthansa of Germany, Cathay Pacific, All Nippon Airways of Japan, United Airlines of the US and Alitalia of Italy.

Mr Ken Cowley, the News Corp director who took over as chairman of Ansett last year, has begun raising cash and cutting costs by selling non-core assets and merging regional carriers with the main airline.

Ansett earned operating profits of ADollars 6.5m in the three months ended September, and is believed to have improved on that in the following quarter. But the airline's financial position remains parlous.

It faces repayments of ADollars 240m this year on total net debt of ADollars 2.28bn, and has only about ADollars 70m in the form of cash and unused loan facilities. Analysts say it will need a cash injection of at least ADollars 150m to meet the bills.

Executives say too much attention is being paid to the potential cash crunch. If necessary, they say, the money will be provided by the airline's parents - mainly News Corp. However, even if Mr Murdoch bails out Ansett in the short term, the airline will still need fresh equity if it is to capitalise on international opportunities and avoid being left behind by Qantas in the medium term.

Ansett's rights to international routes cost virtually nothing to acquire, but will be expensive to take up. Some of the airline's Boeing 767 aircraft could be diverted from domestic services to the shorter international routes, but analysts say it is hard to see how Ansett could finance the acquisition of bigger aircraft for the Japanese routes.

'The future looks very difficult for them,' says Mr Julian Mulcahy, aviation analyst at ANZ McCaughan. 'The airline was profitable in the first half, and that may give them some help in dealing with their backers, but they do need an equity injection in the next 12 months. If they don't get it, who knows what will happen?'

Ansett Airlines Australia P45 Transportation by Air COMP Company profile CMMT Comment & Analysis P45 The Financial Times London Page 25 1022
International Company News: Net income up 21% at Saudi American Bank Publication 930210FT Processed by FT 930210 By MARK NICHOLSON and AP-DJ CAIRO, KUALA LUMPUR

SAUDI American Bank (Samba), the Saudi Arabian joint-venture bank, has reported a 21 per cent rise in net income for 1992 to SR910m (Dollars 242.45m).

The bank, which is 30 per cent owned by Citicorp of the US, said that profits were led by a 15 per cent rise in earnings to SR193m, which it said marked earnings growth in all sectors.

A gross dividend of SR682.7m, or a net SR55 a share, is to be paid.

Assets rose 5 per cent to SR38.2bn, with the bank's loan portfolio up 21 per cent at SR11.6bn, almost all from domestic business.

Customer deposits rose 2 per cent to SR28.3bn. Samba added SR34m to loan loss reserves.

Public Bank, the third largest commercial banking group in Malaysia, has staged a 33 per cent increase in pre-tax profits to MDollars 219m (USDollars 83.3m) for 1992 and is stepping up its dividend, AP-DJ reports from Kuala Lumpur.

The bank said that its performance was bolstered by strong growth in lending and deposits. The dividend is lifted from 4.25 cents a share to 5 cents, an increase of 18 per cent. Earnings per share rose by 25 per cent to 11.4 cents.

Development & Commercial Bank, the Malaysian banking and financial services group, reported a 34 per cent gain in pre-tax profit to MDollars 157m for 1992.

Saudi American Bank Public Bank Development and Commercial Bank South Africa, Africa Malaysia, Asia P6011 Federal Reserve Banks FIN Annual report P6011 The Financial Times London Page 25 275
World Commodities Prices: Jute and Cotton Publication 930210FT Processed by FT 930210

JUTE

February/March c and f Dundee BTC Dollars 360, BWC Dollars 380, BTD Dollars 325, BWD Dollars 340, C and F Antwerp BTC Dollars 340, BWC Dollars 340, BTD Dollars 315, BWD Dollars 315.

COTTON

Liverpool- Spot and shipment sales amounted to 713 tonnes for the week ended February 5, compared with 129 tonnes in the previous week. Renewed purchasing in many specialist styles attracted much attention. CIS and American qualities as well as Tanzanian and Syrian growths moved off freely.

World P0131 Cotton COSTS Commodity prices MKTS Market data P0131 The Financial Times London Page 28 108
The Lex Column: Axa Publication 930210FT Processed by FT 930210

Yesterday's convertible bond from Axa suggests its investment in Equitable Life is starting to look less of a steal. The US business was always going to require additional capital. Even so, the market might be forgiven for worrying that the final bill will run into hundreds of millions of dollars. Axa is being understandably vague. It cannot itself assess the precise impact of proposed US capital adequacy regulations or the final extent of provisions on the investment portfolio of junk bonds and mortgages.

Having taken its US ambition thus far, though, Axa can hardly let Equitable Life fall into disrepair. With US buyers of life assurance taking a keen interest in financial strength, that means keeping credit ratings and solvency well up with the pack. By injecting funds into its US operation last year, Aegon is setting a fast pace. If others follow, Axa may end up facing a choice between losing market share and injecting still more capital. With its shares trading at a three-year high, Axa had a natural opportunity to raise cash. As recession looming at home, it may not get as good a chance again.

Axa France, EC P5099 Durable Goods, NEC P5199 Nondurable Goods, NEC P631 Life Insurance CMMT Comment & Analysis P5099 P5199 P631 The Financial Times London Page 18 226
The Lex Column: Reuters Holdings Publication 930210FT Processed by FT 930210

Few companies are robust enough these days to increase their capital expenditure and dividends by a quarter and still be left with increased cash at the year-end. But with a rating topping those of the giant drugs companies, Reuters has to move at the speed of light.

Its fortunes depend on smoothly rolling out a stream of blockbusting products which are both tricky and costly to develop and market. Once successfully launched, they produce an embarrassment of riches. But that leaves Reuters looking slightly uncomfortable with its Pounds 710m cash pile. The more generous dividend policy is one way of disbursing the money. A special one-off payment remains a possibility. But Reuters appears intent on investing most of the cash in new activities. The speed and success of this investment will largely determine whether it can retain its premium rating.

Reuters has a host of options; the concern is that few appear to offer the same returns as its core business. The company's interest in Visnews and ITN highlights its ambitions in television but rewards will be slow in coming. With the core dealing services experiencing more intense competition and with the pipeline of new products progressing more slowly than the company would like, Reuters may come under some short-term pressure. Like the drugs stocks, Reuters may be heading for a rerating.

Reuters Holdings United Kingdom, EC P735 Miscellaneous Equipment Rental and Leasing P6719 Holding Companies, NEC P2711 Newspapers P2752 Commercial Printing, Lithographic CMMT Comment & Analysis FIN Annual report P735 P6719 P2711 P2752 The Financial Times London Page 18 271
The Lex Column: Charter Consolidated Publication 930210FT Processed by FT 930210

It is difficult to fault Charter Consolidated's sale of its 38 per cent stake in Johnson Matthey. Since the two main purchasers, Johannesburg Consolidated and Minorco, are jointly buying 20 per cent, one might have expected them to pay a premium for the degree of control which that represents. But the stake is being kept within the Anglo American family and Charter cannot complain about a historic exit multiple of nearly 20. Indeed the failure of the move to flush out a full bidder and the relatively large parcel which is being placed with institutions suggest Johnson Matthey is pretty fully valued by the market.

Charter may not find it quite so easy to dispose of the proceeds. At current interest rates, it will suffer earnings dilution while it holds the money in cash. A reasonably quick move is thus called for. The assumption is that it will begin by buying its own shares back from Minorco, leaving it free to pursue its ambitions in manufacturing.

The deal will leave Charter with net cash of some Pounds 400m. That is more than enough to buy out Minorco's 36 per cent stake, which is currently worth some Pounds 250m. The market will then discover whether Charter's Mr Jeffrey Herbert is as shrewd a buyer as he is a seller - no mean challenge when most low-rated assets are cheap for a reason. He must be hoping that, after its help with the first leg of the transaction, Minorco will set the right tone by not driving too hard a bargain on the second.

Charter Consolidated Johnson Matthey Johannesburg Consolidated Investment Minorco United Kingdom, EC South Africa, Africa P10 Metal Mining P6719 Holding Companies, NEC P391 Jewelry, Silverware, and Plated Ware P2865 Cyclic Crudes and Intermediates P3341 Secondary Nonferrous Metals CMMT Comment & Analysis P10 P6719 P391 P2865 P3341 The Financial Times London Page 18 324
The Lex Column: Sterling's dark side Publication 930210FT Processed by FT 930210

Yesterday's producer prices were always likely to attract attention as a first indication of the extent to which New Year price adjustments reflected sterling's devaluation. On that basis the news is both good and bad. Manufacturers' input prices rose 1.5 per cent over the month. Thanks to falling unit labour costs as well as slack demand, the increase in output prices was confined to 0.8 per cent. That is still a relatively large increase, however, which implies a degree of inflationary pressure in the economy. It would certainly be reasonable to expect that companies will move quickly to rebuild their margins once demand resurfaces.

For the time being, though, the pressures are unlikely to deter the government from cutting interest rates again. All of which makes it perplexing that the equity market should fall by 39 points on a day when sterling was also weak.

Recent experience suggests the prospect of weak sterling and lower interest rates is a recipe for higher share prices. Perhaps investors felt it was time for some profit-taking, especially since rights issue fears remain.

Perhaps the market is also watching political developments. Talk of cutting welfare spending is a reminder that Mr Major must deliver the occasional sop to the right as well as the left wing of the party. That could mean eventual action to head off a protracted fall in sterling. A weak currency will cease to be a blessing for shares the moment it becomes politically unacceptable.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 18 274
Observer: Boot in Publication 930210FT Processed by FT 930210

Keen to impress, a much landed Swiss businessman proudly walked a visiting Texan customer around his wide acres. 'Fine trek,' the Texan remarked afterwards. 'When I look over my spread back home, d'you know, I have to go in my car and it takes me a whole day to cross it.'

'I had a car like that once, too,' the Swiss said.

Switzerland, West Europe United States of America P65 Real Estate CMMT Comment & Analysis P65 The Financial Times London Page 17 91
Observer: Party time Publication 930210FT Processed by FT 930210

Monday's Conservative Winter Ball at the Grosvenor House, the party's main fund-raising event of the year, left several well-known politicians looking rather the worse for wear. But, given that the party is in hock to the tune of Pounds 19m, it was a case of all hands on deck to rouse the party faithful.

So how odd to find Lord Archer no longer running the raffle. His court jester's role has gone to Gyles Brandreth whose buffoonery experience is limited to being a game show host and Tory MP for Chester.

Conservative Party (UK) United Kingdom, EC P8651 Political Organizations CMMT Comment & Analysis MGMT Management P8651 The Financial Times London Page 17 122
Observer: Corrective Publication 930210FT Processed by FT 930210

Plans to privatise some of Britain's best-known prisons have led to all sorts of strange names coming out of the woodwork. Take UK Detention Services - a joint venture between John Mowlem, Sir Robert McAlpine and the sinisterly named Corrections Corporation of America.

Surely they could have followed the pattern established by other privatisations such as British Airways, Gas, Telecom and Aerospace, and called the company British Porridge plc.

United Kingdom, EC P9223 Correctional Institutions CMMT Comment & Analysis P9223 The Financial Times London Page 17 93
Observer: Cuccia's revenge? Publication 930210FT Processed by FT 930210

Perhaps today's board meeting of La Fondiaria, Italy's second biggest insurer, will give a clue as to how one of the country's more complex financial puzzles is to be solved.

La Fondiaria has changed owners four times over the past decade and the recent death of its president, Camillo De Benedetti, publicity-shy cousin of Carlo of Olivetti fame, means that it is likely to change hands yet again.

It has the makings of a typical Italian corporate drama. Just over three years ago Camillo bought into Fondiaria at the behest of Raul Gardini, the then Ferruzzi boss, upsetting Enrico Cuccia, Mediobanca's legendary deal-maker. Apparently, Cuccia had long wanted to merge Fondiaria with Generali, Italy's biggest insurer, to create a new European giant.

Fondiaria has expanded aggressively under Camillo, notably in Germany, but its ambitions have been severely clipped by the financial constraints of some of its shareholders, particularly Ferruzzi. Most punters are now betting on Fondiaria being broken up, under a Cuccia-devised plan to strengthen Generali and lower Ferruzzi's borrowings. Fondiaria's main operations would be sold to Generali, while its two smaller subsidiaries would go to San Paolo, the big Turin-based bank, and a foreign insurer, respectively. However, past experience suggests that solving Italian financial riddles is never as simple as it seems at first sight.

Fondiaria Italy, EC P6311 Life Insurance COMP Company News CMMT Comment & Analysis P6311 The Financial Times London Page 17 245
Observer: Porter calling Publication 930210FT Processed by FT 930210

Out goes Christopher Chataway as LBC chairman and in comes Dame Shirley Porter. But the real power behind the throne of London's talk radio station is Lady Porter's son, John, who put together the rescue package.

Although he is part of the Tesco supermarket family, Porter junior is very much his own man. After Oxford and a stint with the Boston Consulting Group, he struck lucky in Californian real estate, which helped finance investments in a string of ventures ranging from credit card verification systems to a California winery.

A former Bow Group treasurer, he shares his mother's love of Conservative politics. Indeed, now that controversial mama seems set to bow out of that arena, it's not beyond possibility that he'll take over as the family's true blue banner bearer.

London Broadcasting United Kingdom, EC P4832 Radio Broadcasting Stations PEOP Personnel News CMMT Comment & Analysis P4832 The Financial Times London Page 17 162
Observer: Coquettish Publication 930210FT Processed by FT 930210

One outfit certainly not renowned for its readiness to hitch up its skirts at the drop of a share-dealer's hat is the German steel and engineering group, Thyssen. So what are we to make of the company's advertisement in yesterday's Financial Times, inviting 'her shareholders' to next month's annual meeting?

One possible explanation lies in Anglo-German (mis)understanding. Perhaps Thyssen's copywriters, with or without the aid of the FT's ad department, simply translated into English the feminine characteristics of the German word 'Aktiengesellschaft'?

Then again, of course, the Iron Lady of the Ruhr could have something really sexy in mind for March 19 in Dusseldorf.

Thyssen AG vorm August Thyssen Huette Germany, EC P1499 Miscellaneous Nonmetallic Minerals P33 Primary Metal Industries P3534 Elevators and Moving Stairways P3714 Motor Vehicle Parts and Accessories COMP Company News CMMT Comment & Analysis P1499 P33 P3534 P3714 The Financial Times London Page 17 156
Observer: Anticipating marriage Publication 930210FT Processed by FT 930210

The honeymoon threatens to be over before the wedding for London's young Securities Institute and the Institute of Investment Management and Research which, in essence if not name, is 36 years older.

Merger talks are due to culminate this month in plans by a joint working party. But there were reputedly ructions at IIMR's council meeting this week with members 'hopping mad' over the year-old SI's campaign to recruit members.

Seeking to add 500 to its present 5,000, who're mainly former Stock Exchange members, the Securities Institute has been beating the drum about a 'window of opportunity' because, until March 31, experienced securities industry practitioners can become members without passing exams.

That is seen as premarital infidelity by some of the 3,000 members of the IIMR, exclusively exam-entry since 1979. 'They're promoting the merger as a saleable event before it has been agreed,' sniffed one. 'It's a bit naughty.'

United Kingdom, EC P873 Research and Testing Services COMP Company News CMMT Comment & Analysis P873 The Financial Times London Page 17 179
Leading Article: Trade on a cliff edge Publication 930210FT Processed by FT 930210

RARELY, if ever, can the principal trade negotiator of the European Community have visited Washington at a more delicate time. For where the Bush administration was at least shame-faced about its unilateralism in trade policy, the Clinton administration appears bare-faced. Sir Leon Brittan - like Mr Michio Watanabe, the Japanese foreign minister, who will be in Washington at the same time - needs to remind the US administration of the serious risks it runs.

Mr Mickey Kantor, the new US trade representative, has said that 'the days when we could afford to subordinate our economic interests to foreign policy or defence concerns are long past'. This credo is not even controversial in US policy-making circles any more. It is nonsense, all the same.

The trading policies pursued by the US in the postwar era did not subordinate US economic interests to those other objectives. On the contrary, the postwar economic recovery of Europe and Japan greatly expanded the opportunities facing US producers, just as it did the opportunities enjoyed by US consumers. This Mr Kantor seems to ignore. What he seems to mean by 'our economic interests' are the interests of particular US industries. The cue has already been followed by the automobile industry, with a long list of others right behind it.

What is needed, they all argue, is a 'level playing field'. Moreover, the US has, they also assume, the right both to survey and then bulldoze its partners' terrain. The possibility that the US playing field might not be level either seems not to occur. Yet US anti-dumping policy, US tariff peaks and US-imposed voluntary export restraints are just a few of the ways that it too distorts trade.

Export volumes

The administration should consider a few facts. Despite obstacles abroad, the volume of US exports expanded by 74 per cent between 1985 and the first quarter of 1992, while German exports rose by 28 per cent and those of Japan by less than 20 per cent.

Moreover, trade policy has been liberalising worldwide. The trade policies of the EC, for example, are highly imperfect. Yet the net effect of the single market programme - not least in the contested area of public procurement - has been to increase opportunities for foreign companies, for US ones not least. The EC has not been alone. Japan's trade policies have moved steadily in a liberalising direction, while 63 countries have notified the Gatt of unilateral trade liberalisation since the start of the Uruguay Round.

Not since the early years of this century can US producers have faced a more open world market. Nor can there ever have been such worldwide acceptance of what US policy-makers have been arguing for so many decades. Yet the US seems no longer to be particularly interested. On the fundamental question of whether and how to complete the Uruguay Round - hardly an unexpected one, after all - it vouchsafes no clear answer.

Dangers of conflict

The administration may believe that no great harm need be done by the worsening of trade relations. If so, it is likely to be proved wrong. One of the main reasons that the EC felt obliged to settle the oilseeds dispute, despite French resistance, was the fact that it had been taken to the Gatt twice, and lost. More broadly, trade conflict is bound to make global economic co-operation more difficult, while failure to complete the Uruguay round would impair fragile global confidence and worsen already weakening US export prospects. Moreover, the administration should not assume there will be no retaliation. President Mitterrand has already said that the EC must respond to protectionist measures with 'protectionism and a half'.

Sir Leon must try to lift the discussion above the particular disputes between the US and EC, even above the immediate fate of the Uruguay Round. He needs to remind Mr Kantor what is at stake. He should show himself accommodating where the US has a case, but firm where it does not. Above all, he should stress that unilateralism will not remain the prerogative of the US alone.

Ultimately, Sir Leon's interlocutor is Mr Clinton. The president needs to be asked how far he is prepared to risk what his predecessors achieved over half a century. The world waits for his answer.

United States of America European Economic Community (EC) P9641 Regulation of Agricultural Marketing P9721 International Affairs GOVT Government News CMMT Comment & Analysis P9641 P9721 The Financial Times London Page 17 757
Descent from riches to rags: The dire state of the UK's public finances is forcing the government to consider radical remedies Publication 930210FT Processed by FT 930210 By PETER NORMAN

The figures are daunting. In the coming financial year, the British government will have to borrow about Pounds 1,000 for every man, woman and child in the country, tapping financial markets for funds at a rate of Pounds 1bn a week.

The outlook, if the City of London is to be believed, is even more alarming. In five years, the pessimists say, the government could be borrowing more than 10 per cent of UK gross domestic product a year to plug holes in the public accounts, while the nation's debt to GDP ratio could be 70 per cent and rising.

The dire state of Britain's public finances is all the more apparent when measured against the recent past. Three years ago, the public sector ran a large surplus, enabling the government to reduce the national debt. Today, the talk is of cruel choices between tax increases or welfare cuts and of a fiscal rake's progress into a structural budget crisis of Italian proportions.

Although prospects for recovery are likely to be uppermost in Mr Norman Lamont's mind as the chancellor prepares his March 16 Budget, the government's announcement this week of an exhaustive review of public spending priorities over the rest of this decade is symptomatic of deep concern about the nation's finances.

The official line is that the present problem is cyclical, reflecting the fall in tax revenues arising from the recession and rising costs, such as unemployment pay and other social security outlays such as income support. But serious commentators such as the Organisation for Economic Co-operation and Development in Paris and the Institute for Fiscal Studies, as well as City securities houses, including Goldman Sachs and UBS Phillips & Drew, argue that part of the deficit is now structural. It will not be self-correcting if and when the economy returns to normal growth.

Whatever the diagnosis, the chancellor cannot ignore the sudden shift from a Pounds 14.7bn public sector surplus in 1988-89 to a deficit of Pounds 25.7bn in the first nine months of the present financial year alone. The shortfalls in prospect threaten to make a mockery of the government's election manifesto promises such as making further cuts in personal tax rates. Financing the deficits could put a question mark over recovery from recession.

But how has Britain got into this mess - if indeed it is a mess? And what does the decline into deficit of the past five years tell us about the outlook for public spending, taxation and correcting the deficit?

There would be no deficit problem without the recession. But the recession cannot fully explain the deterioration. Social change, tax reform, political mistakes and electoral politics over the past 14 years have left their mark on tax revenues and public spending, and helped create Britain's deficits.

Last November's Autumn Statement gave an important clue as to how the recession affects government finances. It revised upwards the public sector borrowing requirement forecast for the 1992-93 financial year to Pounds 37bn from the Pounds 28bn predicted at the time of the 1992 Budget. The Pounds 9bn worsening in the deficit was primarily due to a Pounds 6.7bn drop in anticipated tax receipts while spending this year was estimated to be Pounds 2.3bn higher than previously forecast.

The sensitivity of tax revenues to economic slowdown is not a new phenomenon. Indeed, a drop in the tax burden in recession is an important aspect of the 'automatic stabiliser' mechanism in a modern mixed economy, which helps smooth the business cycle and revive growth.

But the tax reforms of the 1980s - and in particular the corporation tax changes initiated in the then Mr Nigel Lawson's Budget of 1984 - appear to have increased the responsiveness of revenues to changes in the cycle.

The government benefited from this in the period of strong growth in the 1980s, when the increase in corporation tax receipts contributed about one-third to the swing in public finances from deficit to surplus between 1984-85 and 1988-89. Revenues from corporation tax receipts grew at an average rate of 25 per cent a year in the five years after 1984-85 and were worth more than 4 per cent of GDP, or Pounds 21.5bn, at their peak in 1989-90.

But the recession has produced an equally sharp contraction in corporation tax revenues. They fell to Pounds 18.26bn in 1991-92 and so far in this financial year have declined by 18.3 per cent to Pounds 9.97bn from Pounds 12.2bn in the same 1991-92 period.

The worry for the future is that corporation tax revenues may not rebound once the recession is over. Their buoyancy in the 1980s partly reflected special circumstances, not least the unusual length of the upswing. Mr Lamont has since cut corporation tax rates below the levels bequeathed by Mr Lawson while companies have a large recession-generated overhang of losses to set against tax.

The government's in-depth probe of the annual Pounds 260bn of public spending is a clear admission that something has gone badly wrong on that side of the budget. The departments selected by Mr Michael Portillo, the chief secretary to the Treasury, for initial scrutiny - social security, health, education and the Home Office - show where the government suspects structural problems are rife.

When Mrs Margaret Thatcher took office in 1979, she was determined to reduce the role of the state in society and cut public spending. In the mid-1980s, the government's public spending objective was modified to 'take a declining share of the national income over time while value for money is constantly improved'.

Yet Treasury estimates suggest that general government expenditure (that is, spending by central government and local authorities) less privatisation proceeds in the current financial year ending on March 31 will amount to 44.75 per cent of GDP - more than the 44 per cent share of 1979-80.

The recession and the rise in unemployment to nearly 3m from 1.6m in April 1990 partly explain this disappointing trend. According to the latest estimates, each 100,000 rise in unemployment adds about Pounds 345m to the annual social security budget, with Pounds 45m going on unemployment benefit and Pounds 300m on income support, housing benefit and community charge benefit. The fact that this recession has hit the middle classes in the formerly affluent areas of the south-east has added to the government's costs. At the last count, some 411,000 income support recipients were receiving help with mortgage interest payments at an annual cost of Pounds 949m.

But spending on social security will be 65 per cent more in real terms in 1992-93 than in 1978-79 and only 25 percentage points of this increase can be explained by the current recession.

Between 1978-79 and the current financial year, social security payments have increased as a share of GDP to 13.2 per cent from 10 per cent. Social security expenditure has nearly doubled in nominal terms since 1984-85, when it was Pounds 40bn, to an estimated Pounds 79.2bn in the current financial year.

Government figures show that, in real terms, the level of social security spending was higher at the end of the 1980s than after the 1979-81 recession in spite of nine years of growth. The increase in outlays in the current recession has been far sharper than in previous one.

These trends reflect changes in society as well as rising unemployment. The number of people over the age of 75 has risen by 22 per cent since 1981; there are more single parents; more of the social security budget has to be spent on the long-term sick and disabled. There is no quick fix to resolving cost increases of this sort.

Other changes in public spending have reflected deliberate political choices in response to the perceived needs of society or the wishes of the electorate. Annual spending on housing fell in real terms by 52.4 per cent between 1978-79 and 1992-93. In the same period, the public sector's annual expenditure on trade, industry and energy fell a real 37.5 per cent as a result of privatisation and the elimination of subsidies for ailing industries.

On the other hand, the government's annual National Health Service budget has risen by 56 per cent in real terms since 1978-79 and is expected to account for 5.8 per cent of GDP in 1992-93, against 4.6 per cent 14 years ago. Law and order, transport and education have all required more funding, with annual outlays rising in real terms by 96 per cent, 28 per cent and 26 per cent compared with 1978-79.

But the UK would be better able to afford such burdens if the past 10 years had not been punctuated by expensive political banana-skins and the prime minister and Mr Lamont had not greatly relaxed their grip over expenditure and taxation ahead of the 1992 general election.

Of the political mishaps, the poll tax debacle was the most damaging and costly. The scale of the damage is clear in government figures for the 'new control total', a new spending measure introduced last summer that eliminates most cyclical spending. This jumped in real terms by 5.3 per cent in 1989-90. More than half of this increase (2.45 per cent) reflected a sharp jump in local authority self-financed expenditure as councils rushed to push up spending by a real 35.4 per cent to Pounds 15.6bn ahead of the introduction of the new tax. They acted in the knowledge that they could blame any consequences for taxation on central government: a gamble that paid off in 1991, when Mr Lamont increased value added tax to 17.5 per cent from 15 per cent to pay for a reduction in individual poll tax payments.

Government spending on services such as health, education and the police has also risen substantially in response to changed priorities since Mr John Major became prime minister in November 1990.

Overall spending on services grew in real terms by 4.16 per cent between 1990-91 and 1991-92, while growth between 1991-92 and 1992-93 has been budgeted at a real 5.97 per cent. Sharp increases in the control total have been budgeted for the current financial year, reflecting the increased spending on services announced before the election.

The OECD, in its latest survey of the UK economy, estimates that roughly 30 per cent of the deterioration in the budget balance since 1990 has been due to structural rather than cyclical factors. It calculates that the cyclically adjusted budget deficit increased by about 1.5 per cent of GDP between 1990 and 1992, because of higher spending and reduced revenues. Much of this addition to the structural budget deficit reflected changes announced in the pre-election Autumn Statement of 1991 and Budgets of 1991 and March last year.

But what of the future? Here the pundits differ. The OECD thinks the government should increase tax revenues by up to Pounds 10bn to steady the deficit. Goldman Sachs and the IFS see a need to close the annual gap between revenue and expenditure over the medium term by about Pounds 20bn.

Looking ahead, Mr Gavyn Davies, chief UK economist at Goldman Sachs and one of the seven-man panel of forecasters appointed to advise Mr Lamont, says that the public sector borrowing requirement in 1993-94 is likely to be about Pounds 54bn or 8.75 per cent of GDP. On a central, and possibly optimistic, assumption of 3 per cent growth from 1993-94 onwards, he says that the deficit is likely to stay at more than Pounds 50bn a year until 1997-98.

Mr Bill Martin, chief economist of UBS Phillips & Drew, has simulated Treasury growth, expenditure and revenue projections to conclude that the PSBR could still be 2.75 per cent of GDP in the 1997-98 financial year, lifting Britain's stock of debt to some 50 per cent of annual national output compared with about a third at present.

He warns that a more pessimistic scenario, which assumes lower growth and rising public spending in line with electoral demands, would produce a deficit of about Pounds 80bn in 1997-98. This would be equivalent to 10.25 per cent of GDP and result in a public debt to GDP ratio of 70 per cent that would still be rising at that stage.

However, some experts, such as Mr Chris Trinder, research director of the Public Finance Foundation in London, warn against panic reactions to such deficit forecasts. The PSBR is the difference between two big numbers, and forecasts have been notoriously wrong in the past, Mr Trinder points out. Mr Andrew Britton, director of the National Institute of Economic and Social Research and another of Mr Lamont's seven advisers, is also fairly sanguine. He says that some of the discretionary loosening of policy in recent years has been good for the economy, while the Maastricht treaty provides for deficits of up to 3 per cent of GDP.

Until recently it seemed that the Treasury might be coming to terms with the deficits. In evidence to the House of Commons Treasury and Civil Service Committee last autumn, Mr Lamont cast some doubt on the Treasury's stated goal of balancing the budget over the economic cycle. While asserting that this was still the government's objective, he added: 'That has never ever meant taking the sum of the borrowing over the years and saying that it should sum to zero.'

However, Mr Portillo's investigation of public expenditure points the other way. It is a reaffirmation of the government's determination to reduce public spending as a share of national income and leave wealth creation to the private sector.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government spending CMMT Comment & Analysis P9311 The Financial Times London Page 17 2306
Leading Article: Rethinking British defence Publication 930210FT Processed by FT 930210

MR MALCOLM Rifkind, the British defence secretary, sought to pre-empt yesterday's report from the House of Commons select committee by rescinding some planned cuts in the country's armed forces - at a cost of 'only' Pounds 80m or one-third of 1 per cent of the defence budget. On Monday Mr Michael Portillo, the chief secretary to the Treasury, announced a sweeping review of public expenditure in general, but appeared to exempt defence as a principal target. Yesterday the select committee duly reported, seeking even more concessions than Mr Rifkind had already offered.

It may be concluded from these events that Britain is still far from a political consensus about the scale of its defence spending in a post-imperial world. The question that has haunted the debate for decades continues to hover. Is there a case for economically battered Britain to outspend its richer European neighbours, devoting 4 per cent of its economic output to defence, compared with 3.4 per cent for France and only 2.2 per cent for Germany?

There are many signs that old lessons have not been learnt. In 1990 the statement Options for Change by the then defence secretary, Mr Tom King, suggested substantial reductions in force levels as a result of the end of the cold war, though even then the cuts in costs did not match the proposed cuts in manpower. With these cuts still not fully implemented, there is already talk of overstretch, which is merely the current term for describing the old problem of too few resources to match too many commitments. The select committee calls the overstretch 'chronic' and wants all planned cuts in ground forces to be stopped.

Top tables

The motives behind such thinking too often stem from a nostalgia for a country that was more powerful and relatively richer than it is today. More insidiously, attempts to keep up with defence spending spring from a desire to impress the Americans and to maintain a place at top tables. Almost invariably, however, the dilemma returns: Britain tries to do too much and, in the context of the latest public spending crisis, has to cut back.

Mr Douglas Hurd, the foreign secretary, has done something to develop the context for an alternative view. In a recent speech at Chatham House, he noted the trend towards international military intervention, whether of the peacekeeping or peacemaking variety, and envisaged for Britain a worthy rather than a leading role. His theme was that Britain cannot do everything towards which it feels morally or politically impelled.

Burden-sharing

Mr Hurd's analysis, however, stopped short of suggesting solutions. If Britain is to do less, who is to do more? In Europe, Germany? In Asia, Japan? If there is to be more burden-sharing, by what process is that burden to be shared: by ad hoc contributions of the kind which financed the war against Saddam Hussein, or via the United Nations, which is already bedevilled by the failures of some members to pay their dues?

Nor is this a complete list of the awkward questions which lie ahead. If Britain is to cede more international defence activity to others, how long can it maintain its position as a permanent member of the UN Security Council? If it is seriously to consider relinquishing that seat, what price could it or should it seek in return? And within the European Community, how can a potential British desire for more burden-sharing be made to fit with its anxiety about more integrated EC defence structures?

As the world seeks answers to these complex questions, Britain has much to offer. Its armed forces have a deserved reputation for professionalism. Its relationship with the sole superpower, the US, is special. Britain can do much to help modernise Nato, develop the Western European Union and cement bilateral links with France. It can also play a worthy part in international peacekeeping.

But it cannot evade larger questions about the resources of its own economy or shifts in relative global economic and political standing. Mr Rifkind's concessions will comfort those who prefer old glories to harsher truths.

United Kingdom, EC P9711 National Security GOVT Government spending CMMT Comment & Analysis P9711 The Financial Times London Page 17 710
Letter: Hoover relocation as part of larger trend Publication 930210FT Processed by FT 930210 From Messrs SEAN SHEPLEY and JONATHAN WILMOT

Sir, Are Europe's politicians ready for the single market? Perhaps not if the reaction to the announcement of Hoover's plans to shift production of vacuum cleaners from Dijon to Glasgow is anything to go by. This case has nothing to do with social dumping and everything to do with the single market's basic goal - increased productivity and higher living standards for workers.

A particular result of the single market is that production becomes more concentrated and much more specialised by region. That Hoover's announcement came just days before Nestle's decision to move from Glasgow to Newcastle and Dijon was a neat example of the way in which different industries are attracted to different regions. In the US, this process of regional specialisation is far more advanced, suggesting Europe still has a long way to go.

Indeed, the Hoover and Nestle examples are part of a tidal wave of relocation sweeping across Europe. Many more plants will have to close and possibly even whole industries may have to relocate before we see the most efficient production structure in Europe. In this restructuring process, those regions with best access to Europe's core markets will find it easier to attract production and jobs. Peripheral regions will have to work harder to create an attractive regional base for inward investment.

One point is clear: by harmonising social conditions, the location advantage of the core regions would be boosted enormously. Although flexibility in labour and product markets is important for all regions, it is absolutely essential for the lagging regions on Europe's periphery. Anything else will be a recipe for mass unemployment, followed by migration to the prosperous core. For us, this is the real 'social dumping' that the Community should be worried about.

We go into these issues in greater deal in our recent paper, Europe: Core vs Periphery. The response we received from the Dutch authorities appears to us to be far preferable to that seen so far in France.

'The development towards increasing specialisation per region and the substantial importance of clusters of companies therein, already plays an important role in Dutch policy. The policy of (the Ministry of) Economic Affairs constantly stresses the importance of technology, infrastructure and a well-educated workforce to attract clusters of companies.'

Sean Shepley,

Jonathan Wilmot,

Credit Suisse First Boston,

2a Great Titchfield Street,

London W1P 7AA

United Kingdom, EC P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 16 428
Letter: VAT plan would hit food industry and the poorest Publication 930210FT Processed by FT 930210 From Mr MICHAEL MACKENZIE

Sir, So Lex (February 3) believes that imposing standard-rate VAT on all food will have little consequence for consumers, employment or the food industry] This conclusion verges on the glib, in assuming that the British economy and the food industry have infinite capacity to absorb inflationary pressures.

During a period of recession the UK food industry could not confront such an economic shock with equanimity. To absorb price increases it would have to cut back further on investment and pare overheads and operating costs even closer to the bone. Lex has also ignored the 18 per cent increase in key raw material prices imposed on food and drink processors by the devaluation of the green pound since last September. This compounds the problem of remaining competitive with overseas suppliers and any additional price pressures could well sell UK jobs abroad.

Imposing standard-rate VAT on food will hit the poorest sections of society hardest. How can those who already buy the lowest-priced food trade down even further, as Lex suggests? The article recognises the 'knock-on' effects of reduced consumer expenditure in other sectors but fails to specify that this means deeper recession still and yet more unemployment. These consequences have to be confronted squarely.

Food is essential to life and no food should be taxed, on principle.

Michael Mackenzie,

director-general,

Food and Drink Federation,

6 Catherine Street,

London WC2B 5JJ

United Kingdom, EC P20 Food and Kindred Products GOVT Taxes CMMT Comment & Analysis P20 The Financial Times London Page 16 269
A charge that's set to shock: Most UK bank customers may soon have to pay fees on their personal accounts Publication 930210FT Processed by FT 930210 By JOHN GAPPER

Ms Theresa Bergne went into her bank last week to express her annoyance at the charges it makes if she goes into overdraft. The prospect of being charged even if she stays in credit is worse. 'I would be absolutely furious. They have my money, and they earn interest on it. I shouldn't have to pay for every little piece of administration,' she says.

The high street banks are hardly popular at the moment, partly because of criticism of lending policies to small business. But an end to 'free' banking for personal customers threatens a nadir in their reputation. 'I think they are going to be in the firing line,' says Mr Alistair Darling, the Labour party's City of London spokesman, 'They will expose themselves to the accusation of extracting money to pay for their past mistakes.'

Fears of criticism have delayed charges. But they may not be far off. The first move was made last week by Save & Prosper, the small bank owned by Robert Fleming. It said that from April it would charge 15,000 holders of its Classic current account if their balance falls below Pounds 1,000.

It now appears only a matter of time before big banks start imposing charges on a large proportion of their 49m personal accounts. The banks all publicly insist that they have no plans to start charging. But privately, several fear a rival might break ranks during the season of full-year results announcements, which starts on Friday with Lloyds.

Pressure has been raised by the fall in base rates to 6 per cent. This has undermined the shaky economics of free banking by cutting the amount that banks earn from balances in current accounts. The returns on both money market and corporate lending have fallen along with base rates. One bank estimates that it now loses money on 80 per cent of its current accounts.

The same bank argues that it would be impossible to hold back on charging if base rates fall much further. Banks now estimate that they need an average balance of between Pounds 1,000 and Pounds 1,500 in each account to generate enough interest income to pay for the annual cost of Pounds 60 to Pounds 90 of running each account.

The timing of a move to impose charges is a delicate calculation. If one bank acted, the others would be likely to follow. This is because the first might otherwise shift its least profitable customers to the others. One banker estimates that there are 1m customers whose business no bank really wants without charges because their balances are too low.

Yet while they would probably follow a leader, most banks are reluctant to lead themselves. This is partly because of fear of public criticism. But it is also because each bank says it needs time to calculate a pricing strategy. By just introducing a blanket charge, the first bank to charge risks repelling its good customers along with its bad ones.

While they ponder this problem, banks have raised charges for personal customers who slip into overdraft. In effect, they are now overcharging them to pay for unprofitable accounts kept in small surplus. 'There is a strong argument that those who borrow money are now subsidising those who play carefully by the rules,' says one bank chief executive.

Free banking for customers in credit among the big banks was started by Midland in 1984 in response to the challenge from building societies which started to offer cheque-clearing accounts. The other high street banks followed in 1985. The cost of offering customers clearing services free was not such a strain because base rates were around 13 per cent.

But the innovation had two damaging effects for banks. The first was that the banks encouraged the public perception that they did not provide a worthwhile service. 'We have given banking away free, so people have not regarded it as a commodity,' says a bank chief executive. 'We have made ourselves the only developed nation in the world which does not require payment for core banking.'

The second damaging effect of free banking was that it raised the costs of administering accounts by fragmenting the customer base. Because accounts were free, more people opened two. The number of personal accounts at banks, which rose only slightly from 24.5m to 26m between 1981 and 1984, started growing rapidly to today's 49m.

Not only did fewer accounts become profitable as average balances fell, but the costs of processing cheques and card transactions rose. The banks' Association for Payment and Clearing Services has just estimated that it now costs the banks a total of Pounds 4.5bn a year to run the clearing system, about half of which is the cost of distributing cash.

Mr Ian Lindsey, banking director of Save & Prosper, admits that it started charging partly because it feared the average balance in its Classic account would be cut from the current Pounds 5,000. 'We were already getting accounts that we did not want under the old tariff, and we feared the trickle would become a flood if another bank started charging,' he says.

Banks are considering four main strategies which could stop their most profitable personal customers leaving if charges are reintroduced:

Not charging customers who retain high balances: this is likely for customers with balances above Pounds 1,500 because the interest earned on their balances is greater than the cost of operating their accounts. The fine calculation is in deciding which other customers should get free services. Mr Lindsey believes the high street banks may set the limit as low as Pounds 500 in order to keep customers whose overall business is valuable.

Offering different amounts of service for different levels of fee: an obvious example would be to offer 24-hour telephone banking only to those who pay extra. But it is hard to segment existing services because they are offered through branches which are open to all customers. Giving new forms of service in return for fees will only add to overall costs.

Linking 'free' banking to the total value of a customers' business with the bank: this would be a logical strategy to encourage sales of products such as mortgages, loans and insurance. The question is whether banks will be able to preserve their claim to offer independent advice if such incentives are introduced.

Maintaining 'free' banking for young customers. Youth accounts lose money because they usually have low balances. But the loss is worth incurring if it establishes loyalty from a customer who becomes more profitable with age. Young people with earnings potential such as students may continue not to be charged, or may be charged less.

Because banks are likely to choose different combinations of these strategies, the effect on the industry is uncertain. Banks might persuade customers to close second accounts to maintain higher balances in their primary one. But they will be vulnerable to lower-cost competitors such as building societies or telephone banks which can retain 'free' banking longer.

Banks look hopefully at the experience of the Barclaycard credit card subsidiary of Barclays when it introduced an annual fee in 1990. It lost 485,000 active accounts and a further 1m dormant ones from a total of 10m within a year. But the number of transactions remained virtually the same, as the same business was conducted on fewer cards.

Mr Richard Reay-Smith, chief executive of Barclaycard, says the introduction of charges was not too damaging because it was carefully planned. By offering new services at the same time as it introduced a fee, Barclaycard created a sense that it was worth paying for.

That is the best the banks can expect. The worst is that there will be a flight of the customers to whom they were hoping to sell more products. When the move finally comes, a lot will turn on the reaction of Ms Bergne and the rest of the growing band of dissatisfied bank customers.

United Kingdom, EC P602 Commercial Banks TECH Standards TECH Services COSTS Service prices P602 The Financial Times London Page 16 1373
Letter: Credit not where credit's due Publication 930210FT Processed by FT 930210 From Mr STUART CONSTABLE

Sir, Sir Teddy Taylor, in quoting that 'strange singer' Bob Marley at the Young Conservatives conference, was in fact misplacing the credit for the line he chose (''Yobs' blow loud Euro-raspberry at Major', February 8).

'Stand up for your rights' in this context comes from the song 'Get Up, Stand Up', written by Marley's friend Peter Tosh who was murdered in Jamaica in 1987.

I would draw Sir Teddy's attention to the very fine solo works of Mr Tosh, which for many articulated the messages of Rastafarianism and anti-racism more potently and coherently even than Marley himself.

Stuart Constable,

78 Deangarden Rise,

High Wycombe, Bucks

United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page 16 139
Letter: Heseltine - an accountant bites back, and foul called Publication 930210FT Processed by FT 930210 From Mr RICHARD BEVILLE

Sir, I note that Mr Heseltine's criticisms of accountants have been met with personal comments about his examination record. Is it any wonder, then, that the act of deliberately playing the man, instead of the ball, is termed a 'professional foul'?

Richard Beville,

63 Shelley House,

Churchill Gardens,

London SW1V 3JE

United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services CMMT Comment & Analysis P8721 The Financial Times London Page 16 90
Letter: Heseltine - an accountant bites back, and foul called Publication 930210FT Processed by FT 930210 From Ms CHRISTINE A CATON

Sir, Mr Heseltine was reported as saying that the UK has got the balance wrong in the creation of wealth ('Heseltine laments oversupply of accountants', February 6). He inferred that accountants and lawyers are too many in number and not crucial in financial strategy. In response to Heseltine (part qualified) a representative from the Institute of Chartered Accountants apparently spoke wearily and guardedly and the FT remarked in passing that the institute reports to the DTI on regulatory matters]

As a chartered accountant in practice, weary and worn with regulation and compliance, sick of the recession, the grumbling and the resistance of clients to professional fees, I am not surprised that the standing of a chartered accountant has become denigrated. May I suggest some reasons for this unpalatable situation.

(a) Some 30-40 per cent of my practice time is spent on compliance, regulation and form filling exercises for the government. I cannot therefore develop my expertise to the full or maximise my contribution and experience to the businesses of my clients.

(b) I cannot offer a full and embracing professional service to client companies because I have to demonstrate to the Joint Monitoring Unit that as audit compliance partner I have carried out an audit, as wide in scope for a large public company, for small proprietorial companies. The scope of the work has become greater with additional man hours.

(c) I can only employ the levels and calibre of staff, as dictated by my professional body, and the costs of practice administration and training have increased significantly.

I have two sons aged 17 and 21 and I am thinking very seriously as to whether their futures would be better without professional qualification. Mr Heseltine's comments and the rather spineless reaction from the Institute of Chartered Accountants certainly add substance to this view.

Christine A Caton,

director,

Caton & Partners,

Essex House,

George Lane,

South Woodford, London E18

United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services CMMT Comment & Analysis P8721 The Financial Times London Page 16 358
Ready, willing but still unable: A proposal to give Germany a role as peacekeeper Publication 930210FT Processed by FT 930210 By EDWARD MORTIMER

There should be German troops in Northern Ireland. It might not solve the Northern Irish problem, but it could well be the solution to the German problem.

Some readers may be surprised to hear that there is still a German problem. Others may suppose that today's German problem is an economic one. But if you had been at the annual Munich Conference on Security Policy last weekend, you would know that the new German question is about German troops serving outside the Nato area. It falls into several parts:

Where can the troops go?

What can they do when they get there?

What colour helmets should they wear?

Is a constitutional amendment required?

Chancellor Helmut Kohl wants to be free to send German troops anywhere, and for any purpose - 'peacekeeping, peacemaking and peace-enforcing' - required by the United Nations. He does not think an amendment is needed, but has agreed to seek one, in deference to his Free Democratic party coalition partners.

The trouble is, he cannot muster the requisite majority without the support of the Social Democratic (SPD) opposition. The SPD, for its part, thinks the Bundeswehr should be available to the UN only for 'blue helmet missions' - a phrase generally understood in Germany to refer to traditional UN peacekeepers, who can use force only in their own defence. The SPD parliamentary leader, Mr Hans-Ulrich Klose, said his party had accepted 'the now very much wider spectrum of such operations . . . including the monitoring of embargoes, underpinning humanitarian operations, setting up protective zones and the preventive stationing of blue helmets, that is, approximately 90 per cent of all the missions that have occurred so far'.

Mr Klose added that he himself 'would be in favour of having the Bundeswehr participate in all such missions of the UN or regional organisations under its mandate, even where - to accomplish the set goal - force had to be used as well'. He would take exception only to missions 'whose goal is the use of force'.

Since it is hard to imagine the goal of any mission being defined as the use of force for the heck of it, this formulation took Mr Klose within spitting distance of the chancellor's position.

It caused a ripple of excitement, but only a ripple, since it appears Mr Klose has no chance of carrying his party with him; and even he said he would be stricter than the government in insisting on a 'definite link with a specific and lasting UN mandate'.

Everyone in Germany seems to agree that the use of force, other than in direct defence of yourself or your allies, has to be somehow legitimised by the UN. Only non-official English-speaking visitors at the conference were so ungracious as to point out that this means making any military action by western countries, whether to rescue people from genocide or to prevent a local war from spreading, dependent on the whim of the Chinese and Russian governments.

Not only Germans but Europeans in general seem to agree that German troops cannot be used at present in the former Yugoslavia. It was therefore discouraging, for those who see American troops as an essential ingredient of any serious effort to end the war in Bosnia, to hear a prominent Republican senator, Mr William Cohen, say that Congress was unlikely to sanction direct US military involvement unless there was German participation 'not just in Awacs (surveillance aircraft) but behind artillery pieces and perhaps in tanks'.

As things stand, even the German crew members on the Nato Awacs aircraft now monitoring the no-fly zone in Bosnia will have to be withdrawn if and when the Security Council authorises military action to enforce it.

Europeans have come to accept Germany's inability to join any military action in the former Yugoslavia as a fact of life, not least because they know the arrival of German troops would be exploited in Serbian official propaganda. But many speakers did question Mr Kohl's rationale for not joining when he said 'there are places in Europe where it is out of the question for German divisions to be sent, because there are people still alive who have a very concrete experience' of the second world war 'and all the horrors connected with it'.

Americans especially, but some Germans too, said it was quite wrong to equate today's democratic Germany with yesterday's Nazi Germany, or the Bundeswehr with the Wehrmacht. On the contrary, Germany's past war crimes gave it all the greater obligation to involve itself in efforts, including military efforts, to preserve the peace in Europe now.

If the chancellor's argument were to be accepted, said Mr Josef Joffe, foreign editor of the Suddeutsche Zeitung, the German newspaper, the only place in Europe where German troops could be deployed would be Sweden.

Perhaps he is right, but I think Northern Ireland might be prepared to put up with them, in spite of its memories of German bombing. It is clearly inside the Nato area, and with a bit of effort Germany could field units comprising equal numbers of Catholics and Protestants.

And then 12 British battalions based in Northern Ireland, with plenty of 'peacekeeping' experience and no constitutional inhibitions about serving anywhere, would be free to do their bit for the new world order.

Germany, EC P9711 National Security GOVT International affairs P9711 The Financial Times London Page 16 922
Arts: Harold Pinter's No Man's Land Publication 930210FT Processed by FT 930210 By MALCOLM RUTHERFORD

The star of Harold Pinter's No Man's Land, which has moved from the Almeida in Islington to the Comedy Theatre in the West End, is not so much Pinter the writer as Pinter the actor. Pinter plays Hirst, the part originally taken by Ralph Richardson in the National Theatre production in 1975. In the second act he shows one of the most commanding stage presences I have seen, often by not speaking. Paul Eddington plays the other sexagenarian, Spooner, following John Gielgud in the original. The influence of TS Eliot is pervasive and presumably deliberate. This is Pinter as the author must wish it to be done. It is often vacuous, but it is sensational to watch.

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 150
Arts: Solti and the Vienna Philharmonic - Concert Publication 930210FT Processed by FT 930210 By ANDREW CLEMENTS

The Vienna Philharmonic is giving three London concerts during the current season, part of its 'European series' shared with Paris and Berlin. James Levine conducted the first programme in November and Riccardo Muti will take charge of the last in May; Georg Solti appeared with the orchestra on Monday for a programme of Mendelssohn (the Fourth Symphony) and Shostakovich (the Fifth).

The combination of Solti and an orchestra still able to trade on its illustrious pedigree ensured a full, rapturous house. It was, though, an occasion to inspire only modified rapture; artists and repertory had been mismatched in a strangely perverse way. Applying Solti's angular propulsiveness to a Mendelssohn symphony is the musical equivalent of breaking a butterfly on a wheel, while the VPO's greatest admirers would not dare to claim that it plays Shostakovich with the same distinctive flair and style it brings to the Viennese classics or to Strauss.

Yet a genuinely great orchestra, which the Vienna patently still aspires to be, really should have the potential to adapt its approach rather than construe everything within its own terms of reference. It did so brilliantly at the Proms last August when playing for Boulez, but seemed to be operating strictly on autopilot for the Shostakovich here.

Solti, who appears to be working systematically through the canon, was strangely restrained in the

Fifth too. One expected this conductor and these strings to

make something more of the opening paragraphs and to invest the heart of the slow movement with sensuous depth, but no. Even the finale, launched at a frantic pace, ran

out of steam well before the

close. It was pallid, routine, uninteresting.

Only an encore of the Fledermaus overture, whipped and driven in the Solti way with a sort of tight-lipped humour, showed any character; by then it was too late.

Royal Festival Hall; final concert May 30

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 346
Arts: The killing fields brought home - Television Publication 930210FT Processed by FT 930210 By PATRICIA MORISON

In the wrong part of Sarajevo, the washing-up can cost you your life. Panorama's Forcing a Peace (BBC 1, Monday) began with reporter Martin Bell and his crew filming people who daily run the gauntlet to fetch water from a tap in a cellar, the only running water left in their neighbourhood. Each day, Serb snipers pick off their toll of victims. We saw a young man shot in the thigh, saw the fresh wound, and his puzzled expression suddenly wiped away by the white-faced immobility of shock. Bell's interpreter, a doctor, staunched the wound and the BBC jeep did duty as an ambulance.

This was a notable feat of reporting and deeply harrowing. Bell's team filmed the fighting in the front-line of the battle, from trenches cut through Sarajevo's Olympic Village. Killing and the daily struggle to live are closely intertwined. As trees in the parks are hacked down for firewood, the snipers' aim gets ever more accurate. The parks, and now a football pitch, have been taken over for cemeteries. A bread-queue makes an easy target.

Over the months, film-clips on the news broadcasts have tended to become cliches which actually make it harder to register what life can actually be like in Sarajevo. Time and again, we have seen puffs of white smoke drifting over what still seems like a picture-postcard prospect of tiled roofs, tawny-coloured churches and minarets. Film of UN military vehicles on the road to the airport can become an image of normality. Last night's images gave the lie to that when we saw UN vehicles speed past a young woman lying by the roadside in a pool of blood.

It takes time to bring home the savagery of the war in Bosnia. Monday night's Panorama seemed like a very long 40 minutes. A Moslem woman spoke of months of captivity with 12 other women, and of being subjected to rape once, twice, or more at night. She spoke, too, of a six year-old girl held with them. A UN worker described in detail the manner in which amputations had been carried out in one hospital in a besieged Moslem town. Children endure that, too, and the wonder is that some of them even survive.

Bell's point was a simple one; that the ordinary Bosnians' suffering has been so great that the outside world must now intervene to force a peace. Rightly, he did not get into discussion of precisely how that might happen, and what it might cost in non-Bosnian lives.

His aim was an unsparing and, in the end, even-handed presentation of the ghastliness of this war. In a Bosnian Serb village, 23 were massacred, either shot or their throats cut in cold blood. Their corpses lay in a room awaiting burial, white and stiff as tailors' dummies.

For some reason, in the UK the Bosnian tragedy has failed to trigger that mysterious thing, a public sense of pity and outrage. The trivialisation of TV news can hardly have helped. Last year's revamp of ITV's News at Ten has left it with a glib format which on some nights teeters on the edge of inanity. Serious current affairs documentaries of the calibre of Panorama are more to be prized than ever.

Until this week, I had a false image of what going down the Nile on a pleasure-boat entails. My mental picture was of people on deck-chairs beneath an awning, looking with rapt interest at the immemorial landscape of palms, peasants, and water-buffalo. But apparently it is not like that at all, accord-ing to BBC2's Assignment report on Egypt, The Gun and the Veil (Tuesday).

These days, people go down the Nile lying side by side, nearly naked and sweating oil rather in the manner of sardines on toast. It seems not so hard to sympathise with the views of Omar Abdul Rahman, leader of the Islamic League. The sheikh is a venerable, blind, holy man who lives in voluntary exile in New York after being tried, but acquitted, on the charge of ordering President Sadat's assassination. He inveighs against tourists as the work of the devil, polluting the land with gambling, adultery, prostitution, Aids, etc.

Unfortunately, the sheikh's words did not make clear whether he will tolerate on Egyptian soil the kind of discreet, respectably dressed tourist who wears ankle-length skirts and a head-scarf. Since followers of the Islamic League have murdered a small number of tourists, one would have appreciated a directive from the sheikh.

At any rate, substantial damage has been done to the tourist trade, allegedly down some 30 to 50 per cent this year, causing the Egyptian government to lose millions of dollars in revenue.

And yet, there is far more to the rising tide of religious orthodoxy in Egypt than highly-publicised violence against westerners. In a poor (albeit by no means the poorest) district of Cairo, the kind of area where tourists never penetrate, the blocks of flats look onto lakes of sewage. In such districts, the Moslem Brotherhood runs cheap yet effective clinics where doctors and nurses show themselves to be kind, compassionate, honest - in a word, to be good Moslems. This sane and sympathetically made documentary showed that it is qualities like these which may be the keenest weapon in the armoury of so-called Islamic fundamentalism.

Femme Fatale by Simon Gray, in the current season of Screen 2 (BBC2, Sunday), was a black comedy about how the random relations between good intentions and evil consequences. Not vintage Gray, perhaps, but an enjoyable play all the same. Its problem lay with a dangerously slow opening. Of course the ironic undertow was there, only it seemed to be flowing a mite too sluggishly to compensate for the setting, twee flummery in a Somerset village. For a while it seemed that this was merely an EC version of Cold Comfort Farm, with a diminutive, hot-blooded Italian virgin (Sophia Diaz) brought in as agent provocateuse.

Things did pick up speed once the characters developed a bit and once the cloven hoof of Vicar Ronnie became clearer, played by Simon Callow. Garage-owner Algie (James Fleet), made a splendidly evil Scots seducer who never got his girl. Without being hilarious, there was plenty to smile at. It made a nice touch to have the corpulent shopkeeper (Colin Welland) almost as enamoured of his Italian daughter-in-law's pasta, pronounced as in meat pasty, as her voluptuous body.

Last week's Essential History of Europe (BBC 2, 9.00), will surely have left Luxemburgers feeling put out, and with good reason. The opening proposition was that 'more Luxemburgers commit suicide each year than are killed on the road'. Which fact is, of course, wholly meaningless unless we are also told about the country's road safety record.

Instead, we were left to deduce unfavourable conclusions about the lives of the poor rich folk of that tiny nation. Later, there was sinister mention of a bridge from which suicides throw themselves, an effective and time-honoured method of doing yourself in which is also popular in London, Bristol, and Paris. What really is the evidence that Luxemburgers are the lemmings of the EC?

As far as I know, every country in the EC has a drugs problem so it seemed gratuitous to fasten on the drugs scene in Luxemburg. Furthermore, it is plain silly to claim anything paradoxical in a country where jobs are plentiful and living-standards are notably high, having the same proportion of drug addicts as in 'other major capitals'.

From the stand-point of this oddly prejudiced, often self-contradictory analysis, Luxemburg was in a no-win position. The strangest things were marked to the debit side of the slate; that there is only one prison, and that one third of its inmates are there for drug-related crimes. Again, without statistics this is meaningless. Maybe there is a super-efficient gendarmerie, or maybe there are only thirty criminals in jug.

The children of the country's large influx of Portuguese workers 'are becoming Luxemburgers' - the innuendo being this this is per se a bad thing. In the last war, the 'German occupation focused Luxemburg's frail sense of nationality'. Why should it be judged frail, given that previous speakers had stressed the cohesiveness of this fortress state, its inhabitants bound by their 'secret language' and their passion for clubs. It will be inter-esting to see what next's week's concluding film in this provocative series makes of Belgium's wartime experience.

United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 15 1434
Arts: Popular revivals in London - Opera Publication 930210FT Processed by FT 930210 By RICHARD FAIRMAN

When money is short, it is a prudent opera company that strives to get maximum mileage out of productions which it knows work well. Two revivals of trusted stagings, one at each of the London opera-houses, returned at the weekend and it is good to report that neither gives the impression merely of a tired warhorse being trotted out for another run.

The Royal Opera's Il barbiere di Siviglia has arguably improved on each occasion that it has been seen and this revival brings together some of the best individual performances encountered so far: a cast confident of its star appeal, balancing brash, youthful vigour with wily experience.

The main newcomer is Thomas Hampson in the title-role. This is his debut with the Royal Opera, not before time, and an occasion which he enjoys to the full, singing out proudly with his easy, impressive, ample baritone and generally making sure that his role is the focus of attention. He bestrides the stage with an overpowering all-American confidence, which is not necessarily right for Rossini's lowly barber who lives by his wits alone, but the flair is irresistible.

Alongside him are two American colleagues happily remembered from previous revivals, Jennifer Larmore as an attractive, vocally sure Rosina and Bruce Ford, a sensitive Count Almaviva with not quite enough personality. Simone Alaimo creeps on as a spooky Don Basilio, the sepulchral presence cleverly underplayed, the voice a real Italian Rossini bass. Not to be outdone, Gabriel Bacquier's Doctor Bartolo proved a master at deploying the killing comic touch at the most lethal moment and is still a singer of some force, even though he will be 70 next year. Can the reference books really be right?

All were kept firmly together by Evelino Pido, who trussed up the score rather fearsomely, allowing few musical freedoms but kept the pace bright and swift. He also encouraged his singers to bring along a selection of their own vocal ornaments, which is all to the good. No lack of sparkle there, or in any other department.

The conducting of Mark Elder was the feature that gave the strongest profile to English National Opera's revival of Rigoletto on Thursday. Even when the production was new (how long ago that seems now]) he did not bring it the urgency, the powerful feeling of the music driving the drama forwards, that made this performance so convincing.

Among the principals, the only newcomer here was Rosa Mannion, bravely singing Gilda over, and at times audibly through, a heavy cold. Even in these circumstances, however, the beauty of her singing shone forth and she made the character tellingly progress, from the lightly floating virginal purity of the early scenes to the tragic victim she becomes after the abduction. Arthur Davies remains a dashing, youthful Duke, singing with winning freedom, except when he is ambushed by vocal doubts in his Act 2 aria. Jonathan Summers is again the powerful, unsubtle Rigoletto, but one who commands the stage.

According to the advertisements in the press, this now renowned mafioso Rigoletto, like so many prima donnas who announce their retirement only to re-appear, is again on the point of disappearing for good. If there really is anybody who has not yet seen it, this is the last chance - and probably as good a one as any.

Il Barbiere di Siviglia at Covent Garden until March 5 (Box Office 071-240 1066). Rigoletto at the London Coliseum until March 12 sponsored by National Power (Box Office 071-836-3161)

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 617
Arts: Today's Television Publication 930210FT Processed by FT 930210 By PATRICIA MORISON

Tomorrow's World (BBC 1, 7.30) asks who is going to pay to prop up Angkor Wat, the vast temple built in Cambodia (at about the time of the Norman Conquest), which is now badly in need of restoration.

Indian archaeologists have been working away on the structure during the years that Cambodia was closed to the rest of the world. Unfortunately, some claim their techniques have done more harm than good.

Migraine sufferers should cast an eye over Food File (C4, 8.30). The series begins with an item on managing one's diet to alleviate migraine.

The moral majority may not have much say in controlling what manner of art-works and performances we see in this country, but nevertheless, the American experience is one which has an impact over here. Organisers of shows with sponsorship by US companies have found their freedom for manoeuvre curtailed.

So - there is all the more reason to catch the second showing of the documentary about censorship which itself caused a furore, Damned in the USA (C4, 11.20).

United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 15 202
Management: Survival of the best qualified - Alan Cane examines the strange case of the vanishing IT directors Publication 930210FT Processed by FT 930210 By ALAN CANE

Information technology directors, sometimes called chief information officers, enjoyed a brief moment of glory in the late 1980s. Since then, they have begun to resemble an endangered species. A surprising number of these highly qualified and capable individuals, including some well-known names, have either resigned or lost their jobs.

Michael Earl, a professor at the London Business School, and Philip Vivian of the executive search firm Egon Zehnder were intrigued by the 'mystery of the vanishing CIOs' and set out to compile a survival kit* for what many now acknowledge as the toughest job in a company, combining technical competence with general management abilities.

CIOs emerged in the 1980s as the realisation grew that IT could have an influence in a company well beyond cutting administrative costs. IT budgets increased sharply on the promise of computer-based competitive advantage and CIOs were appointed to manage and exploit the technology.

But CIOs made chief executives feel insecure. One told Earl and Vivian: 'What keeps me awake at night is not knowing whether my IT director is doing a good job.'

Careful comparison between 10 CIO 'survivors' and 10 who had failed to stay in post revealed five significant differences:

Relationship building. Survivors actively built relationships with their peers and superiors in ways which enabled them to command support for IT within the organisation. It took time and effort. One survivor claimed it took two years to interest and educate a new senior executive.

Non-survivors, on the other hand, fought shy of these relationships. One agreed he did not enjoy 'the diplomacy and politics required in a corporate role'.

CEO relationship. Survivors were close to the CEO and enjoyed their support for IT investments. Non-survivors had a poor or non-existent relationship with their chief executive. Typical comments were: 'With successive organisational changes, I became more remote from the managing director and when we had a bad patch, I had no support or sponsor,' or: 'He was the wrong guy to take IT forward; he was obsessed with costs.'

Shared IT vision. Survivors worked to create a vision for IT's contribution to the business and made sure it was shared with the company's senior executives. Non-survivors either hugged the vision to their chests: 'The global information systems strategy was my vision alone,' or complained about the lack of one: 'It was a very short-term sort of business.'

Sensitivity. Survivors seemed to have a fine sense of which battles to fight and which to avoid: 'Be dynamic, but only in what the company is ready for,' concluded one. Non-survivors, on the other hand, were often at odds with senior management over important policy shifts. 'Being antagonistic once or twice works, but in the long run it is wearing on people,' said one sacked CIO.

Credibility. Survivors delivered the goods operationally. 'We are a factory,' one survivor said. 'If the organisation is not satisfied with operations the whole view of IT is affected,' said another.

Non-survivors often met neither performance nor financial targets.

Survivors also combined technical know-how with social skills and had spent more time in data processing than non-survivors. General managers pressed into the role of CIO prove unsatisfactory, Earl and Vivian conclude.

They suggest that chief executives should treat IT as a legitimate 'nursery' for the company's best talent and seek to develop young executives' IT expertise by a spell in data processing.

But CIOs find it hard to break out of the IT mould, even at a price. One former CEO and CIO said: 'I want to take up a CEO job again, but I only get offered CIO jobs. I would want four times the rate for being CIO that I would accept for being CEO.'

*The role of the Chief Information Officer: a study of survival. Available free from the London Business School or Egon Zehnder International, Mayfair Place, London W1X 5FH.

United Kingdom, EC P99 Nonclassifiable Establishments MGMT Management P99 The Financial Times London Page 14 683
Management: Resetting the clock - Asea Brown Boveri is transforming its factories by slashing lead times Publication 930210FT Processed by FT 930210 By ROBERT TAYLOR

Asea Brown Boveri, the Swedish-Swiss engineering giant, is going through what it calls 'a new industrial revolution' in its plants around the world.

Known as the T50 strategy in Sweden, where it is most advanced, it has a firm objective: to halve all lead times in the company's activities by the end of this year. This is being done by decentralising work responsibilities and widening individual worker skills within teams.

'We have made work cycle times the instrument for reform,' declares Bert-Olof Svanholm, ABB's Swedish president, the inspiration behind T50. 'Time at work is a concept everybody can understand.'

The company can point to some early successes for the strategy. In its power systems production it has cut the time for making high-voltage direct current transmission equipment from three to two years. The time for supplying customers with standard switchgear has fallen from three to five weeks to three to five days from receipt of the order to delivery. Cycle times in ABB's components division have been reduced from 86 to 35 days.

ABB started to introduce T50 into its Swedish plants in June 1990. In the company's words it is 'a programme with a beginning but no end'. An estimated half of the company's 32,000 Swedish workers are now involved actively in the strategy with most of the rest in the initial stages. So far the company claims that, on average, cycle times have been slashed by 21 per cent and more than 300 high-performance teams have been created.

Until now, ABB argues, most companies have given the highest priority to reforming direct production methods. 'For too long the direct production area alone has been the autostrada of manufacturing and little attention was being given to what happened before and after it,' explains Svanholm.

He draws inspiration for the strategy from the practice of lean management so widespread in Japan's auto industry. 'We are trying to blend Japanese methods with the Swedish work culture,' he explains.

The drive behind T50 has come from the top of ABB under the direction of Percy Barnevik, the company's charismatic chief executive. He made his senior managers read and digest the influential management study from the Boston Consultancy group - Competing Against Time - when it was published three years ago.

The company is perhaps better suited than most Swedish enterprises to introduce the time-based concept into its operations. 'We have become a very decentralised organisation over the past 10 years,' explains Svanholm. 'If we had tried this in the old days of stratified management hierarchies there would have been so much resistance and it would have been abandoned within a fortnight.'

It was the structural change pushed through by Barnevik in Asea during the early 1980s that paved the way. The T50 concept was a logical evolution from the existing organisation, not a radical break with past practice.

T50's most important result has been to place the much-hyped, but seldom-practised, principle of customer satisfaction at the centre of ABB's priorities. 'The customers are our focus. We must respond to their demands for the delivery of orders on time,' says Svanholm.

It is the close alliance forged between the company and the trade unions that smoothed the way for T50. Indeed, says Svanholm, the trade unions at ABB are as enthusiastic as the company in transforming the work process. 'They were in on the strategy from the start,' he points out.

According to Klaus Eklund, who headed a government-commissioned inquiry into Sweden's productivity problems, ABB has gone much further than other companies in creating 'a coalition between progressive management and blue-collar unions in boosting productivity'.

The unions, moreover, have established their own committees to monitor T50 and make sure it works with the full involvement of their members. Without such co-operation it is hard to see how T50 could make any headway in ABB's Swedish plants, where the unions remain powerful.

In part, the strategy has developed in response to the expressed views of the company's own employees. Three years ago ABB commissioned an independent opinion survey of the shopfloor mood. It found that while manual as well as white-collar workers were loyal and committed to the company they felt they did not enjoy enough influence over their own working conditions, their work was not being managed effectively enough and there was a lack of team spirit.

Such findings strengthened Svandholm's conviction that the company needed to reappraise its attitude to its own employees. 'We want to create a new kind of independent-minded, all-round worker,' he explains. 'There is a lot of bullshit in management theory about treating people as a human resource. But too often that has meant very little in practice. We really do believe workers should become adaptable and independent and as a result gain more control over their own work.'

For ABB T-50 means the prospect of bigger profits, better productivity and higher-quality products as well as lower absenteeism and labour turnover. For the employees it means a better working environment, greater job interest with constant skill upgrading, and eventually a better wage rate linked more closely to individual effort.

The creation of what ABB calls Target Oriented High Performance work teams made up of 10 to 15 workers is crucial to the T50 strategy. 'The old system handed down orders from above through different, fragmented departments and it was very time-consuming,' explains Kenneth Synnersten, ABB's executive vice-president in charge of T50 in Sweden. 'Now we organise around the flow of production through the team approach.'

The traditional system involved specialised demarcation of responsibilities for sales, inventories, production and distribution with an inevitably high level of bureaucratic managerial control and top-heavy administration. By the creation of smaller, flexible teams with wider responsibilities, the frontiers between administration and production have been abolished.

The new strategy has also brought the collapse of the barriers separating white- from blue-collar workers. Now all ABB employees are called 'associates' and under new agreements will have the same pay rates, working hours, holidays and travel allowances, although this has brought some difficulty with some white-collar workers who fear a threat to their status.

T50 has also introduced what Svanholm calls a 'flat organisation with fewer bosses and more workers taking on responsibilities'. As a result the functions of ABB's line managers have been transformed.

'They have many more demanding job tasks to do now,' says Svanholm. 'Before they were a combination of policeman and errand boy. Now they act as a support for workers.' The foremen and the production engineer are being turned into 'coaches' who move between the work teams to assist when needed.

The company puts a strong emphasis on training and education. The need to upgrade worker skills lies at the heart of the T50 strategy. What ABB wants is to heighten the competence of each worker within the team.

The strategy, however, is not trouble-free. It is being introduced at ABB in the middle of recession. 'So far this has not affected the programme,' insists Synnersten. But the strategy means a leaner workforce. Without any growth in production up to a quarter of ABB's jobs may disappear as a result.

'Yes, T50 will mean fewer jobs,' admits Anders Vallius from the Metalworkers union. 'But if we can increase sales in the longer term then employment opportunities will go up as well. We know ABB must stay ahead of its competitors.'

Asea Brown Boveri Sweden, West Europe P3532 Mining Machinery P3629 Electric Industrial Apparatus, NEC P3694 Engine Electrical Equipment MGMT Management P3532 P3629 P3694 The Financial Times London Page 14 1283
People: Lord Eden, Allan Jonnes and Matt McBride - an apology Publication 930210FT Processed by FT 930210

On January 18, in an article about the Bricom Group Ltd and its recent management changes, we wrongly stated that the Bricom Group is in a disastrous financial situation and implied that the former management team of Lord Eden, Allan Jonnes and Matt McBride was to blame. We fully accept that this was totally untrue. We are assured that the Bricom Group prospered under its former management and is in a sound financial position. We understand that the management changes resulted from a change in the strategic direction of the Bricom Group. We greatly regret the damage and embarrassment caused by our article to Lord Eden, Mr Jonnes and Mr McBride.

Bricom Group United Kingdom, EC P6719 Holding Companies, NEC P451 Air Transportation, Scheduled P4581 Airports, Flying Fields, and Services P4789 Transportation Services, NEC P5021 Furniture COMP Company News PEOP Personnel News P6719 P451 P4581 P4789 P5021 The Financial Times London Page 13 170
People: Bodies politic Publication 930210FT Processed by FT 930210

Bert Morris (above), deputy group chief executive of National Westminster Bank, has been appointed a non-executive member of the management board at the DEPARTMENT OF SOCIAL SECURITY.

*****

Jean Gaffin, former treasurer of the Parliamentary Advisory Council on Transport Safety, has been appointed chairman of OFTEL's advisory committee on Telecommunications for Disabled and Elderly People.

*****

James Davis, chairman of DFDS, Bromley Shipping, and TIP Europe, has been appointed a trustee of the NATIONAL MARITIME MUSEUM.

*****

Philippe Giraud, senior partner in the Bossard Group, has been elected president of the EUROPEAN FEDERATION OF MANAGEMENT CONSULTANCY ASSOCIATIONS.

*****

Gil Gray, BA's chief pilot for Boeing 757s and 767s, has been appointed a member of the CIVIL AVIATION AUTHORITY on the retirement of Brian Trubshaw.

*****

David Swan, formerly European affairs director of Imperial Tobacco, has been appointed chief executive of the TOBACCO ADVISORY COUNCIL.

*****

Leo Schoevers, a director of HCS InfoTech in the Netherlands, has been elected senior vice-president Europe, Africa and the Middle East of the ASSOCIATION FOR SERVICES MANAGEMENT INTERNATIONAL.

Office of Telecommunications (UK) National Maritime Museum (UK) European Federation of Management Consultancy Associations Civil Aviation Authority (UK) Tobacco Advisory Council (UK) Association for Services Management International United Kingdom, EC P9199 General Government, NEC P9631 Regulation, Administration of Utilities P8412 Museums and Art Galleries P8621 Professional Organizations P9621 Regulation, Administration of Transportation P8611 Business Associations PEOP Appointments Giraud, P President European Federation of Management Consultancy Associations Schoevers, L Senior Vice President Association for Services Management International P9199 P9631 P8412 P8621 P9621 P8611 The Financial Times London Page 13 271
People: Mathieson returns to Rover Publication 930210FT Processed by FT 930210

One of the more senior Eindhoven-based sales and marketing executives of DAF, the collapsed Anglo-Dutch commercial vehicle maker, is back at a desk within the UK's Rover Group.

The return to Rover of Sandy Mathieson (right), who is to become commercial director of Rover's UK car sales, reunites some of the key figures who in the 1980s shaped the fortunes of DAF's Birmingham-based vans subsidiary. The latter is now - like the rest of DAF's UK operations - in the hands of receivers.

Mathieson's welcome back on board at Rover, formerly British Leyland, is courtesy of George Simpson, Rover's chairman. Simpson himself is a former managing director of Leyland DAF, appointed soon after the formerly UK State-owned Leyland truck and van operations were merged with DAF, under Dutch control, in 1987.

Simpson first made his name, however, by turning round the vans operation - then known as Freight Rover - into a profitable enterprise in the years leading up to the DAF takeover. Mathieson was his right-hand-man as sales and marketing director.

Mathieson will also be joining Graham Morris, managing director of Rover Europe, who oversees sales and marketing operations for Rover cars and Land Rover/Range Rover 4wd vehicles throughout Europe.

Rover Group United Kingdom, EC P3711 Motor Vehicles and Car Bodies PEOP Personnel News P3711 The Financial Times London Page 13 233
Jobs: At last, a gleam of practical intelligence - Despite evidence on what really makes for high performance, employers stick to faulty measures Publication 930210FT Processed by FT 930210 By MICHAEL DIXON

FOR all its own obdurate optimism, the Jobs column must bow to PA Consulting Group when it comes to looking determinedly on the bright side.

After questioning 88 large employers in Britain, the group cheerily declares that the freeze on the recruitment of university graduates is lifting. The stated reason is that: 'Only 5 per cent of blue chip organisations surveyed do not intend to recruit any graduates in 1993.'

How things have changed. It's not long since the opposite of a cheering interpretation would have been put on the same survey finding, which could equally well be re-worded to read: 'As many as one in every 20 big organisations will be recruiting no graduates whatsoever.'

There is nevertheless little doubt that PA's happier wording will be thought preferable by Britain's government. After all, its educational prescription for the country's economic and social health is evidently to shackle teachers ever more tightly to the task of getting their charges through a succession of academic examinations, culminating in those for university degrees.

True, no one has yet explained precisely how such exam-passing will increase the nation's future well-being, and the results of past expansions of degree-level study are hardly encouraging. But given ministers' enthusiasm for expanding it still more, they must be comforted to see that 95 per cent of big employers intend to take on at least one graduate.

Alas it may have blinded them to a couple of clouds no bigger than a man's hand, which unlike the one made famous by the prophet Elijah are not necessarily omens of good. The first cloud is represented by the appearance of the Yale University psychologist Robert Sternberg at the Ciba Foundation's recent London conference on human ability. The second is a staff development programme at Nuclear Electric, the state-owned outfit running nuclear power stations in England and Wales.

Professor Sternberg's research includes studies, in harness with fellow-shrink Richard Wagner, into what makes for productive performance at work. And one of the findings which he spelt out to the conference was that results in academic exams are no guide to teaching or research ability, let alone to practical and creative potential.

'Many people with high test scores at school will get good university grades. But this doesn't indicate they will be successful in later life; people with lower scores may be more successful,' he said. 'The bottom line is that we need to recognise and think about giftedness in ways other than just looking at academic standards. What matters at school doesn't matter nearly so much in later life.'

The factor which does matter is what he calls tacit knowledge or practical intelligence, which does not correlate with standard IQ. He defines it as 'knowledge that usually is not directly taught, spoken about or written about, in contrast to knowledge directly taught in classroom' - the know-how typically acquired in doing something for real. He and Dr Wagner have also worked out methods of identifying same.

Now, one of the ways which history has shown to be least effective in changing ingrained habits is to have them exposed as stupid by a professor on the basis of cogent research. For example, the Jobs column described Robert Sternberg's findings at length nearly eight years ago only to see Britain's counter-productive obsession with exam-passing become more compulsive still.

Even so, this time there is reason to hope the outcome may be different, because Nuclear Electric has got into the act. It has taken the Sternberg-Wagner ideas on the productive worth and indentification of tacit knowledge, tested them carefully in the workplace, and - as was demonstrated by the company's Max Choi at last month's British Psychological Society conference - they work.

As a result, he said, 'our development programme is now focused on practical intelligence.' And although Nuclear Electric is but one among many employers, the intelligent step it has taken may point a better way to greater well-being than all the graduate recruitment in the world.

MEANWHILE, whatever may become of PA's optimism about the employment prospects of the next crop of degree-winners, its survey gives much information about graduates of former years who not only found but are still in jobs. As the underlying table gives only a sample of it, anyone wanting the full report which is priced at Pounds 445 should contact Jenny Cambridge at 123 Buckingham Palace Rd, London SW1W 9SR; tel (0)71-730 9000, fax (0)71-333 5050.

My extract takes two sorts of employed graduates: one deemed adequate though no more than that in the job, and the other considered a high-flier. The table shows the typical pay of each sort after various lengths of time in 13 types of work. 'Accounting' covers the in-company variety as well as professional practice, and the pay figures include bonuses in addition to basic salary.

Where the types of work are ranked in the table is determined by the differential which the high-flier enjoys over the adequate performer after five years' service. The variances strike me at least as surprising, if not downright bewildering. The range runs from nearly 32 per cent in the case of production to a mere 2.2 per cent in chemical engineering.

United Kingdom, EC P8221 Colleges and Universities P99 Nonclassifiable Establishments STATS Statistics PEOP Labour P8221 P99 The Financial Times London Page 11 918
Business and the Environment: Halting industry in its tracks - The controversial US Endangered Species Act may soon be even tougher on land users Publication 930210FT Processed by FT 930210 By VICTORIA GRIFFITH

Funding for the Endangered Species Act is coming up for approval by the United States Congress this year. Businessmen and women from sectors as diverse as farming and real estate development will be affected by the government's decision on the funding bill.

In its 20 years, the Endangered Species Act has become one of the most controversial environmental laws to hit the books. Species protection has led to vitriolic, even violent, confrontations between environmentalists and workers in sectors such as logging and fishing.

The power of the Act is forbidding. Soon after being signed into existence in the 1970s, the ESA was used to delay construction of the Dollars 120bn (Pounds 80bn) Tellico Dam in Tennessee to protect the rare snail darter fish. The Act has continued to have far-reaching effects on land use industries.

The confrontation in the Pacific Northwest between loggers and defenders of the rare spotted owl became a 1992 election issue, and the theme of 'putting people first' (before animals, that is) was at the heart of many of George Bush's campaign speeches in the region. Loggers, with the support of the then president, felt their jobs should take precedence over the rare bird's habitat.

The Act has affected many other industries. Oil companies claim their drilling activities have been limited unnecessarily. Farmers in the west complain of severe grazing restrictions to protect certain species of bird. And real estate developers in southern California are bitter over building curbs to protect the kangaroo rat.

Under the decidedly pro-environmentalist Clinton administration, most observers expect the Act to be not only renewed, but strengthened. Under consideration will be:

Measures to speed up the process by which species are listed as endangered.

The possibility of listing entire ecosystems, not just species, under the Act.

Increased funding for policing of the Act.

Harsher penalties for offenders.

Possible compensation for landowners who find endangered species on their property.

The ESA has ardent supporters and detractors. Its most extreme opponents propose listing rare animals as 'relic species' which could not adapt to the late 20th century. Instead of maintaining a natural habitat for these species, these activists propose breeding the animals in captivity in order to prevent their extinction.

Certain 'dune-buggy' recreation clubs have claimed that their right to ride vehicles on beaches and desert turf should take priority over the preservation of animal and bird life. And stories have circulated in the Florida press about landowners who poisoned rare turtles nesting on their property rather than face building restrictions.

More moderate opponents of the ESA say it threatens many Americans' livelihood. A particularly bitter battle is brewing over the rights of shrimpers in the Gulf of Mexico. Gulf coast shrimpers are angry about turtle excluder devices (Teds) which they have been forced to install in their netting. The device is a kind of trap door which allows sea turtles to escape.

'The problem is, it also lets the shrimp out,' says Darcy Keefe, a fourth-generation shrimper. 'We'd like to comply with the law, but we also have to make a living.' Keefe says most of his shrimping colleagues have been forced out of business by the ESA.

The National Wildlife Federation in Washington DC, however, claims Teds are one of the Act's biggest success stories. According to the federation, the devices annually save about 55,000 sea turtles that would otherwise drown in shrimp nets. And a study released by the organisation last year claimed that Teds actually caused little hardship. The report noted a 15 per cent increase in shrimpers' average daily catch since the Ted regulations applied.

Shrimpers say the study tells only one side of the story. 'Each vessel may be catching more shrimp, but that's partly because there are fewer shrimping boats out there,' says Keefe. 'And the Teds are heavy; they stretch our nets, and we have to pay the extra cost.'

In another bitter ESA dispute, the Pacific Northwest Generating Co-operative, which provides hydro-electric energy to many communities in the northwestern states, says it faces additional costs of between Dollars 1bn and Dollars 5bn to save rare salmon on the Columbia River.

Environmentalists would like the company to aid salmon migration by drawing down reservoirs behind the dams to push up water levels at certain times of the year. But the company says that would mean prohibitively expensive alterations to the dams already in place on the river.

'It's not just the hydro-electric power that's at risk,' says David Harper, director of legislation for the group. 'Changing the river levels would have an impact on shipping along the waterway, which in turn affects farmers trying to get their wheat to port.'

The history of the ESA is littered with smaller casualties, too. Edward Lee of Kansas used to make a living by collecting gravel from streams to sell to businesses. A few years ago, he was forced to shut his operation in order to protect an endangered catfish laying eggs in the gravel. Richard Christie, a Montana rancher, found himself unwittingly in violation of the law when he shot and killed a grizzly bear that was feeding on his sheep.

Opponents of the ESA say that environmentalists often invoke the law to protect land they prefer to see undeveloped. But many environmentalists contend there is nothing wrong with this approach.

'Many of the industries which are affected by the law make money by abusing public resources,' says Michael Bean, chairman of wildlife for the Wildlife Defence Fund in Washington DC. 'We are in many cases faced with inadequate land use restrictions.'

In spite of the strong emotions, some activists are convinced that compromise is possible. One success story is a deal between environmentalists and Louisiana loggers to protect the black bear. The loggers promised to leave tree corridors to allow the bears free access to their hunting areas. The environmentalists, for their part, agreed to allow a certain amount of logging in the bears' habitat.

An unlikely alliance has also formed between some environmentalists and property rights activists, who are pushing Congress to offer financial incentives to landowners who find rare species.

'We've heard the stories about turtle poisonings in Florida,' says Adam Roberts, research assistant for the Animal Welfare Institute in Washington DC. 'Obviously, we don't want that to happen, so we're lobbying for better compensation to property owners.'

Activists on both sides of the issue are also pushing for earlier listings to prevent crisis confrontations. One Louisiana logger pointed out that the black bear was a legal hunting target until shortly before listing as an endangered species.

'We believe the Act could be more efficient if listings occurred earlier,' says Kathleen Hartnett, a director of the National Cattlemen's Association. 'And we also think the law could be applied more efficiently.'

Hartnett points to the ESA's limited success in restoring many species to healthy levels. Hundreds of species have been added to the list, which is expected to top 1,100 by 1996, but only five have recovered enough to be removed from it.

'We think more money should be applied to the recovery of species which stand a real chance, while others should be abandoned as basket cases,' says Hartnett.

Although opponents and supporters of the Act are beginning to work together, the two sides are probably on course for more bitter clashes over the next few years.

And if the Act is strengthened, as is expected, land use industries in the US may have even more to lose in the battle to preserve biodiversity in the US.

United States of America P0971 Hunting, Trapping, Game Propagation GOVT Regulations CMMT Comment & Analysis P0971 The Financial Times London Page 9 1307
Business and the Environment: Sceptical ears are deaf to old refrain Publication 930210FT Processed by FT 930210 By BRONWEN MADDOX

Destruction, deterioration and degradation of the environment is the refrain of the 10th edition of State of the World, the annual bible of the Worldwatch Institute, a Washington DC-based think tank known for its gloomy forecasts of the world's future.

The institute and its founder, Lester Brown, have built a considerable international reputation on the back of this annual compilation* of reports and essays, translated into 27 languages.

But despite this year's emphasis on the economic costs of environmental damage, the book is part of that broad stream of environmental writing likely to be of interest mainly to the converted.

The collection - each of the nine chapters by a different author - bombards the reader with warnings of disaster and exhortations to action, from reviving coral reefs to 'rediscovering rail' and 'preparing for peace'.

This apparent lack of discrimination between problems is particularly marked in Brown's opening chapter, which crams a reference to most environmental issues into 17 pages. The problems have never been greater, he claims, while faith in science to solve them has shrunk.

Assumptions are presented as fact in sub-clauses such as ' . . . given the deteriorating state of the planet . . . ' along with other highly debatable views.

One of his central claims is that 'the environmentally destructive activities of recent decades are now showing up in reduced productivity of croplands, forests and fisheries . . . in rising health care costs for cancer, birth defects, allergies, emphysema, asthma'. However, these sweeping assertions ignore the argument that increased incidence of cancer in industrialised societies is partly due to people living longer - by many standards a success. Nor do they question how much food production in Africa or the former Soviet Union has been affected by political disruption.

His most ambitious claim is perhaps that we have arrived at 'the end of rapid GNP growth', and that the 'worldwide' recession he has identified is caused partly by 'environmental degradation'. His study quotes scientific reports suggesting that annual 'losses' from sulphur deposits on European forests could be Dollars 30bn (Pounds 20bn) a year. However it does not attempt to offset these against the extra costs that would fall on industry from cleaning up, and so is able to reach the conclusion that such pollution is causing a 'heavy economic toll'.

A reluctance to recognise successful responses to threats is also detectable in statements such as: 'In Rio (at last year's Earth Summit) the risks to life posed by the loss of stratospheric ozone were on everyone's mind, a threat not even imagined in 1972.' But treaties to phase out ozone-depleting chemicals were in place at that point, which gave many Rio delegates hope that more complex problems of climate change could be successfully tackled.

When pressed on these questions face to face, Brown gives clearer answers than his text, and ranks population growth and global warming as the most important threats. Many would agree with those priorities, including the new Clinton administration, which has just indicated that it will restore public funding for the United Nations Population Fund, curtailed in the 1980s because of domestic objections to work involving abortion.

Although reluctant, like many environmentalists, to welcome nuclear power as a solution to the carbon dioxide problem, he says: 'Our objections are not for ideological reasons but for economic ones - it doesn't look to us as though nuclear is going to make it.' He also argues: 'I'm not saying there aren't solutions for environmental problems, just that we can't keep on doing what we're doing.'

However, few of those qualifications have made it into print. This year's Worldwatch report is dispiriting because of what it suggests about the state of environmental debate, rather than the state of the world.

*State of the World, 10th anniversary edition, Worldwatch Institute, Earthscan Publications, 120 Pentonville Road, London N1 9JN. pp268, Pounds 9.95.

United States of America P2731 Book Publishing TECH Products CMMT Comment & Analysis P2731 The Financial Times London Page 9 687
Ofgas chief to quit as soon as monopoly report is published Publication 930210FT Processed by FT 930210 By DEBORAH HARGREAVES

SIR James McKinnon, the gas industry regulator, is to step down in September, almost a year before the end of his contract.

Sir James, renowned for his acerbic manner and combative style, said yesterday he would leave his post as director general of the regulatory body Ofgas after the publication of a report on British Gas by the Monopolies and Mergers Commission, due in July.

'That report is bound to propose some fundamental changes to the business and I believe a new person should follow through those changes from beginning to end,' he said.

Sir James's announcement came as Ofgas became embroiled in another row with British Gas over complaints from customers last year. Ofgas said complaints had risen by 89 per cent to 1,624, but British Gas said it was not aware of more than half those.

Relations between the company and the regulator have been rancorous and have recently sunk to an all-time low.

But Sir James, 63, attacked his critics yesterday: 'Many people are perplexed at the aura of tension between British Gas and Ofgas, but to think there would be no conflict between a regulator and monopoly supplier is somewhat naive.'

Without the scrutiny of Ofgas, there would not be the 'tension and acrimony' that had developed, Sir James said, 'but neither would there be the results achieved'. He pointed to a 20 per cent drop in gas prices in real terms since privatisation in 1986 as one of his greatest achievements.

Ofgas yesterday accused British Gas of over-charging schools for gas supply by at least Pounds 2,000 a year each when they opt out of local authority control.

British Gas points to a legal technicality which means the company must charge schools separately for gas and not as bulk purchasers under a local authority. This increases the price by 10p a therm since bulk purchasers are eligible for a quantity discount.

'Schools' budgets are strapped in many ways and you can imagine they are aggrieved with British Gas's treatment,' said Mr Greg McGregor, director of competition and tariffs at Ofgas.

Complaint figures disputed, Page 6

Office of Gas Supply (UK) United Kingdom, EC P9631 Regulation, Administration of Utilities P4923 Gas Transmission and Distribution PEOP Personnel News Sir James McKinnon, Director General Office of Gas Supply P9631 P4923 The Financial Times London Page 18 409
Sapin wants closer German ties: Bonn expresses caution over fast-track union between franc and D-Mark Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN and QUENTIN PEEL PARIS, BONN

MR Michel Sapin, the French finance minister, pledged his commitment yesterday to closer monetary co-operation with Germany. But finance ministry officials rejected speculation that Bonn and Paris might permanently fix a rate between their currencies.

Senior officials at the French finance ministry confirmed that the two countries did envisage closer co-operation on questions such as intervention in the foreign exchange markets, but without specific measures to formalise their ties.

At the same time, senior officials in Bonn cautioned strongly against expectations of a 'fast track' monetary union between the D-Mark and the French franc, or between the five inner core currencies of the European Monetary System, before the strict economic convergence criteria of the Maastricht treaty had been fulfilled.

They said the Bundesbank and Chancellor Helmut Kohl had repeatedly stressed the need to fulfil the convergence requirements, including lower inflation, sharply reduced budget deficits, and strict control over state debts. Germany faces difficulty fulfilling the first two criteria before 1996.

The comments come at a time of persistent speculation, particularly in Paris and Brussels, about the possibility of France and Germany stepping up monetary co-operation if the continued instability of the foreign exchange markets threatens the long-term future of the EMS.

The French finance ministry dismissed as 'absolutely without foundation' reports that the two countries might agree a fixed exchange rate between their currencies. Mr Sapin also stressed that the French and German governments did not intend to take monetary measures which would exclude other European currencies.

'The European currency will not be simply a Franco-German one,' he said. 'I would say 'yes' to the idea of Franco-German co-operation being the hard core of the European monetary system, but I would say 'no' to the idea of other countries being excluded.'

In Bonn, Mr Rene Monory, president of the French Senate and a leading member of the opposition UDF, called for a fast track to a single European currency to end recent speculative attacks against individual currencies in the EMS.

However, the debate is being treated with great caution in the main German government ministries and with virtual disdain in the Bundesbank in Frankfurt.

'The pressure is coming from France, from the French opposition, but they have not given us any idea of the mechanics,' according to one well-placed official.

'The Bundesbank is very reticent about the whole idea. It would seriously limit its room for manoeuvre,' he added.

Another senior official said the proposals for a fast track monetary union were 'a crisis scenario, not a government scenario. The French have to say how they would do it.'

A German finance ministry official said: 'One can fantasise about things like a fast-track solution, but we have not been asked to.'

France, EC P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9611 P9311 The Financial Times London Page 18 504
Autobahn drivers face annual fee Publication 930210FT Processed by FT 930210 By ARIANE GENILLARD BONN

GERMANY'S ruling coalition yesterday approved plans to privatise its 7,000 miles of motorways and charge foreign and domestic motorists for using them.

Under the plan, German motorists are to be charged an annual fee for using the country's autobahn network. Foreign motorists passing through will have to pay a fee and display window stickers to drive on an autobahn.

The fee is to be introduced next January, and will be in addition to the normal car tax paid by German motorists.

A commission headed by the transport ministry has until March 10 to examine the users' fee. Last Friday, Mr Gunther Krause, the transport minister, drew sharp criticism when he said he was considering a fee of up to DM400 (Pounds 166).

The move to charge for using German autobahns, which lie at at the heart of Europe's high-speed road transport system, is expected to run into resistance from ordinary motorists as well as the German car industry.

Plans to introduce a similar system for trucks was abandoned last year after opposition from Brussels and the motor industry.

The government, which is struggling to reduce a large deficit and find funds to rebuild east Germany, is pursuing privatisation to raise additional revenue.

The move is intended to help finance the urgently needed restructuring of the loss-making railways. The German rail system, which has recorded profits only once since the second world war, is expected to be DM60bn in debt by the end of the year. Its 1992 loss is estimated at around DM14bn.

'To finance the reforms of the rail system, the coalition parties have agreed to the eventual privatisation of the motorway network,' said Mr Dieter Vogel, government spokesman for the three-party coalition.

The government hopes a levy will encourage travellers to switch from motorways to trains.

Although no details were released about when or how the government would privatise the national road network, a government official said the first step would be to ensure that projects for modernising motorways in the east were privately financed.

Last year the government discussed what it called a 'concessionary' model, in which private groups could finance and build rail and road projects on the government's behalf.

Germany, EC P9621 Regulation, Administration of Transportation P4785 Inspection and Fixed Facilities GOVT Taxes P9621 P4785 The Financial Times London Page 18 400
The Lex Column: British Gas Publication 930210FT Processed by FT 930210

The attempt by British Gas to portray itself as exercising self-restraint on pricing cut little ice with either the regulator or the market. Yesterday Ofgas said its reading of the gas price index did not justify price rises in the first place. Whichever side is right, the exchange is a side-show to the main event at the Monopolies and Mergers Commission. Even confirmation that the combative Sir James McKinnon will step down from Ofgas this year did nothing to lift the shares. They are likely to under-perform until the outcome of MMC review is clear.

British Gas United Kingdom, EC P4923 Gas Transmission and Distribution COSTS Product prices P4923 The Financial Times London Page 18 126
Parliament and Politics: Duty to report suspicions of bank fraud moves closer Publication 930210FT Processed by FT 930210 By ALISON SMITH

PLANS to give auditors a statutory duty to report suspicion of fraud on the part of their client banks to the Bank of England will take a step forward later this month when the government publishes a consultation paper.

The paper, which follows consultation with the professional institutes, will include draft regulations setting out the new duties for auditors of banks, building societies, friendly societies and some companies.

The Treasury hopes the extensive discussions it has already held with the profession mean that the official consultation period can be relatively short and it can proceed with legislation in the autumn. It is seeking legislative time in the next parliamentary session, but is not guaranteed a slot in the programme.

Labour is critical of the delay so far because ministers said the move was a matter of urgency after the Bingham report into the collapse of BCCI.

'I'm dismayed by the government's lack of urgency,' said Mr Alistair Darling, a Labour Treasury spokesman.

The accountancy profession initially argued that there was no need for legislation on the duty to report fraud, since auditors had this requirement in their guidelines.

United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P8721 Accounting, Auditing, and Bookkeeping Services GOVT Government News P9651 P8721 The Financial Times London Page 8 234
Parliament and Politics: Labour hopes to be champion of businesses Publication 930210FT Processed by FT 930210 By DAVID OWEN

MR GORDON BROWN will today stake Labour's claim as the champion of small and medium-sized businesses, as the party continues its co-ordinated campaign to seize the middle-ground of politics.

Following party leader Mr John Smith's rejection of traditional policy dogmas on Sunday, the shadow chancellor will set out Labour's position against 'entrenched' economic interests, such as banks and utilities, arguing that their influence means businesses and ordinary citizens lost out.

Urging moves towards increased competition and more effective regulation, Mr Brown will tell an audience of Labour backbenchers that the government is incapable of addressing the problems these entrenched interests create.

He will call for an immediate Mergers and Monopolies Commission inquiry into the small business services provided by banks, which Labour believes are exercising too much power with too little responsibility.

To back his claim, Mr Brown will publish figures alleging that, in the four years to 1991 when thousands of small companies were going bankrupt, the high street banks substantially raised their dividends.

The party yesterday signalled a fresh offensive in its campaign for root-and-branch reform of financial services regulation, calling for a 'complete overhaul' of the present self-regulatory regime.

In an early day motion tabled by all three junior front-bench Treasury spokesmen, Labour asserted that the present seven-year-old system had failed. It also called for a 'proper and effective' replacement 'without further delay'.

The motion stopped short of demanding a supra-regulatory body, such as the US Securities and Exchange Commission the motion said the new regime should be 'supervised by a majority of those representing the public interest and not by a convention of vested interests of the industry.'

It noted that no 'adequate' regulatory regime was 'likely to be in place before 1994'. It said any new system 'must have sufficient power and resources to regulate the sale of financial products.'

The motion concluded by attacking the government's failure to 'take any interest' in the subject, which it said illustrated it had 'chosen to side with the vested interests of the industry rather than the interests of the public'.

The government has ruled out bringing forward fresh legislation, indicating it would prefer to see reform within the existing system.

Mr Anthony Nelson, economic secretary to the Treasury, said last year that tougher control of City institutions by regulators was needed to overcome shortcomings in present laws.

A second Labour motion, tabled by the same group of frontbenchers, sought to highlight problems associated with home income plans - a financial product sold mainly to elderly people in the late 1980s as a means of releasing income from their homes.

Labour Party (UK) United Kingdom, EC P8651 Political Organizations MGMT Management P8651 The Financial Times London Page 8 469
Parliament and Politics: Statesman fights Publication 930210FT Processed by FT 930210

THE New Statesman & Society magazine last night said it would fight libel actions brought against it by the prime minister and caterer Ms Clare Latimer. The publication also launched a defence fund to help pay the costs of the case.

United Kingdom, EC P4953 Refuse Systems P9511 Air, Water, and Solid Waste Management RES Pollution GOVT Government News P4953 P9511 The Financial Times London Page 8 77
Parliament and Politics: Waste-dumping tax proposed Publication 930210FT Processed by FT 930210

A NEW levy on dumping waste in landfills would encourage more incineration and recycling of rubbish, according to a report commissioned by the government.

The report, by Coopers & Lybrand for the Department of the Environment, says a levy on landfills - licensed pits for dumping rubbish - would be feasible. Its main effect would be to increase the amount of waste sent to incinerators, but in the long term it would make recycling more commercially attractive.

Landfill Pricing: Correcting Possible Market Distortions HMSO, Pounds 12.

United Kingdom, EC P4953 Refuse Systems P9511 Air, Water, and Solid Waste Management TECH Sales agreements GOVT Taxes P4953 P9511 The Financial Times London Page 8 123
Parliament and Politics: Welsh reforms may cost Pounds 154m Publication 930210FT Processed by FT 930210

REFORM of local government in Wales which will see the end of two-tier authorities will cost between Pounds 61m and Pounds 154m over 15 years, according to a report for the government by management consultants Touche Ross.

Mr David Hunt, the Welsh secretary, is expected to decide in the next few weeks on the exact form of the reorganisation. The eight counties and 37 district councils are to be replaced by unitary authorities.

A Welsh Office discussion paper last year suggested the 45 councils could be replaced by 15, 18, 23 or 27 unitary authorities. Touche Ross says the 15-council option would cost between Pounds 61m and Pounds 154m, and the 27-authority option would cost between Pounds 67m and Pounds 152m.

United Kingdom, EC P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 8 151
Parliament and Politics: Smith urges west to help east Publication 930210FT Processed by FT 930210 By IVO DAWNAY

MR JOHN SMITH yesterday called on the west to launch a concerted effort to address the economic problems of the new eastern European democracies and the developing world, Ivo Dawnay writes.

Calling for a new Marshall plan for eastern Europe, the Labour leader used a speech in Athens to question the austerity measures being imposed on the new democracies by international banks and institutions.

In his debut as chairman of the Socialist International's economic committee, he argued that the G7 group of industrialised western powers needed a statesman to galvanise assistance to the east.

He also called on the European Community to reach a compromise with the US to ensure that a rapid agreement was reached on the General Agreement on Tariffs and Trade.

Labour Party (UK) United Kingdom, EC P8651 Political Organizations GOVT International affairs P8651 The Financial Times London Page 8 161
Parliament and Politics: Lamont hears Tory views on VAT Publication 930210FT Processed by FT 930210 By RALPH ATKINS and IVOR OWEN

MR NORMAN Lamont, the chancellor, heard some support last night from Tory MPs for an extension of the value added tax base but at the same time was warned not to introduce measures in the March 16 Budget that would threaten economic recovery.

At a meeting of the Conservative backbench finance committee there was also backing for Treasury plans to tackle the public sector borrowing requirment, starting as early as the December Budget.

The meeting of about 40 MPs, at which Mr Lamont did not speak, heard calls for VAT to be extended, perhaps to newspapers, in order to boost Treasury revenues. But in a sombre atmopshere there was no consensus and other Tories would be unhappy with any tax rises.

Last night's session marked the end of an extensive consultation exercise Mr Lamont has had with Tory MPs over Budget alternatives.

Tory MPs remain jittery about the fragility of any recovery and were divided about whether interest rates should be cut further - or should have been cut as far as they have.

Earlier, Mr John Major was forced on the defensive in the Commons over the Conservative party's election pledge not to extend the scope of VAT.

The prime minister's repeated attempts to hold to the customary formula, that he could not comment on possible tax changes with the March 16 Budget just five weeks away, were brushed aside by Mrs Margaret Beckett, the deputy Labour leader.

Mrs Beckett recalled that during last year's general election campaign Mr Major said the government had no plans to extend VAT and that there was no need to do so. She demanded: 'Do you stand by those words?'

Mr Major replied: 'You know we are near to the Budget. You must wait.'

The Treasury's long-term spending review is already under way. Mr Michael Portillo, chief secretary to the Treasury, has had preliminary meetings with colleagues at the departments of health and education and at the Home Office as part of his review of public spending.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 8 373
Parliament and Politics: Government beats off revolt on leasehold Publication 930210FT Processed by FT 930210 By DAVID OWEN

THE Government comfortably beat off a rebellion by London-based Tory backbenchers in the Commons last night as the Housing and Urban Development bill moved to its report stage.

Sir John Wheeler, the MP for Westminster North, and Mr Dudley Fishburn, the MP for Kensington, had both said they would be voting against the government.

But a Labour amendment seeking to extend the government's leasehold reform proposals to properties with a high ground rent was defeated by 294 votes to 252, a government majority of 42.

The bill would give up to 750,000 leaseholders the right to buy the freehold of their property, enabling tenants for example to join to buy the freehold of their block of flats.

Groups of Tory back-benchers supporting the interests of private landlords and tenants with long leases have each been endeavouring to swing the reforms in their favour.

The landlords' lobby yesterday backed away from confrontation, withdrawing proposals for a tightly drawn residency qualification without forcing a vote after the govern-ment offered minor concessions.

Mr Fishburn said the low-rent test provision that the defeated amendment would have struck out would create a two-tier property market. 'In effect, whole swathes of London will be disenfranchised and whole armies of Tory voters will feel let down.'

Sir John said the test was there to address a situation that 'simply does not exist.' If not removed, it would 'come back to haunt us again and again.'

For the government, Sir George Young, housing minister, said the test provided 'an important distinction' between the rental and long-lease markets.

United Kingdom, EC P651 Real Estate Operators and Lessors P9531 Housing Programs GOVT Draft regulations P651 P9531 The Financial Times London Page 8 299
Parliament and Politics: MPs seek further reversals in Army manpower reductions Publication 930210FT Processed by FT 930210 By DAVID WHITE and IVOR OWEN

A CROSS-PARTY Commons committee yesterday demanded further changes in the government's plans for reducing the size of the Army.

The defence committee, triumphant after the partial climbdown last week by Mr Malcolm Rifkind, defence secretary, called for the cancellation of further plans to merge or disband infantry regiments.

Sir Nicholas Bonsor, Conservative chairman of the committee, said members were unanimous that Mr Rifkind's decision to restore 3,000 Army posts and to cancel two regimental amalgamations was not enough.

Last week's change increased the target for Army personnel in the mid-1990s from 116,000 to 119,000 compared with about 145,000 at present. Mr Rifkind told BBC radio that a further increase was highly improbable. But Sir Nicholas said: 'We are an extremely dogged committee, and we don't take no for an answer.'

The number of infantry battalions - excluding the Brigade of Gurkhas - has been reduced since last July from 50 to 45. Under the government's original Options for Change plans it was due to be reduced to 36. The revised government plan means two more will be retained, but the committee is arguing for the number to be kept at 45.

The committee attacked the government's decision to make cuts in other areas of its defence budget to pay the Pounds 80m annual cost of its revised plan.

Sir Nicholas said it was 'not unrealistic' to ask the Treasury to review reductions in defence spending set out in last November's public spending round.

The committee's report, prepared before the change in Army plans, warned of 'chronic overstretch' and attacked the restructuring plans as 'inappropriate and ill-advised'.

In contrast to the Army, the RAF is expected to make more drastic cuts than foreseen in the Options for Change review, to fewer than 70,000 instead of the expected 75,000. RAF chiefs aim to cut support services to a minimum in a move to preserve front-line units and safeguard equipment plans.

Mr Rifkind yesterday moved to deflect some of the fallout from the committee's report by attacking disarray in the Labour party over defence.

In the Commons he attacked Mr John Reid, a Labour frontbench spokeman, telling him to 'start converting' his own party supporters before seeking to give instructions to Conservative MPs. Mr Reid claimed the committee's report showed that the government had no strategy on defence, no policy on security and 'no idea where it is going'.

He suggested that instead of indulging in U-turns and staggering from pillar to post over the amalgamation of regiments the government should instigate a full defence review as advocated by Labour leaders.

Defence Committee, Britain's Army for the 1990s: Commitments and Resources: HMSO, Pounds 14.70.

Editorial Comment, Page 17

United Kingdom, EC P9711 National Security GOVT Government News P9711 The Financial Times London Page 8 483
Parliament and Politics: Welsh reforms may cost Pounds 154m Publication 930210FT Processed by FT 930210 By ANTHONY MORETON

REFORM of local government in Wales which will see the end of two-tier authorities will cost between Pounds 61m and Pounds 154m over 15 years, according to a report for the government by management consultants Touche Ross.

Mr David Hunt, the Welsh secretary, is expected to decide in the next few weeks on the exact form of the reorganisation. The eight counties and 37 district councils are to be replaced by unitary authorities.

A Welsh Office discussion paper last year suggested the 45 councils could be replaced by 15, 18, 23 or 27 unitary authorities. Touche Ross says the 15-council option would cost between Pounds 61m and Pounds 154m, and the 27-authority option would cost between Pounds 67m and Pounds 152m.

The government's favoured option is thought to be 23 authorities although the eight counties are pressing for the number to be 15.

Compensation for loss of office among the 90,000 council employees will be the main cost - between Pounds 20m and Pounds 90m.

Mr Hunt said that he expected the actual costs to be 'towards the lower end of the range'.

United Kingdom, EC P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 8 216
Parliament and Politics: Ministers look at landfill issue Publication 930210FT Processed by FT 930210

A NEW levy on dumping waste in landfills would encourage more incineration and recycling of rubbish, according to a report commissioned by the government.

The report, by Coopers & Lybrand for the Department of the Environment, says a levy on landfills - licensed pits for dumping rubbish - would be feasible. Its main effect would be to increase the amount of waste sent to incinerators, but in the long term it would make recycling more commercially attractive.

Mr David Maclean, environment minister, said the report 'forms part of the government's programme of work to explore the use of economic instruments in environmental policy'. Environmentalists welcomed the encouragement a levy might give to recycling, but were uneasy about an increase in incineration.

The issue of disposal of solid rubbish has become increasingly controversial as the shortcomings of each method have become clear. Following environmental pressure, the terms of licences for landfill operators have been steadily tightened. The report argues that landfill costs will rise 'substantially' before 2000 even without a levy because of tighter rules and the difficulty of finding new sites.

Landfill Pricing: Correcting Possible Market Distortions HMSO, Pounds 12.

United Kingdom, EC P4953 Refuse Systems P9511 Air, Water, and Solid Waste Management RES Pollution GOVT Government News P4953 P9511 The Financial Times London Page 8 229
Pollution liability 'threatens financing' Publication 930210FT Processed by FT 930210 By BRONWEN MADDOX and RICHARD LAPPER

FLOWS OF capital to industry could be 'seriously impeded' because bankers and insurers are afraid of future environmental costs, a government advisory committee warned yesterday.

Changes in the laws on environmental liability 'could have profound and adverse consequences for business across all sectors', the working group said in a report to the trade and industry and environment departments.

One banker said yesterday: 'The critical issue is whether banks who take property or land as security could be held to be liable for its pollution. It could be something a sensible bit of due diligence can deal with, or it could be a time bomb; it's too early to know.'

Mr Tony Baker of the Association of British Insurers said: 'Recent legal trends are hastening the day when insurers will be unable to offer pollution cover as a part of standard policies.'

It amended its recommended policy wordings restricting coverage to sudden and accidental pollution in 1990.

Companies have become increasingly concerned that they could be liable for damages and clean-up costs under recent UK and EC environmental legislation. UK court cases have raised questions of whether the principle of 'retrospective liability' for past pollution that met the environmental standards of the day would become widely applied.

The 14-strong group, which is chaired by Mr Derek Wanless of National Westminster Bank, also criticises recent government proposals for a register of contaminated land for assessing only the past use of land and not the degree of pollution.

The Financial Sector Working Group produced the report for the Advisory Committee on Business and the Environment, which is a group of senior businesspeople set up to advise the trade and industry and environment departments on environmental issues from a business perspective.

Bankers and insurers welcomed the report. Lloyds Bank said: 'We endorse the committee's comments and are looking at the issue seriously.'

Mr Tom Symes, head of the environmental department at Nabarro Nathanson, the solicitors, said 'Insurers will certainly welcome the conclusions of the report. What they need is to have the position of potential retrospective liability clarified, particularly if any strict liability wordings are agreed by the EC.'

However, others warned that such fears may be overblown - at least until there is a longer record of court cases or changes in legislation. A director of the credit rating department of a City merchant bank said: 'We have been unable to complete some transactions because of unresolved environmental problems, mainly to do with land, but the banking world has sometimes got a bit paranoid about the issue. Just because there is pollution doesn't mean there will be huge claims.'

Ms Sarah Gooden, of Gouldens, the firm of solicitors, said: 'It is a big issue, but it is possible the banks are more worried than they need to be: they sometimes fix on potential problems and take some time to get comfortable with them.'

United Kingdom, EC P9511 Air, Water, and Solid Waste Management P602 Commercial Banks P6411 Insurance Agents, Brokers, and Service GOVT Regulations P9511 P602 P6411 The Financial Times London Page 7 525
Receivers expect Daf break-up: Talk of non-EC buyer 'very premature' - Attempt to reassure dealers / Major rejects Labour call for government aid Publication 930210FT Processed by FT 930210 By KEVIN DONE, Motor Industry Correspondent

THE RECEIVERS for Leyland Daf believe that several parts of its operations can survive last week's collapse into receivership, but the group will probably have to be broken into its constituent parts. There will be heavy job losses and some locations are likely to be closed.

Talk of an outside buyer - speculation has focused on truckmakers such as Paccar of the US and Hino of Japan - is 'very premature' and no formal contacts have been made.

In the first week since their appointment last Wednesday as joint administrative receivers, Mr John Talbot and Mr Murdoch McKillop of accountants Arthur Andersen have done little but fight immediate fires. Mr McKillop said: 'Our main aim has been to stabilise the sales and production operations. Then you can have a stabilised business to sell, but it is still very premature to talk about a sale.'

To date the receivers have:

Agreed financing for the short-term working capital needs of Leyland Daf amounting to Pounds 7m - the sum they requested from Daf's banking consortium.

Made arrangements for the immediate payment of wages and salaries for the 5,500-strong workforce in the UK.

Set about restoring production at the truck plant at Leyland, Lancashire, and at the Birmingham van plant. Made arrangements with the court-appointed administrators for Daf in the Netherlands that should allow the resumption of the 'vital' flow of trucks and components between the UK and the Dutch and Belgian operations.

Addressed a full meeting of UK dealers to try to maintain some confidence in the dealer network.

All these actions may secure the businesses for a few weeks, but the hard task will now begin of assessing what can be salvaged for the long term.

The UK receivers believe that the rescue plan being prepared by the Dutch administrators - which calls for the creation of a new limited company with the working title of New Daf - could make good sense.

This would absorb the core operations of Daf's Dutch and Belgian medium and heavy-duty truck activities. Most importantly for the UK, however, New Daf would probably also include Leyland Daf's truck assembly operations at Leyland.

The UK receivers will develop this plan at a further meeting with the Dutch administrators, Mr Louis Deterink and Mr Friso Meeter, later this week. Both sides believe at present that New Daf's future lies in being able to continue to offer an integrated product range to the 1,300-strong Daf dealer network across Europe.

This product range would include light trucks made at Leyland and the medium and heavy-duty trucks made at Eindhoven in the Netherlands, with cabs coming from Westerlo, Belgium.

'The key concept is to try to keep that integrated product range together,' said Mr McKillop. 'For the core business the sum of the whole is worth much more than the sum of the parts.'

The Leyland plant also has two lucrative military contracts with the Ministry of Defence, one of which runs until early 1995.

Mr McKillop rejected the criticism that the New Daf rescue plan is inimical to UK interests. He said: 'There will be severe pain too in Holland and Belgium.'

The ownership of a slimmed-down Leyland truck assembly operation within New Daf is still to be resolved. It could be wholly or part-owned by New Daf or could be partly owned by UK interests. The vital element, however, is that this operation would be tied by ownership or supply contracts to New Daf and would remain an integrated part of the Daf truck range.

Even under this plan there will still have to be painful job cuts at Leyland. Only half of around 2,200 employees there are employed in the assembly plant. Some 430 are involved in components assembly, 340 in truck product development and 160 in headquarters administration. Many of these jobs are now at risk, as are some of the assembly jobs.

The Birmingham van operation appears at much greater risk, however. Its long-term future depended on Daf's ambitious joint venture with Renault of France to develop a new generation of medium and heavy vans, code-named Excel, for launch in the mid 1990s. This product was to have replaced the present ageing Daf 200/400 series - the former British Leyland Freight Rover vans - and was to have been built both in Birmingham and at Renault's plant at Batilly in eastern France.

As far as Daf and the future of the Birmingham plant are concerned, this project appears to be dead. It is understood that even before the company went into receivership last week, Daf had decided that it would have to pull out of the Excel project because it did not have the finance to continue.

Renault and Daf have each spent around Pounds 45m on Excel, but it is estimated that a further Pounds 100m must be spent to complete the development work with another Pounds 100m-Pounds 200m needed to bring it into production.

Excel has now become one of the receivers' most pressing problems. Around 270 Leyland Daf jobs in the UK, mainly in Birmingham, are tied up with the project and are immediately at risk. Urgent discussions are being held with Renault to clarify whether it intends to press ahead with the project alone or with another partner.

Without Excel and excluded from the core truck strategy of New Daf the Birmingham plant - with around 2,000 jobs - faces a most difficult future.

The receivers believe that it could survive in much reduced form, however, with a strategy directed towards producing very basic, low-price utility vans, essentially for the UK market only, and for a core of loyal, large fleet customers.

This plan is still at an early stage and would probably require a management buy-out and may need to be kick-started by some form of government selective regional assistance.

At Glasgow the receivers will seek to make the Albion van and truck axle plant into an independent operation with the hope of selling it to an engineering sector buyer. As a supplier to Leyland and Birmingham its future will be tied closely to the ability to save these plants in some form, and again heavy job losses are inevitable.

At Chorley, Lancashire, Leyland Daf has a modern automated warehouse and distribution operation with an annual turnover of around Pounds 100m and a workforce of some 400. At present this activity is excluded from the plan for New Daf, but the receivers believe it could well attract an outside buyer as a going concern.

Parts sales are a vital element in any truck manufacturer's profitability, however - much better returns are derived from the after-sales operations than from the sale of the new vehicle itself - so New Daf would be vitally interested in a continuing link with the parts business.

The Leyland Daf sales and marketing operation at Thame, Oxfordshire, which has about 330 employees, is expected to be reduced in size and will probably be moved. New Daf will have to have a sales and marketing operation in the UK, however, to run the dealer network, so a slimmed-down operation is expected to survive, although at another location and with the nature of the ownership still to be clarified.

Leyland Daf Finance is not in receivership in the UK but the Dutch administrators have said that Daf Finance, its Dutch parent company, will be 'run down and closed'.

Whatever strategies are evolved by the administrators and receivers for Daf and Leyland Daf, considerable job losses are inevitable. The pain is likely to begin before the end of this week.

Leyland DAF DAF United Kingdom, EC Netherlands, EC P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories COMP Company News PEOP Labour RES Facilities P3713 P3714 The Financial Times London Page 7 1330
Yarrow warship yard closes Publication 930210FT Processed by FT 930210

SHIPYARD worker Bobby Graham gazes at the strike-bound Yarrow shipyard on the river Clyde in Glasgow. He and 1,300 others are on strike for the first time in years, seeking a 'substantial' pay rise. Next door is Leyland Daf's plant where 550 workers are waiting to hear their fate, while nearby is a Nestle biscuit factory where up to 550 workers could lose their jobs when production moves south.

The Yarrow warship yard has been closed since Friday in one of the biggest pay disputes in Britain for several years. The strikers want a substantial increase on their basic weekly rate of Pounds 218 for a skilled worker. The company has offered a Pounds 300 lump sum for the year to July followed by a 3.8 per cent rise for the following 12 months.

Meanwhile Mr John Major, the prime minister, yesterday rebuffed fresh calls for the government to intervene to help rescue Daf vehicle plants.

His comments provoked an angry reaction from Labour MPs in the Commons and came after Mr Robin Cook, shadow trade and industry secretary, said Britain should follow the example of the Netherlands and offer financial support.

Yarrow Shipbuilders United Kingdom, EC P3731 Ship Building and Repairing PEOP Labour P3731 The Financial Times London Page 7 221
Complaints for Ofgas Publication 930210FT Processed by FT 930210

THE RANGE of complaints in the annual report of Ofgas runs from crossed meters to disconnection problems, theft from gas meters and accounting errors.

One customer ended up with arrears of Pounds 880.20 because he was connected to the wrong gas meter. When he complained to British Gas, the company offered to write off half the bill but Ofgas persuaded it to write off the whole account.

Another customer complained after gas bills and a disconnection notice were sent to his deceased mother's account in spite of his informing British Gas several times of her death.

The company paid the customer Pounds 250 compensation for distress caused.

An industrial customer was charged Pounds 1,596.43 after using a gas-fired fan heater for four months. When he asked the manufacturer whether the heater could burn 86,063kW-hours in the time stated, he was told that if the fan heater was on for 24 hours at maximum output it could burn only 6,992kW-hours.

The customer received an account reduction of Pounds 1,200.

British Gas Office of Gas Supply (UK) United Kingdom, EC P4923 Gas Transmission and Distribution P9631 Regulation, Administration of Utilities TECH Standards P4923 P9631 The Financial Times London Page 6 207
Contractors warn over threat to tendering: Companies tell Catherine Milton and Gillian Tett that EC rules may wreck the government's plans Publication 930210FT Processed by FT 930210 By CATHERINE MILTON and GILLIAN TETT

GOVERNMENT contractors yesterday issued a warning that confusion over employment legislation could wreck the Conservatives' plans to increase market testing and competitive tendering for public services.

Contractors say the process of competitive tendering would be undermined if European Community regulations protecting the terms of employment of staff in mergers and acquisitions were held to apply to the contracting-out of government and council services.

Mr Robin Oakley-Smith, chairman of the Cleaning and Support Services Association, said yesterday that applying the Transfer of Regulations (Protection of Employment) rules would make it harder for private firms to compete effectively. Under Tupe private companies that win public-sector contracts would have to retain employees on their existing terms of employment.

'If the regulations were to apply, the process of competition would be virtually meaningless, as every company would be obliged to maintain the same cost base,' said Mr Oakley-Smith, whose association represents 160 companies with total annual turnover of Pounds 1.3bn.

His comments reflect a mood of growing frustration among government contractors over the uncertainties surrounding the regulations, which implement the EC's 1977 Acquired Rights Directive. Recent decisions of the European Court of Justice have extended the regulations' scope to cover contracting out some public services.

Of 20 large and medium-sized contractors contacted this week, five said the legislation applied to their bids, while seven said it did not, while the balance insisted that the situation varied on a case by case basis.

Some contractors believe they will be unable to compete effectively with in-house departments because of the European legislation. All agree that clarification and consistent advice are needed.

'It seems that the British government just wants to sit back and let the courts decide - but even the lawyers disagree,' complained one large contractor, who said he was 'utterly fed up' with the situation.

Some contractors suspect this confusion is deliberate - government departments or local councils that are opposed to private contractors or market testing are, they say, using the threat of Tupe to fight privatisation.

'The real frustration is that we have been flying the flag for the government with compulsory competitive tendering. But now they've pulled the plug at the eleventh hour,' said Mr Mike Wardle, joint managing director of a company which provides sports and leisure facilities for local authorities.

Mr Wardle's company is, like several other contractors, facing legal action over its failure to observe Tupe regulations on previous local authority contracts. However, as he points out, even a decision in the British courts will not necessarily resolve the issue.

'The annoying thing is that if we win in this country, we would still go to Europe and lose,' he said.

Some businesses in the waste management sector - where terms of employment often change significantly under private management - believe Tupe could kill their business. 'If we are obliged to offer employment to all the previous employees we just couldn't be effective against the public sector,' said one large contractor. This message is echoed by other catering, cleaning and security groups. However, the majority of companies contacted said they would still be able to compete with in-house teams even if the regulations applied.

Specialist and information technology service groups appeared to be least affected by Tupe.

'We would normally expect to take on most of the workforce anyway,' commented a specialist defence contractor.

'In IT, you need the existing staff to deliver a service from Day One,' says Mr Charles Cox, director of Hoskyns, the computing services group.

Mr Nigel Brocklehurst, personnel manager for CFM, a subsidiary of ICL which provides computer management services for about 25 local authorities, said the regulations can make transfers simpler: 'If you are transferring more than about 50 or 100 staff it is a logistical nightmare to transfer them any other way.'

Mr Brocklehurst admitted there are cost implications. 'You inherit things like liability for 30 years' service which could be expensive. But you reflect the cost in your charges to the client.'

Other contractors said inheriting collectively bargained agreements and 'outdated' council working practices was 'irritating'.

Nevertheless, the one issue on which there was unanimity across the sectors is the need for clarification. As Mr Simon Cox, managing director of ISS Mediclean, one of the largest health service contractors said: 'What we want to see is some consistent advice coming out of the government. That's the most important thing.'

United Kingdom, EC P9199 General Government, NEC MKTS Contracts GOVT Regulations P9199 The Financial Times London Page 6 779
Motor show plan Publication 930210FT Processed by FT 930210

THE Motor Show could move from Birmingham's National Exhibition Centre to London and be held annually instead of every two years, under plans being considered by the Society of Motor Manufacturers and Traders.

Society of Motor Manufacturers and Traders (UK) United Kingdom, EC P7999 Amusement and Recreation, NEC RES Facilities P7999 The Financial Times London Page 6 66
Toyota sales chief resigns Publication 930210FT Processed by FT 930210

MR SIMON Foster is resigning after 12 months as chief executive of Toyota (GB), the sales and distribution company owned jointly by Inchcape Group and Japan's largest carmaker. His resignation takes effect at the end of March.

He was director of the Society of Motor Manufacturers and Traders before joining Toyota. He said he 'would prefer a somewhat wider management role in which my industrial experience could also be useful'.

Mr Foster's successor will be Mr Trevor Taylor, the deputy chief executive.

Toyota (GB) United Kingdom, EC P5012 Automobiles and Other Motor Vehicles PEOP Personnel News Foster, S Chief Executive Toyota (GB) P5012 The Financial Times London Page 6 120
Company cars hold their own Publication 930210FT Processed by FT 930210

IN SPITE of the recession there has been no discernible reduction in the provision or quality of cars supplied to employees by companies surviving it, according to the Monks Partnership annual review of company car policies.

The survey also found that nearly 20 per cent of all companies surveyed offered a cash alternative last year, but only one in 10 employees was interested.

United Kingdom, EC P99 Nonclassifiable Establishments MGMT Management P99 The Financial Times London Page 6 88
Halifax cuts savings rates Publication 930210FT Processed by FT 930210

HALIFAX, the UK's largest building society, has announced gross interest rate cuts of between 0.6 percentage points and 0.8 points on its savings accounts with effect from today.

The gross rates on its 90-day savings and its instant access accounts are coming down in most cases by 0.65 points and, in some cases, by 0.6 points. That follows a reduction of 0.56 of a point in its mortgage rate.

Chelsea Building Society, which cut its mortgage rate by 0.51 points to the market rate of 7.99 per cent on Monday, has cut its gross savings rates by up to 0.75 points.

Leeds Permanent is cutting savings rates by between 0.5 points and 0.75 points today, following its cut of 0.56 points in its mortgage rate.

Chelsea Building Society Halifax Building Society Leeds Permanent Building Society United Kingdom, EC P603 Savings Institutions COSTS Service prices P603 The Financial Times London Page 6 161
Telecoms newcomer wins full licence Publication 930210FT Processed by FT 930210 By TONY JACKSON

THE first direct competitor to British Telecommunications and Mercury under government plans to open up the telecoms market was given the go-ahead yesterday, Tony Jackson writes.

Ionica, a privately-owned company, has been granted a licence to run a radio-based system across the country. It aims to take 5 per cent of the household and small-business market within 10 years. Mr Nigel Playford, managing director, said: 'We aim to undercut BT across the board.'

Ionica was one of four companies awarded a provisional licence in August. The others - Millicom, Worldcom and National Network - are still in discussion with the government. Draft licences were announced yesterday for a further six companies: Vodafone, Millicom, ScottishPower, Scottish Hydro, Telecom Electric and City of London Telecommunications.

Ionica's shareholders are Yorkshire Electricity, Northern Electric, Ivory & Sime, 3i, Robert Fleming, Kingston Communications and Symbionics.

Ionica United Kingdom, EC P4812 Radiotelephone Communications P9631 Regulation, Administration of Utilities TECH Sales agreements P4812 P9631 The Financial Times London Page 6 177
Sterling fails to shed intrinsic weakness Publication 930210FT Processed by FT 930210 By JAMES BLITZ, Economics Staff

STERLING'S fall yesterday to a historic low against its trade-weighted index has again raised concerns about the currency's weakness on the foreign exchanges.

The pound hit a low during the day of 76.2 against the index, which measures sterling against a basket of other currencies and which Mr Norman Lamont, the chancellor, has said he monitors closely. It closed at 76.6, compared with 77.2 on Monday night. The fall means in effect that the pound is worth 76.6 per cent of its value in 1985.

The currency's return near to the historic low of DM2.3480 was a further sign of weakness. Mr Mark Brett, a currency economist at Barclays de Zoete Wedd, said he was particularly concerned by the way the pound had fallen sharply in just two days. 'The pound has an incredibly small resilience,' he said.

There are several reasons for this intrinsic weakness.

First, UK interest rates are lower than those in most European countries. Three-month sterling interest rates were yesterday at about 6.25 per cent. By contrast, three-month French francs were at 11.75 per cent and D-Marks at 8.32 per cent. Investors are also concerned that growing inflation in the UK will erode the value of sterling assets.

Yesterday's producer-price figures, showing a sharp rise in the cost of imports due to sterling's devaluation, indicated how quickly inflation is feeding into the economy now that the pound is nearly 16 per cent below its value on Black Wednesday - September 16 - last year.

Second, dealers remain uncertain about the direction of the government's economic policy. The most pessimistic view in the market is that the government has no clear plan for economic management, and that recent cuts in interest rates were the product of panic rather than policy. The most charitable view is that the government is going for economic growth, and will bring interest rates down further.

Mr Brett says: 'The government has three issues to worry about now: growth, the fiscal deficit and inflation - and it is worrying about them in that order.'

That view may explain why dealers were unwilling to set much store by the government's claim that it would rein in public spending to help reduce a growing public-sector borrowing requirement.

Mr Mark Austin, Treasury economist at Midland Global Markets, said: 'The view is that it is very easy to make plans to cut expenditure and far more difficult to carry them out.'

Finally, sterling's departure from the European exchange rate mechanism has made it the most volatile currency in Europe, offering good returns to investors willing to play it. 'People have probably won and lost more on the pound than on any other currency this year so far,' says Mr Jim O'Neill, head of research at Swiss Bank Corporation.

Forecasts as to where the pound is heading in the short term vary sharply.

Mr O'Neill believes the pound will soon recover on new signs of UK economic growth.

He believes next week's retail sales figures for January may show a sharp rise. 'The pound could bottom out at DM2.30, but we should see DM2.50 this year,' he says.

Mr Brett is more pessimistic: 'Dealers are being paid a big premium to short the pound and buy one with a higher yield,' he said. In his view the pound will only be cheap enough to offset the low yield for investors when it has reached DM2.20.

United Kingdom, EC P6231 Security and Commodity Exchanges P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P6231 P9311 The Financial Times London Page 6 609
Railway sell-off plan gives guarantee Publication 930210FT Processed by FT 930210 By RICHARD TOMKINS, Transport Correspondent

BRITISH RAIL passengers are likely to see few if any changes to train services when privatisation starts next year, says a government consultation document to be published this week.

Companies bidding for franchises to take over BR's passenger services will be bound by contract to BR's 1994 timetable, with only marginal changes in services to reflect market demand.

Later the Department of Transport foresees a gradual evolution in the timetables as train schedules change to reflect what customers want.

The consultation paper sets out to fill one of the last big gaps in the government's rail privatisation plans by setting out the rules for allowing private-sector train operators on to the tracks. It confirms that companies winning passenger-service franchises will face limited competition initially from other operators.

The government hopes to get privatisation off to a good start by making the franchising process as simple as possible.

Franchise bidders will not be involved in negotiations over services or track charges. These will be laid down by the franchising director after negotiations with Railtrack, the proposed state-owned track authority.

Companies will be presented with the contract and asked to bid. The one bidding the highest price - or requiring the lowest subsidy - will win.

Anyone else wanting to run a passenger or freight train in competition with the franchisees will have to negotiate their own track fees with Railtrack based on what they can afford to pay.

In the case of freight, operators who cannot afford to pay at least the marginal extra costs they impose on the railway may qualify for a new system of government grants.

The paper notes that all access arrangements are subject to EC law, reinforcing fears that train operators may bring actions for discrimination if they feel they are being treated unfairly.

Gaining Access to the Railway Network: the Government's Proposals. Room S18/24, Department of Transport, 2 Marsham Street, London SW1P 3EB. Free.

British Rail United Kingdom, EC P4011 Railroads, Line-Haul Operating P9621 Regulation, Administration of Transportation TECH Services GOVT Draft regulations P4011 P9621 The Financial Times London Page 6 362
Supervision head quits Bank early Publication 930210FT Processed by FT 930210 By ROBERT PESTON, Banking Editor

MR ROGER BARNES is to retire early from the post of banking supervision head at the Bank of England.

Mr Barnes, 55, is five years short of the Bank's normal retirement age. He will stay in the job for several months.

His 20-year career in banking supervision was marred towards its end by criticism of his department for its role as supervisor of Bank of Credit and Commerce International, the corrupt bank closed in 1991.

He was accused in Lord Justice Bingham's report into the affair of having 'a rooted unwillingness to believe ill of BCCI'. That report also said he showed 'misjudgment' in March 1990 in not reporting allegations of fraud at BCCI to the Bank's Board of Banking Supervision, which oversees his department.

The Bank said yesterday, however, that there had been no pressure on Mr Barnes to retire early. The Bank added that 'he approached the Bank early last year with a request to retire in the summer of the current year'. His job is widely regarded as one of the toughest and most thankless in the City of London.

He will be replaced by Mr Michael Foot, 46, who is head of the Bank's European division. Mr Foot was described by a colleague as one of the Bank's 'brightest and best'. A banker said he was 'one of Eddie's men', meaning that he is close to Mr Eddie George, the governor-designate.

Mr Foot has never worked in the supervision department, which monitors the financial strength and probity of banks operating in the UK.

The Bank also appointed Ms Carol Sergeant, 40, to the new post of deputy head of banking supervision responsible for monitoring big UK commercial banks and merchant banks.

Bank of England United Kingdom, EC P6011 Federal Reserve Banks P9651 Regulation of Miscellaneous Commercial Sectors PEOP Appointments Barnes, R Head Banking Supervision Bank of England Foot, M Head Banking Supervision Designate Bank of England P6011 P9651 The Financial Times London Page 6 345
Higher import prices hit manufacturing costs Publication 930210FT Processed by FT 930210 By PETER MARSH, Economics Staff

WORRIES about inflationary pressures intensified yesterday with news that the sliding pound contributed to a sharp rise in manufacturing costs last month.

The cost of raw materials and fuels purchased by manufacturers rose by a seasonally adjusted 1.5 per cent in January compared with December, largely because of higher import prices.

The Central Statistical Office said prices of these items last month were 7.2 per cent higher than a year previously, the highest year-on-year figure since May 1989.

The year-on-year rise was well above City expectations, and compared with a figure of a revised 5.4 per cent for the 12 months to December.

It reflected the continuing effects on import prices of the 15 per cent fall in the pound since Britain left the European exchange rate mechanism in September.

Separately, the CSO said wholesale prices of manufactured products for the UK market, excluding food, drink and tobacco, rose last month by 2.7 per cent compared with January 1992.

That was the biggest year-on-year rise since August and reflected companies' eagerness to increase prices for new-year sales programmes. In December the year-on-year rise was 2.4 per cent.

The statistics increased expectations that the government's target for underlying inflation may be breached over the next year. The Treasury wants to keep the year-on-year increase in the retail prices index, excluding mortgage costs, at 4 per cent or less.

Including food, drink and tobacco, the prices of which can be affected by changes in excise duties, the year-on-year rise in wholesale prices of manufactured products was 3.5 per cent in January, the same as in December.

The rise in manufacturing costs between December and January resulted partly from increases in the price of UK-produced foods such as milk. Under European Community arrangements, payments to British farmers are automatically boosted should the pound fall.

Prices of home-produced foods increased by 1.1 per cent last month compared with December while prices of imported foods went up 0.2 per cent. In each case these prices do not allow for seasonal fluctuations.

Fuels excluding petroleum products rose in price over this period by 0.3 per cent while metals saw a price increase of 0.2 per cent.

Since the pound left the ERM, prices of fuels and materials purchased by manufacturers have increased by a seasonally adjusted 5.6 per cent. But these extra cost pressures have been countered by relatively low rises in wages. Confidence among small to medium-sized companies is improving in Britain but declining in continental Europe, according to a survey by the 3i investment group and the Cranfield School of Management.

The survey of 8,000 companies in Britain, France, Germany, Spain and Italy shows that many UK businesses believe the recession is ending. Businesses in the other nations are becoming more worried about sales prospects because of the deterioration in European economies, particularly in Germany.

United Kingdom, EC P9611 Administration of General Economic Programs STATS Statistics COSTS Costs & Prices ECON Economic Indicators P9611 The Financial Times London Page 6 512
BA set to make more changes Publication 930210FT Processed by FT 930210 By PAUL BETTS, Aerospace Correspondent

BRITISH AIRWAYS is expected to announce further changes in its management structure this week in the continuing aftermath of the Virgin Atlantic 'dirty tricks' affair.

The airline yesterday said it had appointed Mr Peter Jones head of public relations following the departure last week of Mr David Burnside, whose settlement is estimated to have been up to Pounds 300,000.

Sir Colin Marshall, BA's new executive chairman, confirmed in the airline's staff newspaper that there would be further changes to the airline's existing management team.

Meanwhile, BA and Virgin are to hold more talks tomorrow to try to reach a compromise over Virgin's compensation demands for the commercial damage it claims to have suffered because of BA's actions.

British Airways Virgin Atlantic Airways United Kingdom, EC P4512 Air Transportation, Scheduled MGMT Management PEOP Personnel News P4512 The Financial Times London Page 6 158
Head of scrutiny at Bank to quit early Publication 930210FT Processed by FT 930210 By ROBERT PESTON, Banking Editor

MR ROGER BARNES is to retire early from the post of banking supervision head at the Bank of England.

Mr Barnes, 55, is five years short of the Bank's normal retirement age. He will stay in the job for several months.

His 20-year career in banking supervision was marred towards its end by criticism of his department for its role as supervisor of Bank of Credit and Commerce International, the corrupt bank closed in 1991.

He was accused in Lord Justice Bingham's report into the affair of having 'a rooted unwillingness to believe ill of BCCI'. That report also said he showed 'misjudgment' during March 1990 in not reporting allegations of fraud at BCCI to the Bank's Board of Banking Supervision, which oversees his department.

The Bank said yesterday, however, that there had been no pressure on Mr Barnes to retire early. The Bank added that 'he approached the Bank early last year with a request to retire in the summer of the current year'.

He is being replaced in a job - widely regarded as one of the toughest and most thankless in the City of London - by Mr Michael Foot, 46, who is now head of the Bank's European division.

Mr Foot was described by one of his colleagues as one of the Bank's 'brightest and best'. He was described by a banker as 'one of Eddie's men', meaning that he is close to Mr Eddie George, the governor-designate.

Mr Foot has never worked in the supervision department, which monitors the financial strength and probity of banks operating in the UK.

One banker said it was disappointing that the Bank had not used the opportunity to reform the department by bringing in an outsider to the supervisory post.

Mr Foot read economics at Cambridge University and Yale in the US. In the early 1980s he worked in the Bank's market division, which is responsible for financing government debt.

The Bank also appointed Ms Carol Sergeant, 40, to the new post of deputy head of banking supervision responsible for monitoring big UK commercial banks and merchant banks.

Bank of England United Kingdom, EC P6011 Federal Reserve Banks P9651 Regulation of Miscellaneous Commercial Sectors PEOP Appointments Barnes, R Head Banking Supervision Bank of England Foot, M Head Banking Supervision Designate Bank of England P6011 P9651 The Financial Times London Page 6 412
Gas complaint figures disputed Publication 930210FT Processed by FT 930210 By DEBORAH HARGREAVES

BRITISH Gas and its regulator were in dispute yesterday over the number of complaints received from customers last year.

Sir James McKinnon, the director-general of Ofgas, the regulator, said in his annual report that complaints increased 89 per cent to 1,624. British Gas said it had no knowledge of more than half those complaints.

The Ofgas annual report said the rise 'tends to confirm the belief that complaints are on a rising trend generally'.

However, the Gas Consumers' Council, which represents customers, said it had received 19,281 complaints in 1992 - 13 per cent fewer than the year before.

Mr James Cooper, chairman of the council said: 'The 89 per cent annual increase says more about Ofgas's public profile than it does about British Gas's performance.'

British Gas said Ofgas had referred 506 complaints to the company - one complaint for every 35,000 customers.

But Sir James dismissed these claims as being made by British Gas 'spin doctors'. Ofgas said that in the nine months to December last year, British Gas had processed between 17,000 and 18,000 complaints that resulted in compensation being paid and these would be a tiny fraction of the overall number of complaints received.

Many complaints were by customers having difficulty paying their bills. Others complained about difficulty in being connected to the gas main. The number of disconnections for non-payment of bills fell to 16,991 last year from 18,009 the year before.

Sir James said he was looking carefully at the 'flimsy evidence' provided by British Gas in support of the price freeze it announced on Monday. But he said his reading of the index that governs prices showed no room for a rise as the company claimed.

He said he was pushing British Gas to provide competitors with terms for transporting interruptible gas supplies. Interruptible gas is the cheapest supply available to industrial users - the supply can be cut off during times of peak demand.

No rivals have entered the market yet, although one company tried to negotiate terms for transporting interruptible gas along British Gas's pipelines. British Gas has not provided terms. Sir James said: 'It would be regrettable if Ofgas had to have recourse to its statutory powers before British Gas honoured its earlier agreement to do so.'

Competitors supply 20 per cent of the overall industrial market and British Gas will not be able to fulfil its commitment to the Office of Fair Trading to halve its share of the market by 1995 without opening up the interruptible sector.

British Gas Office of Gas Supply (UK) United Kingdom, EC P4923 Gas Transmission and Distribution P9631 Regulation, Administration of Utilities TECH Standards MKTS Market shares P4923 P9631 The Financial Times London Page 6 465
Egg advice Publication 930210FT Processed by FT 930210

THE GOVERNMENT yesterday accepted a report from the Advisory Committee on the Microbiological Safety of Food recommending that all eggs be stamped with a use-by date and eaten within three weeks of being laid.

United Kingdom, EC P0252 Chicken Eggs TECH Safety P0252 The Financial Times London Page 6 56
Greenham sale Publication 930210FT Processed by FT 930210

GREENHAM COMMON air base, the focus of protests in the 1980s against deployments of US nuclear cruise missiles, is to be sold, Mr Archie Hamilton, armed forces minister, announced yesterday.

United Kingdom, EC P9711 National Security COMP Disposals P9711 The Financial Times London Page 6 52
Expo businesses attack DTI over Seville service: The Department of Trade and Industry is under fire from businessmen and politicians for alleged mismanagement of the British pavilion at Expo 92, the international fair held last year in Spain Publication 930210FT Processed by FT 930210 By JIMMY BURNS and TOM BURNS MADRID

The building, paid for with about Pounds 20m of public money, was hailed at the time by Mr Peter Lilley, trade secretary, as 'a showpiece of British imagination and flair, Britain at its most innovative and entertaining best'.

But four months after Expo closed it lies empty while the DTI finds itself embroiled in a controversy which includes:

Liquidation of a retailing company contracted by the DTI to run the pavilion shop and fly the flag with an assortment of British products supplied by dozens of leading UK companies. The company, Joanna Bickerton Associates, has debts of nearly Pounds 500,000.

Freezing of a Spanish bank account opened by the DTI on behalf of JBA, containing an undisclosed amount of money.

A possible lawsuit against the DTI. KPMG Peat Marwick, JBA's liquidators, are taking advice on whether there was direct legal involvement by the DTI in the JBA trading operation, which went into receivership last August, and whether a successful claim can be made against the DTI on behalf of creditors.

Separate legal action being considered by at least two other creditors against the DTI.

Demolition of the award-winning pavilion possibly by the end of March unless a buyer is found.

The pavilion, the size of Westminster Abbey, was designed by Nicholas Grimshaw, built by Trafalgar House and won a 1992 British Construction Industry prize. The total cost of construction and appearing at Expo was Pounds 25m, about Pounds 5m from commercial sponsorship, the rest from the government, mainly the DTI.

One of Joanna Bickerton Associates' creditors, HHL Publishing, which supplied magazines and books to the pavilion, is taking legal advice on how to recover Pounds 240,000 owed by the company.

Mr Steve Pae, HHL finance director, said: 'We believe that a lot of the information that was provided to us by the DTI when we went in for tender was misleading. There is also a question over whether the DTI was acting as a 'shadow director' of JBA during the Expo,' effectively helping to run some aspects of the company.

A second creditor, Farrow and Humphreys, a leading UK manufacturer of toiletries, is owed Pounds 7,000 for goods delivered to Expo but never paid for. Mr Ron Humphreys, Farrow and Humphreys managing director, said he is considering legal action to recover money held in an Spanish bank account opened for JBA in the DTI's name, which he has had frozen under a court order.

He does not yet know how much is in the account, but the DTI has admitted that at least some of the money is from sales of goods in the Expo shop run by JBA, and represents money owed to suppliers.

Mr Humphreys has written to Mr Michael Heseltine, trade and industry secretary, strongly criticising his department's handling of the Expo. 'As one of the . . . exporting companies damaged by the affair, our cash resources and the confidence of our bankers has been badly dented, thereby reducing - not enhancing - our export drive, not to mention our enthusiasm and sense of national pride.'

Mr Richard Bickerton, a JBA director said: 'I hold the DTI completely responsible for providing us with market research (on the projected number of visitors to the UK pavilion) which proved to be grossly inaccurate . . . They've not only messed us up, but also a number of very good British companies of a variety of sizes.'

KPMG Peat Marwick have confirmed that Mr Bickerton owned a building company, GOH Bickerton and Sons, which went into receivership two years before the Expo fair. The DTI has told the FT that that was not a retailing company. JBA was picked as sole British concessionaire for Seville on the basis of the company's past good record in running shops similar to those at Expo, the DTI said.

The DTI forecast of visitors, on which the retailing contract was based, said 2.75m people would visit the pavilion during Expo, which ran from April to October. JBA said Expo receipts show the true figure was nearer 1.5m.

More than 50 organisations supplied the British pavilion through JBA and all are owed money. They include Dartington Crystal, Royal Doulton (part of Pearson, which owns the Financial Times), the BBC World Service, Marks and Spencer and Highland Spring. The BBC confirmed that it had registered a claim with JBA's liquidators. Royal Doulton and M and S had no comment. Highland Spring said: 'We are owed money . . . we are waiting to see what the DTI has to say.'

The DTI said that it has made some ex gratia payments covering royalties which companies were made to pay to JBA before Expo got under way. Advance royalty payments were stipulated by the Expo authorities.

The DTI said the ex gratia payments did not constitute any admission of liability and that it considers any other outstanding sums to be commercial debts for which the department cannot be held responsible.

Ms Rosalind Cole, the DTI's 'project manager, Expo 92 Unit' was unavailable for comment. Sir John Ure, a former British ambassador and UK 'commissioner-general for Expo' - described by the DTI as the 'figurehead' for the fair, said when it closed: 'Our main objectives - to project Britain as an outward looking, technologically advanced, friendly nation . . . have been met.' Sir John has since retired.

Mr Eric Dancer, managing director of Dartington Crystal, which has a claim of Pounds 40,000 against JBA said: 'I think British industry should think very seriously about participating in any future trade show organised by the DTI. The DTI has let the side down very badly.'

The DTI is also facing criticism from a different quarter. Conserve, a Tory party pressure group set up three years ago by Sir David Trippier, then minister of the environment to promote environmental issues, has accused the DTI of going against the 'national interest' in delaying a decision on the future of the British pavilion. Conserve trustees include Lord Forte and Lord Palumbo.

Another Conserve director, Prof Paul Cook, a scientific adviser to the Department of the Environment, suggested moving the pavilion to Regent's Park in London under the auspices of the British Science and Technology Trust, of which he is president. Trustees include Baroness Thatcher.

In a letter sent on behalf of Conserve to the political office at 10 Downing Street and to Mr David MacLean, environment minister, Lady Olga Maitland MP said: 'Bearing in mind there is no question of financial input from the government, it would be vital for the scheme's success to have the government's unqualified blessing. This will provide the lever to raise the necessary funds.' The proposal was forwarded to the DTI which has never responded. Prof Cook said: 'The DTI has handled our proposal atrociously . . . at least they should have the decency to say one thing or the other. Taxpayers are geting nothing out of Expo.'

The DTI said some proposals had been turned down on financial or construction grounds. Advised by property agents Healey & Baker, the DTI is in 'final negotiations' with an interested company.

It is understood that the DTI has been in discussions with a businessman, Mr Sharad Patel, who wants to move the pavilion to the UK as headquarters of a new media satellite station. The DTI has been offered less than Pounds 1m for the pavilion which would take at least six months to be removed.

Under rules agreed by all participating countries, the five-storey British building may be knocked down if the DTI fails to dispose of it by the end of March. Alternatively the DTI will have to start paying rent to the Spanish authorities.

Ms Ines Alba from Cartuja 93, the government agency running the former Expo site, said: 'We calculate that the delay is going to cost the British government another Pounds 65,000.'

The DTI rejected charges of mismanagement and defended its Expo record: 'It was an opportunity to show the rest of the world what Britain could do, the Best of Britain.'

Additional research by Tom Burns in Madrid

------------------------------------------------------------------------ TARNISHED PAVILION: CONFLICTING VIEWS OF BRITAIN'S SHOWPIECE AT EXPO 92 ------------------------------------------------------------------------ 'A showpiece of British 'Our main objectives - to project imagination and flair ... Britain as an outward looking, Britain at its most innovative technologically advanced, and entertaining best' friendly nation - have been met' PETER LILLEY SIR JOHN URE former trade secretary UK Commissioner-general for Expo ------------------------------------------------------------------------ 'As one of the exporting 'I hold the DTI completely companies damaged by the responsible for providing affiar, our case resources us with market research which and the confidence of our proved to be grossly bankers has been badly dented' innacurate' RON HUMPHREYS RICHARD BICKERTON Farrow and Humphreys MD JBA director ------------------------------------------------------------------------ 'British industry should think 'The DTI has handled our very seriously abour participating proposal atrociously. in any future trade show organised Taxpayers are getting nothing by the DTI. The DTI has let the out of Expo' side down badly' PROF PAUL COOK ERIC DANCER Conserve director Dartington Crystal MD ------------------------------------------------------------------------

Joanna Bickerton Associates United Kingdom, EC Spain, EC P7999 Amusement and Recreation, NEC P9611 Administration of General Economic Programs RES Facilities MGMT Management GOVT Government News P7999 P9611 The Financial Times London Page 5 1594
White House staff cut by 25%: Clinton carries out pledge to ensure government makes do with less Publication 930210FT Processed by FT 930210 By JUREK MARTIN, US Editor WASHINGTON

PRESIDENT Bill Clinton fulfilled a campaign promise yesterday by announcing a 25 per cent reduction in the White House staff, proclaiming that 'government must do more and make do with less'.

The cuts, to take effect by October 1, the start of the next fiscal year, will reduce the number of those in the office of the president to 1,044 from the 1,394 on the payroll at the end of the Bush administration.

Estimated savings, including salary cuts of 6-10 per cent and the elimination of other perks such as unlimited newspaper subscriptions, are put at about Dollars 10m (Pounds 6.6m) a year. Other departments and agencies are expected to announce cost savings as part of Mr Clinton's broader goal of eliminating 100,000 federal jobs out of about 3m.

Announcing the cuts, Mr Clinton said: 'This is one of the few times in history that any president has actually shrunk the size of the White House staff'. It would lead to 'leaner, more effective government'.

Mr Mack McLarty, the White House chief of staff, said the president would make do with 10 per cent fewer senior aides. He added that the reductions were designed to send 'a strong message' to other departments and to Congress that sacrifices would have to be made in the interests of cutting the federal deficit.

Exempt from the cuts announced yesterday are staff at the Office of Management and Budget and the trade representative, who together employ about 800 people. Though traditionally part of the White House structure, the heads of both enjoy cabinet rank and will, therefore, have to come up with economies similar to other departments.

Actual redundancies will be minimised. Nearly 300 of the existing White House staff are career civil servants on secondment from other agencies and will return to their departments. Hardest hit is the drug policy office, mostly filled with political appointees, which will come down in size to 25 people against 146 under President Bush. However its chief, when appointed, will be elevated to cabinet rank, Mr McLarty said.

Among other symbolic changes, henceforth only three senior aides - the chief of staff and the national security adviser and his deputy - will be automatically entitled to use White House chauffeured limousines.

United States of America P9199 General Government, NEC PEOP Labour GOVT Government spending P9199 The Financial Times London Page 4 422
World Trade News: Detroit car makers avoid collision - Nancy Dunne sees US anti-dumping cases dropped Publication 930210FT Processed by FT 930210 By NANCY DUNNE

THE Big Three US car makers yesterday backed away from their threat to file dumping cases against Japanese car companies but said they would continue to 'monitor the situation'.

While Detroit was announcing this decision, the Association of International Automobile Dealers was interviewing lawyers to explore legal options to counter the threat of protectionist moves against the US industry. However, Mr Philip Hutchinson, association president, said the industry group, which represents 17 foreign producers, would probably now defer its own legal action.

'There is a silver lining in all this - particularly for the consumer,' Mr Hutchinson said.

Chrysler, Ford and General Motors issued a formal statement saying they wanted to 'give the Clinton administration the opportunity to develop its position on trade and jobs'. This would 'bring broader results in the near term than proceeding with a dumping suit at this time'.

Meanwhile they will share 'the compelling data we have developed in our analysis of dumping with senior members of the administration'.

The Big Three had several reasons to refrain from filing dumping cases. The administration is believed to have discouraged the complaints; it is already battling a protectionist image, incurred by the imposition of duties on the steel cases and proposed sanctions against the EC in a government procurement dispute.

There are widespread fears in the industry that after the disastrous Big Three trade mission to Japan last January with President George Bush, the dumping action would just bring more bad publicity. The companies could find themselves denigrated as 'wimps' or poor losers by their critics and the public alike.

This would come at a time when Detroit's reputation for quality is improving and it is benefiting from the end of the recession and growing demand. Rebates, given as a lure to car shoppers, have begun to decline, and Chrysler has had a profitable year and General Motors could have its first for several years.

US trade officials say there was no certainty that the Big Three could prove dumping had occurred and had injured the US industry. While US car companies have been slashing their prices to gain market share, Japanese car prices have been rising.

All the companies are so linked internationally that the US manufacturers may well be shooting themselves in the foot if they seek government action against their rivals. After all, one out of 10 car imports is now brought into the US by Detroit.

GM has supply and technology arrangements with Honda and Isuzu, a joint venture with Nissan, market distribution arrangements with Renault and Saab and a manufacturing and assembly relationship with Volvo.

'The question is: 'Who is the US industry?'' said Mr Michael Coursey, a Washington trade lawyer. 'Toyota? Nissan? Honda? At the end of the day, it might not matter.'

US trade lawyers say the foreign manufacturers in the US have a number of legal options against the dumping cases. They can bring an anti-trust action if they can prove the American industry is acting in collusion to raise prices.

Foreign-owned companies which manufacture in the US could seek legal standing as US producers in order to file dumping cases against the cars brought in by the Big Three.

-------------------------------------------------- US CAR MARKET - 1992 -------------------------------------------------- Total market 8,211,236 of which imports 1,994,748 -------------------------------------------------- Japanese car makers: -------------------------------------------------- Toyota/Lexus 418,661 Honda/Aeura 293,127 Nissan/Infiniti 269,379 Mazda 169,007 Mitsubishi 90,988 Subanu 49,687 Suzuki 6,098 Isuzu 7,823 Daihatsu 5,026 -------------------------------------------------- European: -------------------------------------------------- Alfa Romeo 2,828 Aston Martin 60 Volkswagen/Audi 87,950 BMW 65,691 Ferrari 960 Jaguar 8,681 Lamborghini 156 Lotus 375 Maserati 240 Mercedes-Benz 63,312 Peugeot 335 Porsche 4,115 Rolls-Royce/Bentley 392 Saab 26,377 Volvo 67,916 Yugo 1,412

-------------------------------------------------- Korean: -------------------------------------------------- Hyundai 108,549 -------------------------------------------------- American: -------------------------------------------------- General Motors 93,917 Chrysler 62,174 Ford 89,512 -------------------------------------------------- *This excludes light trucks (including minivans), sales of which totalled 4.68m in 1992 -------------------------------------------------- Source: Automotive News --------------------------------------------------

Chrysler Corp Ford Motor General Motors Corp United States of America Japan, Asia P3711 Motor Vehicles and Car Bodies P9611 Administration of General Economic Programs MKTS Foreign trade GOVT Legal issues MKTS Market shares P3711 P9611 The Financial Times London Page 4 706
Bill and Al on the road again: Away from Washington, out among the voters, the issue is still the economy - and it is picking up Publication 930210FT Processed by FT 930210 By JUREK MARTIN

BILL Clinton and Al Gore begin another campaign today, on their natural turf. The president is off to Detroit and the vice-president to Ontario, California, to appear in televised 'town meetings', fielding questions from citizens, not the media.

Their goal is quite simple: to convince a wider audience that this is a young administration still firmly on track, which is not necessarily the prevalent impression inside the hypercritical and media-dominated capital. They will probably welcome the change of scenery in their first escape from Washington since the inauguration.

But, even as they leave, there are changes in Washington itself which indicate some adjustment by the president to the capital's political realities. Back on board in the White House, albeit in informal consulting capacities, are Mr James Carville, Mr Paul Begala and Ms Mandy Grunwald, three of the key political strategists behind Mr Clinton's skilful and disciplined election campaign.

Implicit in their return, which may be no more than temporary, is the recognition that the administration has had an uncertain political beginning, marked by the double failure to find a new attorney general and the early controversy over Mr Clinton's determination to end the ban on homosexuals in the military.

The withdrawal, for 'nannygate' reasons, of Judge Kimba Wood from consideration to run the Justice Department seems a more grievous item of White House mismanagement than that of the aborted nomination of Ms Zoe Baird.

Judge Wood has acknowledged in a letter to the New York Times that the newspaper's initial accounts of her exchanges with the White House - obviously, though anonymously, provided by her journalist husband Mr Michael Kramer - were partly inaccurate and that she may, indeed, not have been crystal clear in what she said. But there is no gainsaying that Mr Clinton's aides were ill-advised in leaking that she was at the top of the short list to be attorney general.

The net result is that, for the moment at least, the administration finds itself fending off outraged criticism (not only from women's groups and talk show hosts) that the president is applying a double standard to men and women appointees and is running scared of public opinion.

Now, it appears all nominees for positions requiring Senate confirmation, about 1,100, will be obliged to confirm that they have always obeyed the law in hiring domestic help, a criterion not exactly germane to their abilities to do the job. Worse, it may well rule out of consideration a lot of talent.

Finger-pointing for this firestorm is under way. Mrs Hillary Rodham Clinton, already a target because of her patent power and influence, is being blamed for her insistence on finding a woman for the justice department. Other aides, like Mr 'Mack' McLarty, the White House chief of staff, Mr Bernard Nussbaum, the president's legal counsel, and Mr George Stephanopoulos, the communications director, are also being charged with lack of political nous.

Similar accusations of loose talk surround the formation of economic policy. Mr Stephanopoulos has defensively blamed unauthorised leaks for the number of kites being flown around town - on social security and energy taxes and on the size of any planned stimulus. The impression gleaned is that whenever one has been shot down - as in the mooted freezing of the indexation of pensions - the administration has caved in to powerful special interests.

The Kimba Wood fiasco last Friday interrupted what had been a good week for Mr Clinton. The passage of the family leave bill could be portrayed as early evidence that Washington legislative 'gridlock' was over. There had been a series of presidential consultations with Congress and with the nation's governors that spoke of policy innovation and new co-operation.

At least these passing domestic passions have taken some of the heat off foreign policy. This may come as little consolation to Mr Cyrus Vance and Lord Owen, the Bosnian negotiators, who are convinced that the prospect of US assistance is the main reason why the Bosnian Moslems have not agreed to their peace plan, but it has bought some time for the administration to make up its own mind.

More generally, as Mr Jim Hoagland perceptively wrote in the Washington Post yesterday, it is becoming increasingly clear that Mr Warren Christopher's role as secretary of state is 'to keep Clinton out of trouble abroad in the opening phase of his presidency'. In the Middle East, Bosnia, Somalia and Haiti, 'quick fixes and policy reviews are the order of the day.'

The compromise agreement negotiated by Mr Christopher with Mr Yitzhak Rabin, Israel's prime minister, over the Palestinian deportees was a quick fix, getting the US off the potentially embarrassing hook of being forced to veto a UN Security Council resolution against Israel. His trip to the region next week equally is designed to buy some more time.

Such delay does not seem to suit the European Community, agitated over trade policy, and Japan, anxious because it seems to have no friends in the Clinton court. This week's visits to Washington by Sir Leon Brittan, the EC trade commissioner, and Mr Michio Watanabe, the Japanese foreign minister, may not be as fruitful as either would like.

But it is a fair bet that in Michigan and California tonight foreign policy will not intrude much on Mr Clinton and Mr Gore. Their dialogues with the people, in the preferred medium of the moment, are going to be about what brought them into office, neatly summed up in the placard Mr Carville hung on the Little Rock election war-room; 'the economy, stupid'. The only difference now is that it is getting better.

United States of America P91 Executive, Legislative and General Government MGMT Management GOVT Government News Clinton, B President (US) P91 The Financial Times London Page 4 997
Brazil's satellite to monitor rainforests Publication 930210FT Processed by FT 930210 By CHRISTINA LAMB RIO DE JANEIRO

BRAZIL yesterday moved into the space age with the successful launch of its first satellite.

The SCD-1, developed entirely in Brazil, was launched from the Kennedy Space Centre at Cape Canaveral in Florida yesterday morning - the culmination of a Dollars 150m (Pounds 99.3m) project begun in 1979. In recent years the programme has suffered long delays caused by the perilous state of Brazilian government finances.

Orbiting 750km above earth, the satellite will be used for collecting meteorological and environmental data about the Amazon rainforest. The data will be transmitted to the Brazilian space institute (INPE) for monitoring forest fires and the concentration of carbon monoxide and dioxide in the atmosphere. Landsat, the American satellite used for capturing images does not provide such detail.

Mr Pawal Rosenveld, head of satellite monitoring at INPE, said yesterday: 'This is a technological and political success as it puts Brazil in the club of countries which have the knowhow for satellite manufacture.'

The satellite was launched using the Pegasus rocket made by the American Orbital Science Corporation. A second Brazilian-made satellite SCD-2 is planned to be launched at the end of this year with a Brazilian made rocket.

Brazil, South America P4789 Transportation Services, NEC P9661 Space Research and Technology P3663 Radio and TV Communications Equipment TECH Services GOVT Government News P4789 P9661 P3663 The Financial Times London Page 4 242
World Trade News: Japan acts to cool US trade tensions Publication 930210FT Processed by FT 930210 By MICHIYO NAKAMOTO TOKYO

MR Yoshiro Hayashi, the Japanese finance minister, will try to defuse mounting trade tension with the US when he meets Mr Lloyd Bentsen, the US treasury secretary in Washington at the weekend. Mr Hayashi is expected to relay Tokyo's objection to US proposals to raise tariffs on minivans and multi-purpose vehicles from 2.5 to 25 per cent.

Mr Yoshiro Mori, international trade and industry minister, yesterday urged the US to act sensibly in dealing with the proposed tariff increase, saying he would be willing to travel to the US ahead of Premier Kiichi Miyazawa, to discuss trade issues including the minivan tariffs.

Mr Mori's trade minister's initiative comes as Tokyo also prepares for a three-day visit to the US by Mr Michio Watanabe, deputy prime minister and foreign minister, starting tomorrow. Mr Watanabe is expected to focus on political issues, but discussions between Mr Hayashi and Mr Bentsen are set to touch on trade, including Japan's growing surplus with the US and efforts to conclude the Gatt Uruguay Round.

Japan is increasingly concerned about Washington's trade stance. As well as the minivan issue, the Japanese are worried they are being pushed into bilateral talks on matters they believe are better dealt with through a multilateral forum such as Gatt, including the opening of Japan's rice market. Calls are increasing in the US to make this a bilateral issue. Japan also believes preliminary anti-dumping duties imposed on Japanese steel imports by the US Commerce Department undermine efforts to work towards fair trade in steel.

Japan's Iron and Steel Federation yesterday said it had sent a position paper to US government and congressional leaders seeking their support in the anti-dumping action, and stressing the importance of the multilateral steel agreement.

Friction is growing over landing rights, after the US Transport Department said it might retaliate against Japanese airlines, after Tokyo decided not to allow United Airlines to extend its New York-Tokyo flights to Sydney.

Japan, Asia P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT International affairs P9311 P9611 The Financial Times London Page 4 366
World Trade News: Vietnamese deal for Thomson-CSF Publication 930210FT Processed by FT 930210 By REUTER HANOI

VIETNAM'S busiest airport is to have a modern air traffic control system installed by the French electronics giant Thomson-CSF, the company said yesterday, Reuter reports from Hanoi.

The company said Vietnam's state carrier, Vietnam Airlines, had chosen it to supply and install the new system at Tan Son Nhat Airport in Ho Chi Minh City, Vietnam's commercial centre.

The company, which signed another contract with Vietnam Airlines in August to supply landing communications systems for Ho Chi Minh City Left: President Francois Mitterrand is greeted by Vietnamese foreign minister Nguyen Manh Cam (right) as he arrives at Hanoi airport

and the central town of Danang, said it had also received government approval to open an office in Vietnam.

The news came hours after the arrival in Hanoi of French President Francois Mitterrand.

Mr Mitterrand is the first western head of state to visit Vietnam and is accompanied by several ministers and leading businessmen.

The French government has been trying to help integrate communist Vietnam - both economically and politically - into the international community, especially since the collapse of the Soviet bloc.

That has included pressing the US government to lift its trade embargo against Hanoi and its virtual block on World Bank and International Monetary Fund loans for Vietnam.

Thomson CSF Vietnam, Asia P3812 Search and Navigation Equipment P4581 Airports, Flying Fields, and Services P9111 Executive Offices MKTS Contracts GOVT International affairs P3812 P4581 P9111 The Financial Times London Page 4 258
World Trade News: Washington in steel row Publication 930210FT Processed by FT 930210 By FRANCES WILLIAMS GENEVA

THE US was yesterday subjected to a barrage of criticism from trading partners over its decision last month to impose swingeing anti-dumping duties on imports of steel from 19 countries, including seven EC member states.

The issue will be pressed by Sir Leon Brittan, EC trade commissioner, when he meets Mr Mickey Kantor, US trade representative, in Washington tomorrow. Sir Leon will also be taking up the US threat to shut EC companies out of bidding for federal contracts, and the continuing standoff in the Uruguay Round global trade talks.

At a stormy meeting of Gatt's governing council, the US anti-dumping, and earlier anti-subsidy, duties on steel were variously described as 'unwarranted and unjustified', 'unfair', 'disturbing' and a threat to world steel trade and the Uruguay Round.

The EC, which said the duties were the latest measure in 'a massive assault on the world steel market' by the US, has already sought talks with the US as the first step to a formal Gatt complaint. Brazil, which put the item on the council agenda, said it too had sought consultations.

Support came for renewed talks on a Multilateral Steel Agreement, which would phase out steel tariffs in return for elimination of most subsidies. MSA talks broke down last spring but are scheduled to begin afresh later this month.

Gatt members were angry that the anti-dumping duties, provisional until the US International Trade Commission rules on whether dumping has injured US producers, relate to imports already covered by voluntary restraint arrangements. Over 80 anti-dumping and anti-subsidy suits were filed by US steel makers weeks after the 10-year-old VRAs expired after March 1992. Gatt's council yesterday approved membership terms for the Czech and Slovak republics, which separated at the end of last year, and granted Azerbaijan, the former Soviet republic, observer status. Swaziland has become Gatt's 106th member.

Editorial Comment, Page 17

United States of America European Economic Community (EC) Czech Republic, East Europe Slovakia, East Europe P331 Blast Furnace and Basic Steel Products P9611 Administration of General Economic Programs GOVT Taxes GOVT International affairs P331 P9611 The Financial Times London Page 4 367
Venezuela plans to sell off four power companies Publication 930210FT Processed by FT 930210 By JOSEPH MANN CARACAS

THE VENEZUELAN government, in an effort to reactivate its stalled privatisation programme, is focusing its attention on selling off four electric power companies this year.

Mr Julian Villalba, head of Venezuela's privatisation programme, said this week the government hoped to obtain as much as Dollars 1.4bn (Pounds 920m) this year by selling its shares in Planta Centro, a large electric generating facility, and Enelven and Enelbar, two regional power generation and distribution companies.

The administration also has plans to sell the state-owned electric company that serves the resort island of Margarita.

The administration of President Carlos Andres Perez obtained over Dollars 2bn from privatisation in 1991, but saw sales of state assets decline steeply last year, when rebellious military units staged two attempted coups d'etat.

The government, eager to obtain money from privatisation to help cover a large fiscal deficit projected for this year, may find it hard to sell important state-owned assets.

Venezuelans are scheduled to elect a new president and national congress next December, and it is still not clear if the next government will pursue the unpopular economic reforms initiated by Mr Perez in 1989.

The outlook for possible investors in Venezuela's electric power sector improved late last year after the government approved a series of staggered increases in residential and commercial power rates scheduled to continue after a new administration takes office in 1994.

Aside from the electric power companies, the government also hopes to sell other state-owned assets this year, including an airline, horseracing tracks, hotels, sugar mills and perhaps some of its remaining shares in the national telecommunications company, CANV.

Planta Centro Enelven Enelbar Venezuela, South America P4911 Electric Services P9631 Regulation, Administration of Utilities COMP Company News GOVT Government revenues P4911 P9631 The Financial Times London Page 4 313
Zaire MPs caution Mobutu Publication 930210FT Processed by FT 930210 By REUTER KINSHASA

Zaire's transitional parliament decided yesterday that President Mobutu Sese Seko had no right to sack opposition Prime Minister Etienne Tshisekedi, Reuter reports from Kinshasa. Mr Mobutu had signed an order firing Mr Tshisekedi, blaming him for army riots in late January in which several hundred people were killed.

Zaire, Africa P9121 Legislative Bodies GOVT Government News Mobutu, S S President (Zaire) Etienne, T Prime Minister (Zaire) P9121 The Financial Times London Page 3 86
Togo peace talks break down Publication 930210FT Processed by FT 930210 By REUTER COLMAR

Talks aimed at rescuing the west African state of Togo from bloodshed broke down yesterday, French Co-operation Minister Marcel Debarge said, Reuter reports from Colmar. Representatives of hardline President Gnassingbe Eyadema left Colmar in eastern France during the night, after talks with the country's pro-democracy movement had been postponed indefinitely, he added.

Togo, Africa France, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 3 82
Cambodia UN office attacked Publication 930210FT Processed by FT 930210 By AP PHNOM PENH

Prince Norodom Sihanouk, Cambodia's head of state, returned home yesterday as UN peacekeepers investigated an overnight attack on a UN office in the north-west of the country that left five Cambodians dead and 16 injured, AP reports from Phnom Penh. Forty unidentified troops launched a three-hour attack late Monday night in Bakan district, about 185km north-west of Phnom Penh.

Kampuchea, Asia P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times London Page 3 93
Loans for riot-hit business Publication 930210FT Processed by FT 930210 By REUTER BOMBAY

The Reserve Bank of India, the country's central bank, yesterday said it would help businesses hit by recent communal riots across the country, Reuter reports from Bombay. It told commercial banks to extend credit limits for companies affected by the Hindu-Moslem bloodshed by 25 per cent.

Reserve Bank of India India, Asia P601 Central Reserve Depositories P9229 Public Order and Safety, NEC COMP Company News GOVT Legal issues P601 P9229 The Financial Times London Page 3 89
Keating woos women and business Publication 930210FT Processed by FT 930210 By EMILIA TAGAZA MELBOURNE

MR Paul Keating, the Australian prime minister, yesterday launched an election campaign package, promising to cut the company tax rate from 39 per cent to 33 per cent.

He also offered a 10 per cent investment allowance for purchases of plant and equipment by small and medium businesses. And for working women, Mr Keating proposed a 30 per cent cash rebate, claimable every week, for work-related child care.

Mr Keating hopes the business incentives will encourage private investment and help cut unemployment. But he is also targeting his weakest electoral spots: business and women voters.

The company tax cuts will put a further strain on the government budget.

Mr Keating's 95-page package includes a revised forecast for the 1992-1993 budget deficit, which is now expected to rise to ADollars 15.9bn (Pounds 7bn) from the previous forecast of ADollars 13.5bn. The expected rate of economic growth has also been scaled down from 3 per cent to 2.5 per cent.

Mr Keating said the package would add ADollars 692m to the 1993-1994 budget and ADollars 387m in 1996-1997. He proposes to fund the package by selling a further 19 per cent of the government's stake in Commonwealth Bank. This would earn the government ADollars 1bn but its total holding would fall from 70 per cent to 51 per cent.

He also proposes to bring forward the collection of company taxes. With a new set of incentives, Mr Keating hopes to woo a large section of the business community who openly support the tax and industrial relations policies proposed by the coalition of the conservative Liberal and National parties.

The conservative opposition, led by Mr John Hewson, is campaigning on a new goods and services tax and the abolition of seven business taxes, including the payroll tax.

Mr Hewson said he did not believe the ruling Labor party could deliver the promised package. He said the government would not be able to raise the money, in the same way that it found it difficult to meet the personal tax cuts promised last year.

Mr Hewson is expected to launch his own election campaign platform in a few days.

The business community has not been impressed by Mr Keating's bait. Mr Ian Spicer, head of the Australian Chamber of Commerce and Industry, said the tax breaks alone would not cure unemployment. He said the package overlooked the problem of industrial relations.

'I don't believe we'll see any marked improvement in employment in the short term if these are the only initiatives presented by the government,' he added.

Mr Rob Bastian of the Council of Small Business Organisations of Australia said he was aghast at the government's plan to 'claw forward' its collection of the bulk of business taxes.

Australia P91 Executive, Legislative and General Government MGMT Management P91 The Financial Times London Page 3 484
Hyundai founder retires as party leader Publication 930210FT Processed by FT 930210 By JOHN BURTON SEOUL

MR Chung Ju-yung, the founder of South Korea's Hyundai business group, yesterday announced his retirement from politics following his recent indictment for election violations in the December presidential polls.

Mr Chung had appeared demoralised by the weekend indictment, and stayed away from the United People's party's (UPP) first anniversary celebration on Monday.

But 'he told me he was at ease now', said his son, Mr Chung Mong-joon, who is an MP for the UPP.

His sudden departure as chairman of the UPP will probably lead to its dissolution. UPP officials admitted it was unlikely that Mr Chung would continue to fund the party from his estimated Dollars 4bn (Pounds 2.6bn) fortune, depriving the group of its main financial source.

'I will no longer engage in politics,' Mr Chung said yesterday in a brief statement to MPs at the UPP headquarters, which is already being vacated. 'Instead, I will work for the economy.'

Mr Chung, who described Mr Kim Young-sam, the next Korean president, as an 'idiot' during the election, also apologised for criticising his opponents. 'I should have regarded them as partners and praised them.'

He gave no indication if and when he would give up his parliamentary seat, although he is still expected to leave the National Assembly shortly.

'Chairman Chung was already losing interest in politics even before the indictment because he was defeated for president, which was his main goal,' explained a senior UPP official.

'He couldn't accept remaining in politics if it only meant being a legislator in the National Assembly.'

Mr Chung finished third in the presidential election, while the UPP is the third biggest party in the National Assembly, holding 11 per cent of its seats, following parliamentary elections last March.

If the UPP collapses, most of its MPs would become independent members or join either the ruling Democratic Liberal party or the main opposition Democratic party.

Mr Chung was indicted on Saturday on charges of receiving more than Dollars 60m in illegal campaign funds from Hyundai Heavy Industries (HHI), his group's shipbuilding unit. He claims the money came from the sale of shares in HHI.

Prosecutors said they would continue legal proceedings against Mr Chung in spite of his political retirement.

His departure from politics, however, reduces the chances that the government will conduct reprisals against Hyundai as it did last year when Mr Chung formed the UPP to challenge the government's tight control over business.

The share prices for most of the 19 listed Hyundai companies rose at the news of Mr Chung's retirement.

Hyundai officials suggest that his future role will be to develop overseas business by serving as a roving ambassador for the group.

Mr Chung retired as the Hyundai chairman in 1987, although he and his family retain majority control of the conglomerate, the biggest in Korea.

United Peoples Party (South Korea) Slovakia, East Europe P8651 Political Organizations PEOP Appointments Chung Ju-yung, chairman United Peoples Party (South Korea) P8651 The Financial Times London Page 3 513
Togo peace talks break down Publication 930210FT Processed by FT 930210 By REUTER COLMAR

Talks aimed at rescuing the west African state of Togo from bloodshed and crisis broke down yesterday and were suspended indefinitely, French Co-operation Minister Marcel Debarge said, Reuter reports from Colmar.

He said representatives of hardline President Gnassingbe Eyadema left Colmar in eastern France during the night, after talks with the country's pro-democracy movement collapsed. The Franco-German-sponsored meeting had brought together the country's five leading political groups.

Togo's foreign minister, Mr Ouattara Natchaba, had earlier accused France of threatening military intervention, and said the army should be given a say if Togo's problems were to be solved.

Togo, Africa France, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 3 127
Iraq muddies water of Turkey-Syria dam deal: Threats over Euphates project Publication 930210FT Processed by FT 930210 By JOHN MURRANY BROWN

IRAQ'S recent threat to take legal action against foreign contractors on a Turkish dam project was more than just another warning shot across the bows of Ankara's multi-billion-dollar south-east Anatolian project. The outburst is seen as an indication of growing concern in Baghdad at the possibility of a water deal between Turkey and Syria which could leave Iraq high and dry.

Iraq's anxiety follows the recent accord signed in Damascus committing Turkey and Syria to find a 'final solution' to the allocation of the Euphrates river this year. Some diplomats in Ankara discount the move as yet another 'agreement to disagree'. However, for both countries, there seems to be ample reason to push for a more permanent settlement to this long riparian dispute.

Ankara's control of the Euphrates and the Tigris rivers, both of which rise in its central highlands and flow into the Gulf, has long soured relations with its Arab neighbours. Turkey's irrigation project, known as Gap, has been the main bone of contention - in particular, its plans to irrigate 1.7m hectares along the Syrian and Iraqi borders.

Turkey has long resisted calls for a more comprehensive solution, reluctant to become embroiled in the disputes of Syria and Iraq, which in the mid-1970s came close to open conflict.

With Iraq's continuing international isolation, any deal with Syria would undermine the case for an internationally ratified agreement on the water issue.

Modest progress on the security front helped pave the way for the Damascus accord, in particular Syria's assurances to curb Turkish Kurd separatists on its territory.

There was also a technical reason for the meeting. In 1987 Turkey agreed to guarantee to Syria a discharge of 500 cu m a second where the Euphrates crosses their border. Under that agreement, Turkey was committed to review the water allocation, once the reservoir behind the vast Dollars 4bn (Pounds 2.6bn) Ataturk dam was filled. That day has arrived.

But more than that, western diplomats say Turkey's decision to push for a deal is a measure of the desperate financial constraints facing the Gap project. Hitherto, the World Bank and other donors have refrained from supporting the project directly because of the outstanding water issue.

According to western officials, only if Turkey solicits international finance can it afford to invest in the more costly water conserving equipment, an issue vital for the downstream users. That will only happen if a solution can be found to the dispute.

Donors now believe the day of financial reckoning is fast approaching. The Gap has already consumed Dollars 9bn, much of it financed from the state budget. By next century, when the irrigation infrastructure and the 21 dams and 19 power plants are in place, the project will have cost a heady Dollars 32bn.

As Turkey prepares to irrigate the first hectares on the Harran plain close to the Syrian border in May, the need to address the issue has acquired a new urgency. Turkey will want to reassure the Syrians of continued co-operation, although the Turks seem unlikely to agree to Syria's demands to increase the water supply.

Iraq's latest snipe may thus cause a few ruffled feathers for the commercial banks and export credit agencies now being approached to finance the DM2bn (Pounds 833m) Birecik project.

The consortium led by Philip Holzmann of Germany has been quick to point out that there are no plans for irrigation, only hydro-electric generation. In addition, the Turks argue that Iraq has already given implicit approval to the project, having signed up to a separate plan linking the power grids of Turkey and its Arab neighbours: the Birecik plant is the first stage of this five-country project and would transmit power to the Syrian city of Aleppo.

Iraq's concern over Birecik may still prove premature. Hermes, the German export credit agency, is understood to have second thoughts about supporting a project which the Turks seem intent on financing using the more complex and largely untried technique of Build Operate and Transfer. Under such an arrangement, the contractor owns and finances the project, recovering its cost by selling its product, in this case electricity, back to the public utility. The public outburst from the Iraqis can only further deepen the misgivings of the lenders.

Iraq, Middle East Turkey, Middle East Syria, Middle East P1629 Heavy Construction, NEC P9721 International Affairs RES Natural resources CMMT Comment & Analysis P1629 P9721 The Financial Times London Page 3 758
Japanese employers urged not to cut jobs Publication 930210FT Processed by FT 930210 By CHARLES LEADBEATER TOKYO

THE Japanese government yesterday underlined the seriousness of the economic downturn by taking the unusual step of formally asking companies not to shed labour.

The move shows how worried the authorities have become that there could be a sharp rise in unemployment as economic growth slows.

The labour ministry's call is the latest in a series of government moves to modify business responses to the downturn.

Earlier this week, banks were formally asked not to restrict lending to smaller companies, and financial institutions have been asked not to sell shares to help to prevent further falls on the Tokyo stock market.

The next few months will test whether the bureaucracy still possesses the authority it used to have over the private sector to enforce such guidance.

Mr Kunihiko Saito, chief of the labour ministry's employment security bureau, asked a meeting of business leaders to refrain from cancelling plans to employ new graduates and retire older workers.

Mr Saito told the group: 'Labour adjustment by such means will create great worries over employment in the whole of society. We want you to do your utmost to keep workers employed.' He warned that job losses would undermine society's trust in companies.

The unemployment rate, which was 2.2 per cent for most of last year, rose to 2.4 per cent in December.

A growing number of comp anies have announced recruitment freezes and plans to lay off older workers to cut costs and boost profitability. Within the last week alone Eastman Kodak, the film company, Omron, the electronic goods maker and Minolta, the camera manufacturer have announced plans to trim about 4,000 jobs over the next few years.

The weakened state of the economy was spelt out by a clutch of official statistics.

Bank lending in January grew by just 2.0 per cent, the same rate as the previous two months. The low growth in bank lending means the Japanese money supply is likely to continue to contract.

Japan's machine tool orders last year fell by 37.8 per cent on the previous year to Y710bn (Pounds 3,776m) largely because of a slump in private sector capital investment. Private sector machinery orders, which have been fluctuating wildly in recent months, fell by 6.2 per cent in December, according to figures published by the Economic Planning Agency.

EPA officials said they were extremely cautious about the outlook for machinery orders.

Meanwhile the fall in Tokyo land prices is accelerating, according to a National Land Agency survey. In the final three months of last year land prices in central and north-eastern Tokyo fell at 25 per cent a year, after falling by 20 per cent in the previous quarter.

The land price fall is one factor behind a marked pick-up in sales of cheaper condominiums in Tokyo and Osaka, which suggests that some parts of the property market are beginning to recover strongly. The Real Estate Economy Institute, a private sector research group, said the number of condominiums put on sale in the Tokyo area last month rose by 24 per cent to 1,969 compared with the same month last year.

About 77 per cent of the condominiums were contracted for sale, a marked increase on last year. But this was mainly because the average condominium price had fallen by 25 per cent to Y44m.

Japan, Asia P9611 Administration of General Economic Programs P99 Nonclassifiable Establishments PEOP Labour GOVT Government News P9611 P99 The Financial Times London Page 3 589
Now Zambia points way to fiscal rectitude in adversity: A hoped-for economic example to follow a multi-party political one Publication 930210FT Processed by FT 930210 By TONY HAWKINS

HAVING provided a rare African example of successful transition from one-party rule to multi-party politics, Zambia may be offering another important pointer for the continent: how to balance the budget in adversity.

Describing the country's inflation record - 207 per cent in the year to December - as 'totally unsatisfactory', Mr Emmanuel Kasonde, finance minister, last week unveiled a disinflationary, balanced budget.

If he can make it stick, it will go a long way towards promoting sustained recovery in an economy sapped by mismanagement and weak prices for its main export, copper.

Failure, however, will reinforce the view that, without additional resources, economic recovery is beyond the reach of even the best-intentioned African governments. It will also undermine the government of President Frederick Chiluba, which swept to victory in the elections in October 1991.

The year has not started well. After severe drought last year, maize production should recover strongly from the 1992 crop of only 5.2m bags (of 90 kg), compared to 12.2m in 1991. But the mid-January dry spell has raised fears of another mediocre season.

Meanwhile, the copper price, which averaged 103.5 US cents a lb last year, seems set to stagnate for much of 1993. Since the mineral accounts for around 90 per cent of export earnings, this suggests that any improvement in the balance of payments from last year's Dollars 94m current account deficit is dependent on reduced food imports and lower debt-service payments.

Mr Kasonde's target of an annual inflation rate of 10 per cent by December looks out of reach, with inflation still running at an annualised 200 per cent in the final quarter of 1992 - though well down on the annualised 350 per cent recorded in the first quarter.

Money supply also doubled during 1992, with government borrowing from the Bank of Zambia and the commercial banks, up by 81 per cent, accounting for 56 per cent of the increase in bank lending.

If Mr Kasonde gets his way this will change drastically during 1993. 'The budget,' he told MPs, 'has been framed so that financing comes first; expenditure is the residual.'

The Bank of Zambia will simply say no when government ministries seek to overspend. Extra revenues that might arise from 'higher than programmed inflation' will not be spent. Treasury bill borrowings will be used to roll over existing debt, while government plans to repay 'much of its outstanding' domestic commercial bank debt.

The Zambian track record suggests that they mean what they say. Last year, despite a 2.8 per cent fall in real GDP, a 39.3 per cent decline in farm output and inflation of more than 200 per cent, the government was able to cut the budget deficit from the 7.4 per cent of GDP inherited from the Kaunda administration in 1991, to only 2.2 per cent, or 0.3 per cent if drought-related spending is omitted.

This year, the spending target will rise 80 per cent to K231bn (Dollars 630m).

A debt-relief agreement last July with the Paris Club of official creditors, whereby debt-service costs were reduced by some Dollars 270m a year in the three years to 1995, will contribute substantially towards budgetary savings.

But some bitter political battles are looming. Mr Kasonde has a fight on his hands on public spending, on wage increases, and over civil service retrenchment - with some analysts suggesting that 50,000 people, or half the civil service, will have to be laid off. He hopes that effective tax cuts, achieved by raising thresholds substantially and broadening the three income tax bands (of 15 per cent, 25 per cent and an unchanged top rate of 35 per cent), will alleviate pressure for wage rises. This too is optimistic.

However, a reduced rate of corporate tax, the promised abolition of exchange controls, inherited at independence 29 years ago, and the assertion that government no longer has a role to play in fixing the exchange rate, are all grist to the private enterprise mill.

Some perspective can be gained too from a comparison with Zambia's far more industrialised and prosperous neighbour Zimbabwe, which like Zambia suffered from severe drought in 1991-1992 and which is also undergoing structural reform, albeit in a far more leisurely manner.

But these impressive achievements and worthy intentions will prove inadequate to the task of rebuilding the economy unless private sector investment recovers strongly. That is not going to happen without substantial public sector investment in the infrastructure, especially transport, education and training.

These are long-haul strategies which means that the Zambian recovery, when it comes, will be slow.

----------------------------------------------------------- ZAMBIA: KEY INDICATORS COMPARED WITH ZIMBABWE (1992) ----------------------------------------------------------- Percentage pa Zambia Zimbabwe ----------------------------------------------------------- Real GDP growth -2.8 -9 Decline in agricultural output -39.0 -35 Inflation 207.0 49 Money supply growth 99.0 19 Budget deficit (% of GDP) 2.2 11 -----------------------------------------------------------

Zambia, Africa P9611 Administration of General Economic Programs ECON Economic Indicators STATS Statistics CMMT Comment & Analysis P9611 The Financial Times London Page 3 851
Singapore seeks to be more competitive Publication 930210FT Processed by FT 930210 By KIERAN COOKE SINGAPORE

SINGAPORE is introducing a 3 per cent goods and services tax (GST) and promised significant cuts in corporate and personal taxes in a budget at the end of this month.

Mr Richard Hu, minister of finance, said it was vital that Singapore reduce its direct taxes in order to maintain its long-term competitiveness. It was also important for Singapore to broaden its tax base.

'The whole idea is to make us more competitive,' said Mr Hu. 'The government does not need the additional revenues. . . our fiscal position is very healthy.' Singapore runs a budget surplus and, at 47 per cent of GDP, has one of the highest savings rates in the world. It has foreign exchange reserves officially put at Dollars 40bn.

The government hopes that by introducing its new tax regime, with lower direct taxes, Singaporeans will be encouraged to invest overseas. Government leaders have bemoaned the lack of Singaporean entrepreneurs willing to look at business opportunities abroad, particularly in China.

The government said the lower corporate taxes would partially offset Singapore's high labour and land costs.

It said the GST would be held at 3 per cent for at least five years after its introduction in April 1994.

Singapore, Asia P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 3 234
Yeltsin ready to abandon referendum Publication 930210FT Processed by FT 930210 By LEYLA BOULTON MOSCOW

PRESIDENT Boris Yeltsin said yesterday he was prepared to drop plans for a controversial referendum on whether the president or parliament should rule Russia, writes Leyla Boulton in Moscow.

After Mr Valery Zorkin, the chairman of the Constitutional Court, and heads of republics within the Russian Federation joined opposition to the poll, Mr Yeltsin said: 'Let us proclaim 1993 the year of a moratorium on all political fist-fighting and other major political events. Let us deal with the economy. This is the main thing that can ruin us.'

The referendum plan was born of a compromise at last December's Congress of People's Deputies between the president and parliament to try to break Russia's constitutional impasse. But Mr Yeltsin has become concerned that the referendum may not turn out to be such a simple solution.

Russia, East Europe P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 2 164
Business as usual for Euro-free Swiss: Fears of splendid mountain isolation proved unfounded Publication 930210FT Processed by FT 930210 By IAN RODGER

FOR THOSE who believe that markets are always right, the Swiss made a brilliant decision last December in rejecting a plan to move closer to the European Community.

Since the no-vote in the referendum on joining the European Economic Area (EEA), and contrary to the expectations of most analysts, the stock market has risen more than 10 per cent. Swiss interest rates have fallen by more than a point, the Swiss franc is firm and flight capital is flooding back into the country.

Even shares of middle-sized, export-intensive machinery companies, which many said would be hard hit if the country excluded itself from the European single market, have performed well.

Government and business leaders remain worried about the dangers of isolation. Swiss scientists have already received letters from Brussels advising them that they must abandon their seats on European project planning committees. Swissair, the national airline, is suddenly contemplating mergers with EEA-based airlines to ensure it retains fair access to airports in EC cities. And exporters fear that customs officials in EC countries will deliberately entangle incoming Swiss goods in red tape.

But for the moment, the predominant sentiment in most quarters appears to be a puzzled relief that the negative vote has not yet brought any negative consequences.

Apart from economic worries, there was, in the immediate aftermath of the vote, concern about the sharp divide it exposed between French-speaking Swiss, who massively supported the EAA, and German and Italian speakers, who opposed it.

There were comical scenes in parliament in December with anxious German speakers trying to assuage their fellow citizens by deliberately speaking stilted French. The federal government quickly promised more motorway construction in Romandy and civic leaders in Lucerne launched a 'Salut les Romands' programme, inviting French Swiss to stay in the city's hotels for half price.

While the linguistic cleavage remains worrying, it has been softened somewhat by closer analysis of the voting, revealing that the German and Italian Swiss were not giving vent to any anti-Romand sentiment. It was rather a case of still not wanting to get too close to their formerly belligerent neighbours, Germany and Italy.

There were also important divisions between city and country - all the main cities in German-speaking Switzerland produced majorities in favour of the EEA - and between those, such as farmers and merchants, who benefit from subsidies and other forms of protection from foreign competition, and those who do not.

Perhaps the surprise, one western diplomat said this week, is that so many Swiss - only a fraction under 50 per cent - voted in favour of the EEA. A couple of years ago, the notion that Switzerland should move closer to the EC would have been overwhelmingly rejected. As recently as 1986, a majority vetoed a government recommendation that the country join the United Nations.

The relative strength of the pro-European vote is one reason the government feels it need not jettison its pro-EC integration policy. Mr Adolf Ogi, the president, has flatly refused the demand of Mr Christoph Blocher, the charismatic anti-EC leader, that the country's application to join the EC itself be withdrawn, even though he admits that it is unlikely to be acted upon for several years.

The government's strategy now is unilaterally to take the steps to bring Swiss law and practices into harmony with those of the EC that it would have had to do if it joined the EEA. It hopes that neighbouring countries will recognise these moves and that Swiss people and exporters will not face discrimination in EEA countries.

But it is unlikely that the so-called Eurolex package of some 60 measures will pass intact. Car dealers, construction contractors and scores of other entrepreneurs who benefit from high levels of protection will fight it all the way.

Bern will also seek bilateral negotiations with the EC on the most pressing matters, such as air traffic and some technical trade issues. But Swiss officials are under no illusions about the difficulties they face. As representatives of a small country, they have little bargaining power with the EC. They will not even be able to complain publicly if Brussels is intransigent for fear of reinforcing anti-EC sentiment among the Swiss public.

For their part, EC officials have made clear that they are not willing to negotiate a bespoke EEA just for Switzerland.

On the political front, EEA advocates have already launched petition campaigns to oblige the government to hold another referendum in the near future. But even strongly pro-EC political leaders agree that it would be insulting to the people to stage another referendum quickly, and the result would probably be counter-productive, not just in Switzerland, but also in Europe.

'We think that Europe cannot afford any more negative votes,' says Mr Bruno Spinner, head of the government's integration bureau.

Cynics say that the next vote should not be held until unemployment, already at post-war record levels, has become much worse and several Swiss companies have announced plans to shift production to EC countries.

But all this is hypothetical. Swiss financial markets are in fine shape and economists are beginning to talk about an economic recovery late in the year.

Mr Kurt Schiltknecht, president of BZ Trust and a former central bank economist, shrugs off exporters' worries. He points to the remarkable recovery of the watch industry in the past decade and concludes, 'Swiss manufacturers always perform well under pressure.'

If he turns out to be right, the need and the desire to move closer to the EC could recede indefinitely.

Switzerland, West Europe P96 Administration of Economic Programs GOVT International affairs P96 The Financial Times London Page 2 961
Socialists to debate Craxi's future Publication 930210FT Processed by FT 930210 By ROBERT GRAHAM ROME

MR Bettino Craxi, secretary general of Italy's Socialist party, is under mounting pressure to step down from the leadership and to support the election of a successor at tomorrow's extraordinary assembly of the party.

Despite receiving four separate notices from Milan magistrates that he is under investigation for alleged corruption and illicit funding of the party, Mr Craxi has insisted on remaining the Socialist secretary general. He has consistently denied any wrong-doing and accused the magistrates of carrying out a personalised campaign of denigration.

The special party meeting has been called to consider Mr Craxi's resignation and elect a new secretary general. But the party has postponed such a decision on several occasions.

However, his position has been undermined by the arrest of Mr Silvano Larini, an architect and friend since university days. Mr Larini, who has been on the run outside Italy for eight months, handed himself over to Milan magistrates at the Franco-Italian border post of Ventimiglia on Sunday.

Mr Larini has been cited 21 times in documents seeking waiver of parliamentary immunity for Mr Craxi, and is now said to be co-operating with magistrates over allegations that he was a major collector of funds for the Socialists in Milan public works contracts.

Mr Craxi has sought to ensure he holds sway over any potential successor. He has blocked any suggestion that Mr Claudio Martelli, the justice minister, should lead the party.

Italy, EC P8651 Political Organizations PEOP Personnel News P8651 The Financial Times London Page 2 263
G7 finance ministers to meet in London Publication 930210FT Processed by FT 930210 By PETER NORMAN, Economics Editor

FINANCE MINISTERS from the Group of Seven leading industrial countries will meet in London on February 27 at the invitation of Mr Norman Lamont, the chancellor of the exchequer.

The UK Treasury announced yesterday that the meeting, which will also be attended by G7 central bank governors, would be informal, 'with no expectation of decisions or initiatives', and that the ministers did not intend to issue a communique afterwards.

The ministers and governors are expected to discuss how best to boost activity in the world economy when recovery in the UK is uncertain and the economic outlook for Japan and continental Europe bleak.

While the G7 has reason to be pleased about signs of recovery in the US, America's trading partners may express concern about signs of protectionism in Washington since the Clinton administration took office. Russia's problems may also be raised.

Mr Lloyd Bentsen, the US Treasury secretary, has sought a meeting with his colleagues from Japan, Germany, Britain, France, Italy and Canada before the next scheduled G7 gathering on April 29 in Washington. He has said he wants to breathe new life into the group, which recently has tended to be a forum for bickering rather than international co-operation.

The London meeting will be a first opportunity for Mr Bentsen and Mr Yoshiro Hayashi, the recently appointed Japanese finance minister, to meet the other G7 finance ministers.

It is unusual but not unprecedented for the G7 to meet without issuing a communique. The most recent occasion was in 1989.

United Kingdom, EC United States of America Germany, EC Japan, Asia France, EC Italy, EC Canada P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 297
Greek-Cypriots feel the effects of economic heat Publication 930210FT Processed by FT 930210 By KERIN HOPE NICOSIA

GREEK-CYPRIOT hoteliers are complaining that bookings have fallen sharply this year, but the island's economic planners admit a sense of relief.

Last year's record tourist season, marked by a 43 per cent jump in arrivals to just under 2m, pushed up gross domestic product by between 7.5 and 9 per cent. With tourism contributing about 20 per cent of GDP, a leaner year should take some steam out of an overheated economy.

'We're already too dependent on tourism,' says one official. 'We reached a ceiling last year. We don't have the resources - workers, water, beaches - to cope with more people.'

GDP growth this year should fall below 4 per cent, provided there is no last-minute flood of bookings. The travel industry claims the Cyprus pound, pegged to the Ecu since last summer, is too strong to be competitive in the British package holiday market, the main source of visitors to Cyprus.

The clothing industry, the other main foreign exchange earner, is also in trouble because of the strong Cyprus pound. Orders from Britain, the largest customer, are shrinking. One big Greek-Cypriot manufacturer has moved to Jordan to take advantage of cheaper labour costs.

The island's labour shortage has grown so acute that strict immigration rules have been relaxed. The workforce increased by about 5 per cent in the past year, with the arrival of more than 12,000 east European and Asian workers on short-term contracts at wages well below the Greek-Cypriot average.

Nonetheless, labour costs have been rising more quickly than the European average, as Cyprus is still committed to index-linked wage rises. With the introduction of VAT last year, annual inflation rose to 6.5 per cent, the highest level for almost a decade.

This year, inflation is projected to drop to 4.5 per cent as the central bank tightens a credit squeeze. The commercial banks have been threatened with severe penalties if the practice of letting liquidity drop below official limits is continued. But the central bank has comparatively little room for manoeuvre as the government is still unwilling to lift a 45-year-old law, a relic of British colonial days, that puts a 9 per cent ceiling on interest rates.

Demand is forecast to shrink, after a desperate rush to acquire cars and household appliances before VAT was imposed. Imports rose by almost 20 per cent last year, with the current account deficit widening to CPounds 114m (Pounds 160m), equivalent to 3.5 per cent of GDP.

This feverish prosperity is not matched in the north of the island, where the Turkish-Cypriots are heavily dependent on aid from Turkey, estimated to cover about 40 per cent of budget outlays. They have a per capita income less than a third of the Greek-Cypriot level of around Dollars 12,000.

An independent economist points out that reuniting Cyprus in an arrangement that would promote economic co-operation with the north would make room for more tourists and allow Turkish-Cypriots to join the workforce.

But, he adds, without a settlement, the prospects of attracting investment to help diversify the economy will remain limited.

Cyprus, Middle East P7011 Hotels and Motels P9611 Administration of General Economic Programs MKTS Sales ECON Gross domestic product ECON Inflation P7011 P9611 The Financial Times London Page 2 555
Brussels tries to forge steel rescue plan: Call to cut over-capacity upsets Spain but gets cautious welcome elsewhere Publication 930210FT Processed by FT 930210 By ANDREW HILL, TOM BURNS, ANDREW BAXTER and WILLIAM DAWKINS, Our Foreign and Industrial Staff

EUROPEAN Commissioners yesterday began the sensitive task of preparing a draft rescue plan for the ailing European steel industry, after getting a cautiously positive response from steelmakers to a Commission report on over-capacity.

But the report by Mr Fernand Braun, the EC's 'steel envoy,' immediately ran into trouble in Spain, where the government's long-standing attempt to restructure its loss-making, state-owned steel industry is threatened.

Mr Martin Bangemann, EC industry commissioner, and Mr Karel Van Miert, responsible for competition policy, met senior executives of the EC's largest steel manufacturers in northern Belgium on Monday night to discuss the report.

Mr Braun has concluded that steelmakers could cut capacity by up to 25.8m tonnes in crude steel and 17.9m tonnes in rolled products. '(The steelmakers) have said the Braun report is very positive and very constructive, and they confirmed, more or less, the range (of capacity cuts),' said one senior Commission official yesterday.

Both Mr Bangemann and Mr van Miert insist cuts in capacity are essential if the industry is to get Community aid for the 50,000 redundancies likely as a result of restructuring. The Commission must come up with detailed proposals for a meeting of EC industry ministers on February 25.

In Madrid, the government is shocked that Spain is called on to provide almost 50 per cent of the proposed overall cuts in rolled flat steel capacity when it produces just 6 per cent of the Community's output.

As Madrid sees it, Mr Braun's recommendations call for a total capacity cut of 3m tonnes in flat products, of which the Spanish contribution will be 1.3m tonnes.

Madrid may have only itself to blame, for just under a year ago it unilaterally forwarded a plan to Brussels that outlined a cut in its steel output from 6m tonnes a year to 4.5m tonnes. In return Madrid wanted permission to implement subsidies for a Dollars 5bn restructuring plan.

The Spanish plan ran aground in October when the EC Commission told Madrid it should either write off more capacity or trim the subsidies.

Meanwhile, steel unions, mainly based in the politically volatile Basque country, demanded more subsidies for smaller cuts. Mr Braun's report has made the government's position still more uncomfortable.

Elsewhere, leading European steel companies welcomed the Braun report but were not prepared to say individually whether they had offered any capacity cuts.

Usinor Sacilor, the French state-owned steel maker, finds the commission report 'positive,' according to a group official. 'Now we must follow it through to the end,' he said.

The French company argues that Commission policing of closures must measure actual falls in production rather than theoretical cuts in capacity. 'It is very much up to Brussels to find a means of regulation,' the official said.

British Steel said Monday's meeting with the Commission was 'useful and positive'. The Commission, it said, was 'clearly cognisant of the problems facing the industry and intends to take action to facilitate the restructuring.'

Reporting by Andrew Hill, Tom Burns, Andrew Baxter and William Dawkins

European Economic Community (EC) P331 Blast Furnace and Basic Steel Products P9611 Administration of General Economic Programs MKTS Production GOVT International affairs P331 P9611 The Financial Times London Page 2 569
Bosnia peace 'needs 25,000 UN troops' Publication 930210FT Processed by FT 930210 By ROBERT MAUTHNER NEW YORK

THE international community will have to make an exceptional effort to ensure that any peace settlement in Bosnia is effectively implemented.

That conclusion emerges from a report to the United Nations Security Council on the latest negotiations on Bosnia by Mr Boutros Boutros Ghali, the UN secretary general.

The international mediators, Mr Cyrus Vance and Lord Owen, told the Security Council their peace package was enforceable, but would require 15,000 to 25,000 UN troops. Some military experts say that is a very conservative estimate.

Admitting the many past failures of ceasefire and other agreements in the former Yugoslavia, Lord Owen implied that this was a weakness which needed further consideration in the mediators' plan. Mr Vance and Lord Owen hope that problem will be addressed by the US administration in its own proposals for a peace settlement, due to be announced shortly. Specifically, they want the US to make a substantial contribution to the peacekeeping forces.

The US is likely to propose modifications to the map dividing Bosnia into semi-autonomous provinces to give the Moslems more territory, a more robust relief efforts to overcome the Serb militias' harassment of aid convoys, and tighter sanctions against Serbia. President Bill Clinton is also reported to be considering the appointment of a special US envoy to work in co-operation with the mediators.

The mediators, according to Mr Boutros Ghali's report, have told the warring parties that an enforceable 'no-fly' ban would be required after a ceasefire to give teeth to the control of heavy weapons. Aircraft used for enforcing the air exclusion zone might also be empowered to strike at any heavy weapons not declared to the UN Protection Force.

The mediators also urged the Security Council to establish awar crimes court to try people accused of grave breaches of international law in the former Yugoslavia.

One striking conclusion of the report is that it blames the Bosnian Moslem government, represented in New York by Mr Haris Silajdzic, the foreign minister, for refusing to discuss the proposed map during the talks in New York. This, along with the demand by Mr Radovan Karadzic, the Bosnian Serb leader, for referendums on the proposals in the contested areas, were the main obstacles to an agreement.

It remains to be seen whether the intense pressure on Mr Karadzic during the past 48 hours by Russia and Serbia to accept the map will bear fruit before the US proposals are announced. So far, the argument that it is in his interest to do a deal in advance of the more pro-Moslem stance expected to be adopted by Washington, has fallen on deaf ears.

United Nations Security Council Bosnia-Hercegovina, East Europe P9711 National Security GOVT International affairs P9711 The Financial Times London Page 2 473
Brussels puts the brakes on motorbikes Publication 930210FT Processed by FT 930210 By JOHN GRIFFITHS

A EUROPEAN Commission draft directive, which effectively dictates to motorcycle manufacturers the detailed design of their engines, and even the type and quality of metals they may use for some components, is causing an outcry throughout the industry and among user groups.

The directive, so detailed that it specifies such engineering parameters as gasket thicknesses, inlet port design and ignition system operation, is intended to prevent owners 'tuning' their machines to obtain more power.

But it would have an impact, with as yet unforeseen effects, on the design, development, marketing and other commercial fortunes of all manufacturers seeking to sell their machines in the EC.

Motorcycle industry and user groups, now lobbying fiercely against its adoption, insist that Brussels bureaucrats are exceeding their competence.

Mr Graham Sanderson, spokesman for the British Motorcyclists' Federation, said: 'It graphically illustrates why so many European citizens are concerned about the Maastricht treaty and the further ceding of power to the Commission.'

The required technical specifications for engine manufacture make up an addendum of six closely-typed pages.

Mr Sanderson's remarks came as the European parliament was resuming the first reading of another motorcycle-related bill, under which the Commission is seeking to adopt a directive restricting motorcycles to no more than 100 brake horsepower.

If adopted, this would prohibit the sale in EC markets of the more powerful machines produced by some European manufacturers, as well as the big Japanese makers, Honda, Yamaha, Suzuki and Kawasaki who dominate the world's motor cycle markets.

In the case of Triumph, the reborn UK motor cycle manufacturer currently expecting to produce nearly 7,000 motorcycles this year, five of its eight models would become illegal within the EC.

The Commission is pushing for the adoption of both directives on the grounds that they would improve the generally poor safety record of motorcycles and mopeds.

The 100 brake horsepower directive has already hit opposition in the European parliament, whose economic and industry policy committee has already rejected it once. The 'anti-tampering' directive has yet to reach the parliament but is expected to do so within the next few weeks.

European Economic Community (EC) P3751 Motorcycles, Bicycles, and Parts TECH Products GOVT Draft regulations TECH Standards P3751 The Financial Times London Page 2 385
Socialists to debate Craxi's future Publication 930210FT Processed by FT 930210 By ROBERT GRAHAM ROME

MR Bettino Craxi, secretary general of Italy's Socialist party, is under mounting pressure to step down from the leadership and to support the election of a successor at tomorrow's extraordinary assembly of the party.

Despite receiving four separate notices from Milan magistrates that he is under investigation for alleged corruption and illicit funding of the party, Mr Craxi has insisted on remaining the Socialist secretary general. He has consistently denied any wrong-doing and accused the magistrates of carrying out a personalised campaign of denigration.

The special party meeting has been called to consider Mr Craxi's resignation and elect a new secretary general. But the party has already postponed such a decision on several occasions.

However his position has been undermined by the arrest of Mr Silvano Larini, an architect and friend since university days. Mr Larini, who has been on the run outside Italy for eight months, handed himself over to Milan magistrates at the Franco-Italian border post of Ventimiglia on Sunday.

Mr Larini has been cited 21 times in documents seeking waiver of parliamentary immunity for Mr Craxi, and is now said to be co-operating with magistrates over allegations that he was a major collector of funds for the Socialists in Milan public works contracts.

Behind the scenes Mr Craxi has been trying to ensure he holds sway over any potential successor. He has blocked any suggestion that Mr Claudio Martelli, the justice minister, should lead the party or hold high office.

The party faces the difficult challenge of finding a new executive with sufficient credibility to overcome the serious damage inflicted by allegations of its involvement in kick-backs on contracts. The Socialists' only solace is that magistrates are widening their investigations towards Rome, exposing other parties.

Yesterday, Mr Vittorio Sbardella, a powerful local Christian Democrat politician in Rome, received notice that he was under investigation for alleged corruption. He is the most senior Rome politician to be linked to instances of alleged corruption.

In addition, confessions made to Milan magistrates by a former member of the board of Enel, the state electricity authority, have implicated two Republican MPs in alleged illicit party funding - Mr Antonio Del Pennino and Mr Italico Santori. This is embarrassing for the small Republican party and its leader, Mr Giorgio La Malfa, who has maintained it was outside the corruption net.

In another development, Mr Aldo Belleli, owner of a prominent contracting company with overseas interests in oil, was yesterday placed under house arrest following a charge of alleged corruption.

Italy, EC P8651 Political Organizations PEOP Personnel News P8651 The Financial Times London Page 2 446
Austrian banker attacks UK devaluation Publication 930210FT Processed by FT 930210 By DAVID GARDNER STRASBOURG

EUROPE'S single market risks collapse unless the EC holds steady to its goal of economic and monetary union (Emu), according to Dr Maria Schaumayer, governor of the central bank of Austria, which hopes to be inside the EC by 1995 after starting accession negotiations last week.

She warned yesterday that European integration 'would be seriously endangered' if currency speculators got the better of the European Monetary System's embattled exchange rate mechanism.

It is assumed Austria would join any 'hard core' monetary union based on Germany, France and Benelux countries, if such a move went ahead.

Dr Schaumayer, addressing the currency conference of the European Parliamentarians and Industrialists Council in Strasbourg, also criticised the policy of competitive devaluations being followed by some EC member states - led by the UK - describing any consequent benefits for export industries as 'a flash in the pan'. By contrast, she praised the Franco-German co-operation in defence of the French franc.

The European parliament's monetary affairs committee is also underlining the threat to the single market, the ERM and Emu from competitive devaluations, in a report it will present next month.

The report, by Dutch socialist Euro-MP Alman Metten, calls for a big EC growth package, and urges member states to agree with the US and Japan 'target zones for currency parities of the dollar, yen, Ecu or D-mark.'

European Economic Community (EC) Austria, West Europe P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9721 P9311 The Financial Times London Page 2 266
DTI faces Expo 92 criticism Publication 930210FT Processed by FT 930210 By JIMMY BURNS

THE Trade and Industry Department has come under heavy criticism from British companies who have run up debts because of what they allege is mismanagement of the British pavilion at Expo 92 last year in Seville, Spain.

More than 50 companies supplied an assortment of products to Joanna Bickerton Associates, which has gone into liquidation owing nearly Pounds 500,000 after being contracted by the DTI to run the pavilion shop.

The Expo was billed by the DTI as the world's largest fair and an opportunity to display the best of Britain's commercial and cultural achievements.

But four months after the end of Expo, the DTI is embroiled in a controversy involving at least three possible lawsuits, while the future of the pavilion is in doubt.

The total cost of construction and appearing at Expo was Pounds 25m, about Pounds 5m from commercial sponsorship, the rest from the government, mainly the DTI.

Expo attack, Page 5

Joanna Bickerton Associates Spain, EC United Kingdom, EC P7999 Amusement and Recreation, NEC P9611 Administration of General Economic Programs GOVT Government News P7999 P9611 The Financial Times London Page 1 199
World News in Brief: Ivan the Terrible's treasures found Publication 930210FT Processed by FT 930210

Russian archaeologists believe they have found the library and treasures of 16th-century Tsar Ivan the Terrible (left) in a labyrinth of tunnels under the site of his palace at Alexandrov, north of Moscow. Ivan laid the foundation of the modern Russian state in a series of ruthless conquests.

Russia, East Europe P8412 Museums and Art Galleries RES Facilities P8412 The Financial Times London Page 1 79
World News in Brief: Bomb attack soldier dies Publication 930210FT Processed by FT 930210

One of seven soldiers injured in a triple IRA bomb attack on an army patrol in Armagh died in hospital. He was Lance Corporal Michael Joseph Beswick, 21, a single man from Heywood, Lancashire.

United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 66
World News in Brief: Airbase for sale Publication 930210FT Processed by FT 930210

Greenham Common airbase near Newbury, Berkshire, focus of protests in the 1980s against deployment of US nuclear cruise missiles, is to be sold, armed forces minister Archie Hamilton said.

United Kingdom, EC P9711 National Security RES Facilities P9711 The Financial Times London Page 1 56
World News in Brief: Queen to fight The Sun Publication 930210FT Processed by FT 930210

The Queen has decided to press ahead with legal action against The Sun for breach of copyright, Buckingham Palace said, following the newspaper's reply to a letter from her solicitor concerning the early publication of her Christmas message.

United Kingdom, EC P2711 Newspapers P91 Executive, Legislative and General Government GOVT Legal issues P2711 P91 The Financial Times London Page 1 74
Sterling falls sharply on inflation fears Publication 930210FT Processed by FT 930210 By PETER MARSH and JAMES BLITZ

STERLING FELL sharply yesterday on signs that UK inflationary pressures may be strengthening and on growing international disenchantment about prospects for recovery in Britain.

Investors from the US, the Middle East and Far East sold pounds for other currencies, pushing sterling to a record low on its trade-weighted index and close to its lowest ever level against the D-Mark.

Share prices on the London stock exchange dropped on speculation that the falling pound might limit the government's room to cut interest rates.

A factor swaying sentiment was the unexpectedly strong inflationary pressures last month arising from higher import costs, triggered by the pound's 15 per cent devaluation since it left the European exchange rate mechanism in September.

The cost of raw materials and fuels purchased by manufacturers rose by a seasonally adjusted 1.5 per cent between December and January. Prices of these items at the factory gate were 7.2 per cent higher than a year previously, the highest year-on-year figure since May 1989.

Any sign that inflation is strengthening could dissuade the government from a further cut in base rates from 6 per cent, in spite of calls from many City economists and industrialists for an easing in borrowing costs to help demand.

Mr Norman Lamont, the chancellor, is expected to come under pressure from the Treasury's panel of outside economic advisers for an early cut in base rates, possibly around the time of the Budget on March 16.

The seven-strong Treasury panel met for its first policy discussions yesterday. It finished after five hours without issuing a formal statement. The panel is due to report next week to Mr Lamont, who was warned last night at a meeting of backbench Tory MPs not to introduce measures in the Budget which could threaten recovery - although some Conservatives did back increases in VAT or other taxes.

Mr Eddie George, deputy governor of the Bank of England who takes over in July as governor, is expected in a speech in Frankfurt tomorrow to sound a warning note about inflation in his first policy address since news of his promotion last month.

After the heavy selling of sterling, the currency hit a low of 76.2 on its trade-weighted index, which measures its value against a basket of currencies. It closed slightly higher at 76.6, from 77.2 on Monday night.

Against the D-Mark, the pound came within a tenth of pfennig of its historic low of DM2.3480 reached last Wednesday amid an earlier bout of selling. Profit-taking saw sterling climb back slightly, to a London close of DM2.3625 and for an overall loss on the day of 2 pfennigs, after a 3-pfennig drop on Monday. The pound also lost further ground against the dollar, closing down nearly 1 cent at Dollars 1.4305.

In New York, sterling closed at DM2.3655 and Dollars 1.4305.

The heavy selling on the London stock market reflected the dropping pound, together with worries about a possible spate of rights issues. The FT-SE 100 index of leading shares closed 38.7 lower at 2,831.3. Investor sentiment was depressed by a pessimistic tone to early Wall Street trading - the Dow Jones Industrial Average eventually closing 22.96 down at 3,414.58.

Mr George Magnus, international economist at SG Warburg Securities, the London investment house, said: 'Sterling's torrid performance is a reminder that there is as yet no confidence in the financial community of a cyclical recovery in the UK.'

Foreign exchange fears, Page 6

From riches to rags, Page 17

Lex, Page 18

Sapin seeks close ties, Page 18

International capital markets, Page 27

London stocks, Page 38

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON Inflation ECON Balance of payments P9311 The Financial Times London Page 1 634
Storehouse chief quits to join US fashion retailer Publication 930210FT Processed by FT 930210 By NEIL BUCKLEY

MR DAVID DWORKIN, chief executive of Storehouse, is leaving the retailing group to become chief executive of Carter Hawley Hale Stores, one of the largest fashion retailers in the US.

Storehouse, which includes the BhS and Mothercare chains, had been expected to make an announcement today about the future of Mr Dworkin - who is widely credited with having turned the group around - after its shares fell 11p to 194p on rumours he was about to resign.

But Carter Hawley Hale announced last night that Mr Dworkin was to take over from Mr Philip Hawley as president and chief executive officer from April 1.

Storehouse refused to comment on the announcement. Mr Samuel Zell, general partner of Zell/Chilmark Fund, CHH's principal owner, said Mr Dworkin's appointment was a 'tremendously significant and exciting development for CHH. David Dworkin is a proven star in the retailing industry'.

Mr Dworkin, a 49-year-old American born in Cleveland, Ohio, was recruited to head the BhS group in November 1989 from Bonwit Teller, the US department stores group, and became Storehouse chief executive in July 1992.

Analysts said the challenge at Carter Hawley - a successful retailer in the 1980s which had problems controlling its debt and emerged last October from 18 months in Chapter 11 bankruptcy protection - would be just the sort Mr Dworkin would relish, having laid the foundations for recovery at Storehouse.

Mr Dworkin has reduced the size of the business, selling Habitat and Richards, and focusing on BhS and Mothercare. He has also introduced management reforms which have led to a consistent increase in sales and margins at BhS.

Storehouse made a pre-tax profit of Pounds 3.1m for the half-year to October, against a Pounds 13.9m loss in the previous first half.

There is no obvious successor to Mr Dworkin at Storehouse and the group is expected to look outside for a replacement.

Storehouse Carter Hawley Hale Stores Inc United States of America United Kingdom, EC P6719 Holding Companies, NEC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5311 Department Stores PEOP Appointments Dworkin, D President and Chief Executive Carter Hawley Hale Stores Inc P6719 P5719 P5611 P5621 P5311 The Financial Times London Page 1 389
Stock & Currency Markets Publication 930210FT Processed by FT 930210

------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------ FT-SE 100: 2,831.3 (-38.7) Yield 4.32 FT-SE Eurotrack 100 1,124.14 (-6.98) FT-A All-Share 1,381.38 (-1.2%) FT-A World Index 141.71 (-0.2%) Nikkei 17,022.27 (-259.46) New York: Dow Jones Ind Ave 3,414.58 (-22.96) S&P Composite 445.33 (-2.52) ------------------------------------------------------ US CLOSING RATES ------------------------------------------------------ Federal Funds: 2 7/8% (2 15/16%) 3-mo Treas Bills: Yld 2.983% (2.971%) Long Bond 105 3/16 (105 3/16) Yield 7.193% (7.193%) ------------------------------------------------------ LONDON MONEY ------------------------------------------------------ 3-mo Interbank 6 1/4% (6 3/16%) Liffe long gilt future: Mar 101 1/16 (Mar 101 5/16) ------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------ Brent 15-day (Mar) Dollars 18.25 (18.425)

------------------------------------------------------ Gold ------------------------------------------------------ New York Comex (Feb) Dollars 329.4 (328.9) London Dollars 328.15 (Same) ------------------------------------------------------ STERLING ------------------------------------------------------ New York: Dollars 1.4305 (1.439) London: Dollars 1.4305 (1.4395) DM 2.3625 (2.3825) FFr 7.9975 (8.0575) SFr 2.1875 (2.205) Y 173.5 (178.5) Pounds Index 76.6 (77.2) ------------------------------------------------------ DOLLAR ------------------------------------------------------

New York: DM 1.65375 (1.657) FFr 5.6012 (5.606) SFr 1.532 (1.536) Y 121.175 (123.8) London: DM 1.652 (1.6545) FFr 5.59 (5.5975) SFr 1.529 (1.532) Y 121.35 (123.95) Dollars Index 67.0 (67.4) Tokyo opening Y 121.28 ------------------------------------------------------

United States of America United Kingdom, EC Japan, Asia P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices MKTS Market data P1311 P3339 P6231 The Financial Times London Page 1 231
Ofgas chief to step down Publication 930210FT Processed by FT 930210

Sir James McKinnon, head of the gas industry watchdog, who accused British Gas yesterday of 'wriggling and squirming' over a price formula package, is to step down a year early. Sir James said he would leave once the report on British Gas by the Monopolies and Mergers Commission is published.

Report, Page 18; Complaint figures disputed, Page 6

United Kingdom, EC P9631 Regulation, Administration of Utilities PEOP Appointments Sir James McKinnon, head Office of Gas Supply (UK) P9631 The Financial Times London Page 1 95
SFO loses test case on right to silence Publication 930210FT Processed by FT 930210 By JOHN MASON, Law Courts Correspondent

THE POWERS of the Serious Fraud Office to compel suspects to answer questions were undermined yesterday after Mr Larry Trachtenberg, one of four men charged over the Maxwell scandal, won the first round of a test case against the SFO.

A charge brought by the SFO that Mr Trachtenberg had broken the law by refusing to answer questions during a 'Section Two' interview - during which people lose their right to silence - was dismissed yesterday by Clerkenwell Magistrates' Court.

The stipendiary magistrate Mr Christopher Bourke, ruled that because he had already been charged, the former adviser to the late Mr Robert Maxwell had, as the law provides, a 'reasonable excuse' for refusing to answer the SFO's questions.

The verdict could significantly hamper a number of the 60 investigations currently being carried out by the SFO. Anyone charged by the SFO could use the same argument as Mr Trachtenberg to avoid answering the SFO's questions under Section Two.

While the SFO is not completely bound by yesterday's decision, and any future cases will have to be decided on their individual merits, the ruling leaves the SFO with far less room for manoeuvre in trying to make defendants answer questions once charges have been brought against them.

The SFO said only that it was considering the implications of the court ruling.

However, it is thought certain that it will appeal against the decision and that the issue will have to go to the House of Lords for a final resolution.

During the hearing, Mr Trachtenberg, who was arrested in June last year, argued that he had a reasonable excuse not to answer questions under compulsion since he had already been charged with theft and fraud. Agreeing with Mr Trachtenberg, the magistrate said: 'The accused, knowing he was charged but not what grounds, was demanded on pain of imprisonment to give up his whole case to the prosecutor.

'The Crown, thus provided, and employing the accused himself to their advantage, would furnish their case and proceed to fashion it against him. They thus abandon their burden of proof.'

Mr Trachtenberg, who had faced a prison sentence of up to six months, made no comment after the hearing. His solicitor, Mr Rod Fletcher of Russell Jones Walker, said his client's actions in refusing to answer the SFO's questions had been 'fully vindicated'.

United Kingdom, EC P9221 Police Protection GOVT Legal issues P9221 The Financial Times London Page 1 424
International Company News: Disposals bring Nestle close to EC compliance Publication 930210FT Processed by FT 930210 By GUY DE JONQUIERES and IAN RODGER LONDON, ZURICH

NESTLE, the Swiss food group, has found a buyer for most of the mineral water assets which EC competition authorities required it to dispose of after it acquired Groupe Perrier of France last year.

However, the proposed FFr750m (Dollars 134m) sale - to Societe d'Investissement d'Aquitaine, holding company for the French Castel beverages company - does not fulfil all the conditions which Brussels has insisted on before it approves the Perrier take-over.

The Commission requires Nestle to sell to a single buyer mineral water springs with a total annual capacity of 3bn litres and several specified brands, including Vichy, Thonon, Pierval and Sr Yorre. But the deal with SIA covers capacity of less than 3bn litres and excludes the Pierval brand.

Nestle said yesterday that SIA was not interested in Pierval, and that it doubted whether any other buyer could be found for it. The Swiss company was putting the proposed sale to Brussels, in the hope that it would nonetheless be approved.

The Commission said that it had not yet received details of the proposed sale from Nestle. However, a spokesman said that Nestles agreement to meet the conditions specified last year amounted to a commitment.

Until Nestle disposes of the Perrier assets to a new owner approved by Brussels, the Swiss company may not complete the sale of Volvic, another large Perrier brand, to BSN, France's largest food manufacturer.

The Swiss company is counting on the proceeds of the Volvic deal to cover part of the FFr13.4bn it paid to acquire Perrier after a hard-fought takeover battle in which it was supported by Mr Antoine Riboud, BSN chairman.

Nestle had apparently hoped that the Volvic sale would defuse objections from EC competition authorities. However, Brussels judged that Nestle and BSN would together enjoy a duopoly of the French mineral water market and ordered disposal of some of Perrier's assets to reduce the Swiss company's dominance.

The assets which SIA has agreed to buy had sales of more than FFr620m in 1991. The Castel group has annual revenues of FFr5.6bn.

As part of its agreement with SIA, Nestle will buy out minority shareholders in Compagnie Fermiere de Vichy, developer of a spa and hotel project partly financed by income from Vichy mineral water sales.

Nestle Societe d'Investissement d'Aquitaine France, EC P6719 Holding Companies, NEC P2086 Bottled and Canned Soft Drinks P5149 Groceries and Related Products, NEC P9611 Administration of General Economic Programs COMP Disposals P6719 P2086 P5149 P9611 The Financial Times London Page 24 440
International Company News: Highveld cuts its dividend Publication 930210FT Processed by FT 930210 By PHILIP GAWITH

HIGHVELD Steel and Vanadium, the South African steel producerin the Anglo American group, reported steeply lower profits for 1992 and is to cut its dividend.

Mr Leslie Boyd, chairman, said demand for all products had deteriorated. He did not make a specific profit forecast for 1993 but said he expected the bottom of the cycle would be reached this year.

While 1992 turnover rose by 8 per cent to R1.49bn (Dollars 477m), pre-tax income fell by 32 per cent to R74.4m.

A sharp fall in the tax bill to R3.6m, from R13.6m, limited the decline in attributable income to R70.8m from R95.6m.

An increase in the number of shares in issue, however, saw earnings per share fall to 80.1 cents from 130 cents.

Mr Boyd said the group had faced poor steel export conditions owing to oversupply.

Vanadium consumption - Highveld is the world's largest producer - remained weak, owing to low consumption in the steel industry, and Mr Boyd noted that the Vantra division operated at only 25 per cent of capacity.

Highveld Steel and Vanadium South Africa, Africa P1094 Uranium-Radium-Vanadium Ores P331 Blast Furnace and Basic Steel Products FIN Annual report P1094 P331 The Financial Times London Page 24 217
International Company News: Schering reports fall in profits to DM262m Publication 930210FT Processed by FT 930210 By DAVID WALLER FRANKFURT

SCHERING, the Berlin-based pharmaceuticals group which is undergoing a strategic re-orientation, yesterday reported a fall in pre-tax profits to DM262m (Dollars 158m) for 1992, down from DM274m a year earlier. Turnover fell 2 per cent to DM6.27bn from DM6.36bn.

The group said profits had been hit by the downturn in German agrichemical business combined with the reduction in state subsidies for Berlin. This had been offset by the profit contribution from the sale of the group's industrial chemicals, natural substances and galvanising technology businesses during 1992.

Schering sold the first two in November for DM660m to Witco of the US. Last month, it transferred its electro-plating business to Elf Atochem of France. The disposals accord with its strategy of concentrating on pharmaceuticals and agrichemicals and abandoning areas where it does not have market leadership.

Schering said its pharmaceutical sales rose 6 per cent to DM3.91bn despite adverse exchange rate effects. Sales in the agrochemicals division dropped 16 per cent to DM1.27bn. There was no comment on the outlook for the 1992 dividend.

Schering Germany, EC P2822 Synthetic Rubber P2824 Organic Fibers, Noncellulosic P2833 Medicinals and Botanicals P2834 Pharmaceutical Preparations P2879 Agricultural Chemicals, NEC COMP Company News FIN Annual report P2822 P2824 P2833 P2834 P2879 The Financial Times London Page 24 230
International Company News: BNP eyes purchase of Spanish bank Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN and PETER BRUCE PARIS, MADRID

BANQUE Nationale de Paris, the largest of France's state-controlled banks, is considering plans to expand its Spanish interests by buying Banco de Fomento, a medium-sized retail bank controlled by Banco Central Hispanoamericano.

BNP yesterday confirmed that it had been in contact with BCH and had discussed the possibility of buying Banco de Fomento.

However, it stressed that it was only one of a number of companies to have indicated an interest and that it had not yet made a formal offer for the company.

The French group already has a modest presence in Spanish retail banking through the network of 73 branches it has opened since the early 1980s. BNP's Spanish activities also include interests in investment banking, property finance and leasing.

BCH, Spain's biggest bank in terms of assets, was formed by the merger of Banco Central and Banco Hispanoamericano in 1991. It wants to dispose of associated national and regional banking networks, which duplicate its own spread of branches.

The bank also needs to improve 1993 profits after reporting a 23 per cent fall on pre-tax profits for last year, although that was due in part to new Bank of Spain accounting procedures.

Fomento, which once held the former Banco Central's vast industrial portfolio, has attracted considerable interest from other European banks - notably Deutsche Bank, whose Spanish operation is concentrated mainly in Catalonia - because it is one of the few retail banks available with a national, as opposed to a regional, network.

It runs 176 offices nationwide and has assets of Pta305bn (Dollars 2.6bn). BCH owns 76 per cent of Fomento, which reported net profits of Pta1.87bn for last year after Pta2.39bn in 1991, a fall also explained by new accounting rules.

BNP, a possible candidate for future privatisation, is one of Europe's largest banks.

The bank came under pressure last year due to the competitive state of the French banking market and the Paris property crisis, with first-half net profits falling by 13.4 per cent to FFr1.33bn (Dollars 237.5m) on net banking income of FFr19.48bn.

So far, BNP has adopted a more cautious attitude to international expansion than other French banks, notably Credit Lyonnais, another large state-controlled bank. But it has recently shown signs of a more expansive strategy, such as last year's partnership agreement with Dresdner Bank of Germany.

Banque Nationale de Paris Banco de Fomento Spain, EC P6022 State Commercial Banks COMP Acquisition P6022 The Financial Times London Page 24 430
International Company News: Investment plan approved Publication 930210FT Processed by FT 930210 By EMIKO TERAZONO TOKYO

JAPAN'S ministry of finance yesterday approved brokers' plans to launch a new cumulative stock investment scheme for retail investors next month.

Nomura, Daiwa, Nikko, Yamaichi Securities and three second-tier brokers will offer a scheme that allows individuals to invest a minimum Y10,000 (Dollars 80) in a specific stock.

Currently, stocks can only be bought in units of 100 to 1,000 shares, and most retail clients use investment trust funds. Under the new scheme, investors will pay brokers between one and three instalments a month to invest in one issue. The brokers will pool these funds to buy specific stocks, paying the dividends according to the investors' amounts of cumulative investment.

Nomura Securities Daiwa Securities Nikko Securities Yamaichi Securities Japan, Asia P6211 Security Brokers and Dealers P9651 Regulation of Miscellaneous Commercial Sectors TECH Services P6211 P9651 The Financial Times London Page 24 157
International Company News: JCI to hold payout in spite of fall in profits Publication 930210FT Processed by FT 930210 By PHILIP GAWITH JOHANNESBURG

JOHANNESBURG Consolidated Investment, the South African mining house, yesterday reported lower half-year profits but, thanks to solid progress by the group's industrial investments, the outturn was better than many analysts had feared.

Attributable earnings for the six months ended December fell by 6 per cent to R155.6m (Dollars 49.8m) with income from investments accounting for R136.3m, against R144.7m last time. The contribution from operating subsidiaries fell to R4.8m from R16.8m.

Equity-accounted earnings fell by 7 per cent to R176.5m, or to 119 cents a share from 129 cents. However, the dividend is being maintained at 42 cents a share.

Mr Pat Retief, chairman, said trading had been very difficult with all the commodity markets weakening. Although Mr Retief felt the group had performed reasonably well, he cautioned that earnings during the current half were likely to stay under pressure. Full-year results would be 'significantly lower'.

Mr Retief said the 50 per cent decline in profit from platinum - the JCI group is the largest producer - had had a 'major adverse impact' on results. There had also been a 'substantial' decline in income from coal interests, while ferrochrome producer CMI made large losses.

The industrial interests had again contributed more to group earnings than mining. JCI's main interests are in South African Breweries, the food group Premier, newspaper interests and the Toyota motor group.

Mr Retief said the purchase of a 10 per cent stake in Johnson Matthey, the precious metals group, would not have a significant effect on JCI's balance sheet and would not dilute earnings.

Johannesburg Consolidated Investment South Africa, Africa P10 Metal Mining P6719 Holding Companies, NEC FIN Interim results P10 P6719 The Financial Times London Page 24 304
International Company News: IBM unveils machines to bolster mainframe market Publication 930210FT Processed by FT 930210 By ALAN CANE

IBM, the US computer maker, has launched a range of products designed to persuade customers that mainframe computers will remain an important feature of corporate data processing. This is the company's first significant announcement since Mr John Akers said he would step down as chief executive.

The statement, packed with technical detail, would be of interest chiefly to data processing specialists were it not for IBM's financial difficulties and the central role mainframe computers have played in the company's history.

It unveiled 18 new machines, some air cooled, some water cooled, in its flagship Enterprise Systems range. One model, comprising eight processors coupled together is said to be the world's most powerful general purpose computer. No prices have been announced; IBM strikes individual deals with customers.

IBM lost money in 1991 and 1992 in a reversal of its earlier easy mastery of the computer business. Its Dollars 4.9bn loss in 1992 was the largest in US corporate history.

Its financial difficulties have been attributed largely to its fixation with mainframes. They are large, expensive machines which command high gross profit margins but which are increasingly unpopular with customers.

They favour smaller, less expensive computers and desk top systems linked together in networks, a trend called client-server computing.

IBM's move seems designed to convince doubtful buyers that mainframes have a legitimate role both in client-server designs and in open systems.

Mr Nicholas Donofrio, general manager of the company's Enterprise Systems division said: 'People think we are just in the mainframe business. In fact we are in the large problem solving business. Compared to the traditional mainframe market, this is a much broader opportunity. It is a Dollars 150bn market which will grow at about 7 per cent over the next five years.' However, he added that IBM's traditional opportunities would probably shrink over the next four years.

IBM's mainframe revenues are reckoned to have declined by about 15 per cent, to Dollars 9.3bn From Dollars 10.9bn last year.

However, computer experts said that for many data processing applications there was no substitute for the raw power and flexibility of a mainframe. These include, for example, airline reservation systems, where transactions involving thousands of individual requests have to be processed simultaneously.

Among yesterday's announcement was a batch of software products which would make it easier for mainframes to act as system manager in a client-server network.

There was an open systems version of its operating system MVS - the crucial software which manages the working of the computer and determines which applications it can handle.

Within hours of the launch in Europe yesterday, Siemens Nixdorf of Germany announced its own eight processor mainframes, also using an open operating environment.

International Business Machines Corp United States of America P357 Computer and Office Equipment P7372 Prepackaged Software COMP Company News TECH Products P357 P7372 The Financial Times London Page 23 495
International Company News: Avesta Sheffield reports on changes Publication 930210FT Processed by FT 930210 By ANDREW BAXTER

AVESTA SHEFFIELD, the Anglo-Swedish company which is one of Europe's biggest stainless steel producers, has detailed the first effects of its post-merger rationalisation and hinted of more to come.

The company was formed in November from a merger between Avesta of Sweden and British Steel's stainless operations. Avesta shareholders have a 60 per cent stake and British Steel owns the remainder.

Stockholm-based Avesta Sheffield said changes were already under way. Employment is being cut from about 9,000 at the time of the merger to 8,750, including 50 jobs in distribution, 70 in plate production, and 60 on the precision strip side in Sweden.

In line with the job cuts, a wide-plate finishing facility at Sheffield has been closed, and in precision strip a detailed examination is being made of possible rationalisation at Sheffield.

Mr Per Molin, chief executive, said: 'It is already clear we will benefit from the synergy effects we anticipated. In some cases the financial affects are greater than we had originally envisaged.'

In spite of strong market volumes in Europe, the company is suspending melting at its Tinsley Park site in Sheffield for the week beginning February 15. Similar melting cuts are being introduced in Sweden, aimed at reducing stocks and supporting a recent upward movement in prices.

Avesta Sheffield United Kingdom, EC Sweden, West Europe P33 Primary Metal Industries COMP Company News COMP Merger PEOP Labour P33 The Financial Times London Page 23 254
International Company News: Ericsson buoyed by strong quarter Publication 930210FT Processed by FT 930210 By CHRISTOPHER BROWN-HUMES STOCKHOLM

SHARES in Ericsson, the Swedish telecommunications group, rose 9 per cent yesterday as it benefited from a better-than-expected 1992 result, a bright forecast for 1993 and news of a healthy order intake.

The group's profit for the year fell to SKr1.30bn (Dollars 180m) from SKr1.60bn in 1991, but this disguised an exceptionally strong fourth-quarter performance when profits rose to SKr1.18bn from SKr97m.

It disclosed a 19 per cent increase in orders to SKr55.4bn from SKr44.7bn and was distinctly upbeat on prospects.

Ericsson held its 1992 dividend at SKr3.50, as earnings per share dipped to SKr3.18 from SKr3.69. Sales for 1992 rose 3 per cent to SKr47.0bn.

Many analysts believe the fourth-quarter results mark the beginning of a strong recovery.

The driving force behind the group's performance has been its strong order growth, as bookings have risen for five consecutive quarters. The strongest performer has been mobile telephone systems, where order bookings rose 56 per cent last year. Confirming the trend, the group yesterday announced a ADollars 200m (USDollars 135.1m) contract from Arena GSM to supply telecommunications equipment for Australia's third cellular telephone network.

The company indicated that it was well placed to win new orders from China with a possible value of up to SKr7.4bn.

Procordia, the Swedish food and pharmaceuticals group, said yesterday it had signed a preliminary agreement to sell its Finnish daughter company, Wallac, to EG&G, the big US technology group.

Procordia said the disposal reflected its decision to concentrate on health care and branded consumer goods.

Wallac manufactures analytical and immunodiagnostic systems.

World stock markets, Page 35

LM Ericsson Procordia Sweden, West Europe Finland, West Europe P2086 Bottled and Canned Soft Drinks P2099 Food Preparations, NEC P2131 Chewing and Smoking Tobacco P2834 Pharmaceutical Preparations P7011 Hotels and Motels P3446 Architectural Metal Work P3651 Household Audio and Video Equipment P366 Communications Equipment FIN Annual report COMP Company News COMP Disposals P2086 P2099 P2131 P2834 P7011 P3446 P3651 P366 The Financial Times London Page 23 345
International Company News: Euroc decline in profits continues Publication 930210FT Processed by FT 930210 By CHRISTOPHER BROWN-HUMES

EUROC, the Swedish building materials group, saw profits after financial items fall 17 per cent to SKr125m (Dollars 16.8m) in 1992, the third successive decline, writes Christopher Brown-Humes.

The group blamed a sharp drop in construction activity in its main markets, stiffer competition and reorganisation costs. These more than offset the effects of cost-cutting and increased productivity. In 1991, the group made a SKr151m profit.

Euroc Sweden, West Europe P3272 Concrete Products, NEC P3531 Construction Machinery P6719 Holding Companies, NEC FIN Annual report P3272 P3531 P6719 The Financial Times London Page 23 109
International Company News: Total sees 52% drop in earnings Publication 930210FT Processed by FT 930210 By WILLIAM DAWKINS PARIS

TOTAL, the smaller of France's two oil groups, yesterday estimated a 52 per cent fall in annual net profits, mainly due to a sharp decline in refining margins, reflecting the impact of recession on the demand for refined products.

The profits fall, to FFr2.8bn (Dollars 512m) from FFr5.8bn in 1991 is in line with Total's warnings at the end of 1992 that net earnings would fall by more than the 47 per cent recorded in the first six months. This contrasts with a 35 per cent profits decline at Elf Aquitaine, Total's larger French rival, reflecting Elf's lower exposure to refining.

Refining margins, of Dollars 4.1 per barrel, were exceptionally high in 1991 because of the demand unleashed by the Gulf war, and nearly halved to Dollars 2.1 per barrel last year, reflecting 'world wide economic stagnation', said Total. As a result of the difficult economic situation, Total has taken a FFr500m non-recurring charge in last year's accounts.

Group operating profits fell by 30 per cent to FFr7.2bn from FFr10.3bn over the period, within which refining and marketing profits were more than halved to FFr2bn from FFr4.9bn. Total's US refineries recovered from difficult markets in 1991 to break even last year. Exploration and production profits were unchanged at FFr2.9bn, while trading profits fell to FFr600m from FFr1bn. The chemicals division produced a rise in operating profits to FFr1.7bn from FFr1.5bn, helped by an improvement in the profitability of the recently reorganised inks and resins companies.

Total's worldwide reserves rose over the period to 531m tonnes of oil equivalent from 513m tonnes, not including Total's interest in the new Cusiana oil field in Colombia, discovery of which was unveiled last year.

Cash flow fell slightly to FFr10.1bn from FFr13.7bn in 1991 while capital spending was unchanged at about FFr15bn. By the end of the year, debts stood at 35 per cent of shareholders' funds.

Elf Sanofi, the pharmaceuticals arm of Elf Aquitaine, the French state-owned oil group, yesterday said it expected net profits of more than FFr1bn in 1992, up from FFr950m in the previous year.

The group, which last month announced a merger with Yves Saint Laurent, one of the best known names in French fashion, attributed the improvement to the benefits of its alliance with Sterling Winthrop, the US drugs company.

Total Elf Sanofi France, EC P1794 Excavation Work P1781 Water Well Drilling P1311 Crude Petroleum and Natural Gas P2834 Pharmaceutical Preparations COMP Company News FIN Company Finance P1794 P1781 P1311 P2834 The Financial Times London Page 23 438
International Company News: Axa shares hit by fall in profits and bond issue Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN PARIS

AXA, one of France's largest insurance groups, yesterday saw its shares fall FFr28 to FFr1,114 on the news of a fall in net profits for 1992 and of a FFr3.65bn convertible bond issue to strengthen the capital position of Equitable Life, its US associate.

Mr Claude Bebear, Axa chairman, said it needed to invest several hundred million dollars in Equitable to enable the US company, in which Axa bought a 49 per cent stake in 1991, to meet the new US regulations on risk-based capital ratios.

Equitable needs to raise its ratio from the present 85 per cent to the required level of 100 per cent by 1995 when the new rules come into effect. Mr Bebear stressed that the new ratio was the only reason for Axa's investment in Equitable Life.

However, Axa suffered a sharp fall in profits last year with net attributable profits slipping to between FFr1.5bn and FFr1.6bn from FFr2.4bn in 1991. The group, like other French insurers, was hit by the intensely competitive state of both the life and non-life markets in France.

Axa, which had previously announced a 34 per cent fall in first-half profits to FFr979m, was affected by a steep reduction in the value of its exceptional gains on sales of property and industrial investments and by a poor second-half performance from Equitable Life.

In spite of yesterday's fall in Axa's share price analysts appeared convinced that the investment in Equitable Life would be sufficient to solve the ratio problems and that the US company was on course for recovery.

Analysts expect a moderate improvement in Axa's performance for 1993 in spite of the difficulties of the French insurance market.

BNP Securities has predicted net profit of FFr2bn for this year with Paribas forecasting FFr1.8bn.

World stock markets, Page 35

Axa France, EC P6311 Life Insurance P5099 Durable Goods, NEC P5199 Nondurable Goods, NEC COMP Company News FIN Annual report P6311 P5099 P5199 The Financial Times London Page 23 350
UK Company News: Weak property market wipes out growth at MSC Publication 930210FT Processed by FT 930210 By IAN HAMILTON FAZEY, Northern Correspondent

MANCHESTER SHIP Canal yesterday reported a marginal decline in pre-tax profits for 1992, down from Pounds 10.8m to Pounds 10.5m as difficult property markets wiped out growth on its port operations.

Turnover rose 37 per cent to Pounds 27.7m (Pounds 20.2m) and operating profits by nearly 14 per cent to Pounds 5.97m (Pounds 5.25m), thanks to a continuing squeeze on costs.

The port made profits of Pounds 6.07m, a rise of 16 per cent on turnover up 3.5 per cent at Pounds 20.9m and cargoes ahead 2.8 per cent at 7.96m tonnes.

This, however, was not enough to counter falling income from property and investments, and there was an exceptional debit of Pounds 1.45m to disband the company's police force.

The company's main port interests are concentrated around Ellesmere Port and Runcorn in Cheshire, while most of its property comprises the old Manchester docklands at Trafford Park and Salford Quays, where there is local oversupply of new office space.

Tax took Pounds 2.05m (Pounds 2.2m credit) - because of reduced enterprise zone allowances.

This caused earnings per share to fall to 219.6p (339p). The proposed single dividend is unchanged at 4.5p.

Shareholders' funds improved from Pounds 137.3m to Pounds 153.1m after revaluation of dredging deposit grounds and the company's interest in a waste disposal site.

Mr Robert Hough, chairman, said the property division had 'weathered the storms reasonably well'. Rental income had fallen by Pounds 700,000, but properties had been sold for Pounds 9.88m at a profit of Pounds 390,000.

He believed Harbour City, the flagship development in Salford Quays, would eventually attract more tenants because of its high standard of design. He also hoped for a government decision this year on the company's Dumplington site.

The 300-acre site is on the south bank of the canal at the junction of four motorways. A regional shopping centre is proposed.

Manchester Ship Canal United Kingdom, EC P4499 Water Transportation Services, NEC P4214 Local Trucking With Storage P4225 General Warehousing and Storage FIN Annual report P4499 P4214 P4225 The Financial Times London Page 22 365
UK Company News: Fatter and ready for market / A look at the flotation plans of Yorkshire Food Publication 930210FT Processed by FT 930210 By ANDREW BOLGER

YORKSHIRE Food Group, which has expanded rapidly by buying ingredients businesses from Berisford International, will be floated on the market this spring.

The Bradford-based business was founded by Mr Mike Firth, 46, the chairman and chief executive.

In 1991 Yorkshire, backed by institutions, paid Pounds 11m for Scotia Haven Foods, Berisford's loss-making dried fruit business, and last year bought Treehouse Farms, Berisford's Californian almond processor, for Dollars 9.96m (Pounds 6.6m).

These acquisitions boosted Yorkshire's turnover from Pounds 15m in 1990 to more than Pounds 60m last year. Operating profits have grown from Pounds 664,000 to more than Pounds 3.5m. The group is expected to have a market value of about Pounds 35m.

A forceful Yorkshireman, Mr Firth and his team transformed Scotia Haven's pre-tax losses of Pounds 1.29m in the year before acquisition to a profit of Pounds 900,000 by squeezing working capital.

Stock values were reduced from more than Pounds 6m to Pounds 1.5m by the end of 1991, so outside warehousing totalling 70,000 sq ft was no longer required at the plant near Warrington, Cheshire.

Stock control was integrated with the production, buying and sales functions, and improved credit controls helped cash management.

Permanent staff kept their jobs, but 80 fewer seasonal workers were employed and nine senior managers were replaced by three from Yorkshire Foods.

However, Yorkshire is not just in the business of trimming costs. Treehouse incurred a loss of Dollars 743,000 in the year before it was acquired, but the new owners brought it back into profit by substantially increasing the company's purchase of nuts - almost all of which were sold by Christmas.

Mr Firth believes that the same management disciplines can be applied to other parts of the food industry, and Yorkshire intends to make further substantial acquisitions. He said: 'It comes down to ambition - I believe we have a management team which is capable of running a much bigger company.'

Mr Firth, who studied physics at Bradford University, established his own packaging business in 1974 with a Pounds 3,000 bank loan after he quit as a production manager with Mars.

He said: 'Mars offered me promotion, but I'd always wanted to run my own business and did not want to get used to a fat salary.'

After packaging toys and games, in 1979 he established Normanton Foods, near Leeds, which packs sugar, mainly for Sainsbury.

It later expanded into direct purchasing of raw materials for packing and selling to retail chains.

In 1983 Mr Firth bought the stock of Hunni Foods, a commodity packer of nuts and pulses from the receiver for Pounds 25,000 - and then sold it for Pounds 40,000. Hunni brought an additional range of products, a label and a modest customer base, which by 1985 extended to Wm Morrison Supermarkets.

Mr Firth relishes the cut and thrust of the commercial fray. He recalls an early attempt to drive him out of business by a major competitor, which offered to supply Morrison at practically cost price.

Morrison allowed him to keep the reduced-rate business, but Mr Firth obtained a copy of the competitor's rock-bottom bid, and delighted in faxing it to buyers of all the leading supermarket chains. Mr Firth said: 'The whole affair cost me about Pounds 150,000, but it must have cost them Pounds 1.5m. I've never enjoyed myself so much.'

Yorkshire has two beverage subsidiaries near Halifax - Freshroast Coffee, which roasts and packs beans, and Coffee Mac, which offers an extensive range of beverage dispensing machines.

Although the businesses account for only about 4 per cent of the enlarged group's sales, they enjoy high margins and the group intends to build Coffee Mac, which currently has 500 machines installed, into a national chain.

The group has enjoyed more mixed fortunes with its two baking subsidiaries, Forshaws (Confectioners) and Crossfield, which supply pies to retailers and caterers.

Last year the daily delivered confectionery business and bakery business was closed because of the high levels of investment needed in an extremely competitive market.

Crossfield has won important contracts, such as supplying part-baked frozen pies, which have a distinctive 'home-made look' to EuroDisney in France. Baking represents only 2.5 per cent of group sales, but Mr Firth is determined to learn more about the bakery business - which he estimates is worth more than Pounds 3bn annually.

However, there is no doubt that Yorkshire's main focus will be on relatively large food processing and packaging operations, where the management's tight controls have most scope for finding cost-savings and greater efficiency.

Mr Firth said: 'It is easier to make savings with big numbers. You also spend the same time on a Pounds 40m deal as you do on a Pounds 4m one.'

The group, which will have gearing of about 30 per cent after the flotation, is likely to make a fairly rapid move in the UK. Longer-term, Mr Firth likes the West Coast of the US, and believes the size of the domestic market there means many American businesses do not fully appreciate export opportunities.

Yorkshire will come to the market through a placing sponsored by stockbrokers Panmure Gordon. It is being advised by National Westminster Bank.

The group has been backed by Murray Johnstone's venture capital arm and Phildrew Ventures.

Yorkshire Food Group United Kingdom, EC P6719 Holding Companies, NEC P7389 Business Services, NEC COMP Company profile FIN Share issues P6719 P7389 The Financial Times London Page 22 929
UK Company News: Betacom back in the black with Pounds 350,000 Publication 930210FT Processed by FT 930210 By GRAHAM DELLER

BETACOM, the telecommunications equipment supplier which is 71.3 per cent owned by Mr Alan Sugar's Amstrad, returned to the black in the half-year to December 31 1992.

On turnover from continuing operations ahead to Pounds 6.67m (Pounds 5.11m) - reflecting an expanded product range, particularly in telephone answering machines - pre-tax profits emerged at Pounds 350,000 against losses of Pounds 644,000 in the corresponding six months.

The figures were compiled under FRS 3 accounting principles.

Costs of restructuring and rationalising the range amounted to Pounds 73,000.

The result was helped by an interest turnround to Pounds 145,000 receivable (Pounds 218,000 payable), and included an operating profit of Pounds 213,000 (Pounds 324,000) from discontinued businesses.

The disposal of the Loewe Betacom joint venture was completed in September.

Operating profits from continuing operations totalled Pounds 65,000, against a deficit of Pounds 196,000.

Mr Ken Ashcroft, chairman and former corporate finance director at Amstrad, said the group 'was now recovering its market share in the UK after an extremely difficult period'.

Net assets at the period end amounted to Pounds 10.4m, including cash of Pounds 3.4m.

Earnings per share emerged at 0.46p, against losses of 3.86p.

Betacom United Kingdom, EC P3661 Telephone and Telegraph Apparatus P5063 Electrical Apparatus and Equipment P3679 Electronic Components, NEC FIN Interim results P3661 P5063 P3679 The Financial Times London Page 22 243
UK Company News: Halifax focuses eyes on Europe Publication 930210FT Processed by FT 930210 By JOHN GAPPER, Banking Correspondent

HALIFAX Building Society yesterday disclosed that it was preparing its first venture into Europe by applying for a licence to establish a subsidiary in Spain to attract retail savings deposits for mortgage lending.

The application contrasts with other moves by societies to expand in Europe by acquisition. Abbey National acquired a mortgage lending business in Spain in 1989, which has been hit by losses on residential mortgages.

Halifax said it wanted to test the market for retail savings and mortgage lending similar to its core business in the UK by establishing a branch office in Madrid. A Spanish general manager would join the society on March 1.

The society said its application had been submitted to the Spanish ministry of economy and finance in December, and a response was awaited. The operation would be called Banco Halifax Hispania.

Mr Jim Birrell, chief executive, said Spain was a good long-term market. 'Our approach will be a cautious learning exercise, with the initial focus on savings. This is in keeping with our traditional core business.'

Halifax Building Society Spain, EC P603 Savings Institutions COMP Company News TECH Licences P603 The Financial Times London Page 21 212
UK Company News: MTM sells US plant for Dollars 9m Publication 930210FT Processed by FT 930210 By RICHARD GOURLAY

MTM, the specialist chemicals company struggling with a bank refinancing and the arrival of a large new shareholder with mysterious intentions, has sold a business in the US.

The group said it had received Dollars 9.05m (Pounds 6m) for the sale of its intermediate fine chemicals plant in Columbus, Ohio, to ISF Fine Chemicals, a subsidiary of GAF Corporation of New Jersey.

MTM will receive Dollars 7.05m on completion and the balance will be held in escrow pending clarification of the value of working capital and potential warranty claims.

MTM is trying to focus its attention on fewer businesses in order to reduce group debt, now standing at about Pounds 120m.

Last week AB Hebi, a Swedish company, bought nearly 7 per cent of MTM from Mr Richard Lines, the chairman who built the company and eventually oversaw a precipitate decline in the share price.

MTM ISF Fine Chemicals United States of America P6719 Holding Companies, NEC P874 Management and Public Relations P28 Chemicals and Allied Products COMP Disposals P6719 P874 P28 The Financial Times London Page 21 197
UK Company News: Fleming Overseas Publication 930210FT Processed by FT 930210

In the six months since its June 1992 year end, net asset value per share of Fleming Overseas Investment Trust increased 26 per cent from 214.7p to 271p. At December 31 1991 assets were 222.5p.

Earnings rose to 2.16p (1.78p) per share. The interim dividend is maintained at 1.5p.

Fleming Overseas Investment Trust United Kingdom, EC P672 Investment Offices FIN Interim results P672 The Financial Times London Page 21 80
UK Company News: Standard Platforms Publication 930210FT Processed by FT 930210

Standard Platforms Holdings, the USM-quoted computer hardware and software group, has disposed of its US DocuFile subsidiary to Mr Martin Caniff, its president

This was the only firm offer received although the company had been in negotiations with three potential purchasers. In the light of the DocuFile disposal, Mr HS Hardy, whose main area of responsibility has been within that company, has resigned from the Standard Platforms board without compensation.

Provision of Pounds 100,000 relating to the disposal has been made in the current interim accounts. For the six months to September 30 there were substantially lower pre-tax losses of Pounds 22,673 after the provision, against losses of Pounds 471,341.

Turnover more than doubled to Pounds 1.88m (Pounds 849,497), some Pounds 165,287 (Pounds 24,560) of which related to the discontinued operations of DocuFile.

Losses per share were 0.5p (12.1p). There is no dividend.

Standard Platforms Holdings United States of America P7372 Prepackaged Software P357 Computer and Office Equipment COMP Disposals FIN Interim results P7372 P357 The Financial Times London Page 21 182
UK Company News: Platon Intnl Publication 930210FT Processed by FT 930210

Platon International's board put shareholders on hold yesterday following Monday's bid from Wills Group. Shareholders were urged to do nothing until the directors had considered the offer with their financial advisers. The shares rose 5p to 26p yesterday.

Mr Robin Meyer, Platon's chairman, will be writing to shareholders in the next few days.

Platon International Wills Group United Kingdom, EC P6719 Holding Companies, NEC P3823 Process Control Instruments P2824 Organic Fibers, Noncellulosic P3825 Instruments To Measure Electricity COMP Company News COSTS Equity prices P6719 P3823 P2824 P3825 The Financial Times London Page 21 104
UK Company News: BET and Rank prefs downgraded Publication 930210FT Processed by FT 930210

CREDIT RATINGS on the preferred stock of both BET and Rank Organisation were downgraded sharply yesterday by Moody's Investor Service, the US rating agency.

Both companies' stock was cut by two notches, from A2 to Baa1, while both also lost the top Prime-1 rating on its commercial paper.

The BET move reflected the lengthy restructuring expected in its core businesses, 'intense competitive pressure' on operating margins and possible delays in disposing of underperforming assets, Moody's said. It expected Rank's recovery from the recession to be 'significantly delayed,' and added that the company would need to continue to restructure to improve returns.

BET Rank Organisation United Kingdom, EC P6719 Holding Companies, NEC P7311 Advertising Agencies P781 Motion Picture Production and Services P7011 Hotels and Motels P7032 Sporting and Recreational Camps P1311 Crude Petroleum and Natural Gas P4832 Radio Broadcasting Stations P4833 Television Broadcasting Stations COMP Company News FIN Company Finance MKTS Market data P6719 P7311 P781 P7011 P7032 P1311 P4832 P4833 The Financial Times London Page 21 180
UK Company News: Attack on overheads helps P&P - Pounds 8.9m charge for change of emphasis clears ground for recovery Publication 930210FT Processed by FT 930210 By ALAN CANE

P&P, the personal computer distributor and computing services supplier, is beginning to show the benefits of a determined attack on escalating overheads, with a profit before tax last year of Pounds 2.01m, up from Pounds 711,000 previously.

The company, however, recorded a net loss for the full year of Pounds 7.88m, as a result of taking an extraordinary charge of Pounds 8.93m to cover the costs of extricating itself from the distribution of high volume, low-cost personal computers - a business where cost cutting and intense competition have reduced margins to unprofitable levels.

The share price yesterday rose 5p to 44p.

Turnover in the year to November 30 1992 was slightly lower at Pounds 222.8m (Pounds 228.3m). However, as personal computer prices have been falling at up to 40 per cent a year for the past two years, the bald figures conceal a substantial increase in volume of business.

Earnings per share were more than doubled at 1.9p (0.7p) and a final dividend of 0.7p is declared, making a total of 1.4p (4.33p).

Shareholders' funds remain in excess of Pounds 40m, or 72p a share, and the company has net cash of Pounds 3m.

P&P has suffered over the past two years through being one of the largest participants in a sector where profit margins have fallen steadily.

It has now taken the step of disengaging itself from the high volume distribution of low cost computers where gross profit margins were only 10 per cent. That leaves it in computing services, with gross profit margins of close to 60 per cent, and in higher value computer products where gross margins of over 20 per cent can be achieved.

The Pounds 40m-a-year-sales high volume business, comprising relationships with dealers and contracts with manufacturers and P&P itself, will either be sold or run down.

Mr David Southworth, group managing director, said the worst was over: 'If we manage cash and overheads for the next two years, we will do very well.'

COMMENT

Mr Southworth is looking a good deal happier these days. The decision to cut away the least profitable part of the business and to take the Pounds 8.9m charge for doing so has cleared the ground for recovery and the management team has already shown its competence in coming to grips with costs. Forward profits are difficult to predict in the computer business in the current climate, but it would be surprising if there was not a strong advance on 1992. With a historic p/e of about 23 there seems little reason to quibble with analysts' opinion of a strong buy.

P and P United Kingdom, EC P6719 Holding Companies, NEC P508 Machinery, Equipment, and Supplies P7372 Prepackaged Software P7379 Computer Related Services, NEC FIN Annual report P6719 P508 P7372 P7379 The Financial Times London Page 21 496
UK Company News: Falcon moving to Luxembourg Publication 930210FT Processed by FT 930210 By MAGGIE URRY

FALCON MINES, the Zimbabwean gold mining group, is moving out of the UK so as not to become liable for UK corporation tax, in particular advance corporation tax on its dividends.

The group, which has no operations in the UK, plans a reconstruction and a move to Luxembourg.

Until the 1988 Finance Act, companies could be incorporated in the UK without being resident for tax purposes if their operations were overseas.

However, that act said such companies would become resident for tax purposes after five years. That provision comes into effect on March 15 this year.

Fewer than 20 per cent of Falcon's shares are held in the UK, and the shares are also listed in Zimbabwe and South Africa.

Falcon's immediate problem, if it remained in the UK, would be that it would become liable for ACT on dividends paid to all its shareholders and would not be able to recover that tax.

At present it has to obtain permission under Zimbabwean exchange controls to take money out of that country to pay dividends to non-Zimbabwean investors. Falcon felt it was unlikely to receive permission to take money out of Zimbabwe to pay UK taxes on dividends paid to shareholders in Zimbabwe.

The group is proposing to move its entire assets and undertakings to a new company, Falcon Investments, which will be based in Luxembourg.

Under the plan, which is to be put to shareholders at two special meetings, holders will receive one new Falcon Investments share for every 10 Falcon Mines shares held.

Falcon Investments shares will be quoted in Luxembourg, as well as Zimbabwe and South Africa, with dealings commencing on March 15. UK investors will be able to trade in Falcon Investments shares in London under Stock Exchange Rule 535 (4) (A). If the proposals are approved, shares in Falcon Mines will cease to trade on March 12 and the company will be wound up.

Falcon Mines United Kingdom, EC Luxembourg, EC Zimbabwe, Africa P1041 Gold Ores COMP Company News GOVT Taxes P1041 The Financial Times London Page 21 359
UK Company News: Powerscreen disposes of Guzzler for Dollars 24m Publication 930210FT Processed by FT 930210 By JANE FULLER

POWERSCREEN International, the Northern Ireland-based maker of screening and crushing equipment, has sold one of its US subsidiaries for Dollars 24m (Pounds 16.8m) to Federal Signal Corporation.

Guzzler Manufacturing, which makes truck-mounted vacuum cleaning equipment for industrial sites and sewers, was bought by Powerscreen for Dollars 17.9m in August 1990.

Mr Barry Cosgrove, finance director, said Federal Signal's first approach had been rebuffed. An improved cash offer had changed the management's mind.

He added that Powerscreen had taken Dollars 5.3m cash out of Alabama-based Guzzler in debt repayments and interest since its purchase. The US company made Dollars 2.1m in after-tax profits on Dollars 27m sales in 1991-92. But that was on a low tax rate of 10 per cent. By next year that rate was expected to rise to 38 per cent.

Mr Shay McKeown, chief executive, said profits from Guzzler were expected to fall to Dollars 1.6m pre-tax this year. It was the one company in the group not performing to budget.

Guzzler's margins had been eroded by price competition in the contractor market. Federal Signal, which has a street cleaning operation, was in a better position to expand Guzzler in the municipal market, whereas Powerscreen would have had to expand its product range into sweepers and refuse vehicles.

'We don't want to be a conglomerate,' said Mr McKeown. The group had decided to concentrate on materials handling, where it has built up international sales of mobile equipment. North America would account for approaching 30 per cent of group turnover even after the Guzzler disposal.

Powerscreen was now expected to have at least Pounds 20m cash in hand at the March year-end. The prime candidate for the next acquisition would be a North American crushing equipment company, preferably involved in the recycling of demolition material or timber.

The UK, which accounted for 29 per cent of first-half sales, would also be an attractive hunting ground. Targets on the Continent tended to look expensive because of the weakened pound.

Powerscreen, which has kept profits moving ahead during the recession, is forecast to increase pre-tax profits from Pounds 18.8m - on Pounds 88.1m sales - to between Pounds 22m and Pounds 23m this year.

Its share price closed down 1p at 359p yesterday. That compares with 156p at the time of the Guzzler acquisition. The 6.16m shares allotted to the vendor were placed - they are worth Pounds 22m compared with less than Pounds 10m then.

Powerscreen International Guzzler Manufacturing Inc Federal Signal Corp United Kingdom, EC United States of America P6719 Holding Companies, NEC P3537 Industrial Trucks and Tractors P3523 Farm Machinery and Equipment P3589 Service Industry Machinery, NEC COMP Disposals P6719 P3537 P3523 P3589 The Financial Times London Page 21 471
UK Company News: Aberdeen Petroleum moves for Brabant Publication 930210FT Processed by FT 930210 By PEGGY HOLLINGER

ABERDEEN Petroleum, the US-based oil and gas production company which is quoted in London, yesterday threw down the gauntlet to Brabant Resources with an all-paper bid valuing the UK explorer at Pounds 6.5m.

The move follows Aberdeen's protracted efforts to reach agreement on a friendly merger with Brabant. If successful, a takeover would double Aberdeen's issued capital.

Mr Nicholas Gay, Brabant's finance director, said his group still strongly opposed any proposals from Aberdeen. 'It is not consistent with Brabant's strategy and there is no clear synergy,' he said.

Brabant would delay its results, due tomorrow, until Aberdeen's offer document is published.

Aberdeen is offering 35 shares - which closed 1 1/4 p down at 11 1/4 p - for every 10 Brabant. This values Brabant at 39.3p per share, compared with last night's close of 39p, up 10p on the day.

Aberdeen already controls 21.4 per cent of Brabant. This includes its holding of 9.99 per cent and irrevocable undertakings from Titon Oil & Metals to accept the bid in respect of its 11.4 per cent stake.

Mr David Hooker, Aberdeen's managing director, said the takeover made sense in the light of an inevitable rationalisation of the small oil and gas sector. 'If we can glue a lot of these companies together, and increase liquidity, it would make sense (for institutional shareholders)', he said. Significant savings could be achieved on overheads and by cutting down exploration.

The bid was described by analysts and some institutional investors as opportunistic, however. One analyst suggested that Aberdeen, with all its assets in North America, 'is carrying costs in the UK which the US is not happy about'.

A large shareholder also suggested that Aberdeen was trying to fend off its own potential predator. Pittencrief, the telecommunications and resource group, recently took a 16.6 per cent stake in Aberdeen. Pittencrief is reported to be building up its oil and gas assets in advance of a demerger of its two divisions.

Aberdeen Petroleum Brabant Resources United Kingdom, EC P1311 Crude Petroleum and Natural Gas P1382 Oil and Gas Exploration Services COMP Company News COMP Shareholding P1311 P1382 The Financial Times London Page 20 375
UK Company News: Shell sells bulk of Colas division for Pounds 72m Publication 930210FT Processed by FT 930210 By ANGUS FOSTER

SHELL UK has sold its road services and building materials subsidiaries to a management-led buy-out vehicle backed by Charterhouse Development Capital.

The subsidiaries form the main part of Shell's Colas division. They include one of Europe's leading manufacturers of road markings and have been sold for Pounds 72m, which includes Pounds 20m of net cash. The purchase price is close to asset value, the company's advisers said.

The road services business trades under names such as Prismo in the UK and Prosign in France. The building materials company manufactures roofing felts and flooring adhesives in the UK. The subsidiaries acquired employ about 1,400 people.

Charterhouse underwrote the Pounds 30m equity portion of the deal. The former management will take a small stake.

The debt portion of the transaction, equal to Pounds 22m before working capital, was arranged by Morgan Grenfell and underwritten by the Bank of Scotland. Shell was advised by Lazards.

Two other companies within the Colas group, road surfacer Colas Limited and civil engineer Colcon, were not for sale and will remain within Shell UK.

Shell UK Charterhouse Development Capital United Kingdom, EC P3292 Asbestos Products P3272 Concrete Products, NEC P2952 Asphalt Felts and Coatings COMP Company News COMP Buy-out P3292 P3272 P2952 The Financial Times London Page 20 232
UK Company News: Reed Intl sells stake in BSkyB Publication 930210FT Processed by FT 930210 By RAYMOND SNODDY

REED International yesterday reached an agreement to sell its indirect stake in British Sky Broadcasting in a deal worth Pounds 62.3m.

Reed is selling its 3.66 per cent stake in BSkyB, the satellite television venture, to the other three principal shareholders in BSB Holdings - Chargeurs, Pearson, owners of the Financial Times, and Granada.

Reed, part of the merged Reed Elsevier publishing group, will receive Pounds 12.3m in cash immediately.

The balance will be paid over the next two or three years out of any proceeds that flow to the three shareholders from BSkyB, whether from dividends or interest payments.

The deal takes Reed to the head of the queue for any money flowing from the satellite venture.

Mr Peter Davis, chairman of Reed, said: 'It is a deal arrived at between the three and ourselves freely because they don't have to buy and we don't have to sell.'

Reed International Chargeurs Pearson Granada Group United Kingdom, EC P4841 Cable and Other Pay Television Services COMP Company News COMP Shareholding P4841 The Financial Times London Page 20 195
UK Company News: Hunting coatings side sold for Pounds 19m Publication 930210FT Processed by FT 930210 By RICHARD GOURLAY

HUNTING, the defence, aviation and oil services company, has sold its specialist coatings division to Williams Holdings, the industrial conglomerate, for about Pounds 19m.

The sale marks the end of Hunting's attempt to develop a special coatings leg that would reduce group dependence on a declining defence market.

Mr Ken Miller, chief executive, said the group had already gone a long way along a better diversification path with the development of its oil services and aviation divisions.

Yesterday Hunting added two Houston-based oil service companies at a cost of Pounds 5m. It also announced a Pounds 250,000 purchase from Pirelli of Sekur, an Italian defence company whose products include fuel tanks and rubber components for tracked vehicles.

Hunting also said that in December it raised Dollars 50m (Pounds 33m) for a 5-10 year period through a dollar private placement. The announcements come only days after it was awarded a seven year contract to manage the UK government's Atomic Weapons Establishment at four sites including Aldermaston in Berkshire.

As a result of the deals, gearing should fall from the 70 per cent level prevailing at the end of December, according to Mr Miller.

This was after taking account of additional working capital requirements to fund the AWE contract and the benefit to shareholders funds from a Pounds 10m profit over book value on the sale.

The coatings businesses, which trade under the Hammerite name, will be an addition to the Williams stable of consumer building products that include Polycell and Cuprinol.

Mr Nigel Rudd, Williams chairman, said the deal was consistent with group policy of buying market leading brands in the consumer building product and fire and safety areas.

Hunting shares closed up 13p at 233p.

Hunting Williams Holdings United Kingdom, EC P6719 Holding Companies, NEC P3566 Speed Changers, Drives, and Gears P3559 Special Industry Machinery, NEC P3569 General Industrial Machinery, NEC P3599 Industrial Machinery, NEC P329 Miscellaneous Nonmetallic Mineral Products P2851 Paints and Allied Products COMP Company News COMP Disposals FIN Company Finance P6719 P3566 P3559 P3569 P3599 P329 P2851 The Financial Times London Page 20 365
UK Company News: Isosceles disposes of US sports goods chain Publication 930210FT Processed by FT 930210 By MAGGIE URRY

ISOSCELES, the heavily-indebted parent company of the Gateway food retail group trying to renegotiate its debt, has finally agreed the sale of Herman's Sporting Goods, its US chain of 259 sports shops.

The price agreed with the purchaser, an investor group led by the Taggart/Fasola Group, a US management firm which specialises in turnround situations, was not disclosed. However, it is thought that Isosceles will receive about Dollars 40m (Pounds 26m) for the chain.

Isosceles has been trying to sell Herman's since it succeeded with a Pounds 2.1bn leveraged buy-out of Gateway in 1989.

The sale of Herman's is expected to close in early March. Mr William Taggart, chairman of the Taggart/Fasola Group, said 'in order to grow in the 1990s Herman's will need fresh capital and fresh ideas'.

Dee Corporation, the former incarnation of Gateway, paid Pounds 278m for Herman's in 1986 and then expanded it by acquiring another chain for Pounds 45m. Even before Isosceles' bid for Gateway, Herman's was proving an unhappy investment.

Soon after Isosceles bought Gateway it is thought to have received an offer for Herman's of about Dollars 300m (then about Pounds 200m), but this fell through when the buyer was unable to assemble the necessary funds. Another possible purchase fell through in October last year.

In Isosceles' last accounts, for the year to April 25 1992, the investment in Herman's was written down by Pounds 144.8m. It was shown in the balance sheet under 'investments held for disposal' and was thought to make up the bulk of the Pounds 57.7m value put on these. Another write-down is therefore expected in the next accounts.

Isosceles is currently in talks with its lenders over a refinancing of Pounds 1.4bn debt. It has a standstill agreement with its banks until May 28 this year.

It has yet to publish interim results, and these may not appear until agreement on the refinancing is reached.

Isosceles Herman's Sporting Goods United Kingdom, EC United States of America P5941 Sporting Goods and Bicycle Shops COMP Company News COMP Disposals P5941 The Financial Times London Page 20 365
UAP and Axa post sharp falls for year Publication 930210FT Processed by FT 930210 By ALICE RAWSTHORN PARIS

THE problems in the French insurance industry were highlighted yesterday when Union des Assurances de Paris and Axa, two of France's largest insurance companies, yesterday announced sharp falls in their net profits for 1992.

Axa's shares fell FFr28 to FFr1,114 on a fall in net profits for 1992 and a FFr3.65bn (Dollars 652m) convertible bond issue to strengthen the capital position of Equitable Life, its US associate.

Mr Claude Bebear, Axa chairman, said it needed to invest several hundred million dollars in Equitable to enable the US company, in which Axa bought a 49 per cent stake in 1991, to meet new US regulations on risk-based capital ratios. Equitable needs to raise its ratio from 85 per cent to 100 per cent by 1995 when the new rules come into effect. Mr Bebear stressed the new ratio was the only reason for Axa's investment in Equitable Life.

However, Axa suffered a fall in profits last year with net attributable profits slipping to between FFr1.5bn and FFr1.6bn from FFr2.4bn in 1991. The group, like other French insurers, was hit by the intensely competitive state of both the life and non-life markets in France.

UAP last night warned of a fall in net profits to between FFr1bn and FFr1.3bn last year from FFr3.76bn in 1991.

News of UAP's profit fall, which was made after the Paris stock market had closed and suggests that the group's 1992 performance was worse than analysts' expectations, comes at a delicate time for the company. UAP is a prime candidate for privatisation.

UAP yesterday said that the main cause of last year's reduction in profits was its exposure to Banque Worms, its French banking subsidiary. The bank lost FFr350m in the first half of last year, and is expected to have lost FFr1bn during the full year.

UAP last month was forced to provide FFr1.4bn in emergency recapitalisation for Banque Worms. UAP increased group turnover by 19 per cent to FFr125bn last year.

However, this growth was mainly due to the contribution from Sun Life, the UK insurer. The group said yesterday that the level of underlying growth in its existing business was 5 per cent.

World Stock Markets, Page 35

Lex, Page 18

Axa Union des Assurances de Paris France, EC P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance P5099 Durable Goods, NEC P5199 Nondurable Goods, NEC COMP Company News FIN Annual report INS Insurance P6311 P6331 P5099 P5199 The Financial Times London Page 19 428
Reuters raises dividend as cash increases Publication 930210FT Processed by FT 930210 By ANDREW BOLGER

REUTERS HOLDINGS, the business information and news group, dipped into a growing cash pile to increase its dividend for the year by 24.7 per cent, in spite of difficulties which continue to affect its main financial customers.

The group's pre-tax profits grew 12.6 per cent to Pounds 383.2m in the year to December 31. Net cash balances rose by Pounds 206.9m to Pounds 709.8m. A 29 per cent increase in the final dividend to 15.9p from 12.3p gives a total for the year of 21.2p (17p).

Mr Peter Job, chief executive, said: 'Market conditions are favourable enough to sustain growth across all our product lines. Problems affecting the financial community in some of our major markets, such as Japan, will probably mean that the rate of increase in our underlying revenue is not as fast as we would like.' About 80 per cent of Reuters' revenues are designated in non-sterling currencies, so the devaluation of the pound is likely to boost revenues, although the full benefits will only flow through to earnings as currency hedges unwind.

Mr Job said: 'Our cash position is strong enough to allow us to pursue new investment ideas and, at the same time, to recommend an increase in dividend well ahead of earnings growth.'

Earnings per share grew 2.3 per cent to 56p, but this was depressed by an extraordinary charge of Pounds 24.6m relating to an Australian tax settlement. Before the extraordinary item, earnings were 12.9 per cent higher at 61.8p.

Reuters' revenue grew 4.5 per cent, adjusted to exclude the effect of currency movements. The Americas turned in a record performance, assisted by the rapid growth of Instinet, the subsidiary which runs an equities transaction business. The American contribution to profits was Pounds 15m, compared with a loss of Pounds 5.2m last time. Revenue grew 13.6 per cent to Pounds 259.4m.

Strong revenue growth in eastern Europe and the China region was offset by continuing weakness of the financial services sector in several main centres. At actual rates of exchange the revenue of Europe, the Middle East and Africa grew 5.9 per cent to Pounds 952.8m, and the contribution to profits rose 9.7 per cent to Pounds 334.7m. Revenue from the Asia-Pacific region rose 6.4 per cent to Pounds 297m and the contribution to profits rose 6.1 per cent to Pounds 131.8m.

Mr Job was satisfied with the progress of two new products, Dealing 2000-2, which offers automated foreign exchange dealing, and Globex, which provides a similar service for futures and options.

Operating profit before interest grew 8.9 per cent to Pounds 316.5m, and interest receivable rose 33.8 per cent to Pounds 66.3m. Capital expenditure was 24.9 per cent higher at Pounds 198.7m.

Lex, Page 18

Reuters Holdings United Kingdom, EC P6719 Holding Companies, NEC P7383 News Syndicates P2711 Newspapers P2752 Commercial Printing, Lithographic FIN Annual report P6719 P7383 P2711 P2752 The Financial Times London Page 19 499
Dame Shirley Porter to head LBC Publication 930210FT Processed by FT 930210 By RAYMOND SNODDY

DAME Shirley Porter, the Conservative politician, will today be appointed chairman of LBC, the London commercial radio station now effectively controlled by Porter family interests.

Mr Christopher Chataway, the LBC chairman who is also chairman of Crown Communications, the broadcasting company now in receivership, has decided to step down as chairman.

It is believed that Mr Chataway, the former Conservative minister who now chairs the Civil Aviation Authority, was asked to stay on by the new controllers of LBC, Mr John Porter Dame Shirley's son, and Mr Matthew Cartisser, his partner.

Mr Porter and Mr Cartisser are the main shareholders in Chelverton Investments, a company which now owns 49 per cent of LBC and has an option on a further 2 per cent.

Mr Chataway, it is believed, has told Mr Porter he will not have the time to chair LBC during the station's franchise renewal period. The LBC frequencies will be advertised by the Radio Authority next month.

He will however stay on as a non-executive director and support LBC's bid to regain its franchise.

A key element in Mr Chataway's support for the new regime at LBC was the renewal of the contract of Mr David Haynes, the chief executive.

Mr Haynes and Mr Chataway were keen supporters of the move into France and the purchase of a stake in RFM which turned into a disaster for the group. Crown was forced into receivership when the CSA, the French broadcasting authority, blocked the sale of the network.

Meanwhile Mr Patrick Meyer, the founder of RFM, who sold out to Crown and now lives in the US, has decided to make a bid for his old radio network.

Mr Meyer, speaking from Arizona, said he has the support of a big financial institution and a famous French artist. He also plans to make stock available to the staff of the network, which has 114 stations. RFM is now in receivership but is still trading and playing pop music.

Mr Meyer says he will soon be presenting his case to the CSA, RFM staff and the receiver when one is officially appointed. 'It is a good station if you get the right format and don't change it all the time,' he added.

Observer, Page 17

London Broadcasting United Kingdom, EC P4832 Radio Broadcasting Stations PEOP Appointments P4832 The Financial Times London Page 19 408
Companies in this issue Publication 930210FT Processed by FT 930210

------------------------------------------------- UK ------------------------------------------------- Aberdeen Petroleum 20 BET 21 Betacom 22 Brabant Resources 20 Bricom 13 Bridon 13 British Airways 6 British Gas 6 British Sky B'cast 20 Charter Consolidated 38 20,19 Dalgety 13 Falcon Mines 21 Fleming Overseas 21 Halifax Bld Soc 21 Hunting 20 Isosceles 20 Johnson Matthey 38,20,19 LBC 19 Lasmo 13 Lloyds Bank 38 MTM 21 Manchester Ship 22

Nat Home Loans 13 P&P 21 Platon Intl 21 Powerscreen Intl 21 Rank Organisation 21 Reed Intl 20 Reuters 19,38 Rover 13 Shell 20 SmithKline Beecham 38 Standard Platforms 21 Storehouse 1,38 Wellcome 38 Welsh Water 38 Williams Hldgs 20 Wills Group 21 Yorkshire Food 22 ------------------------------------------------- Overseas ------------------------------------------------- A&P 26 Anglo American 19 Ansett 25

Avesta Sheffield 23 Axa 19 BNP 24 Banco de Fomento 24 Blackstone 26 Commonwealth Bank 25 Daf 7 Euroc 23 EVN 24 Ericsson 23 Federal Signal 21 GM 26 Goodyear 26 Highveld Steel 24 IBM 23 JCI 24,20,19 Kaiser Aluminum 25 MacMillan Bloedel 23 Mercedes-Benz 24 Minorco 20,19 Nestle 24

News Corporation 25 Noranda 23 Qantas 25 Schering 24 Sears, Roebuck 23 Ssangyong Motor 24 TNT 25 Total 23 UAP 19 Univa 26 UAP 23 Volksbank 26

Warner Bros 26 Whirlpool 26 -------------------------------------------------

World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 19 224
Dworkin to quit Storehouse for US Publication 930210FT Processed by FT 930210 By NEIL BUCKLEY

MR DAVID Dworkin, chief executive of Storehouse, is leaving the retailing group to become chief executive of Carter Hawley Hale Stores, one of the largest fashion retailers in the US.

Storehouse, which includes the BhS and Mothercare chains, was expected to make an announcement today about the future of Mr Dworkin - who is widely credited with having turned the group around - after its shares fell 11p to 194p on rumours that he was about to resign. But Carter Hawley Hale announced last night that Mr Dworkin was to take over from Mr Philip Hawley as president and chief executive officer from April 1.

Mr Samuel Zell, general partner of Zell/Chilmark Fund, CHH's principal owner, said Mr Dworkin's appointment was a 'tremendously significant and exciting development for CHH. David Dworkin is a proven star in the retailing industry.'

Mr Dworkin, a 49-year-old American born in Cleveland, Ohio, was recruited to head the BhS group in November 1989 from Bonwit Teller, the US department stores group.

Analysts and industry insiders said the challenge at Carter Hawley - a successful retailer in the 1980s which had problems controlling its debt and emerged last October from Chapter 11 bankruptcy protection - would be just the sort Mr Dworkin would relish, having laid the foundations for recovery at Storehouse.

Pre-tax profits at Storehouse increased from Pounds 1.3m in 1990 to Pounds 15.8m last year, and are forecast to reach around Pounds 20m this year.

Mr Dworkin has reduced the size of the business, selling off Habitat and Richards, and focusing the group on BhS and Mothercare.

Management reforms, a revamp of the stores' image and products and better use of space and computers, have all contributed to a consistent increase in sales and margins at BhS over the last 15 months.

Although the City reacted badly to rumours of Mr Dworkin's departure, analysts said this would not be disastrous as he had already taken all the fundamental steps required.

There is no obvious successor within Storehouse, and the group is expected to look outside for a replacement.

Storehouse Carter Hawley Hale Stores Inc United Kingdom, EC P6719 Holding Companies, NEC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores P5621 Women's Clothing Stores P5311 Department Stores PEOP Appointments CMMT Comment & Analysis P6719 P5719 P5611 P5621 P5311 The Financial Times London Page 19 406
Bundesbank aims to give Frankfurt markets a lift: David Waller analyses the latest cut in German banks' reserve requirements Publication 930210FT Processed by FT 930210 By DAVID WALLER

THE German interest-rate cut announced last Thursday was only third among items on the Bundesbank's press release. Higher up the list - and more important, in the view of Mr Johann Gaddum of the Bundesbank council - were the move to cut reserve requirements for German banks and to introduce DM25bn (Pounds 10bn) of short-term government securities.

Given the international implications of the interest rate move, Mr Gaddum's tongue must have been partly in his cheek. Still, from the point of view of Finanzplatz Deutschland, Germany as a financial centre, the importance of the other measures should not be under-estimated.

They are the latest in a series of moves in which the Bundesbank has lifted restrictions on German financial services with the aim of strengthening Frankfurt's competitive position in the battle against other European financial centres.

Two such initiatives in recent years have helped create a flourishing futures and options market - the Deutsche Terminborse (DTB) - and a successful commercial paper market. Thursday's decisions are at least as important.

For years, bankers have complained that the Bundesbank's reserve requirements have acted as a brake on profitability and played into the hands of bankers in Luxembourg, London and Paris. For every DM100 that a German bank took as a deposit, it was obliged to place between DM4.50 and DM12.10 with the central bank, interest free.

From the Bundesbank's point of view, this was a useful way of keeping control of monetary developments. For the commercial banks it meant that they could not pay as much interest to depositors as banks in other countries where reserves were non-existent (as in Luxembourg) or small (as in London, where they are 0.35 per cent). Interest rates on deposits in Luxembourg have traditionally been 150 basis points higher than in Germany.

By some calculations, more than DM200bn is deposited in D-Mark accounts outside Germany, driven abroad because of the impact of reserve requirements on marginal interest rates. Last year alone more than DM60bn left Germany to be deposited in Luxembourg, often with local branches of German banks. Reserve requirements are an important contributor to this trend (though Germany's withholding tax is probably the main impetus.)

The Bundesbank has not, in its latest move, gone so far as abolish all minimum reserves: they were cut from an average of 4.5 per cent to 2 per cent on time deposits and savings deposits. They were left unchanged on sight deposits, where the reserve can be as high as 12.5 per cent.

In total, however, the cut has liberated DM32bn of reserves currently lodged interest-free by banks with the Bundesbank. This meant a windfall gain for Germany's big banks, reflected in strong share gains last week.

It has also 'removed some of the competitive differential with Luxembourg and other financial centres', says Mr Klaus Friedrich, chief economist at the Dresdner Bank - and raised the possibility of further easing in the requirements in the future.

The second item on Thursday's list is the announcement of DM25bn of new short-term government securities - Bubils as they have already been christened. These are to be issued next month with maturities of three, six and nine months, and fill an important gap in the range of investment products on offer.

Corporate treasurers will be among the most enthusiastic purchasers of the new securities, but they will be issued in minimum denominations of DM100,000, so they will be attractive to wealthy individuals as an alternative to bank savings accounts.

At present the only way for investors to buy short-term risk-free investments is to buy commercial paper issued by the Treuhand, the government's privatisation agency for eastern Germany, which is the biggest issuer on the German CP market. The shortest maturity for bunds is one year, but the bulk of the government's lending is conducted with longer maturities.

'It rounds out the range of products you will be able to invest in in Germany in comparison to the US,' says Mr Mark Houghton-Berry at Goldman Sachs in Frankfurt. The new instruments are likely to be of interest to institutional investors and to central banks which hold D-Marks as reserves.

Taken as a whole, last week's measures reflect the fact that money market operations - conducted at the moment through regular auctions of security repurchase agreements (repos) and other instruments - are more important than reserves in the battle to contain inflation. The new instruments will round out the Bundesbank's armoury of money-market tools used to fine-tune German interest rates and monetary developments.

'Compared to minimum reserves, the new instruments will give much more sensitivity to the central bankers in their steering of monetary policy,' said Mr Martin Hufner, chief economist at the Bayerische Vereinsbank. 'The money market is too narrow and does not have enough instruments.'

The new paper is not just a convenience; it also marks an important shift in the way the Bundesbank deals with German liquidity, by giving it the ability to influence the holdings of German companies. 'For the first time it will allow the Bundesbank to influence liquidity outside the banking system in the corporate sector,' said Mr Friedrich at Dresdner Bank. 'It will be able to go right to the heart of non-bank liquidity.'

---------------------------------------------------------------------- BUNDESBANK'S KEY CHANGES ---------------------------------------------------------------------- DM25bn of new short-term instruments roughly doubles amount of Federal paper available in money markets. ---------------------------------------------------------------------- Switch of emphasis from minimum reserves to money market will raise importance of day-to-day Bundesbank operations to influence rates. ---------------------------------------------------------------------- German banks will now earn interest on DM32bn of money that was previously tied up interest-free with the Bundesbank. Helps them compete for D-Mark deposits with offshore centres. ----------------------------------------------------------------------

Deutsche Bundesbank United Kingdom, EC P6011 Federal Reserve Banks P602 Commercial Banks P9651 Regulation of Miscellaneous Commercial Sectors FIN Company Finance FIN Share issues CMMT Comment & Analysis P6011 P602 P9651 The Financial Times London Page 19 1003
Charter Consolidated disposes of stake in Johnson Matthey Publication 930210FT Processed by FT 930210 By KENNETH GOODING, Mining Correspondent

CHARTER CONSOLIDATED, the UK industrial group, yesterday achieved its long-held ambition to dispose of its 38.3 per cent shareholding in Johnson Matthey, the world's biggest platinum marketing group. Charter will collect about Pounds 342m from the sale.

A large part of the Charter holding, representing 20 per cent of JM, is to be bought for Pounds 187.8m or 490p for each JM share by a new company jointly set up by Minorco, the Luxembourg investment company, and Johannesburg Consolidated Investment Corporation, the South African mining group.

All four are perceived to be part of an international 'family' of companies influenced or controlled by the Anglo American Corporation of South Africa.

The rest of the JM shares were placed with a wide range of institutions in London yesterday for Pounds 154.6m or 456p a share by Barclays de Zoete Wedd and UBS Phillips & Drew. After the announcement JM shares fell by 19p to close at 473p while Charter's ended 28p down at 656p.

Analysts suggested there was some disappointment that Charter's disposal had not sparked a bid for JM and that the platinum marketing company once again would be virtually bid-proof.

It was widely expected that Charter would use most of the cash raised to buy Minorco's 35.7 per cent stake in Charter and thus disentangle itself completely from the Anglo web

Mr Jeff Herbert, Charter's managing director, said a buy-back was one option. It had been established there would be no adverse tax implications from this. However, no formal approach had been made to Minorco and any deal would depend on Minorco's willingness to sell, and the price.

Analysts suggested that, with the removal of JM from Charter's portfolio, there seemed to be no good reason for Minorco, which is 60 per cent-owned by Anglo and its sister company De Beers, to retain its stake.

Minorco is paying Pounds 90.6m cash to Charter on completion but JCI will pay in two equal tranches of Pounds 48.61m. In the negotiations Hambros advised Charter; S G Warburg advised Minorco; Standard Merchant advised JCI; and Baring Brothers advised JM.

Lex, Page 18

Background, Page 20

Charter Consolidated Johnson Matthey Minorco Johannesburg Consolidated Investment United Kingdom, EC P6719 Holding Companies, NEC P2865 Cyclic Crudes and Intermediates P2851 Paints and Allied Products P3911 Jewelry, Precious Metal P3952 Lead Pencils and Art Goods P3569 General Industrial Machinery, NEC P2819 Industrial Inorganic Chemicals, NEC COMP Disposals COMP Shareholding CMMT Comment & Analysis P6719 P2865 P2851 P3911 P3952 P3569 P2819 The Financial Times London Page 19 438
UK Company News: David Brown - Correction Publication 930209FT Processed by FT 930214

David Brown Group, the gear and pump maker which is shortly to be floated, had one strike in 1991, a year after the group's new management team arrived. The phrase 'a strike each year since they arrived' in yesterday's FT was the result of an editing error.

David Brown Group United Kingdom, EC P33 Primary Metal Industries P3462 Iron and Steel Forgings P3561 Pumps and Pumping Equipment P6719 Holding Companies, NEC COMP Company News PEOP Labour P33 P3462 P3561 P6719 The Financial Times London Page 20 99
'Champagne' claim upheld Publication 930209FT Processed by FT 930211 By ROBERT RICE, Legal Correspondent

FRANCO-BRITISH relations took a blow yesterday when French champagne producers were defeated in a High Court case.

The champagne houses failed in an attempt to stop an English vineyard marketing a sparkling non-alcoholic drink as 'Elderflower champagne'.

The court ruled that the drink produced by the Surrey-based company Thorncroft and sold for Pounds 2.45 in champagne-style bottles with wired corks was 'misrepresentation calculated to deceive'. But it concluded that the damage to the reputation of genuine champagne would be nil or minimal.

'This is Waterloo brought up to date,' Sir Gerard Vaughan, Conservative MP for Reading East, said of the ruling.

It is the first setback in the European Community to attempts by French champagne producers to restrict the use of the appellation 'champagne' to the sparkling wine produced in the Champagne region of France since the fight with cidermaker Bulmer over calling Babycham 'champagne perry' in 1975.

Although the champagne producers lost that case in the Court of Appeal, the matter was settled subsequently by negotiation in their favour before the case was due to go before the law lords.

It comes only weeks after Hoover provoked widespread anger in France by announcing it would shift all European vacuum cleaner production to Cambuslang, near Glasgow, causing the loss of 650 jobs at its plant at Longvic, near Dijon.

The champagne houses said they would appeal.

Mr Malcolm McIntyre, director of the Champagne Bureau, said: 'We are very disappointed and I think this will cause some gnashing of teeth in Europe. It is the thin end of the wedge.'

Mr Guy Woodall, Thorncroft's owner, said he was delighted with the decision. 'The spirit of Agincourt lives on,' he said.

The Leatherhead vineyard has been marketing its drink as 'Sparkling Elderflower' since last April when the champagne producers obtained a temporary injunction preventing it from calling the drink 'champagne' pending a full court hearing.

Yesterday it was awarded costs estimated at Pounds 100,000, against the champagne producers led by Taittinger and will be entitled to damages for expenses caused by the temporary injunction, such as re-labelling.

The exclusive right to the champagne name was confirmed in this country in the early 1960s when Spanish producers of sparkling wine were banned from using it. French producers of champagne have taken legal action in many countries in an attempt to protect the name, bringing 64 actions in the English courts alone since the early 1960s.

Mr David Sills, solicitor for the champagne producers, said he was 'shocked and dismayed' by the decision.

'The judge decided there had been misrepresentaton calculated to deceive yet declined to give us a remedy.

'He also found there was a specific risk of confusion between the goods of the two parties which is contrary to the 1987 European wine regulation which says there must be no risk of confusion.

'He seems to have grafted the English requirement for there to be a likelihood of damage to the plaintiff on to the European regulation,' he said.

Thorncroft Vineyards United Kingdom, EC France, EC P2084 Wines, Brandy and Brandy Spirits P2086 Bottled and Canned Soft Drinks TECH Products GOVT Legal issues P2084 P2086 The Financial Times London Page 8 542
Elderflower champagne makers toast a victory Publication 930209FT Processed by FT 930211

A MANUFACTURER of Elderflower champagne successfully resisted a challenge by the French champagne industry in the High Court yesterday.

Thorncroft, a Surrey-based vineyard, will be allowed to go on marketing its sparkling non-alcoholic drink as Elderflower champagne even though the court ruled that the drink, sold in champagne-style bottles with wired corks, was 'misrepresentation calculated to deceive'.

But it concluded that the damage to the reputation of genuine champagne would be nil or minimal.

Mr Guy Woodall (above left), Thorncroft's owner, and partner Mr Ray Bevan toasted their triumph explosively - with Elderflower champagne.

Report, Page 8

Thorncroft Vineyards United Kingdom, EC P2084 Wines, Brandy and Brandy Spirits TECH Standards GOVT Legal issues P2084 The Financial Times London Page 1 131
International Company News: Westpac sells stake in ANZ for ADollars 215m Publication 930209FT Processed by FT 930211 By BRUCE JACQUES

WESTPAC Banking Corporation, the troubled Australian bank, has continued its asset-sale programme by selling its once-strategic 6.1 per cent stake in the rival ANZ Banking Group for just over ADollars 215m (USDollars 144.9m).

Westpac confirmed completion of the sale yesterday after the bank's brokers began the selling task in New York on Friday night.

The bank has sold a total of 77.5m ANZ shares to a range of Australian and overseas institutions.

The shares were sold at ADollars 2.905 each, yielding a small profit on Westpac's book valuation of ADollars 2.88 following a big write-down last year.

Westpac's major shareholder, the AMP Society, also revealed yesterday it had sold just under 1m ANZ shares, but retained a stake of 5.71 per cent.

The ANZ sales come amid speculation that further leading bank mergers may be allowed if the Liberal-National Party coalition wins Australia's federal election, scheduled for March 13.

Westpac also announced last night it had sold its entire 7.6 per cent stake in the Bank of Melbourne, a small Australian trading bank.

Australia and New Zealand Banking Group Westpac Banking Corp Australia P602 Commercial Banks COMP Company News COMP Disposals P602 The Financial Times London Page 24 215
International Company News in Brief Publication 930209FT Processed by FT 930211 By ALICE RAWSTHORN

SUEZ, one of France's oldest industrial groups, and Pinault, the fast-expanding retail concern, yesterday refused to comment on reports that they are negotiating a cross-shareholding agreement, writes Alice Rawsthorn.

The two companies, according to a report in yesterday's edition of Liberation newspaper, have for months been secretly discussing a deal whereby Suez would take a 22 per cent stake in Pinault in return for buying the latter's treasury stock and for ceding 5 per cent of its own shares.

Pinault, which is trying to raise capital to reduce the debts incurred in its recent acquisitions, said it had 'absolutely no comment' to make on the issue. Suez, an old-established force in French finance and industry under pressure because of the Paris property crisis, also declined to comment.

However, a Suez spokesman did not deny that the group was in discussions with Pinault.

*****

SOCIETE COMMERCIALE de Reassurances, France's largest reinsurance group, is diversifying by buying a 20 per cent stake in Coface, the state-controlled overseas export credit guarantee agency.

*****

ELF AQUITAINE, the French state-controlled oil group, is on course for a return to profits growth in 1993 according to Mr Loik le Floch-Prigent, chairman.

The group's 1992 net profits are estimated to have fallen by 35 per cent from 1991's FFr9.8bn (Dollars 1.78bn) due to the weakness of the US dollar and lower oil prices.

Compagnie Francaise d'Assurance pour le Commerce Exterieur Pinault Societe Commerciale de Reassurance Groupe Suez France, EC P6719 Holding Companies, NEC P602 Commercial Banks P2611 Pulp Mills P2621 Paper Mills P6111 Federal and Federally-Sponsored Credit Agencies P63 Insurance Carriers P2911 Petroleum Refining COMP Company News COMP Shareholding FIN Company Finance P6719 P602 P2611 P2621 P6111 P63 P2911 The Financial Times London Page 22 303
UK Company News: Net asset setback at Eng & Caledonian Publication 930209FT Processed by FT 930211

English & Caledonian Investment, which invests mainly in unlisted UK securities, saw net asset value dip to 162p by December 31. The figure compared with a value of 181.8p a year earlier.

Net revenue for the six months to end-December amounted to Pounds 116,000, down from Pounds 148,000 last time.

The interim dividend is maintained at 1.25p, payable from earnings of 2.59p (3.3p) per Pounds 1 share.

English and Caledonian Investment United Kingdom, EC P672 Investment Offices FIN Interim results P672 The Financial Times London Page 21 104
UK Company News: Provisions cut Bryant to Pounds 7.5m Publication 930209FT Processed by FT 930211 By PAUL TAYLOR

BRYANT GROUP, the West Midlands-based construction company, confirmed yesterday that consumer confidence was improving and that there were signs of re-kindled purchaser interest in new homes.

The announcement accompanied the group's interim results, which showed that pre-tax profits had fallen from Pounds 9.8m to Pounds 7.5m for the half year to November 30.

Bryant is the latest housebuilder to suggest that the combination of low interest rates, falling prices and 'the favourable affordability ratio,' is tempting buyers to return to the market.

Mr Andrew MacKenzie, chief executive, said the company had seen 'a 30 per cent year-on-year increase in both visitors and net house reservations' in the last two months.

These early signs of recovery were strongest in the south-east, but had also begun to feed through to the Midlands, he said.

Despite depressed market conditions last year, Bryant's housebuilding division managed to perform well helping the group to maintain operating profits in the opening half at Pounds 10.3m (Pounds 10.9m) on turnover which fell by 15 per cent from Pounds 163.5m to Pounds 138.4m.

However, a Pounds 1.9m loss in the group's associated undertakings, which mainly reflected Pounds 1.5m in provisions against the group's interest in property developments in Dublin and Birmingham, was behind the fall in profits at the pre-tax level.

Total provisions of Pounds 3.5m included Pounds 1m against assets in each of the property and housing divisions.

Earnings per share fell to 1.9p (2.5p). However, based on the more positive outlook the interim dividend is maintained at 1.4p.

In the first half the homes division increased sales by almost 5 per cent to Pounds 100.9m (Pounds 96.3m) and operating profits from Pounds 7.9m to Pounds 8.7m.

The number of house completions jumped by more than 13 per cent to 1,290.

Turnover in the property division fell to Pounds 7.1m (Pounds 10.8m) reflecting the harsh trading environment in both the UK and Ireland.

The division incurred an operating loss of Pounds 600,000 (profit Pounds 300,000).

The group said it planned to further reduce the level of its investment in property.

Turnover in the construction side of Pounds 30.8m (Pounds 57.1m) was in line with expectations and operating profits of Pounds 2.2m (Pounds 2.7m) reflected a number of settlements related to old contracts.

The division continued to reject work where margins were inadequate.

COMMENT

Bryant's upbeat market assessment, following similar optimistic noises from other builders, helped the shares jump 7p to 124p yesterday. Despite the recession and falling prices the management has succeeded in maintaining housebuilding volumes and margins, while making prudent provisions where necessary. The balance sheet shows group borrowings of Pounds 9.3m, representing gearing of 5 per cent, a level which will enable the group to fund land purchases to support its expanding regional house-building activities. Of more concern are the Pounds 52m of associated companies' borrowings, some Pounds 20m of which are attributable to Bryant but which are due to decline. Providing there are no surprise provisions pre-tax profits should reach about Pounds 17m this year and Pounds 25m next. But with earnings this year of about 4.4p the recent run-up in the share price makes even this quality stock look expensive. Nevertheless, it is a buy on signs of price weakness.

Bryant Construction United Kingdom, EC P6719 Holding Companies, NEC P1521 Single-Family Housing Construction P1522 Residential Construction, NEC P1541 Industrial Buildings and Warehouses P1542 Nonresidential Construction, NEC P1622 Bridge, Tunnel and Elevated Highway COMP Company News FIN Interim results P6719 P1521 P1522 P1541 P1542 P1622 The Financial Times London Page 20 605
International Company News in Brief Publication 930209FT Processed by FT 930210 By RICHARD WATERS and CHRISTOPHER BROWN-HUMES

AXA, the French insurance group, yesterday launched FFr3.65bn (Dollars 663m) of convertible bonds to strengthen the capital position of the group and some of its subsidiaries, writes Richard Waters.

The seven-year bonds, FFr741m of which have been placed internationally, are convertible into Axa shares at FFr1,285 each. This represents a 12.7 per cent premium to yesterday's closing price of FFr1,140, which was recorded before the issue was announced.

Axa has the right to call the bonds, which carry a coupon of 6 per cent and yield to maturity of 7.5 per cent, at any time from the beginning of 1996.

The existing majority shareholders of the group, which control 50.9 per cent, will retain control after the offering. Existing shareholders are being offered one convertible for every 11 shares held, with a priority period to apply before 22 February.

*****

NORDIC Investment Bank boosted profit before allocations to Special Drawing Rights 45m (Dollars 61m) in 1992, up 12.5 per cent from SDR40m a year earlier, writes Christopher Brown-Humes.

The Helsinki-based bank, which is owned by the governments of the five Nordic countries, saw net interest income rise to SDR65m in 1992 from SDR60m. It is proposing an unchanged dividend of SDR10m to member countries.

Nordic Investment Bank Axa France, EC P6311 Life Insurance P602 Commercial Banks FIN Annual report COMP Company News FIN Company Finance P6311 P602 The Financial Times International Page 16 250
Trinidad wages warning angers state workers Publication 930209FT Processed by FT 930210 By CANUTE JAMES KINGSTON

THE government of Trinidad and Tobago is facing a public protest over its inability to make payments to public sector workers while attempting to meet foreign debt obligations.

Thousands of government workers have been protesting in Port of Spain, capital of the English-speaking Caribbean republic, and unions are threatening further action which could cripple the economy. The actions follow statements by the finance minister that retrenchment in the public sector was inevitable. Union leaders have said more protests are likely this week.

The protests started when Mr Wendell Mottley, the finance minister, said that falling international oil prices, the external debt and a high wage bill meant that the government could no longer postpone retrenchment in inefficient public companies. 'Inevitably, the painful matter of separation of a significant number of workers will arise. It is an issue that we just cannot postpone further,' Mr Mottley said.

He said foreign debt obligations and the government's commitments on wages and salaries could not both be met at the same time.

The government has said it would have to take 'tough decisions' on whether it could afford payment of TTDollars 3bn (USDollars 705m) in arrears due to government workers. Union leaders have been incensed by plans to cut thousands of jobs from three public companies - the port authority, the water authority and the transport company.

Mr Mottley said the port authority's monthly revenue was TTDollars 5.7m, while pensions and wages cost TTDollars 10.2m per month. The transport company earned TTDollars 30m last year while paying TTDollars 86m in wages and the water authority last year paid wages of TTDollars 157m while earning TTDollars 134m.

Trinidad and Tobago, Caribbean P9611 Administration of General Economic Programs PEOP Labour GOVT Government News P9611 The Financial Times International Page 4 309
Two British men found dead in Bosnia Publication 930209FT Processed by FT 930210 By AP

Two British men have been found dead in Bosnia, the UK Foreign Office said yesterday, AP reports. The men were reportedly mercenaries training Moslem troops in the area of Travnik, about 70km north-west of Sarajevo.

A Foreign Office spokesman said it had asked the United Nations and the International Red Cross for details about the men, whose identities were not known. Reports suggest they were taken from their apartment in Travnik and driven to Turbe, a village 10km to the west. Major Martin Waters of the British forces in nearby Vitez said they were found tied up with gunshot wounds to the head.

Bosnia-Hercegovina, East Europe P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 2 139
Mafia suspect arrested Publication 930209FT Processed by FT 930210 By REUTER NAPLES

Ms Rosetta Cutolo, 56, one of the 'Godmothers' who allegedly helped turn the Naples Mafia, the Camorra, into a vast criminal empire, was arrested yesterday after 13 years on the run, Reuter reports from Naples. She had been sentenced in her absence to nearly 10 years in jail for a string of offences, including murder.

Italy, EC P86 Membership Organizations PEOP Personnel News GOVT Legal issues P86 The Financial Times International Page 2 84
Greece deports 400 Albanians Publication 930209FT Processed by FT 930210 By AP

Greece sent hundreds of Albanians back across the border as part of an effort to expel an estimated 500,000 illegal aliens, AP reports. Police at the border post of Kristallopigi deported about 400 Albanians at the weekend.

Greece, EC Albania, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 2 66
Pilots oppose EC rule on hours Publication 930209FT Processed by FT 930210 By ROBERT TAYLOR, Labour Correspondent

Europe's airline pilots are planning co-ordinated opposition to a planned European Community regulation designed to increase their working hours, writes Robert Taylor, Labour Correspondent. Leaders of the British Airline Pilots' Association will today meet Lord Caithness, the minister responsible for civil aviation, when they will urge him to reject the regulation on safety grounds.

Europe P45 Transportation by Air PEOP Labour GOVT Regulations P45 The Financial Times International Page 2 86
Denmark faces pay conflict Publication 930209FT Processed by FT 930210 By HILARY BARNES COPENHAGEN

Industrial conflict is threatening Denmark following the breakdown yesterday of negotiations for a new two-year collective wage agreement between employers and trade unions representing 200,000 workers in manufacturing industry, writes Hilary Barnes in Copenhagen.

The employers are seeking a no-increase agreement, which the unions have rejected. But there is a complex mediation system which would delay any strike moves for several weeks.

Denmark, EC P8631 Labor Organizations P30 Rubber and Miscellaneous Plastics Products P32 Stone, Clay, and Glass Products P33 Primary Metal Industries P34 Fabricated Metal Products P35 Industrial Machinery and Equipment P36 Electronic and Other Electric Equipment P37 Transportation Equipment P39 Miscellaneous Manufacturing Industries PEOP Labour P8631 P30 P32 P33 P34 P35 P36 P37 P39 The Financial Times International Page 2 135
Czechs and Slovaks agree bilateral payments accord Publication 930209FT Processed by FT 930210 By PATRICK BLUM PRAGUE

THE Czech and Slovak parliaments approved a payments clearing accord - just in time for yesterday's introduction of separate currencies.

As from yesterday the Czechoslovak koruna (crown) has been abolished to make way for separate Czech and Slovak crowns. Initially, these will be differently stamped old banknotes as the new national ones are gradually introduced. The Czech republic and Slovakia continued to share the same currency after the split of the former Czechoslovak state on January 1 this year. Old banknotes are no longer valid except for small denominations.

The clearing accord aims to provide a stable framework for trade between the two states, though bilateral trade is expected to decline as each country seeks new markets.

On the domestic front, dividing up assets is proving a contentious issue, made more difficult by the introduction of separate currencies and the expectation of a Slovak crown devaluation. Czechs and Slovaks are currently locked in dispute over who owes what.

Mr Ivan Kocarnic, the Czech finance minister, said at the weekend Slovak banks borrowed 25bn crowns (Dollars 860m) more from the former Czechoslovak National Bank than their Czech counterparts and this will need to be repaid. He said payment could be made over a 10-year period. One way would be for Slovakia to waive transit fees on Czech imports of Siberian gas distributed by a pipeline running across its territory.

The division of gold reserves and the national banks' foreign securities assets are also controversial issues. Agreement has been stalled because of a dispute over 7.3 tonnes of gold which Bratislava says were taken by Prague at the end of the second world war when the short-lived Nazi-backed Slovakia was brought back into a unified Czechoslovakia.

The Czech government will accept the transit across its territory of east European refugees expelled from Germany only if Bonn can guarantee that they will not remain stranded in the Czech republic, Mr Jan Ruml, the Czech interior minister, said at the weekend.

Czech Republic, East Europe Cook Islands, Oceania P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs GOVT Government News P9311 P9721 The Financial Times International Page 2 370
World News in Brief: Nobel nominations Publication 930209FT Processed by FT 930210

French President Francois Mitterrand and German Chancellor Helmut Kohl have been jointly nominated for the 1993 Nobel Peace Prize for working towards a united Europe.

France, EC Germany, EC P9721 International Affairs PEOP Personnel News Mitterand, F French President nominated for the 1993 Nobel Peace Prize Kohl, H German Chancellor nominated for the 1993 Novel Peace Prize P9721 The Financial Times International Page 1 76
World News in Brief: Wartime police chief faces trial Publication 930209FT Processed by FT 930210

A French public prosecutor will recommend that Rene Bousquet, a wartime police chief, be tried for sending 13,000 Jews to Nazi death camps, judicial sources said.

France, EC P9222 Legal Counsel and Prosecution PEOP Personnel News P9222 The Financial Times International Page 1 57
World News in Brief: Honecker 'millions' denied Publication 930209FT Processed by FT 930210

Berlin officials denied former East German communist leader Erich Honecker, now in exile in Chile, had received over Dollars 2m that had been hidden in Liechtenstein.

Germany, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times International Page 1 56
World News in Brief: Rebels bombard Kabul Publication 930209FT Processed by FT 930210

More than 200 rebel rockets hit the Afghan capital Kabul, killing 54 people and injuring more than 100, Kabul Radio said. Afghan factions resort to arms, Page 3

Afghanistan, Asia P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times International Page 1 58
How Lamont's advisers would lead Britain out of recession Publication 930209FT Processed by FT 930209

------------------------------------------------------------------------ THE FREE MARKET EVANGELIST Patrick Minford Economics professor, Liverpool University ------------------------------------------------------------------------ INTEREST RATES Wants to see base rates cut by 3 percentage points to 3 per cent by mid-March, and staying at around that rate until the end of year if there is no sign of clear revival. ------------------------------------------------------------------------ TAX INCREASES Not in favour. Wants tax cuts in the medium term to help incentives. Believes high public sector borrowing requirement is largely due to the recession. ------------------------------------------------------------------------ INFLATION TARGET Treasury's target of keeping underlying inflation below 4 per cent will 'quite probably' be breached this year, due to effects of devaluation. ------------------------------------------------------------------------ ERM RE-ENTRY Opposes ERM re-entry at any time, on any terms. ------------------------------------------------------------------------

PUBLIC SPENDING Favours cuts over next few years, together with reforms based on charging for specific services such as health and education. ------------------------------------------------------------------------ ECONOMIC GROWTH On worst case, economy could contract by 0.5 per cent this year. At best, could expand by 0.5 per cent. Longer-term, he is optimistic about growth prospects. ------------------------------------------------------------------------ FORECASTING RECORD Came 4th out of 41 forecasting groups in FT survey of accuracy of growth predictions during recession. ------------------------------------------------------------------------ UNEMPLOYMENT Thinks unemployment will peak in late 1993 at 3.25m, assuming further cuts in interest rates. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990S Continuation of reforms started by Thatcher governments. ------------------------------------------------------------------------

THE CULTIVATED CASSANDRA Wynne Godley Professor of applied economics, Cambridge University ------------------------------------------------------------------------ INTEREST RATES Unsure about whether more action is needed after last month's cut to 6 per cent. At end of last year called for immediate cut to 5 per cent. ------------------------------------------------------------------------ TAX INCREASES Does not want to specify a view. He believes high government deficits may not necessarily be a problem. ------------------------------------------------------------------------ INFLATION TARGET Inflation might 'nudge' government target this year. ------------------------------------------------------------------------ ERM RE-ENTRY Not unless system is reformed. ------------------------------------------------------------------------ PUBLIC SPENDING Not willing to provide a view. ------------------------------------------------------------------------

ECONOMIC GROWTH Last December projected 0.5 per cent growth this year, picking up to 1.5 per cent next year. ------------------------------------------------------------------------ FORECASTING RECORD Unranked in FT survey because insufficient forecasts; since early 1991 has had good record in predicting lengthy recession. ------------------------------------------------------------------------ UNEMPLOYMENT Generally gloomy about prospects. Thinks figures could climb above 3.4m in 1994. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990S UK to sell goods and services on world markets more successfully than in the past. ------------------------------------------------------------------------ THE UNBENDING MONETARIST Tim Congdon Managing director, Lombard Street Research ------------------------------------------------------------------------ INTEREST RATES In December he forecast a 6.5 per cent base rate by the end of 1993. Does not want to say where he thinks rates should be. ------------------------------------------------------------------------

TAX INCREASES Wants a tax increase of about pounds 12bn announced in March 16 Budget, spread over income tax, National Insurance contributions and indirect taxes. 'Very worried' by rise in government deficit. ------------------------------------------------------------------------ INFLATION TARGET Government target may be exceeded briefly this year, but he thinks inflation is on a downward trend in 1994 and 1995, assuming 'sensible' policies and use of broad-money targets. ------------------------------------------------------------------------ ERM RE-ENTRY Never. ------------------------------------------------------------------------ PUBLIC SPENDING Wants 'significant cuts' in next few years. ------------------------------------------------------------------------ ECONOMIC GROWTH 1 per cent growth likely this year. Thinks conditions for a lasting recovery are in place, though much depends on world economic conditions. ------------------------------------------------------------------------

FORECASTING RECORD 8th in FT survey. ------------------------------------------------------------------------ UNEMPLOYMENT Likely to peak at 3.3m in the first half of next year. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990s To reconcile steady growth at trend rate without inflation. Over next year government must act to stop disintegration of financial system by debt inflation. ------------------------------------------------------------------------ THE ENTHUSIASTIC NUMBER-CRUNCHER Andrew Sentance Economics director, Confederation of British Industry ------------------------------------------------------------------------ INTEREST RATES Wait and see before cutting again. Hopes for lower interest rates over the next few years. ------------------------------------------------------------------------

TAX INCREASES May be needed, especially if consumer spending looks like growing too quickly. ------------------------------------------------------------------------ INFLATION TARGET Will not be exceeded 'in any serious way' this year. ------------------------------------------------------------------------ ERM RE-ENTRY Not until economy growing again and conditions in rest of Europe more settled. ------------------------------------------------------------------------ PUBLIC SPENDING Cuts may be needed, especially if PSBR goes too high. ------------------------------------------------------------------------ ECONOMIC GROWTH 0.7 per cent likely this year. ------------------------------------------------------------------------ FORECASTING RECORD 11th in FT survey. ------------------------------------------------------------------------ UNEMPLOYMENT Rise to 3.2m by end of 1994. ------------------------------------------------------------------------

CHALLENGE FOR THE 1990s To reduce unemployment and speed up growth without higher current account deficit ------------------------------------------------------------------------ THE MAN FOR ALL PARTIES Gavyn Davies Chief UK economist, Goldman Sachs ------------------------------------------------------------------------ INTEREST RATES Hopes to see cut to 5 per cent by late spring, possibly 4 per cent later to boost recovery hopes. ------------------------------------------------------------------------ TAX INCREASES Wants to see roughly pounds 12bn in tax increases, to take effect in 1994-95 rather than in 1993-94 so as not to stall recovery. Chancellor could announce tax rises in March 16 budget. ------------------------------------------------------------------------ INFLATION TARGET Inflation not the key problem facing Britain. ------------------------------------------------------------------------

ERM RE-ENTRY Premature to say, as system may not survive. ------------------------------------------------------------------------ PUBLIC SPENDING Unwilling to specify views, but forecasts assume little change to government plans. ------------------------------------------------------------------------ ECONOMIC GROWTH Growth of 1.5 per cent predicted for this year. ------------------------------------------------------------------------ FORECASTING RECORD 7th in FT survey. ------------------------------------------------------------------------ UNEMPLOYMENT Likely to rise to 3.25m and stay at this level for some years. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990s To tackle structural defects in UK economy, including quality of investment, labour market, training and education. ------------------------------------------------------------------------

THE BUSINESS GURU David Currie Head of economic forecasting, London Business School ------------------------------------------------------------------------ INTEREST RATES In favour of generally lower base rates but thinks they might need to rise later this year if higher prices from devaluation start to feed through to wage claims. ------------------------------------------------------------------------ TAX INCREASES May be needed due to high PSBR. ------------------------------------------------------------------------ INFLATION TARGET May be breached over the next two years, though this is not of serious concern. ------------------------------------------------------------------------ ERM RE-ENTRY Unlikely in immediate future. ------------------------------------------------------------------------ PUBLIC SPENDING Large cuts unlikely in the near future, due to the pressure on priority areas. ------------------------------------------------------------------------

FORECASTING RECORD 31st in FT survey. ------------------------------------------------------------------------ UNEMPLOYMENT Likely to remain high, falling only slightly below 3m in 1996. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990s Not willing to specify. ------------------------------------------------------------------------ THE CONSENSUS-MINDED THEORIST Andrew Britton Director, National Institute of Economic and Social Research ------------------------------------------------------------------------ INTEREST RATES After the recent cut, wants to wait for more signs of economic activity before further activity. ------------------------------------------------------------------------ TAX INCREASES Not in favour of precipitate action. Thinks 'scare stories' about large PSBR may be overdone. ------------------------------------------------------------------------

INFLATION TARGET A 'clear risk' of 1 to 4 per cent target being breached this year. ------------------------------------------------------------------------ ERM RE-ENTRY Decision should be postponed until view becomes clearer of how system will evolve. ------------------------------------------------------------------------ PUBLIC SPENDING Thinks spending might overshoot government targets in coming years, in which case some tax increases might be needed. ------------------------------------------------------------------------ ECONOMIC GROWTH Sticking to forecast of about 2 per cent growth this year. ------------------------------------------------------------------------ FORECASTING RECORD 36th in FT survey. ------------------------------------------------------------------------ UNEMPLOYMENT May rise to 3.2m and stay at this level for some years. ------------------------------------------------------------------------ CHALLENGE FOR THE 1990s Reduce unemployment. ------------------------------------------------------------------------ Source: FT interviews and questionnaire; FT survey of forecasts December 21 1992; FT survey of accuracy of growth projections in 1990-92, October 1992; speech by David Currie at Institute of Economic Affairs conference, January 21, 1993; The Consequences of Government's New Inflation Target, Gavyn Davies, January 20 1993. ------------------------------------------------------------------------

United Kingdom, EC P9121 Legislative Bodies P9311 Finance, Taxation, and Monetary Policy PEOP Personnel News Minford, M Ecomonics Professor Liverpool University (UK) Wayne Godfrey Professor of Applied Economics Cambridge University (UK) Congdon, T Managing Director Lombard Street Research (UK) Sentance, A Economics Director Confederation of British Industry (UK) Davies, G Chief UK Economist Goldman Sachs (UK) Currie, D Head of Economic Forecasting London Business School (UK) Britton, A Director National Institute of Economic and Social Research (UK) P9121 P9311 The Financial Times London Page 6 1293
UK Company News: NEI preference share decision Publication 930209FT Processed by FT 930209

Following a formal objection to Northern Engineering Industries' petition for confirmation by the Court of the cancellation and repayment of its 3 per cent, 5.375 per cent and 11 per cent preference shares the judge has reserved judgment.

Accordingly, the timetable for the cancellation and repayment of the preference shares has been extended.

Northern Engineering Industries United Kingdom, EC P6719 Holding Companies, NEC P1799 Special Trade Contractors, NEC P3536 Hoists, Cranes and Monorails P3537 Industrial Trucks and Tractors P3621 Motors and Generators COMP Company News GOVT Legal issues P6719 P1799 P3536 P3537 P3621 The Financial Times London Page 20 112
Personal View: How to mend the labour market Publication 930209FT Processed by FT 930209 By RICHARD LAYARD

With unemployment in the UK nearing 3m it is time for a fundamental re-think of policy. For we now know that high unemployment is not a temporary problem. It is a permanent scar on Britain's present economic structures.

Since 1986 the number of people out of work has averaged 2.4m. Inflation now is the same as in 1986, so this means that, as things are, the government cannot control inflation with fewer then 2.4m unemployed. That is the horrible truth that needs addressing.

First, a policy is needed which will prevent long-term unemployment (of more than one year). On most evidence long-term unemployment does nothing to prevent inflationary wage pressures, so it is a total waste. The long-term unemployed cease to be part of the effective supply of labour since they become of no interest to employers. This imposes a huge cost on taxpayers and companies, as well as on the unemployed themselves.

Unemployment now costs the economy roughly Pounds 60bn, of which Pounds 24bn is borne by taxpayers, Pounds 12bn by lost profits and Pounds 24bn by the unemployed. Long-term unemployment accounts for about a third of the total.

To prevent long-term unemployment requires adopting an 'active labour market policy' of the kind recommended by the OECD and practised in Sweden, even by its new Conservative government.

The principle is that, if people want to work, they should be helped to be employable. And no one should be left to rot in idleness for more than a year with no offer of useful work.

An active labour market policy for Britain would have the following elements:

Job Centres would provide for each unemployed person a personal placement officer, who would ensure that every client received training or a job offer within a year.

Training would be of better quality than at present (Sweden spends the same on an unemployed trainee as on a university student).

If a person gets no offer of regular work within a year, he or she must be offered temporary work. This should be with a regular employer and be paid at the standard hourly rate for the job. A low-quality 'workfare' scheme, where workers get benefit 'plus', would be a real mistake. Workers need the self-respect which goes with a normal job paid at the normal rate. If funds are stretched, the job could in the last resort be part-time. There is little point keeping people off the unemployment register if they are doing nothing useful. Poor-quality schemes are unlikely to be justified. What is done now should be part of a long-term plan, constructing a system which will prevent long-term unemployment.

Details of such a plan have been outlined in a pamphlet by John Philpott and myself*. International evidence suggests that such a system could reduce Britain's unemployment permanently by about 0.75m. In due course it would pay for itself through lower benefits and higher tax receipts.

A complete system could not be fully in place much before 2000. But now is the time to start. The proposed 250,000 temporary jobs should be a step on the way.

Second, a rethink on youth training is needed. At least two-thirds of British workers have no professional or vocational qualification - compared with only a quarter in Germany. No wonder so many find it difficult to get jobs.

If Britain follows the German example it should:

finance all vocational education and training from collective sources (taxes or levies);

require that all young people in employment are employed as trainees, with at least one day a week off-the-job training.

Improving the quality of labour will do much to reduce inflationary pressures. But, point three, Britain must also improve its anarchic system of wage determination. As soon as there is a recovery, wage settlements will rise again, as they did after 1986. The country will be into the same old cycle. Business, in its own interest, should deal with this problem by contriving a more co-ordinated approach to wage determination, analogous to Germany's. But this will not happen without government encouragement.

In this connection everyone in Britain should be watching Germany, to see how it handles infinitely greater problems than Britain has ever had to face. You can be sure that western Germany will control its inflation with fewer than 3m unemployed. So should Britain.

The author is director of the Centre for Economic Performance at London School of Economics.

*Stopping Unemployment, from Employment Policy Institute, Southbank House, Black Prince Road, London SEl 7ST

United Kingdom, EC ECON Employment & unemployment The Financial Times London Page 17 775
Time to tilt the balance: UK pension funds are under growing pressure to increase their holdings of bonds Publication 930209FT Processed by FT 930209 By JOHN PLENDER

Since the turn of the year Britain's pension fund trustees have been weighed down by an awesome volume of paper from City analysts on the relative merits of equities and bonds. Nearly 80 per cent of their Pounds 350bn portfolio is invested in equities - a higher proportion than in any other industrialised country. The question is whether the people who hold the nation's retirement prospects in their hands are dangerously over-exposed, when inflation poses a diminished threat to bond values.

At first sight it may seem an odd question to raise when equity markets across the world are soaring on the back of falling interest rates. Yet for trustees the decline in dividend yields resulting from rising prices can be bad news, since actuaries value pension fund investments on the basis not of stock market values, but potential income streams. And with the equity market yield down to 4 1/4 per cent, against the 8 3/4 per cent available at the long end of the gilt-edged market, the bond-equity debate is very much alive.

The following tour d'horizon of the arguments suggests no simple answers, bar one: the percentage of UK pension fund portfolios devoted to bonds is bound to rise. In a recent review of the debate, Sushil Wadhwani and Mushtaq Shah of investment bank Goldman Sachs point out that there has been a positive correlation between the bond weighting in portfolios and the public sector borrowing requirement (see chart). A PSBR approaching 9 per cent of GDP next year will exert an upward pull on bond weightings, though a less powerful one than in the days of exchange controls.

The maturity of pension schemes is pushing in the same direction. Between 1967 and 1987 the number of pensioners increased as a percentage of all the members of UK pension schemes from 19 per cent to 57 per cent. If mature funds are obliged to sell investments to pay pensions, liquidity in the shape of cash and gilts becomes important.

As the yield curve has steepened, with short interest rates falling faster than long rates, cash looks unattractive to funds that worry about short-term performance. The question, then, is simply the price at which pension funds increase their bond holdings. Do gilt yields provide adequate compensation against the risk of resurgent inflation? Put the other way, will the rising stream of future dividend income adequately compensate for the extra income foregone in gilts, after allowing for the additional risk inherent in equity investment?

The extreme aversion of British pension fund trustees to gilts derives some support from history. According to a study by BZW, the UK investment bank, of the performance of equities and gilts since 1918, equities produced an average annual real return over the past 74 years of 7.3 per cent, compared with a dismal 1.2 per cent on gilts and 1 per cent on cash. On that basis an investor looking for maximum long-term return without regard to risk or income requirements would have done best to hold equities exclusively. It follows that, before fund managers substantially boost their gilt holdings, they have to convince themselves of the existence of a historical watershed. Is it possible, for example, that equities and gilts are mispriced?

This has certainly happened before. In the 1940s and 1950s the conventional wisdom in the rarefied world of the actuarial profession was that equities were so risky that they should yield more than fixed-interest gilts. Yet the value of gilts bought at that time was destroyed by unanticipated inflation.

Today it is easy to make a case that global inflation has been laid low by a combination of central bank rigour, persistent output gaps in the developed world economies and the emergence of a global labour market, all of which exert downward pressure on prices. Yet real rates of interest are above their postwar average, which suggests that the markets' inflation expectations are based more on past experience than on future probability.

Over the past two years that has amounted to a powerful global case for buying bonds. In the UK the argument is complicated by the sorry record of the Treasury and the Bank of England in monetary policy and exchange rate management. But the market knows about the record; and in a debt-burdened economy in which pay settlements are moderating fast as unemployment soars, many analysts feel that the market's expectation of 5 per cent inflation (the long gilt yield minus the yield on index-linked gilts) is excessive.

Consider the equity side of the equation. It is widely accepted that dividend growth holds the key to future share price performance. Adding BZW's historic rate of real dividend growth of about 1 3/4 per cent - close to growth in GDP - to today's equity market yield of 4 1/4 per cent points to a real equity return of 6 per cent. That looks good compared with the real 3 3/4 per cent available on index-linked gilts, or on long-dated gilts after 5 per cent inflation.

Looking at nominal dividend growth, as Paul Walton of stockbrokers James Capel did in a recent exercise, throws up similar results. A survey of leading companies and fund managers showed that the expectation of medium-term dividend growth was 6 per cent; and an examination of the ability of leading companies to pay dividends appeared to support the finding. Given that most actuarial valuations assume a 5 per cent dividend growth rate, this looks reassuring.

But the assumptions can readily be attacked. For a start, few company analysts are making any allowance in their forecasts for the increasingly plausible threat of a sharp deterioration in global trade relations. And it is becoming all too easy to paint low-growth, low-inflation scenarios for the world and for Britain. One of the more cogent comes from Brian Reading of Lombard Street Research, whose latest monthly review suggests that in a world of structural budget deficits, undercapitalised banks and overborrowed companies and consumers, we might even see falling prices by the mid-1990s. He also points out that in the three decades before the first world war inflation averaged less than 1 per cent in the industrialised countries.

As far as dividends are concerned, perceptions may have been over-influenced by the freakishly high payouts of the 1980s. In a recent paper to the Institute of Actuaries, Peter Jones of James Capel pointed out that the period of handsome outperformance by equities against gilts happened before 1958 when dividend yields fell below gilt yields - the emergence of the so-called 'rev-erse yield gap'. With lower dividend expectations than in the 1980s he expects the equity risk premium - the excess return of equities over gilts - to be lower than at any time in seven decades. A point in support of the anti-equity case is that real dividend growth, using a three-year moving average, was negative from 1962 to 1982 (see chart).

But perhaps the most difficult hurdle for equity investors is simply the demanding starting point of a 4 1/4 per cent yield. Just how difficult it is to outperform from a historically low yield base has been demonstrated in an in-house study by Daniel O'Shea of the M&G unit trust group, using BZW's figures up to 1990. This set out to measure the average annual return on equities over five-year periods, dividing the years into those where the starting point was below the average long-term average yield of 4.7 per cent, and those where it was above. The results showed, inter alia, that 65 per cent of the time, when the starting point was below that 4.7 yield, the return on equities was below 3 per cent in real terms. Three per cent is traditionally regarded as the century-in/century-out real return on risk-free bonds. Note, too, that today's yield level is lower than it looks, because of the addition of high-yield utilities to the market in the past decade. So the equity odds are tougher as the bull market continues.

In investment, timing is all. But most fund managers are not in the business of maximising returns. To keep their jobs, they seek whatever modest degree of outperformance is compatible with the behaviour of the herd. The one safe conclusion is that, if this really is the decade of the bond in Britain, most fund managers will be late to act on it.

United Kingdom, EC P6371 Pension, Health, and Welfare Funds P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6371 P6231 The Financial Times London Page 17 1446
Leading Article: Punitive damages Publication 930209FT Processed by FT 930209

GENERAL MOTORS has been ordered by an American jury to pay punitive damages of Dollars 101m, on top of Dollars 4.2m compensation for pain and suffering, to the parents of a 17-year-old boy who died when his GM pick-up truck crashed and burst into flames. His parents claimed that faulty design and placement of the fuel tank caused their son's death. The case, broadcast live on television, has highlighted in a dramatic way the long-running battle between business and consumer groups over the future of America's civil liability system.

Industry has long argued that the US product-liability system has itself become a liability to the economy. Businesses claim it discourages innovation and dampens competitiveness. Consumer groups counter that the threat of lawsuits and huge damages forces companies to make safer products. Industry has powerful arguments on its side. A recent Brookings Institute study of the impact of lawsuits on safety and innovation in five industries concluded litigation was not 'an overwhelming driving force for safety' and that uncertainty over damages awards had 'probably reduced innovation'.

The key to reform lies in replacing the patchwork of state laws with a uniform federal liability code which would create standards for awarding punitive damages. The latest attempt to introduce reform along these lines failed to pass Congress in 1991. This was a pity, because a uniform approach is clearly desirable. It would eliminate the uncertainty in the present system, help to lower litigation costs by promoting settlements, and foster innovation. The business lobby claimed the bill was pro-consumer because it would encourage speedier pay-outs and unclog the courts. Consumer groups said it would deter people from suing. Now business fears that, with the Clinton administration likely to be more pro-plaintiff, the chance for reform may have gone.

One window of opportunity remains. The US Supreme Court has recently accepted a punitive damages case for review, in which it will be asked to rule whether excessive punitive awards are unconstitutional. This is the fifth time the Court has considered the issue, and it has yet to uphold a single challenge. But on the last occasion in 1991, the Court said a punitive award four times bigger than the compensatory damages awarded was 'close to the line of constitutional impropriety'. In the case to be reviewed, the punitive damages were 526 times the compensatory award. All businesses selling products in the US market must hope the Court will now recognise that punitive damages in America have gone too far.

General Motors Corp United States of America P3713 Truck and Bus Bodies TECH Safety GOVT Legal issues P3713 The Financial Times London Page 17 448
Leading Article: Classroom peace Publication 930209FT Processed by FT 930209

SCHOOLS IN England and Wales are caught in a whirlwind. They have never known a period of more rapid change. The cry is going up: 'enough, no more', with teachers focusing their resentment on the first compulsory tests for 14-year-olds, to be sat this June.

Two of the teachers' unions are proposing to boycott the tests, arguing that preparation has been inadequate and disruption will be too great. This is deplorable. The only casualties of a boycott will be pupils. But the government should listen to the well-founded concerns of teachers. It could make the pace of change more manageable without sacrificing the laudable object of its curriculum reforms: higher standards, particularly in basic skills.

Three separate gusts are howling through the classroom. Curriculum reform, accompanied by compulsory tests at seven, 11 and 14, is just the first. Second is the government's campaign to persuade schools to opt out of local authority control. Third is the new inspection regime, which will make all schools subject to regular external monitoring.

Although the first is generating most noise at the moment, it cannot be seen in isolation. Schools are also having to come to grips with devolved budgeting; and many have either opted for grant-maintained status, or are locked in internal debate about whether to do so. They will soon face visits from the new inspectorate.

Curriculum reform comes on top of that. To take just secondary-level English, the main cause of the present unrest, teachers have had to get the national curriculum off the ground in the last three years; this year they also have to cope both with the precipitate abolition of most GCSE coursework and with the compulsory tests for 14-year-olds, materials for which have only just reached them.

Overload alone should counsel restraint. One of the chief concerns among English teachers is that publication of this year's test results will say more about the relative success of schools in digesting mountains of last-minute paper from the government's examinations council than anything else.

It is important not to strengthen the more Luddite teachers' unions, who want to undermine the current testing policy. But for education secretary John Patten's reforms to succeed, he needs the wholehearted co-operation of his workforce. Conceded with good grace, a year's delay in publishing the English test results implies no weakening of his commitment to testing. If it will secure teacher goodwill, it is a small price to pay for peace in the classroom.

United Kingdom, EC P8211 Elementary and Secondary Schools TECH Standards TECH Services CMMT Comment & Analysis P8211 The Financial Times London Page 17 441
Observer: Snowed under Publication 930209FT Processed by FT 930209

Early days yet, but Observer's request for samples of Swiss humour has led to an avalanche of suggestions, most of them printable. This week will therefore be Observer's Swiss joke week.

A Swiss financier has passed on the tale about the late Avery Brundage, a famous president of the International Olympic Committee. God greets Brundage on arrival in heaven and says that since he's been such a good chap he can have a second life. God is a little surprised when Brundage asks if he can return as a banker, but let's it pass without comment.

'Any particular bank in mind?' asks God.

'The Swiss Volksbank,' replies Brundage.

'Why Swiss Volksbank rather than the chairmanship of one of the Big three Swiss banks?' asks God.

Back comes the reply. 'It's easy. All my life I have wanted to work with real amateurs.'

Switzerland, West Europe P99 Nonclassifiable Establishments CMMT Comment & Analysis P99 The Financial Times London Page 17 167
Observer: Good return Publication 930209FT Processed by FT 930209

Good to see that the six-week Bolshoi ballet season at London's Albert Hall has been a great success after all. More than 80 per cent of the seats have been sold and promoter Derek Block and Bolshoi director Yury Grigorovich stand to pocket a Pounds 1m plus profit.

The Albert Hall's new commercially-minded management is also happy - even though it decided to minimise its risk by renting the hall out for a fixed amount rather than a share of the take. It has proved to the world that the Hall doesn't just have to rely on the BBC proms for big commercial successes.

The only possible grumblers are the 300 debenture holders who control close to a third of the 5,200 seats. They sacrificed a chance to watch 34 of the 37 Bolshoi performances so that their seats could be sold to the public.

The consolation is that if the Albert Hall continues to make surpluses, which, as a charity, must be ploughed back into improving the venue, it does raise the value of the debentures. They rarely appear on the market but the last box to be sold three years ago changed hands for Pounds 320,000, a good return on the original, 1871, investment of Pounds 25 a seat.

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 17 238
Observer: Waterfront killing Publication 930209FT Processed by FT 930209

Tiny Rowland's affection for Africa is well documented. It looks, however, as if Dieter Bock, the mysterious German financier who is set to join Lonrho's board this week, also knows his way around the Cape.

Bock is reported to be one of the key investors in a lucrative package of land which links Cape Town's enormously successful waterfront development with the city centre. Local property developers have for years been trying to unlock the potential of the old power station/Imperial Cold Storage site. However, it seems that Bock, with the help of a young entrepreneur called Neil Bernstein, has outmanoeuvred the local property establishment and now controls one of the prize property sites in Cape Town.

Details of Bock's Cape property interests, like the rest of his business affairs, remain sketchy but they suggest that Tiny has spotted a businessman with the same sort of capacity as himself for doing deals.

Meanwhile, don't imagine that Tiny himself has said goodbye to the African stage. There are persistent rumours in Southern Africa that he is going to continue to expand his newspaper interests by helping support a planned ANC daily newspaper.

South Africa, Africa P65 Real Estate CMMT Comment & Analysis P65 The Financial Times London Page 17 215
Observer: Who was who Publication 930209FT Processed by FT 930209

Italy's Socialist leader Bettino Craxi, who only a year ago was seen as a presidential contender, has been dealt a further blow. He is to be struck out of the 1993 Italian edition of Who's Who when it's published in September.

Craxi is under investigation on four counts of corruption and violating laws on the financing of political parties. He denies any wrongdoing but the politically correct Italian edition of Who's Who is not taking any chances with his reputation or its own.

Italy, EC P91 Executive, Legislative and General Government PEOP Personnel News Craxi, B Leader Socialist Party (Italy) P91 The Financial Times London Page 17 117
Observer: Gatwick flyer Publication 930209FT Processed by FT 930209

So you think buying a railway ticket will get more complicated after British Rail's privatisation? You should try buying one today from London to Gatwick Airport.

As things stand, you can choose between two types of train for the journey: InterCity's non-stop Gatwick Express, taking 30 minutes, or a Network SouthEast suburban train taking four minutes longer. British Rail charges exactly the same fare whichever train you choose - Pounds 8.60 for the one-way journey - so everyone takes the Gatwick Express.

But wait: Pounds 8.60 is much more than you would normally expect to pay for a 27-mile trip on Network SouthEast. And indeed, on examining the fare table, you find that the fare from London to Three Bridges, the next station down the line, is only Pounds 6.70. In other words, British Rail is artificially bumping up the Network SouthEast fare to Gatwick to protect its InterCity revenues.

The thrifty solution would clearly be to take a Pounds 6.70 ride on the Network SouthEast train to Three Bridges and get off a station early, thus saving Pounds 1.90. BR says this is unlawful, so you would get into trouble if a ticket inspector caught you. However, the determined cheapskate can legitimately save 70p by taking a Pounds 6.70 trip to Three Bridges and booking another ticket there for the Pounds 1.20 trip back up the line to Gatwick.

All this, of course, will change with privatisation. In all probability, the Network SouthEast service and Gatwick Express will be operated by competing franchisees, so this nonsense about fixing the fares will cease and budget-conscious travellers will swarm to the cheaper service. A pity really, considering the Gatwick Express is just about BR's only profitable passenger service. Clearly a case of caveat emptor.

British Rail United Kingdom, EC P4111 Local and Suburban Transit TECH Services COSTS Service prices P4111 The Financial Times London Page 17 324
Leading Article: Filling the fiscal hole Publication 930209FT Processed by FT 930209

IT DOES NOT take a genius to spot that the British government is in a spot of bother over its growing budget deficit. Only now is the scale of damage done to the government's finances in the last few years becoming apparent. The forthcoming budget provides an opportunity for the government to outline a credible programme for medium-term fiscal consolidation. Credibility requires the government to acknowledge that tax increases, as well as spending cuts, are necessary. Only then might the government's anti-inflationary promises be believed.

The lingering recession that the government's erstwhile exchange rate policy, and slow world economic growth, have bequeathed is partly to blame for the dramatic deterioration in Britain's public finances over the past year. But only partly. The OECD, in an otherwise friendly report on the UK economy, blames the recession for only 70 per cent of the rise in the deficit. The 1991 Autumn Statement's pre-election increases in public spending, combined with cuts in corporation tax rates, make up the difference.

On the assumption of growth of 2.4 per cent next year and unchanged fiscal policies, the OECD estimates that the general government budget deficit would be 6 1/2 per cent of gross domestic product in 1994, while the cyclically adjusted deficit would be over 3 per cent. The Institute for Fiscal Studies is prepared to peer further into the future. Assuming growth of 3 per cent a year from 1993-94 onwards, its Green Budget forecasts the public sector borrowing requirement will be Pounds 54bn in 1993-94, which is 8.75 per cent of GDP, and remain over Pounds 50bn until 1998. If the trade constraint restrains growth to half that rate, then the PSBR could reach Pounds 83bn.

Even the more optimistic growth scenario means a growing burden of debt interest payments on future taxpayers. By the second half of the 1990s, when interest payments on public debt are expected to be 4 per cent of GDP, stabilising the ratio of gross debt to GDP would require a budget deficit of only 3 per cent of GDP, half the level the IFS expects.

In short, the British government must plan to cut its structural budget deficit by the equivalent of about Pounds 20bn a year in current prices if it is to prevent a spiralling rise in the ratio of government debt and interest payments. Part of that saving must come from constraining the growth of public spending below that of GDP. But the scope for substantial public spending cuts in the short term is limited, as chief secretary to the Treasury Michael Portillo acknowledged yesterday. The financial markets will probably be unwilling to absorb gilts on the scale that the government must sell, in the hope that the spending review will come to the rescue. They are more likely to demand punishingly high interest rates on British government securities to cover the inflationary risk.

The government must reassure the markets by acknowledging that reducing the fiscal gap will require higher taxes over the next two years. If required, it should balance a credible commitment to fiscal tightening, with a further cut in short-term interest rates in order to ensure that recovery arrives as soon as possible.

Whether the government, and the current chancellor, can credibly promise non-inflationary export-led growth is debatable. But the longer it waits before acting, and the more cautious its statements in the meantime, the deeper will be the fiscal hole from which the UK has to climb.

This is the second in a series of leaders on the March Budget.

United Kingdom, EC P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9611 P9311 The Financial Times London Page 17 628
Letter: The realistic way to offer prospect of jobs Publication 930209FT Processed by FT 930209 From Mr PETER ASHBY

Sir, You report that President Bill Clinton is now carrying through his election commitment to introduce a new 'safety net' of welfare programmes, on the basis that there must be 'a certain time beyond which people don't draw a cheque for doing nothing' ('Clinton promises welfare task-force', February 3). In the same edition, a letter from Mr O'Driscoll ('A more realistic view of attitudes among long-term unemployed') argues strongly against such an approach in the UK, asking: 'If there are no jobs out there, what is the point in raising people's hopes?'

Of course, our aim should be sufficient jobs for all those who seek employment. But what should our response be if, as now seems likely, registered unemployment in the UK remains above 3m well into the mid-1990s? This is surely the question which urgently needs to be addressed - and it is one which Full Employment UK explores through consultations with randomly selected groups of long-term unemployed people across the UK.

While there are a number who support Mr O'Driscoll's view, we have found that a majority favour the idea of a new contract between themselves and society, under which society would guarantee them work in return for them giving up their right to 'a giro for doing nothing'.

Long-term unemployed people generally recognise that 'something for nothing welfarism' makes it easiest for those of us lucky enough to be in work to forget our responsibilities towards them - just as it makes it easier for many of them to give up on themselves.

Of course, many fear that they could be exploited in a 'workfare' system unless, from the very outset, the government made a proper commitment to developing a high-quality programme. For most, however, the bottom line seems to be that obligatory work is better than obligatory isolation, trapped behind the front door with little prospect of finding regular employment. Peter Ashby,

Full Employment UK,

79 Prince George Rd,

London N16 8DL

United Kingdom, EC P9441 Administration of Social and Manpower Programs CMMT Comment & Analysis P9441 The Financial Times London Page 16 365
Flagship on the rocks: The EC's HDTV strategy is failing Publication 930209FT Processed by FT 930209 By ANDREW HILL

The European Community's strategy to develop advanced cinema-quality television has a new helmsman, its third in eight years. But Mr Martin Bangemann, EC industry commissioner since 1989, may have taken control of Europe's high-definition television (HDTV) policy too late.

Eight years after it was launched, the erstwhile flagship of EC industrial policy is still far from land. Even the shipbuilders themselves now fear that the current policy is holed below the waterline.

Ten days ago, Philips, the Dutch electronics manufacturer, and one of the biggest investors in Europe's HDTV project, announced it had suspended plans to mass-produce television sets compatible with the EC's preferred HDTV transmission standard, HD-Mac. Senior Commission officials say Mr Bangemann, who only took responsibility for HDTV last month, may be forced to admit the failure of the original policy.

Obituaries of EC HDTV policy would not be favourable. A recent report by National Economic Research Associates (Nera) of London and Brunel University describes the European strategy, in comparison with Japanese and US policies, as 'the most unfortunate in its timing and potentially the most costly to the region's taxpayers and consumers'.

When the plan was launched in 1985, the Commission's aim was to corner a new and lucrative consumer electronics market with a combination of technical standards, investment and aggressive marketing.

That approach backfired almost immediately. Advances in technology meant satellite broadcasters were able to circumvent the 1986 legislation and transmit programmes using standards which were not part of the EC-backed 'Mac' family of standards.

Three years later, attempting to salvage the strategy, Mr Bangemann's predecessor, Mr Filippo Maria Pandolfi, sought to encourage broadcasters, manufacturers and satellite operators to work together on HDTV projects, with the incentive of EC funding for HDTV programme-making and transmission. Mr Pandolfi proposed an Ecu850m (Pounds 688m) five-year action plan which would support the development of wide-screen television as an intermediate step towards HDTV.

Britain is blamed by its EC partners for torpedoing this strategy. At acrimonious meetings of EC telecommunications ministers late last year, the UK vetoed the plan, arguing the spending was not justified.

In particular, Britain claims that the analogue standards on which the Community's strategy has been based could quickly be superseded by digital transmission technology. Digital signals are electrical (analogue) signals which have been converted into binary codes. Digital systems can process and distribute a greater volume of information more rapidly than analogue systems and, unlike analogue, can be used for terrestrial as well as satellite broadcasting.

The strongest supporters of the action plan - France, the Netherlands and the Commission itself - were incensed by the British action. They accused the UK of reneging on commitments made at the Edinburgh summit of EC leaders in December. But, despite the pressure on the UK, Philips' decision suggests Europe may have been witnessing the death-throes of the HD-Mac strategy.

Disappointed by the political confusion, Philips argues there is no point in producing HD-Mac sets if funding is not available for transmission on that system. Commission telecommunications officials, enthusiasts for the Mac strategy, tried to put a brave face on the decision last week, pointing out that Philips would complete its research into the system and would be ready to produce HD-Mac television sets if funding was cleared.

But Philips and Thomson, its French counterpart, both fierce lobbyists of the Commission during the standards debate, have already changed their commercial strategy. Rather than wait for regulatory guidance on standards, they will concentrate on producing wide-screen television sets to lower definition standards.

Mr Bangemann also appears to be reconciling himself to the demise of the HD-Mac plan. Last week, he hinted that, under his management, EC policy could have humbler ambitions concentrated on promotion of wide-screen technology. He said the EC should back the development of less bulky flat-screen sets and should encourage the production and conversion of programmes for broadcast on wide-screen television. Some of these elements could be included in a compromise that Denmark, current holder of the EC presidency, hopes could provide an agreement when EC telecommunications ministers next meet on May 10.

There is still considerable doubt about whether Britain would back any funding plan, and French officials say it is likely that there will be another high-level dispute over the UK's intransigence. But even if a less ambitious short-term strategy is adopted, the demise of HD-Mac would leave the Community without a long-term HDTV policy. The US, which is expected to select an advanced digital television standard later this year, will gain a headstart of up to five years in the HDTV market. Industry analysts believe the EC and Japan, which also backed an analogue system, will eventually be forced to adopt the US standard.

Such a development would not necessarily damage European industry - Philips and Thomson are also involved in one of the consortia bidding to produce the US standard - but it would be humiliating for the EC policymakers.

Putting digital technology on the market would also take a long time. European manufacturers expected HD-Mac sets to be marketed from 1992, but the Nera/Brunel report forecasts that only 9 per cent of European households will have digital HDTV sets by 2004.

In the meantime, the main consolation for EC politicians, manufacturers and broadcasters, would be that they and EC consumers had reaped some useful by-products from heavy investment in Mac technology. Wide-screen technology has advanced, and improvements in picture quality have been achieved, both of which would have taken much longer without Community backing.

But the main victory for European industry - that it built a working HD-Mac system - appears Pyrrhic. 'It's a perfect system,' says Ms Angelique Hoogakker, a Philips spokeswoman. 'You'll find plenty of disagreement about implementation and standards, but no one will deny the quality of the system. It's only a shame that, now we have got the advantage in the market, we can't put it into practice.'

One industry spokesman likens the original HDTV policy to Nasa's costly lunar programme in the 1960s. 'It was a difficult goal, with many technological spin-offs,' he says. The difference, of course, is that man did eventually walk on the moon.

European Economic Community (EC) P3651 Household Audio and Video Equipment P3663 Radio and TV Communications Equipment P9611 Administration of General Economic Programs TECH Products CMMT Comment & Analysis P3651 P3663 P9611 The Financial Times London Page 16 1076
Work-out for welfare Publication 930209FT Processed by FT 930209 By JOE ROGALY

They're off. The race to cut the cost of social security, and possibly healthcare, has begun. The prize is a politician's dream: lower taxation, and a golden harvest of votes. To win, a party must find convincing ways of rolling back the frontiers of the welfare state. There's a vision for you.

It will be a marathon run. Labour's commission on social justice will produce its first discussion papers this summer, but it is not expected to report until a year after that. The government's review of public spending, announced yesterday, may take even longer. Both British parties will benefit from watching the United States, where President Bill Clinton is wrestling with his campaign promise to get people off the welfare rolls and into work, while his wife tries to set up a genuinely national health service at no extra cost.

I will not wear you down with too many statistics. We are all aware of the explosive growth in the number of claimants on both sides of the Atlantic since the end of the second world war. But - just as a reminder - in 1948 about 1m people were living on national assistance in Britain. Over the following 30 years that little army nearly trebled, to 2.9m. The payout had by then been renamed supplementary benefit, but that did not make it any cheaper. The latest figure, for 1991-92, is 4.8m. The name has changed again, to income support, but the number is still growing.

Invalidity benefit, paid to half a million people in 1976-77, was collected by 1.3m in 1991-92. Retirement pensions were paid to 8.25m elderly persons in 1976-77; today 10m pension books get cashed at post office counters each week. It is no wonder that social security accounts for a third of central government expenditure.

The thinking behind all of it is now challenged by both major parties. One result will almost certainly be a gradual reduction in the amount spent on state pensions. Everyone is on to that. Mr David Willetts, the Conservative backbench MP described by the prime minister last week as the newest addition to a 'distinguished list of Conservatism's historians and philosophers', has offered his own contribution to the debate. Mr Willetts is too young to claim a place alongside Disraeli or Salisbury, let alone Burke. He has, however, produced a stimulating pamphlet on pensions*.

As he points out, it is wrong to assume that all poor people are old, or that all old people are poor. Between 1979 and 1988 social security benefits paid to retired persons rose by 14 per cent. Occupational benefits rose by 99 per cent and savings income, puffed up by high interest rates, by even more. Yet some three-fifths of pensioners are still heavily dependent on taxpayers. As a general rule, the older the pensioner, the poorer. Mr Willetts' conclusion is that substantially higher rates of benefit should be paid to the over-80s. This implies that, over time, the under-80s should take increasingly less from the rest of us.

My guess is that if the government does not pick this one up Labour's social justice commission will, possibly giving it a spin by making the cut-off age 75.

This is not out of line with the precepts of the Beveridge report, the founding document of the British welfare state, published 50 years ago. 'It was Beveridge's great insight,' says Mr Willetts, 'that benefits aimed at broad categories of people . . . would be well targeted on alleviating poverty while avoiding the administrative nightmares of means testing.' The same principle, he argues, could be said to support indexation of child benefit for under-fives, while leaving the amount for older children to wither on the vine.

None of this is easy. Mothers cannot easily go out to work while infants are below school age. That justifies a higher benefit. Yet as Mr Willetts will discover as his own toddlers grow up, children get more, not less, expensive to run. Can reduction of benefit for older children really be justified?

I do not say this merely to tease the author. Universal hand-outs are eagerly collected by the middle classes, the non-poor. Reducing the amounts or taking them away is the toughest kind of politics. Mr Clinton's advisers know this. That is why Medicaid and US social security are thought of as practically untouchable. Schemes aimed at the very poor, like America's aid to families with dependent children, are unpopular with the majority of voters.

Mr Willetts also proposes to raise the retirement age for both men and women to 67, with 65 as an interim stage. He rightly regards the dramatic fall in labour force participation by people in their 50s and 60s as 'a dangerous absurdity'. As he says: 'The real problem isn't that too many people live too long, it is that too many people stop working too soon.'

What he does not address is the question of how far total employment can be increased, given a long-term trend rate of growth of the economy of, say, 2.5 per cent. The Labour party is better placed to take up the hint given by Mr John Smith in his important weekend speech that a 'new definition of full employment', to include part-time workers, is needed.

This is not, however, a matter of mere party politics. The intellectual climate is changing. Labour will steal ideas thrown up by Mr Michael Portillo, chief secretary to the Treasury, in his review. The opposition's proposals will be lifted by the Tories.

Pensions are only one part of a much larger story. Every corner of the welfare system will be scrutinised during the next few years. Last week the prime minister threw out a hint about 'workfare'; Labour's commission will have to examine schemes aimed at ensuring that, where possible, the state tries to find suitable jobs for unemployed claimants. The point at which the benefits system is a disincentive to work - the 'poverty trap' - will once again be the subject of endless recalculation.

You can feel the time for new ideas ripening. The German social democrats' slogan, 'markets where possible, the state where necessary', was fine when the matter at issue was the exact mix in a mixed economy. Today's task is to reduce the number of dependants. Committees considering this might adopt a new slogan - 'work where possible, welfare where necessary'. It would do for either party. Pin it on the wall.

* The Age of Entitlement. Social Market Foundation, 20 Queen Anne's Gate, London SW1H 9AA. Tel: 071-222 7060.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P94 Administration of Human Resources CMMT Comment & Analysis GOVT Government spending P9311 P94 The Financial Times London Page 16 1134
Letter: Expensive interest policy Publication 930209FT Processed by FT 930209 From TETSURO KIKUCHI

Sir, In Japan we have an old proverb, stemming from our close ties with China: 'Nothing is more expensive than that which seems free.'

This is particularly true when it comes to cutting interest rates. Far from being a 'free' policy - ie quick, painless and without expense to a cash-strapped government - it is, in fact, a very expensive one. But its true costs are hidden.

First, it has a dramatic effect on the value of the pound abroad. Last year, one pound was worth Y260. Now it trades at only Y180. Seen from Japanese eyes, everything in Britain from toothpaste to houses has lost one-third of its value. Britain Inc must be the biggest bargain of 1993.

Second, a freely devaluing currency, unsupported by interest rates, imports inflation, making foreign goods more expensive to buy.

Third, interest rate cuts act as a form of subsidy to British industry. Company debt repayments are lowered, easing the pressure on debt-ridden businesses. But it is dangerous to rely on monetary policy. It is an easy option for a government that otherwise lacks a comprehensive economic policy. But it is a political cop-out. It is paid for in the end by ordinary consumers and future unnecessarily high interest rates.

The devaluing of a nation's currency gnaws at the heart of a country's self-respect and dignity. The decline of sterling has, like your monarchy, been a source of great sadness both in Britain and abroad.

Tetsuro Kikuchi,

European economics editor,

Mainichi Newspapers,

Associated Press House,

12 Norwich Street,

London EC4A 1BP

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 16 290
Letter: Role of the British Tourist Authority is far from superfluous Publication 930209FT Processed by FT 930209 From Mr PETER J BATES

Sir, I was in Japan on a sales mission when I heard of the resignation of the chairman of the British Tourist Authority and his chief executive ('Tourist authority chief quits', January 27), and I was on a British Airways flight home before I read press comment about the government's support for tourism.

The press comment I have seen questions whether or not the commercial sector should undertake the role of overseas promotion themselves and hints that the British Tourist Authority's role may be superfluous.

Nothing could be further from reality. Having just led a sales mission to Japan, an important growth market for tourism to this country, I fully appreciate the work of the BTA. Briefing us on arrival, advising how market conditions have changed since our last visit, on what the consumer and the travel trade now expect and what new opportunities have arisen, should not be underestimated.

Most companies cannot afford to have an office in Japan and must rely on representation and the government tourist office. This is not an area in which our very able embassy in Tokyo is involved.

Without the BTA, how else could we have identified and entertained more than 90 journalists in Osaka and Tokyo, all of whom in the future may write about Britain.

We need a strong, articulate body co-ordinating British tourism interests overseas, guiding commercial interests, co-ordinating joint ventures between airlines, hoteliers and other interested parties, such as charge-card companies.

The government should not fall into the trap of believing that the industry, which is fragmented and often consists of small businesses, can do it alone. Britain is being seriously challenged by other European countries that are prepared to invest. France, Italy and Spain are all attempting to increase their market share.

We need government support and it is time the heritage department recognised the value of the work carried out overseas to support and to underpin the work of the commercial sector.

Peter J Bates,

sales & marketing director,

Savoy Group of Hotels

and Restaurants,

1 Savoy Hill,

London WC2R 0BP

United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 16 385
Letter: Leyland-Daf symptomatic of a wider economic threat to UK Publication 930209FT Processed by FT 930209 From Dr JIM HAMILL

Sir, Most of the debate concerning Leyland-Daf has foc-used on the specific problems of the European truck industry. The expected job losses, however, are part of a wider trend that will have serious implications for the long-term future of British industry.

The UK has been the most important target country for cross-border mergers and acquisitions in Europe. Between 1985 and 1991, foreign companies made a total of 1,189 UK acquisitions valued in excess of Pounds 54bn. This accounts for almost half of the total value of all cross-border deals in Europe in the same period.

Many of the UK's largest companies have passed into foreign ownership through being acquired. As well as Leyland-Daf, these include Beecham (SmithKline), Rowntree (Nestle), STC (Northern Telecom), Jaguar (Ford), Pearl Group (Australian Mutual), Midland Bank (Hongkong and Shanghai). Of equal importance has been the large number of small and medium-sized UK companies (SMEs) becoming foreign-owned. More than 40 per cent of the total number of deals have involved acquisitions of Pounds 1m or less.

The wave of foreign takeovers raises important issues concerning the impact on the UK economy. 'Greenfield' foreign direct investment in the UK has generally been welcomed as making a positive contribution to the economy (eg technology transfer, increased exports, employment creation, improved international competitiveness, etc). The economic impact of foreign acquisitions in the UK is less clear.

Negative effects may be employment losses following post-acquisition rationalisation; reduced local linkages; reduced exports as a consequence of changing plant status; and the transfer of certain head office functions (for example, R&D and marketing) out of the UK to the new parent company.

Leyland-Daf may be the first of many similar cases to emerge over the next few years. The full effects of any merger or acquisition will normally take between three and five years to work through.

Thus, given the boom in foreign takeovers in the UK during the late 1980s and 1990s, it will only be over the next few years that the full effects of these will become clear. Big UK losses can be expected across a range of sectors as a consequence of post-acquisition rationalisation and consolidation.

A new era of foreign multinational-British labour conflict may be approaching, reminiscent of the plant closure battles of the 1970s.

Jim Hamill,

Strathclyde International

Business Unit,

University of Strathclyde,

Glasgow G4 0RQ

United Kingdom, EC P99 Nonclassifiable Establishments CMMT Comment & Analysis COMP Mergers & acquisitions P99 The Financial Times London Page 16 429
Arts: Bluebeard's Castle and Erwartung - Opera in Toronto Publication 930209FT Processed by FT 930209 By PAUL GRIFFITHS

Bartok's one-acter and Schoenberg's 'monodrama' are both couple dramas, even if in Erwartung one member of the couple is missing presumed dead. Both, too, gradually reveal a past in which other people - specifically, other women - were involved. Both look back to that past across a chasm of incomprehension: they are crisis pieces, both dating from the time of musical crisis around 1910. And both are operas in which the essential action is interior. They fit together well, if, as in the Canadian Opera Company's new production at the O'Keefe Centre, Toronto, the longer Bartok piece comes before the exploded, shattered Schoenberg. They also, as a pair, provide an apt and stimulating occasion for the operatic directing debut of Robert Lepage.

The Bluebeard's Castle is not so unusual. The spoken introduction is wisely cut; instead there is a great gilt frame around the stage picture to tell us that what we are seeing is a parable, and to enforce a visual connection with the companion piece. The first images within the frame are striking: a miniature gothic castle rotating in darkness and distance, and then - once Bluebeard and Judith have gone into the picture after delivering their first lines from in front of the frame - an oppressively gloomy, severely square-sectioned tunnel or corridor, coming towards us from a faintly lit portcullis entrance, with the seven doors along the left wall and unbroken masonry along the right (designed by Michael Levine). So far, so good.

But the stage inventions for the openings of the doors are disappointingly tepid: a patch of flame-like light for the torture chamber; for the jewel house, a handful of pearls which, in a limp gesture, Judith scatters; a projection of planet earth for Bluebeard's domain; a lake of tears that Judith can coyly dabble her hand in. Only for the final opening does the production heat up, as Bluebeard's three former wives seem to rise up through the tear lake, though what drenches their wedding gowns is blood.

Here too the orchestra, under Richard Bradshaw, begins to sound excited, especially in the climactic passage where Judith takes her place with her predecessors. Before this the sound is dim and disconnected, and devalued in the domains sequence by a weedy organ. Yet the vocal performances are excellent: Jane Gilbert is a noble Judith, determined and always richly voiced, and Victor Braun sustains a grey lyricism as a Bluebeard scarred and numbed by experience, never believing he can escape his fate.

If this Bluebeard could almost have been staged by anyone, the Erwartung comes at us observed by a very special eye. Mr Lepage takes advantage of having three supernumeraries for Bluebeard's earlier wives to increase the dramatis personae of Schoenberg's solo opera. When the performance starts, in silence, the unnamed Woman of the score is cowering by the bare wall left over from Bluebeard, while a man in a white coat sits ready to take notes. One's heart sinks at the prospect of an 'explanation' of Erwartung as a psychoanalytic session: that was where the piece began, in the experiences of the librettist Marie Pappenheim as a medical student in turn-of-the-century Vienna, not where it ended, or should end.

However, the realism is only there to be turned into the chilled, poised surrealism of Lepage's production, which demands, and gets, feats of gymnastic control from his extras. The next time we see the psychiatrist - the set repeatedly darkens to focus on the Woman allowing nimble scene-shifting - he is calmly sitting sideways on, as if the wall were a floor, while another man, later identified as the Woman's lover, dangles alarmingly through a hole in the wall from one heel.

The mesmerising glide from image to image takes account of what specific elements there are in the libretto, such as the Woman's reinterpretation of her lover's corpse as a log in the forest through which she imagines herself searching. There are also echoes of the Bluebeard staging: Judith rolls rapidly down the stage away from her husband; the lover's naked body makes the same journey slowly, anxiously followed by the Woman who has just lashed at him with a scythe. But more generally the response is to the strangeness and fluidity of the music, to its intensity, its sharp, glistening focus. Even though Schoenberg's own designs for the piece suggest something dark and indistinct, this clinically accurate askewness, this language of dreams, is right on target.

Contact between the stage and the score is further assured by Rebecca Blankenship's imposing performance as the Woman, and by the orchestral playing, which is so much more alert than in the Bartok, and which, in its delicacy touches the lunar beauty of Schoenberg's music.

The double bill goes to the Brooklyn Academy of Music, New York this week, and to Edinburgh in the summer

Canada P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 842
Arts: The Tate puts on new clothes - William Packer questions the gallery's current rehang policy Publication 930209FT Processed by FT 930209 By WILLIAM PACKER

Early every year since 1990, the Tate has paraded itself, proud and elegant, in its new finery: which is not to suggest for one moment, pace the poor Emperor in the old story, that the exercise is become a charade and self-deceptive sham. The clothes are there all right, intriguing and fetching by turns. And if they should seem at times a trifle skimpy, and just a little more see-through than before, is that not but the very latest thing of modern fashion?

The debate, of course, remains as hot and furious as ever, for one man's chic is another's frumpiness, or misjudgment, or active indecency. For my part I find a great deal to be said in favour of this year's rehang, as before. Nicholas Serota's great achievement as incoming director, as he was in 1990 when this rolling programme of rehanging began, was to reclaim and celebrate the Tate Gallery itself, as architecture at the service of art.

We had simply forgotten how good a building the Tate really is at its fin-de-siecle heart, ample, generous and confident in its purposes. That first thrill of surprised recognition remains, undiminished. No matter that this time the sculpture halls contain Rodin at one end and the conceptual minimalism of Carl Andre and his friends, bricks and all, at the other. To move through from the bustle of the entrance lobby and out into that high, long, central nave is to experience and savour one of London's most particular architectural experiences.

And while the feeling may not be sustained at quite such a pitch of magnificence, sustained it is in kind through the sequence of the older rooms, each one hung with exquisite consideration, quite as much for the room itself as for the work to be presented. Only with the drab functional walls of the 1970s extension does there come any sense of anti-climax, and even here it is hardly for want of effort on the part of the directorate. Every room is well presented within the terms it sets itself. Most rooms contain particular works, often unshown these many years, of remarkable interest and quality. Exception may be taken to the what of it, but surely not in any fairness to the way of its being shown.

It is the irony of the situation that Mr Serota has now contrived for himself, that it is indeed quite as much the way as the what of it, for which, fairly or not, he stands generally rebuked. The nub is neatly put on his behalf, and with unconscious irony, by the sponsor, BP, in its introductory statement to the Brief Guide to these New Displays. 'From the outset, the purpose of our partnership with the Tate Gallery has been to enable many more people to see works of art which would otherwise remain in storage . . . the full range of both the national collection of British art from 1500 to the present day and of international 20th century art (has thus been) more fully exposed than ever before.'

Up to a point, Lord Copper. The real issue is what the Tate is, or should be, or could be, and it has clearly been Mr Serota's intention from the outset to make no bones about the problems he faces. For the Tate as it is presently constituted is riven by stresses and contradictions of purpose and policy that are all but irreconcilable, and all to be addressed on evidently inadequate resources. That first rehang, in 1990, was quite as much a political as a curatorial statement, as though to say: here is a gallery into which we can only put so much, if we are to show things as they should be shown: and here is a collection with which we could do so much, if only . . .

It is an argument with which I have a great deal of sympathy. The Tate has magnificent collections which are inadequately presented not by any professional dereliction or neglect, but simply because anything better is impossible. The wonder is that they are presented at all, let alone with the manifest care, imagination and commitment that are the character of this present 'inadequacy'. But how can the Tate hold at once the national collection of British art, that alone would more than fill the present site, and of the art of the modern period, into which the British contribution must be integrated, and of contemporary art, in all its forms, that must be monitored and collected on the wing?

The point was well made, and made, and made, and is now made again - which is where sympathy begins, if not to fail, at least to moderate. For what was at the outset a fine and necessary demonstration begins now to seem indulgent. Whatever its strains and stresses, the Tate remains the repository of a collection and national resource that for three years now and at least one to come, has not been available to the public in any practical and permanent sense. What we have had instead has been an extended sequence of special exhibitions, beautifully chosen and arranged on all manner of themes, that is a wonderful bonus for the frequent and specialist visitor, but quite arbitrary for any newcomer.

The historic British collection up to 1900 is now confined to the first nine rooms of 30. From room 10, the paintings spread ever fewer on the wall, to confound the argument that space is at a premium. Everywhere there are memorable and lovely things, a magnificent double portrait by Fantin-Latour in room 10, Cedric Morris's eggs in room 20.

There were different delights last year and the year before, which I dearly wish were there still, and I shall regret it when this year's works, too, soon disappear.

Last year I entered a plea, not for the reversal of the rehang policy, but rather for its moderation and gradual consolidation around a re-established core. No change there: and in again taking the general principle, I have had no space to treat the particular displays, splendid, controversial, infuriating as by turn they are. I hope to return at least to some of them in due course.

The New Displays at the Tate Gallery are supported by British Petroleum

United Kingdom, EC P8412 Museums and Art Galleries CMMT Comment & Analysis P8412 The Financial Times London Page 15 1092
Arts: Today's Television Publication 930209FT Processed by FT 930209 By PATRICIA MORISON

A strong night on BBC 2, which is just as well looking at the competition - unless you are a fan of Spender (BBC 1, 9.30), which in its last episode sees the Geordie cop getting to grips with a crooked property developer and his troublesome ex-wife.

The Gun and The Veil (BBC 2, 7.45) investigates the profound influence of the spirit of Islamic renewal on Egyptian society. The blind theologian, Sheikh Omar Abdul Rahman, leader of the outlawed Islamic League, is interviewed in exile in New York and declares his conviction that the government of President Mubarak must be overthrown. He and his followers also justify the recent bloody attacks on tourists. Women speak about their reactions to pressure to adopt pious dress and behaviour.

Viewers new to The Ark (BBC 2, 9.25), the documentary series about London Zoo, may not find it easy to appreciate tonight's denouement, the Special General Meeting which seals (no pun intended) the fate of London Zoo's management and director. But watch it, all the same. Clever, subtle, and absorbing, The Ark has been a joy.

United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 15 211
Arts: Contemporary contrasts in style - Weekend concerts Publication 930209FT Processed by FT 930209 By MAX LOPPERT

The BBC Symphony Orchestra's current series of Royal Festival Hall concerts - low-priced, informally presented, imaginatively planned, and (as ever) simultaneously broadcast on Radio 3 - seems to be catching on. Friday's programme, conducted by Mark Wigglesworth, placed music by Messiaen and the 53-year-old Dutch composer Louis Andriessen side by side. It was well attended and well received - as indeed it deserved to be: the mixture was uncommonly lively, stimulating, even perhaps a touch troubling.

The revised version of Andriessen's De Snelheid ('Velocity') was given its premiere. This is a 'process' piece - the composer's own phrase from his introductory chat with Steve Martland - and an attempt to create complex effects of fast movement through contrasts and conflicts of pulse and metre.

From the start a regular beat knocked out on woodblocks provides the musical foundation. Three differently disposed instrumental groups then proceed to build upon it in cross-cutting patterns, and the base-beat itself eventually increases in speed, so that a sense of larger momentum is produced out of proportion to the sum total of all the jiggling, bouncing - and loudly delivered - component parts.

The experience will probably have given greatest pleasure to those who like brash, rock-related sounds bashed out without falter or finesse, and those who enjoy following the tidy working-out of a self-set conceptual problem. Andriessen admirers know what to expect, and if a non-admirer complains that other musical qualities seem non-existent in De Snelheid, he or she is probably missing the point.

It made for a curious and fascinating contrast to follow this 20-minute stretch of 1990s high-tech musical brutalism with the 80 minutes, opulent colour resources, swooning melodic delights and picturesque mysticism of Messiaen's Turangalla symphony. Wigglesworth, who had led a sharp-cut account of the Andriessen, here revealed one or two chinks in his conductor's armour: for while the slow movements were unfolded with suitably rapt control of pace, the fast ones were persistently smudged and spotted by out-of-synch orchestral ensemble.

Another set of contrasts was in store in the same hall two evenings later: Pierre Boulez, conducting the Parisian Ensemble InterContemporain in Messiaen's 1988 chamber-piece Un Vitrail et des oiseaux and then the Philharmonia in the 1937 orchestral version of the song-cycle Poemes pour Mi, brought to the music exactly the combination of spot-on rhythmic precision and pinpoint applications of colour lacking from Wigglesworth.

Comparison is no doubt improper (for the one conductor is, after all, a senior musical figure of enormous experience and the other a hugely promising junior) but inevitable. The exhilaration of Poemes pour Mi was dangerously increased by the singing - scoreless, totally absorbed in word and musical phrase, totally transported - of that perpetually astonishing artist Maria Ewing. Hers is not the weight of voice Messiaen had in mind when writing it; a vast Isolde-like outpouring is needed to sweep across the batteries of brass. But by the sheer imaginative force, variousness and intensity of her delivery she contrived to re-invent both the music and her singing of it.

This was altogether a rich concert: 'difficult modern music' of the kind now supposedly passe and unpopular yet offered with cracking zest to a Festival Hall full of youthful enthusiasts. Boulez also conducted the Ensemble in the first performance of his revised Derive 2, a coruscating scherzo-movement buzzing with the animation and flow of fast-moving conversation; and devoted the centre-part of the programme to Elliott Carter. Final fascinating contrast: between the knotty excitements and fiercely argued intellectual exuberance of Carter's Oboe Concerto and Three Occasions and the heady ecstasies of Messiaen - two composers born (in 1908) only 24 hours apart. This Ensemble InterContemporain-Philharmonia concert is being broadcast tonight on Radio 3.

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 651
Arts: Death of a Faun - Theatre Publication 930209FT Processed by FT 930209 By ALASTAIR MACAULAY

His jump could hang in the air and/or cover the stage. Able to seem both androgynous and animal, he was a vital symbol of the newness of the 20th century. A shy iconoclast, his liaison with Diaghilev was openly homosexual. His ballets, L'Apres-midi d'un faune, Jeux, and Le sacre du printemps were all ground-breaking works of early modernism, and presented aspects of sex that were new to the stage. Lady Ottoline Morrell told him (possibly her brightest remark) that when he danced he was not a man - he was an idea.

Maybe no one who saw Nijinsky dance is left alive today, but the legend is as large as ever. All the above happened before he was 25, and before the First World War. So did his surprise marriage, which earned him instant dismissal from the ballet company that had brought him world fame, and permanent exile from Diaghilev's inner circle. The last part of his legend - madness - followed. In 1919, he was diagnosed as a schizophrenic, in which condition he remained until his death in 1950.

Even the mad Nijinsky remains an idea. On the one hand, he identified with God; on the other, he was often both obscene and violent. Both sides connect to his creative career. Had his psychological abnormality been responsible for his creative originality? Or had he been Trilby to Diaghilev's Svengali?

Death of a Faun, by David Pownall, is set in 1929, after Nijinsky has received news of Diaghilev's death. A one-man show for the ex-dancer Nicholas Johnson, it is conceived as a 90-minute mad scene. No violence or obscenities here - but bags of martyrdom.

The real Nijinsky did on one occasion identify with the crucified Christ, but the God who he wants to be in his diaries is the Creator. And, when he spoke of dancing, he suggested that it was an exalting experience. But Johnson-Nijinsky, harping on the pain of dancing, identifies only with Christ on the cross. And, of course, he makes the connection to Petrushka (who is first seen hanging in a crucified position). The ex-dancer whom Johnson and Pownall put on stage is less like Nijinsky than like the more recent Gelsey Kirkland. Kirkland, another great dancer whose career ended early, then took to a much more vengeful and self-lacerating career - celebrity autobiography.

But why bother to point out how wilfully this play misunderstands Nijinsky? It even mistakes the 'faun' of Nijinsky's ballet (a half-goat rural deity) for a 'fawn' (a young deer); and Johnson performs the steps with the kind of intense facial expression that Nijinsky took pains to delete from his choreography.

The real Nijinsky was both more original and more pathetic than this trite diddums, and his legend will survive Death of a Faun. Nicholas Johnson, however, may be doing irreversible damage to his own career. Strain and pain are not what he himself communicated as a dancer. I remember his lyricism and sweet pleasure in dancing for an audience; and I am sad to find him defacing that image. It is better to recall the Mercutio he created in Rudolf Nureyev's 1977 Romeo and Juliet; and he dedicates these performances to Nureyev's memory.

At the Orange Tree, Richmond

United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 572
Business and the Law: The high cost of damaged goods - General Motors was last week ordered by a US jury to pay punitive damages of Dollars 101m. Robert Rice on a civil liability problem slowly getting out of hand Publication 930209FT Processed by FT 930209 By ROBERT RICE

Two years ago when former US Vice-President Dan Quayle described America's legal system as 'a self-inflicted competitive disadvantage' costing Dollars 300bn a year, US lawyers accused him of making cheap political capital at their expense.

Mr Quayle's remarks struck a cord with the American people and business; in recent years they have grown used to ludicrous law suits and unjustifiable multi-million dollar damages awards. A Connecticut man who sued a ladder maker for Dollars 3m after he fell off and injured himself because the manufacturer failed to provide a general warning of the dangers of using ladders is a case in point.

Americans are undoubtedly litigious by European standards - 18.4m lawsuits were filed last year. But it is the size of awards, particularly awards of punitive damages for corporate misconduct, which is now causing concern in the US.

Businesses claim the US civil liability system has itself become a liability to the economy. Excessive awards discourage innovation and curb competitiveness. Consumer groups say that the threat of lawsuits and awards of damages forces companies to make safer products.

The clearest indication that the problem may now be getting out of hand came last week when General Motors was ordered by an Atlanta jury to pay punitive damages of Dollars 101m on top of compensatory damages of Dollars 4.2m to the parents of a 17 year-old boy who died in 1989 when his GMC pick-up truck crashed and burst into flames.

Damages are high in America largely because they are still set by juries. Elsewhere, judges determine damages. US juries seem to side with the little guy suing the corporation, and, in setting awards, appear to be more influenced by what they feel the corporation can afford to pay than what would be fair compensation for the injuries suffered by the plaintiff.

Large punitive damages are a recent phenomenon in the US. In 1930 awards of Dollars 50,000, Dollars 33,333 and Dollars 12,650 were described by a law magazine as 'startlingly large'. By 1955, the largest punitive damages award in California was still only Dollars 75,000. In 1991 and 1992 alone, however, US courts upheld at least 15 punitive damages awards in the range of Dollars 5m-Dollars 60m.

Recent attempts by businesses to curb levels of punitive damages through the courts have come to nothing. The US Supreme Court has considered four constitutional challenges to punitive damages in the past five years but has yet to uphold a single one.

Now, however, it has accepted for review a case from the West Virginia Supreme Court involving a punitive damages award of Dollars 10m which may prompt the Supreme Court 'to decide, at long last, that punitive damages in the US have gone too far' say Mr Leo Herzel and Mr Roy Englert, partners of Chicago-based international law firm Mayer Brown & Platt.

If they are right and the Supreme Court succeeds in setting constitutional limits for punitive damages, lawyers say it will be one of the Court's most important decisions affecting business for a decade.

The West Virginia case involved a dispute between two businesses, TXO Production Corp, a subsidiary of US steel oil and gas giant USX Corp, and Alliance Resources Corp, over rights to oil and gas beneath a tract of land in the state. A jury decided that TXO's lawsuit claiming doubt about Alliance's title to the land was frivolous and awarded Alliance Dollars 19,000 in compensatory damages, equivalent to its costs of defending the action. The jury, however, tagged on a punitive damages award of Dollars 10m which was upheld by West Virginia's Supreme Court primarily on the ground that TXO had been 'really mean'.

Punitive damages awards in the US are often based on the belief that large companies should be made to pay more than small companies partly because many courts feel this is the only way to impress on senior management the need for responsible corporate behaviour, say Mr Herzel and Mr Englert.

In the General Motors case, for example, it appears that the jury's decision to award such a huge sum was because it felt this was the only way to force the car maker to recall nearly 5m of the same 'sidesaddle' trucks which prompted the original court action. Critics say the 'sidesaddle' trucks are unsafe because the petrol tank, which is fitted outside the frame of the truck, explodes on side impact. General Motors, which made the 'sidesaddle' trucks between 1973 and 1987, has always maintained they are safe.

Some US courts take a different view, however. Judge Easterbrook of the 7th Circuit Court of Appeals in Chicago, for example, believes that ultimately it is the stockholders, the most important of whom are institutions representing ordinary people, who will bear the burden of any punitive damages award against a company. It is wrong, he says, to view punitive damages as a means of punishing big companies.

In the TXO case the Supreme Court will have to decide whether West Virginia's system, by relying heavily on the defendant's wealth in assessing damages, violates due process under the US constitution.

More important, particularly in the light of the General Motors case, the Supreme Court will also have to decide whether an award of Dollars 10m for a wrong valued at Dollars 19,000, has crossed the line of 'constitutional impropriety'. The last time the Supreme Court looked at the issue, in a case from Alabama, it said a punitive damages award equal to four times the compensatory damages awarded was 'close to the line'. The Supreme Court ruling in the TXO case is expected in June.

In any event, the political climate may be beginning to turn against large punitive damages awards. In Virginia, the 4th Circuit Court of Appeals recently upheld the state's Dollars 350,000 cap on punitive damages. Other states have also introduced caps for non-economic loss and some require a proportion of the punitive damages to be paid to the state government rather than the plaintiff.

For European companies with business interests in the US, the American damages system is both puzzling and worrying. In Europe, there is strong resistance within the courts to the type of punitive damages awards seen in America in recent years.

Last June, the German Federal Supreme Court underlined this by ruling that American punitive damage judgments are not enforceable in Germany because they are contrary to public policy.

In England, the Court of Appeal made it clear in the recent Camelford water pollution case that punitive damages will only be awarded in English law in very restricted circumstances. Mr David Higgins, a partner in City solicitors Herbert Smith who acted for the defendants in the Camelford case, says: 'The judgment makes it clear that the American example will not be followed here.'

Until the punitive damages issue has been resolved in the US, Mr Herzel and Mr Englert's advice to large companies doing business in America is simple: guard against the risk of excessive damages by opting for settlement of disputes by arbitration or alternative dispute resolution wherever possible.

United States of America P9211 Courts P99 Nonclassifiable Establishments GOVT Legal issues CMMT Comment & Analysis TECH Standards P9211 P99 The Financial Times London Page 14 1249
Business and the Law: Restrictive TV policy approved - European Court Publication 930209FT Processed by FT 930209

The European Court last week provided reassurance for member countries worried about judicial intervention in the European Community's internal broadcasting market.

The Court said national legislation limiting licensed broadcasting stations' rights to invest in, or be involved in, the establishment, or operation of, foreign stations were permitted under the Rome Treaty's ban on restrictions on the free movement of capital and freedom to provide cross-border services.

The Court's ruling was given in response to a reference from the Dutch Council of State, arising out of proceedings brought by the Dutch media authority against Veronica, a licensed Dutch television station which operated on a non-profit-making basis.

The Dutch court found that Veronica had infringed certain provisions of the 1987 Dutch media law. However, it asked the ECJ to interpret the Rome Treaty's rules relating to capital movements and services so that the national court could decide on the compatibility of the media law with those provisions.

Under the Dutch media law, air time is allocated by the Dutch media authority to broadcasting stations which must be associations of listeners and viewers established for the purpose of representing a particular social, cultural, religious or spiritual interest referred to in their constitutions.

Their exclusive, or at least primary, purpose must be broadcasting and the satisfaction thereby of the Dutch public's social, cultural, religious or spiritual needs.

Income must be used by the stations in connection with programme broadcasting. A large part of their finances comes from subsidies allocated by the media authority. Other income comes from listeners' and viewers' fees and advertising revenue.

The provisions of the media law challenged by Veronica prohibited the broadcasting stations established in Holland from carrying on any activities other than those authorised by the media law or approved by the media authority.

The authority accused Veronica of infringing the regulations by participating in the establishment in Luxembourg of a commercial broadcasting station planned to transmit into Holland and by providing effective support.

The media authority relied on three grounds: Veronica's management had prepared a business plan and provided legal advice; Veronica had provided a bank guarantee in respect of the current account of RTL-Veronica; and it had agreed with another company to provide it with finance for the establishment of a new company which would take a minority stake in RTL-Veronica.

The ECJ held that, in the circumstances of the case, the treaty rules concerning capital transfers and services did not preclude national media regulation which prohibits a broadcasting station established in its territory from carrying on the sort of activities Veronica was accused of.

The Court appears to have reached its conclusions for two different reasons. First, referring to recent case law concerning Dutch broadcasting regulation, the ECJ said that Community law recognised as legitimate, objectives such as those pursued by the pluralist and non-commercial media and cultural policy implemented in the Dutch media law. Such cultural policy objectives were in the general good and could be legitimately pursued.

Then the Court changed direction. It referred to earlier case law establishing that national rules may be enforced to prevent abusive reliance on treaty rights relating to services for the purpose of circumventing the national laws that apply to those established in that member state. For that reason, the court held that the Dutch media law could be enforced to prevent broadcasting stations from circumventing the national rules.

While the ECJ seems to have extended the legal principles applicable to the free movement of goods and services to capital transfers, it is not clear to what extent the court is saying that the questions raised in this case are purely internal to the member state concerned and, therefore, that Community law rights are not relevant.

Case C-148/91, Vereniging Veronica Omroep Organisatie v Commissariat voor de Media, ECJ FC, February 3 1993.

BRICK COURT CHAMBERS, BRUSSELS

European Economic Community (EC) P4833 Television Broadcasting Stations P9721 International Affairs GOVT Legal issues CMMT Comment & Analysis P4833 P9721 The Financial Times London Page 14 680
People: Other moves in insurance Publication 930209FT Processed by FT 930209

Anthony Bolton (above), 50, has been appointed chairman of CT BOWRING & Co (Insurance), the London market wholesale and speciality broking subsidiary of Marsh McLennan, the world's biggest insurance broker. Bolton, who took over as chief executive last year, is stepping into the gap created by the recent retirement of Rod Quill. Quill, now 60, retired at the end of last year after 28 years with the group.

*****

Dick Hazell, deputy chairman of Lloyd's of London last year and an active underwriter at Lloyd's for many years, is to join LIBERTY MUTUAL INSURANCE, one of the United States' largest insurance companies. Hazell, 62, will assume the posts of chairman and chief executive of Liberty Europe, a new UK holding company to be formed this month.

Liberty has also announced the appointment of Stewart Steffey as president of its international insurance operations. Steffey was formerly senior vice-president for Cigna Worldwide where he was responsible for overseas property and casualty field operations.

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Colin Simpson has been appointed chairman and Graham Booth md of SEDGWICK's power & nuclear and construction group.

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Raymond Roughley, formerly regional md, is appointed regional chairman of JARDINE INSURANCE BROKERS' Bradford office. He is succeeded by Kevin Smith.

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Kerry McLean is appointed assistant secretary of the INSURANCE INSTITUTE OF LONDON.

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Alex Mackay, formerly marketing director of Eversheds, has been appointed md of BROCKBANK SYNDICATE MANAGEMENT; George Stevens, group md, has been appointed chairman of Brockbank Syndicate Management.

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Ian Richardson, formerly company secretary at HP Bulmer Holdings, has been appointed company secretary at SUN LIFE CORPORATION.

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Nicholas Morrell has been appointed general manager of the TUNBRIDGE WELLS EQUITABLE FRIENDLY SOCIETY; he succeeds Peter Gray who will become chairman when the society is incorporated at the beginning of next year.

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Roger Cassells has been appointed company secretary of BRADSTOCK BLUNT AND THOMPSON and a director of BRADSTOCK GROUP SERVICES.

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Gordon Brown, general manager and director of QBE INTERNATIONAL INSURANCE, is appointed executive chairman on the retirement of the non-executive chairman Douglas Snoxhill. Robert Grant and Martin Bower have been appointed directors.

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Charles Carter and Nuno da Brito e Cunha have been appointed executive deputy chairmen of JOHNSON & HIGGINS HOLDINGS. Richard Meyer, executive vice-president, US, is the chairman, Emmanuel Olympitis group md, and Patrick Franklin-Adams a director.

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Laurie Thompson, a veteran of more than 43 years with Commercial Union, has moved from managing director to become deputy chairman of CU Financial Services, CU's direct life assurance selling arm, but will retire from CUFS next month. Michael Girling replaces him as CUFS director.

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Bob Adams (below) has been appointed a vice-president at SUN LIFE OF CANADA based in Basingstoke.

CT Bowring and Co (Insurance) Sedgwick Group QBE Insurance (UK) Commercial Union Financial Services Sun Life of Canada Unit Managers Liberty Europe Jardine Insurance Brokers Insurance Institute of London Sun Life Corp Tunbridge Wells Equitable Friendly Society Bradstock Blunt and Thompson Bradstock Group Johnson and Higgins United Kingdom, EC P63 Insurance Carriers P6411 Insurance Agents, Brokers, and Service P6719 Holding Companies, NEC P86 Membership Organizations P6399 Insurance Carriers, NEC PEOP Appointments Brown, G Executive Chairman QBE Insurance (UK) Carter, C Executive Deputy Chairman Johnson and Higgins (UK) Da Brito e Cunha, N Executive Deputy Chairman Johnson and Higgins (UK) Bolton, A Chairman CT Bowring and Co (Insurance) (UK) Hazell, D Chairman and Chief Executive Liberty Europe (UK) Simpson, C Chairman Sedgwick Group (UK) Meyer, R Chairman Johnson and Higgins (UK) Thompson, L Deputy Chairman Commercial Union Financial Services (UK) Adams, B Vice President Sun Life of Canada Unit Managers (UK) P63 P6411 P6719 P86 P6399 The Financial Times London Page 14 622
Business and the Law: Dollars 5bn award against serial killer Publication 930209FT Processed by FT 930209 By ROBERT RICE

In spite of increasing disquiet in the US about the rise in the scale of punitive awards in recent years, the general level of damages rose significantly last year compared with 1991, according to the US National Law Journal, writes Robert Rice.

There were eight awards of more than Dollars 100m. One was for Dollars 5bn against serial killer Robert Berdella, part of which the insurers of his home may have to pick up; another was for Dollars 3.5bn, later reduced to Dollars 1.75bn, against Charles Keating in the litigation arising out of the collapse of the Lincoln Savings and Loan. In 1991 there were two verdicts of more than Dollars 100m. One was later set aside, the other reduced on appeal.

The NLJ notes, however, that there were also far more settlements in 1992, both before and after trial. Many of the largest verdicts were settled within weeks of being handed down by juries.

But awards in business disputes rose significantly and jury decisions continued to batter insurance companies.

Accountancy firms were hit by two big verdicts: one for Dollars 338m against Price Waterhouse which was later set aside, and one of Dollars 558m involving Coopers & Lybrand in the litigation arising out of the collapse of the computer disk-drive manufacturer Miniscribe. This was subsequently settled for an undisclosed sum.

Some of the largest awards from previous years were also overturned or reduced in 1992. The largest verdict of 1990, Dollars 185m against Dresser Industries and Baker Hughes over the production of faulty oil-well fracturing materials, was overturned, while the biggest award of 1991, Dollars 127.7m against pharmaceutical giant Upjohn in a product liability case, was reduced to Dollars 38m.

Overall, 17 large awards were settled after the verdict; 11 large verdicts were overturned or substantially reduced; and 11 prominent case were settled before trial for amounts of between Dollars 25m and Dollars 500m.

United States of America P9211 Courts GOVT Legal issues P9211 The Financial Times London Page 14 349
Technology: Fundraising for a breakthrough - Technically Speaking Publication 930209FT Processed by FT 930209 By LOUISE KEHOE

THIS IS a tale of two companies; both attempting to develop breakthrough technology, both deemed the leaders in their fields. One is American, the other Scottish. One is attempting to break world records for computer performance, the other to deliver on the promise of monoclonal antibodies to cure deadly diseases.

Both have struggled to raise capital to continue their work. Supercomputer Systems (SSI) of Eau Claire, Wisconsin, is desperate for new backers. Two weeks ago the company closed its doors and laid off its employees when funds ran out.

Founded five years ago by Steve Chen, a reclusive but renowned master of supercomputer design previously at Cray Research, SSI set out to build the world's most powerful supercomputer.

Chen's venture won the backing of IBM, which is said to have invested more than Dollars 100m in the venture since 1987.

However, beset by its own financial problems and impatient as SSI overran its development schedule, IBM pulled the plug at the end of January. Finding alternative funding has so far proved impossible.

But SSI's employees have not given up. They continue to seek backing and claim that by November the company will be able to ship its first product.

They say they have fulfilled SSI's founding dream by creating a prototype supercomputer which combines vector and parallel processing - the classic and modern approaches to supercomputing. They believe SSI could still become the supercomputer market leader by offering a unique combination of technology, fulfilling the requirements of general-purpose users as well as research scientists.

Half a world away, Scotgen, of Aberdeen, Scotland, a leader in techniques to 'humanise' mouse antibodies so they are accepted by the human body and can attack viruses, has also found it hard to raise capital. However, Scotgen's prospects were significantly brightened by a Dollars 7m injection of US venture capital, as a result of last week's merger with Vasocor, a California biotechnology company.

The merged company aims to develop diagnostic tests and treatments for heart disease, infectious diseases and cancer. Research will be conducted in Scotland, while the journey from trials to regulatory approval will be handled from California.

These stories provide several lessons. Scotgen's experience confirms the concerns of many in the UK that a dearth of venture capital is inhibiting the formation of new businesses. However, as SSI's plight demonstrates, the belief widespread among would-be British entrepreneurs that US streets are paved with venture capital gold is sadly mistaken.

Scotgen's deal was masterminded by Englishman Robert Fildes, a pioneer of the biotechnology industry and former president and chief executive of Cetus. He has raised more than Dollars 500m in funding for biotech companies in the past and has been the architect of several corporate alliances. A proven management record and experience in raising funds is critical to the prospects of a development-stage venture.

In contrast, Chen's experience in designing world-acclaimed supercomputers has not equipped him to address the critical funding crisis that his company now faces.

Scotgen's story might suggest that national pride should not be allowed to inhibit companies from seeking funding abroad.

Ironically, SSI may not be free to seek a foreign backer, though it has tried. Foreign investment in US-based high-tech companies, especially those whose technology might be of military value, has has long been seen by many in Congress as 'selling the crown jewels'. Early evidence suggests this will be the approach of the Clinton administration, too.

While the US may provide a more plentiful capital market for high-tech ventures, the UK might offer a more benign political environment. In other words, the grass is not that much greener on the other side of the pond.

United States of America United Kingdom, EC P6799 Investors, NEC TECH Services CMMT Comment & Analysis P6799 The Financial Times London Page 13 646
Technology: When all the chips are down - Sematech's tiny microchip highlights the resurgence of the US semiconductor industry Publication 930209FT Processed by FT 930209 By LOUISE KEHOE

It is an achievement that some experts have likened to putting a man on the moon. Using only US-built production tools, Sematech, the government-backed consortium set up to re-establish US pre-eminence in semiconductors, has produced microchips containing electronic elements just 0.35 microns wide - about half the size of the most advanced chips currently in production.

Sematech's breakthrough may be more symbolic than practical. It is expected to be several years before 0.35 micron technology is used in full-scale manufacturing. None the less, the achievement highlights the remarkable resurgence of the US semiconductor industry after several years of having to bow to Japanese competition.

US companies last year won a larger share of the world chip market than Japan for the first time since 1985. Intel has become the largest chip maker in the world, and Applied Materials, a neighbour in Silicon Valley, has overtaken Tokyo Electron of Japan to become the world's biggest supplier of semiconductor production equipment.

By making prototype 0.35 micron chips, Sematech set out to demonstrate that US chip production technology was now at least on a par with the best in Japan. 'In the semiconductor world, this is equivalent to a moon landing,' says Dan Hutcheson, president of VLSI Research, a California market research and consulting group.

This is a far cry from the scepticism shown when Sematech was formed five years ago. Then, the US semiconductor industry was on its knees, outsmarted and outsold by Japanese competitors. The US share of the world chip market was falling rapidly. Japanese chips were widely held to be of higher quality than those made in the US, and Japanese companies dominated the world market for semiconductor production equipment and materials.

Yet questions remain about how much credit Sematech should be given for the revival of the US chip industry and its equipment suppliers. Other factors include: the US-Japan semiconductor industry trade pact, which forced Japan to buy more foreign-made chips; the Japanese economic decline; the rise of Korean chip makers, who compete mainly with Japanese manufacturers of memory chips; and the strength of the world personal computer market, which has boosted sales of microprocessor chips, made primarily by US companies.

Has the US semiconductor industry's comeback, therefore, really been a triumph of government intervention, or is it a demonstration of private-sector ingenuity and the forces of a free market? The question is pertinent as the new administration prepares to implement what is expected to be a more interventionist approach.

'Sematech is the enabler of the US semiconductor manufacturing resurgence,' says Jim Norling, president and general manager of Motorola's semiconductor business. 'It would not be an understatement to say that Sematech saved the (semiconductor production equipment) industry,' adds Papken Der Torossian, chairman of the Silicon Valley Group, an equipment manufacturer that has been one of the largest beneficiaries of Sematech research and development funding.

Others take a more measured view, saying that Sematech served as a catalyst to get the industry to work together on common problems. Jim Bagley, president of Applied Materials, says: 'The next generation of wafer fabrication plants is expected to cost Dollars 800m (Pounds 530m) to Dollars 1bn per factory. The chip makers are saying that they cannot afford it and that equipment costs must come down, but the US equipment industry is barely breaking even. It is a Dollars 5.5bn industry that has zero profitability.'

The solution, he and others believe, is greater co-operation between chip makers and equipment suppliers - as in Japan and elsewhere. Until regulations were loosened to allow Sematech members to work together on pre-competitive research, it did not happen in the US.

Critics suggest that Sematech's Dollars 200m annual budget - half from member companies and half from the Pentagon - went to pay for some expensive, if important, meetings. The consortium has also, however, funded research and development that has significantly strengthened some US semiconductor production equipment companies. This has reduced US chip makers' dependency on foreign equipment producers, a critical goal of the Defence Department.

Also, VLSI Research says US equipment suppliers have stemmed the erosion of their home market by foreign competitors and are beginning to gain ground in Japan and Europe.

Not everyone in the US semiconductor industry is happy with Sematech's achievements, however. Some object to government funding of industry research. Others, including two of Sematech's original 14 member companies, feel the consortium has focused on the wrong issues. LSI Logic, a Silicon Valley semiconductor manufacturer, dropped out of the consortium last year saying it had lost sight of its original goal of improving chip manufacturing methods.

The Defence Advanced Research Project Agency, which has provided half of Sematech's funds, last year said it intended to cut annual funding from Dollars 100m to Dollars 80m. The Pentagon agency views the consortium as a 'tremendous success, resulting in broad infrastructural changes within the industry', according to a report published by the General Accounting Office last year.

Darpa explained its proposed reduction in funding by saying the industry 'should bear the primary responsibility for ensuring continued support for Sematech because it is an industry-led consortium addressing industry needs'. Its original justification for funding Sematech was to ensure that the US would lead in the development of advanced weaponry based on semiconductor chips.

In contrast, industry members of Sematech had a different, although complementary, objective - to revive their industry. With a Republican administration opposed to any form of 'industrial policy', the semiconductor industry executives who founded Sematech saw the Pentagon's concerns about dependency on foreign technology suppliers as an opportunity to gain government support.

With the election of President Clinton, US chip makers can afford to be more frank. They have drawn up a 'road map' of the long-term strategy to maintain competitiveness. Based on the assumption of no increased government or private-sector funding for research and development, it is aimed at enabling industry and government to work together by assigning the most effective roles to individual semiconductor companies, Sematech, university research and government-funded national laboratories, in a co-ordinated effort.

WJ Sanders III, chairman and chief executive of Advanced Micro Devices, a Sematech member company, says: 'I don't favour a lot of government involvement. I think the only reason Sematech made sense was that our external trading partners were pummelling us by using their government's capital.'

While Darpa's money was critical to the formation of Sematech when the US semiconductor industry was in dire straits, the government agency was 'genteel' in its control over Sematech, observes Bagley, and its financial contribution relatively small. 'A hundred million dollars a year pales into insignificance in the context of US government spending . . . half the money and most of the resources for Sematech have come from industry.'

If Sematech is to be the 'role model for government-industry co-operation', as Clinton said during his campaign, this points to modest government support for industry-led efforts rather than large-scale government programmes to restore industrial competitiveness.

---------------------------------------------- 1991 1992 Company* revenue market share (%) ---------------------------------------------- Intel (3) 5,064 7.7 NEC (1) 4,976 7.6 Toshiba (2) 4,765 7.3 Motorola (4) 4,635 7.1 Hitachi (5) 3,902 6.0 Texas Instruments (6) 3,052 4.7 Fujitsu (7) 2,583 3.9 Mitsubishi (8) 2,307 3.5 Philips (10) 2,108 3.2 Matsushita (9) 1,929 2.9 Others 30,266 46.1 ---------------------------------------------- Total 65,587 100.0 ---------------------------------------------- *1991 ranking in brackets ---------------------------------------------- Source: Dataquest ----------------------------------------------

Sematech United States of America P3674 Semiconductors and Related Devices IND Industry profile STATS Statistics P3674 The Financial Times London Page 13 1272
Management (The Growing Business): Business and red tape Publication 930209FT Processed by FT 930209

The Growing Business Page will highlight over the next few months businesses entrapped by red tape. It will award a bottle of Laurent-Perrier pink champagne to each one featured.

The owner-managers of independent businesses are invited to describe their experiences - on no more than two sides of A4 please.

Letters should be addressed to:

Charles Batchelor,

Growing Business Correspondent,

Financial Times,

Number One, Southwark Bridge, London SE1 9HL.

United Kingdom, EC P99 Nonclassifiable Establishments CMMT Comment & Analysis P99 The Financial Times London Page 10 99
Management (The Growing Business): Escaping from the Euro-VAT maze Publication 930209FT Processed by FT 930209 By CHARLES BATCHELOR

A CHANGE in the VAT rules brought about by the creation of the single European market has led to an anxious time for at least one British company.

Northern Tooling Reclamation, a Wetherby-based company which reconditions industrial power tools, went through a difficult few weeks when it feared it might lose a large chunk of its continental European business.

New EC rules which required it to start charging VAT on European deliveries led to threats from several of its agents that they would no longer be able to act for the British company.

To make matters worse, confirmation of the rule change did not come through until early December, just three weeks before they took effect.

Northern Tooling, with sales of just over Pounds 1m - half of them exports - and a workforce of 60, has found a way of absorbing the impact of the new tax rules. But only by paying Pounds 20,000 into a special bank account from which it will make VAT transfers to UK Customs. This avoids charging VAT to its European customers but means it ties up a large sum of its own money and takes on an extra administrative burden.

'If we had not had the cash to provide the VAT cash pool and remove the need for our agents to carry the VAT cost we would have lost their orders,' says Kenneth Sutcliffe, chairman of the 17-year-old company.

The problem arose when Northern Tooling's activities were classified as 'repair', and subject to VAT, rather than 'process', which is not. Previously no VAT was payable on EC exports so the distinction did not matter.

The company told its continental agents that it would add 17.5 per cent VAT to all its invoices from January 1.

But when Northern Tooling's agents made their own inquiries, some said they were told by their local VAT authorities that they had no knowledge of the change.

Sutcliffe checked again with UK Customs, who confirmed the new regulation, but was told there should be no problem because the agents would be able to reclaim the VAT. But since the agents had other suppliers who did not require them to get involved in VAT red tape, they felt they could live without Northern Tooling.

Setting up the special bank account provides a short-term solution but it ties up Pounds 20,000 worth of badly needed capital. Northern Tooling will be able to reclaim the VAT from UK customs but there is a time delay between the initial payment and the repayment.

It will also result in Northern Tooling paying over VAT to Customs only to claim it back almost immediately.

Administering the bank account has meant that Northern Tooling has had to obtain power of attorney from its agents to claim the VAT refund. It has also had to come to an agreement with UK Customs for it to accept photocopies of its invoices rather than the originals.

Customs has said it will look at ways to speed up the clearing of Northern Tooling's VAT refunds so that the impact on the company's cash flow is minimised. It will also lobby in Brussels for a change in the rules so that 'repair of goods' can be zero-rated.

Like many other UK businessmen faced with single market changes Sutcliffe feels he is the victim of overzealous interpretation of the rules by UK Customs. But claims that the VAT authorities in other countries are more lax are hard to verify and Customs says it has to assume its counterparts on the continent are applying the rules.

Nevertheless, this episode has been a nasty shock for Sutcliffe and exposed the vulnerability of his business to decisions taken by bureaucrats in Brussels and London.

'Had any of our major agents pulled out this would have placed a serious strain on our business,' he says. 'In normal circumstances we might have taken this in our stride but we are at the bottom of a recession. Who benefits?'

Northern Tooling Recalmation United Kingdom, EC P354 Metalworking Machinery P355 Special Industry Machinery P7699 Repair Services, NEC MGMT Management GOVT Taxes P354 P355 P7699 The Financial Times London Page 10 710
Management (The Growing Business): Time for taxing the chancellor - In the run-up to the Budget, Charles Batchelor offers a guide for small business lobbyists Publication 930209FT Processed by FT 930209 By CHARLES BATCHELOR

After decades of neglect small businesses are now rarely out of the headlines. Are the banks being beastly? Have Whitehall and Brussels tied them up in red tape? The climate in which small firms operate is subject to constant scrutiny.

But important though these issues are, of even greater significance is the tax regime in which business operates. The run-up to the Budget gives small business lobbyists their best opportunity to influence the man who really matters, the chancellor of the exchequer.

The small business groups have been joined in recent years by the more broadly-based business organisations such as the Institute of Directors, the Association of British Chambers of Commerce and the Confederation of British Industry. All make reference in their budget submissions to the specific problems of small firms.

This has been matched by the chancellor's growing willingness to address their particular concerns. The small business community is a large one with basic Tory sympathies. Last year saw changes in the VAT rules, a relaxation of inheritance tax and an easing of the burden of the Uniform Business Rate.

In the view of the lobbyists, however, much remains to be done and this year's budget submissions contain a wealth of detailed proposals. The main areas of concern are:

VAT. There is widespread concern that frequent adjustments to VAT are turning it into a tax on business instead of, as intended, a tax on final consumption. The IOD warns against it becoming a 'cascade' tax, which 'sticks' and gets built into the costs of businesses further down the chain.

The Federation of Small Businesses calls for the elimination of VAT on transactions between VAT-registered businesses by zero rating them. Zero-rating is already applied to cross-border trade within the EC. This would cut administration costs, minimise the problem of bad debts and reduce the risk of incurring penalties without affecting the VAT yield to the Treasury, it says.

Raising the VAT threshold to Pounds 50,000 (from the present level of Pounds 36,600) would remove a heavy compliance burden at little cost, the IOD suggests.

Capital gains tax. There is widespread agreement among business organisations that by setting this tax at 40 per cent - the same level as the top rate of income tax - the government has put an effective brake on enterprise. Equalising the two taxes took no account of the greater risks associated with building a business, the CBI says. It suggests that assets held for seven years should be exempt.

The Association of British Chambers of Commerce limits itself to a call for a review of the tax threshold and suggests treating short-term gains as income. The IOD goes much further, arguing for a drastic cut in or abolition of capital taxes because of their adverse impact on the venture capital industry.

The British Venture Capital Association makes its own detailed submission, arguing that the people who build up businesses should enjoy the same tax breaks as entrepreneurs and managers in other countries. In Britain's main competitors these people pay no capital taxes or are taxed at far lower rates.

As an interim measure, the association suggests that working directors or managers should qualify for rollover relief on the proceeds of the sale of their shareholdings provided they reinvest the money in an unquoted company within three years. This would enable successful entrepreneurs to start up a second or third business becoming, in the association's graphic phrase, 'serial entrepreneurs'.

Alongside rollover relief, the BVCA suggests a further extension of retirement relief, available to people who sell their businesses after the age of 55. It calls for the abolition of the age limit and the raising of eligible gain from Pounds 600,000 to Pounds 1m.

Uniform Business Rate. A reduction in the UBR would be the most effective way of helping businesses survive the recession, according to the IOD and the Forum of Private Business. Business rates form a large part of the total costs of many businesses and cuts would have an immediate impact on cash flow.

A replacement for the Business Expansion Scheme. For all its faults the BES met a need and its demise at the end of 1993 will leave a gap in the availability of small amounts of equity. Most venture capital companies are not able to provide such small sums economically.

The Union of Independent Companies and Federation of Small Businesses have renewed their plea for a small business development bank which would provide inexpensive funds along the lines of the Bank for Reconstruction in Germany. Investment allowances. The chancellor announced a concession in his Autumn statement which permitted businesses to speed up the rate of depreciation for one year only, but business groups are seeking more fundamental alterations.

The IOD believes special areas such as research and development spending should have more generous treatment. Together with the CBI, it thinks the accelerating pace of change makes established depreciation criteria look increasingly irrelevant. Is it still realistic, asks the IOD, to expect an industrial building to last for 25 years?

It also calls for a change in government policy on what are quaintly known as 'nothings', a ragbag category of business expenses which the Revenue does not allow to be set against tax. They include abortive capital expenditure, lease payments on cars costing more than Pounds 8,000 and, most importantly, the costs of issuing equity capital. The abolition of the BES is an additional reason for a concession on the cost of issuing shares, the IOD says.

Inheritance tax. The small business lobby has done quite well in this area in recent years but is keen to finish this tax off for good. Both the IOD and the chambers of commerce are seeking its complete abolition. Even in its present form this tax encourages business owners to retain their assets until death when it might be better for them to pass them earlier to the next generation, the chambers argue.

Failing complete abolition, the rate should be halved to 20 per cent and the threshold doubled to Pounds 300,000, the IOD says.

Compliance costs. The announcement last week of a comprehensive government campaign against red tape has been given a cautious welcome by the business community, which has nevertheless still targeted instances of bureaucracy in the budget submissions.

A decision to levy National Insurance contributions retroactively on benefits in kind has forced many companies to check back through six years of accounts to bring themselves up to date, say the chambers. The different yardsticks that apply to PAYE and National Insurance contributions also complicate life for the small business owner.

The heavy costs, in both time and money, incurred by the smaller company in administering VAT, PAYE and National Insurance, justify lower taxes for this sector, says the Forum of Private Business.

The recession, coupled with a ballooning public sector borrowing requirement, means Norman Lamont has little scope for cutting taxes on March 16. The small business sector nevertheless believes it has a strong case for sympathetic treatment.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy MGMT Management P9311 The Financial Times London Page 10 1218
Parliament and Politics: Tory MPs uneasy at Portillo's review Publication 930209FT Processed by FT 930209 By DAVID OWEN and ALISON SMITH

TORY BACKBENCHERS yes-terday argued for keeping large areas of the welfare state out of the government's strategic review of public spending priorities, as Mr Michael Portillo, chief secretary to the Treasury, outlined his plans in the Commons.

In the Commons, Tory backbench concerns focused principally on the National Health Service and pensions. However, Tory MPs were privately voicing fears that the review would not achieve its aim of reassuring the markets.

More than one commented that the government seemed to have no appetite for taking radical decisions, and that no crackdown on spending that was likely to be approved by the Commons would have enough impact on public borrowing.

'It's more than window-dressing, and it's essential but it won't get us out of the deficit problem. The only ways out of that are inflationary growth and extending the VAT base,' one backbencher said gloomily.

The public warnings to Mr Portillo began with a contribution from Mr James Couchman, the Tory MP for Gillingham, who said the provision of healthcare free at the point of delivery was cherished by rich and poor alike.

'Any erosion of that principle would be resented very deeply throughout the country,' Mr Couchman cautioned.

On pensions, Sir Anthony Grant, Conservative MP for Cambridgeshire South West, urged Mr Portillo to bear in mind that an increasing number of elderly people had based the last years of their lives on present figures.

'They are not in a position to make drastic changes at this stage of their life, and they don't expect to be let down,' Sir Anthony said.

Labour's bitter opposition to the review was signalled by Ms Harriet Harman, shadow chief secretary. She condemned it as a 'panic response' to the government's economic mismanagement.

'It would be wholly wrong if the British people, already suffering in this recession, ended up paying the price in worse policing, worse schools and worse healthcare, and in lost pensions and lost benefit,' she said.

The prospect of alliances between Labour and some Tories has already been enough to blunt the cutting edge of last year's spending round, and some Tories believe the government's 21-seat majority will undermine the confidence which yesterday's statement that the government would tackle public spending was intended to create.

'They'll be tougher about spending for four years hence than they will for next year,' said one former minister.

The only way to achieve spending cuts, according to one MP, was for the Treasury simply to present a stark choice: 'Ministers will have to give people the choice between cuts and income tax rises,' he said.

United Kingdom, EC P9441 Administration of Social and Manpower Programs GOVT Government News P9441 The Financial Times London Page 9 469
Parliament and Politics: Tortoise plods out of hibernation - Ivo Dawnay tracks John Smith's first steps on a long election race Publication 930209FT Processed by FT 930209 By IVO DAWNAY IF Mr Neil Kinnock was the hare, then Mr John Smith is the tortoise

solid and reliable if maddeningly plodding.

Last Sunday in Bournemouth, the Labour leader's speech to the party's local government conference marked the end of a long winter's contemplative hibernation and his first steps in the race for Downing Street.

What seemed equally clear at Westminster yesterday was that the great majority of Labour MPs of both left and right were breathing a collective sigh of relief. But had Mr Smith's advocacy of an end to dogma been a clandestine announcement of the end of socialism? So long had the wait been for news, any news, from the leader's bunker, that no one appeared to care.

All this says much about Mr Smith's leadership technique - a style about as far from the Kinnock 'bang the table first, ask questions afterwards' approach as it is possible to be. Yet if Mr Smith's agenda is to continue down the Kinnock path of reform, it is still wholly impossible to gauge how far he is ready to go.

One theory - that of some opponents - has it that Mr Smith's highly conservative Scottish Labourism sees nothing essentially wrong with the party's positions but a good deal to criticise in the greedy, self-interested electorate. His aim is to broaden Labour's appeal to their baser interests while keeping the party's core objectives unchanged.

The second view - largely that of his admirers - is that what has appeared to many to be indolence or complacency is in fact a grand, long-term and radical strategy. By keeping his counsel, Mr Smith has waited until the chorus of 'Something must be done' has neared a crescendo before authoritatively dictating that something will be.

A painstaking textual analysis of the Bournemouth speech leaves the reader equally uncertain about the conclusions to be drawn. Mr Smith's call for 'a new politics that puts people first, that rejects dogma and embraces practical, common-sense solutions' is a case in point.

It can either be interpreted as a lightly coded epitaph for socialism - a final burial of ideology in favour of a new individualism lightly sprinkled with social democratic altruism; or, alternatively, merely banal platform rhetoric.

Most Labour MPs appear ready to embrace the broad sentiments. They liked the definition of the Labour task as 'to stand again and again for the frustrated ambitions of the majority of our people'.

But there was also concern that the sandwich lacked a beefy filing of policy prescriptions. Today, the government's advocacy of further privatisation for such as British Rail and the Post Office appears to be, in Mr Smith's words, 'well beyond the limits of public approval and comprehension'.

Yet that is a far from secure guarantee that by 1996-97 Labour will be able to sail to victory as the party of moderation and sound management and a popular hedge against Tory extremism. Nor is it by any means certain that Mr Smith's crusade against vested interests, whether in the privatised utilities, the City or among other elite groups, has any real resonance among the electorate.

What seems more certain is that the scramble for the centre-ground of British politics is under way. Furthermore, in spite of the wailing in the wilderness stage from figures such as Mr Bryan Gould, most of the left are still aboard Mr Smith's creaky bandwagon - if sceptically so.

Mr Alan Meale, the leftwing MP for Mansfield, commented: 'With Kinnock you could bargain; when Smith takes a decision you either play or you don't. The left must fight its corner from inside.'

Nothing in Mr Smith's speech was wildly new. But by declaring the death of dogma, he has nonetheless pushed the party closer to the anti-ideological voters outside its ranks. 'It is,' said one prominent Labour moderniser, 'proof that things are moving in the right direction, but, Lord, why does it have to take so long.'

Labour Party (UK) United Kingdom, EC P8651 Political Organizations MGMT Management COMP Company News Smith, J Leader Labour Party (UK) P8651 The Financial Times London Page 9 713
Parliament and Politics: Iraq inquiry Publication 930209FT Processed by FT 930209

THE GOVERNMENT yesterday repeated its assurance that government departments would co-operate fully with Lord Justice Scott's investigation into British defence-related exports to Iraq. Sir Nicholas Lyell, the attorney general, said departments would give 'full assistance' to the inquiry.

United Kingdom, EC Iraq, Middle East P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 9 68
Parliament and Politics: Prescott calls for shipping radar Publication 930209FT Processed by FT 930209

MR JOHN Prescott, shadow transport secretary, yesterday called on the government to introduce radar surveillance of shipping routes in environmentally sensitive areas, saying the only measure 'rogue operators' would recognise was 'the possibility of getting caught'.

But Mr John MacGregor, transport secretary, cautioned that such a step would be 'extremely expensive'. Radar surveillance in the English channel had been effective in reducing accidents there by 85 per cent, he said.

The exchanges followed last month's incident when the oil tanker Braer was wrecked off the Shetland Islands.

United Kingdom, EC P4412 Deep Sea Foreign Transportation of Freight P9621 Regulation, Administration of Transportation GOVT Government News P4412 P9621 The Financial Times London Page 9 126
Parliament and Politics: Labour warns on social chapter Publication 930209FT Processed by FT 930209 By PHILIP STEPHENS

MR JOHN SMITH confirmed yesterday that the Labour leadership would seek to derail the government's legislation implementing the Maastricht Treaty by defeating it over Britain's opt-out from the social chapter, Philip Stephens writes.

His comments, published in today's issue of The Times, raised the possibility that an alliance of opposition parties and Tory Euro-sceptics could force the government either to drop ratification or to seek renegotiation of the treaty.

Mr Smith insisted that Britain could still ratify the agreement if the government was defeated over the special protocol it negotiated to exclude it from the social provisions of the treaty. He said that other European states would allow the government to drop the opt-out protocol and then press ahead with ratification of the treaty.

But that view was flatly rejected both by the government and by the Tory Euro-sceptics who are determined to defeat the treaty. Displaying a rare consensus, ministers and Tory back-bench rebels concurred that if Mr Smith was successful Mr John Major would be unable to ratify Maastricht.

Ministers said that Denmark inevitably would take advantage of any renegotiation to seek the inclusion in a new treaty of the informal opt-outs from Maastricht it secured at last December's Edinburgh summit. In those circumstances the whole process might unravel.

Senior Tory party managers acknowledged last night that the House of Commons vote on the social chapter, expected next month, would seriously threaten the government's majority. The Liberal Democrats have up to now indicated that they are prepared to vote with Labour against the government.

But Mr Major may be able to rely upon the intense opposition of Tory constituency associations to the social chapter to limit the number of rebels on his own backbenches.

United Kingdom, EC P8651 Political Organizations P9721 International Affairs GOVT Government News CMMT Comment & Analysis P8651 P9721 The Financial Times London Page 9 326
Parliament and Politics: Rising star fighting for the free market Publication 930209FT Processed by FT 930209 By PHILIP STEPHENS, Political Editor

ONE political winner has emerged from the government's planned review of public spending before it has started. Mr Michael Portillo, chief secretary to the Treasury, has confirmed his status as the cabinet's fastest-rising star.

It was he who suggested to colleagues last summer that the appalling state of government finances called for a fundamental reassessment of the way it spends Pounds 250bn a year of taxpayers' money.

Most of big spenders were happy to sign up, persuaded that a long-term review was one of the safer ways to defer the awkward choices facing an increasingly spendthrift government in the midst of recession. They may come to regret that judgment.

Mr Portillo had other ideas. Still three months from his 40th birthday he is the youngest, and technically the most junior minister in the cabinet.

He is also one of its brightest, most hard-working and ideologically committed members - determined to advance in tandem his political career and the cause of aggressively free-market Conservatism.

His review may serve both causes. Mr Portillo understands more clearly than many that the philosophical direction of any government depends crucially on the level of its spending commitments and the priorities to which they are aimed. Within a few months he will have a better grasp of the implications of present spending programmes than anyone else in government.

The chief secretary appreciates also that economic chaos provides one of the most powerful forces for change in the Conservative party: it is only then that Tory MPs have to face up to the choice between unpalatable cuts in public spending and ruinous increases in taxation.

So Mr Portillo used the launch of the review - focusing at first on the social security, health, education and home office budgets - to re-open the political debate about the limits of the welfare state.

No one doubts where Mr Portillo stands personally. A conviction politician, he would like to see a further decisive tilt away from the state and towards the individual - in education, in social welfare and in health. He would like further cuts in taxation and closer targeting of welfare benefits. He is not so naive as to believe the review will transform overnight a timid government into a radical one. The state pension and child benefit - two main components of the welfare budget - are protected until the next election by manifesto commitments.

But Mr Portillo understands that one of the lessons of the 1980s is that if the climate of opinion is carefully managed in advance the radical can be translated into the reasonable view. His sights are on the Tory party in 10 years. By then he could be leading it.

A few Tory MPs are already tipping him to replace Mr Norman Lamont in a summer reshuffle. Such rapid promotion is probably premature. Mr Major may well be loath to mark him out as heir-apparent. But, as he stressed in the Commons yesterday, Mr Portillo is looking to the medium term.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Government News Portillo, M Chief Secretary The Treasury (UK) P9311 P9611 The Financial Times London Page 9 553
Parliament and Politics: Road funds shortfall forecast Publication 930209FT Processed by FT 930209

ADDITIONAL SOURCES of finance to fund Britain's road-building programme may be needed by the end of the century if congestion on motorways and trunk roads is to be avoided, Mr John MacGregor told MPs yesterday.

'We have to see whether private finance can augment public finance,' he said, responding to opposition calls to clarify whether the government was considering introducing road tolls as an environmental measure or to raise Treasury revenues.

United Kingdom, EC P9621 Regulation, Administration of Transportation GOVT Government News P9621 The Financial Times London Page 9 101
Parliament and Politics: Welsh success in poll tax receipts Publication 930209FT Processed by FT 930209 By IVOR OWEN

DISTRICT councils in Wales have been so successful in collecting the poll tax in the current financial year that receipts exceeded the estimated amount by Pounds 16m, Mr David Hunt, the Welsh secretary, disclosed in the Commons yesterday, Ivor Owen writes.

He said the money would be used to reduce the burden of the council tax, which will replace the poll tax in April.

Mr Hunt again insisted that the Pounds 2.6bn the government would provide for local government services in Wales in the coming financial year should ensure 'reasonable' council tax bills.

He stressed that 90 per cent of all local authority revenue expenditure would be funded by central government support, and enable just over Pounds 900 to be spent on every man, woman and child in Wales.

Mr Ron Davies, Labour's shadow Welsh secretary, strongly disputed the minister's claim that the level of grant should make it unnecessary for any local authority to cut capital spending programmes.

Mr Davies maintained that the money being provided by the government would not be adequate to allow vital public services to be retained, and result, at a conservative estimate, in the destruction of some 2,500 jobs in the public sector.

United Kingdom, EC P9121 Legislative Bodies GOVT Taxes P9121 The Financial Times London Page 9 231
Viewing in about 9.5m homes expected by 2000: FT Satellite Monitor Publication 930209FT Processed by FT 930209 By RAYMOND SNODDY

ABOUT 9.5m homes in the UK will be able to watch satellite television by the year 2000, the latest forecasts from Continental Research show.

The number is down on the forecast made by Continental in November 1990, when the market research group thought the total would be 10.3m. The revision has been made because of slower growth last year.

Of the 9.5m homes in the latest forecast - 45 per cent of the UK total - 6.8m receive the new television channels via their own dish or communal aerial system and the remaining 2.7m from cable.

The latest FT Satellite Monitor, produced by Continental Research, estimates that gross sales and rental of satellite dishes in January totalled 65,000 compared with 70,000 in January last year.

Continental estimates that 17,000 of total retail sales last month were upgrades of equipment, replacements of existing equipment or renewals after a break in subscription.

This gives a net increase for the month of 48,000. Continental also found a growth of interest from a low level in December with more than 300,000 households saying they would install satellite television.

Interest may have been stimulated by satellite coverage of the present England cricket tour of India.

The latest Continental figures coincide with the publication by Broadcasting Audience Research Bureau, which produces official broadcasting ratings, of a paper reviewing the work of the three organisations regularly monitoring the growth of the satellite television market. They are Continental, Barb and GfK, the German-owned market research group.

BARB estimates are derived from 3,500 face-to-face interviews in the home each month and cover the entire UK for all forms of reception.

Barb figures for February 1 estimate that 3.05m homes can receive satellite television, including all form of cable distribution.

The latest figure for satellite dishes is 2.323m, an increase of 26,000 since the beginning of January. GfK, sponsored by the ITV Association, uses a series of 10,000 home random samples at six month intervals. These surveys are supplemented by projections from sales data obtained from retail audits and a sample of purchasing behaviour in 25,000 homes.

GfK figures exclude Northern Ireland, the Channel Islands and the Isle of Man, which could add 50,000 to 60,000 dishes to the total.

The latest GfK figures suggest that by November 21 dish ownership totalled 2.01m.

Barb believes the single most important number for estimating the size of the emerging market is the number of satellite dishes for private homes.

United Kingdom, EC P4841 Cable and Other Pay Television Services MKTS Equipment sales P4841 The Financial Times London Page 8 446
Wages of security guards rise 3.2% Publication 930209FT Processed by FT 930209

THE AVERAGE hourly wage for security guards has risen by 3.2 per cent to Pounds 3.50 in the past six months, according to a British Security Industry Association survey.

Mr David Fletcher, chief executive of the association, said higher wages were usually paid once customers recognised they were essential for quality service. Lower wages often lead to higher staff turnover and a consequent drop in experience and standards, he added.

United Kingdom, EC P7381 Detective and Armored Car Services PEOP Labour P7381 The Financial Times London Page 8 99
Revenue staff reject pay system Publication 930209FT Processed by FT 930209

MEMBERS of the Inland Revenue Staff Federation have rejected revised plans for performance pay.

They voted by 34,147 to 6,588 to back a campaign of non-co-operation. The Revenue was one of the first government departments to introduce a performance-pay system, but after complaints from both staff and managers revised proposals were introduced on an experimental basis.

United Kingdom, EC P9199 General Government, NEC PEOP Labour P9199 The Financial Times London Page 8 82
Shell Oil move in US legal fight Publication 930209FT Processed by FT 930209

SHELL Oil has petitioned the California Appeals Court to re-hear some issues raised in its case with insurers who include underwriters at Lloyd's of London. The case concerns the cost of cleaning up pollution at the Rocky Mountain Arsenal site in Colorado where Shell makes pesticides.

In the 1980s the US Environmental Protection Agency ordered the company to clean the site. Its insurers refused to meet the cost.

The court ruled last month that Shell could not collect on insurance policies that it had bought after 1969, when insurers introduced a clause limiting coverage for pollution caused by 'sudden and accidental' release of pollutant.

The judge referred to a lower court issues relating to coverage for pollution between 1952, when Shell started manufacturing pesticides at the plant, and 1969, opening the possibility that Shell might claim on its older policies.

Shell Oil United Kingdom, EC P6531 Real Estate Agents and Managers P291 Petroleum Refining RES Pollution INS Insurance GOVT Legal issues P6531 P291 The Financial Times London Page 8 182
Lautro fines life group Pounds 80,000 Publication 930209FT Processed by FT 930209 By JOHN AUTHERS

LIBERTY LIFE, the life assurance group, has been fined Pounds 80,000 by Lautro, the industry regulator, for failing to screen its direct sales staff adequately before recruiting them, John Authers writes.

Lautro also said Liberty Life failed to control its internal affairs responsibly, and that it did not ensure its sales force was properly supervised.

Liberty Life stopped recruiting sales staff for three months in mid 1992 to demonstrate to Lautro that its screening procedures had been reviewed. It has paid Pounds 5,000 compensation to 46 investors who were sold the wrong products.

Mr David Pritchard, sales director, said that previously the company had not checked the financial background of its recruits as thoroughly as it should have done.

The fine follows a series of penalties imposed on life groups for inadequate control of separately managed tied agents. London & Manchester was fined Pounds 80,000, Guardian Royal Exchange had to pay Pounds 100,000 and Scottish Widows was fined Pounds 120,000.

Liberty Life Assurance United Kingdom, EC P6311 Life Insurance COMP Company News PEOP Labour TECH Standards GOVT Legal issues INS Insurance P6311 The Financial Times London Page 8 203
Labour MEP dons motorcycle leathers in protest at EC plans to limit motorcycle power Publication 930209FT Processed by FT 930209

A Labour MEP yesterday donned motorcycle leathers and climbed on to a British-built Triumph Daytona to protest at EC plans to limit motorcycle power. Today Mr Roger Barton, MEP for Sheffield, will wear his leathers when he addresses the European parliament in Strasbourg about the issue.

The parliament is to debate the resumed first reading of a bill which would restrict motorcycles to no more than 100 brake horsepower. This would outlaw some of the more powerful motorcycles manufactured by Triumph in the UK and other makers elsewhere. Triumph said five of its eight models would be affected by the limits. The British Motorcyclists Federation deplored the proposed legislation.

European Economic Community (EC) United Kingdom, EC P3751 Motorcycles, Bicycles, and Parts GOVT Draft regulations P3751 The Financial Times London Page 8 150
Tesco may challenge over video sale ruling Publication 930209FT Processed by FT 930209

THE USE of a child by trading standards officers as an agent provocateur to catch retailers illegally selling goods to children such as video films classified for adults was upheld by the High Court yesterday.

Lord Justice Staughton, sitting with Mr Justice Buckley, rejected an appeal by Tesco, the supermarket chain, against a conviction by magistrates in Willesden, north London, for supplying an 18-rated film to a boy of 14.

Lord Justice Staughton said the boy was given Pounds 10 by a trading standards official and told to buy a video with an 18 classification. He was told to give his true age if asked.

The boy obtained the video and Tesco was later found guilty of a breach of the 1984 Video Recordings Act, fined Pounds 750 and ordered to pay Pounds 416 in costs.

Tesco argued that if the boy was acting as an agent for the officer, the video was supplied to the official, not the boy, and was therefore lawful.

Tesco said it was considering challenging the ruling in the House of Lords as 'a matter of general public importance'.

Lord Justice Staughton said it was no doubt 'fairly common for children to arrive at shops and say they wish to buy cigarettes or alcohol for a parent or some of other adult, and the same may happen with video recordings'.

Even if the child was telling the truth, it was doubtful that it could be said that the supply was to the adult and not the child.

Tesco United Kingdom, EC P5311 Department Stores P5411 Grocery Stores P6719 Holding Companies, NEC COMP Company News TECH Standards GOVT Legal issues P5311 P5411 P6719 The Financial Times London Page 8 296
Adam Smith Institute says BBC should be floated on Stock Exchange Publication 930209FT Processed by FT 930209

THE BBC should be floated on the Stock Exchange as a single company licensed to broadcast two television channels and five radio stations, the Adam Smith Institute, the rightwing think tank, says today.

Transfer of ownership 'into the hands of millions of ordinary shareholders' would not only raise 'huge sums' for the Treasury but would take the BBC out of the political domain.

The report argues that the BBC should be funded by advertising, but the transition from licence fee funding could be phased over 10 years. The licence fee system means the BBC 'is not liable to any penalty for failure to provide what the general public want to see or for that matter to reap the rewards'.

The study rejects the idea that there would not be enough advertising to support the BBC and the existing commercial broadcasters.

As the BBC becomes a privatised corporation, public service broadcasting should be opened up to competition. An Arts Council of the Air - possibly an offshoot of the existing Arts Council - which would channel funds for public service broadcasts. Organisations, including the BBC, would submit bids to produce such works. Overall the report concludes the proposals would take broadcasting in Britain a large step towards a free market system.

What Price Public Service? The Future of the BBC, Adam Smith Institute, 23 Great Smith Street, London SW1P 3BL. Pounds 15.

British Broadcasting Corp United Kingdom, EC P4833 Television Broadcasting Stations COMP Company News CMMT Comment & Analysis P4833 The Financial Times London Page 8 272
First speed-trap camera case Publication 930209FT Processed by FT 930209

LEGAL HISTORY was made yesterday with the first prosecution of a speeding driver based on evidence from the new controversial speed-trap cameras.

According to police in west London the cameras, four of which are rotated at 42 sites, have cut accidents significantly since their introduction in October last year.

At Ealing magistrates court Mr Stephen Quashie, 19, of Harlesden, north-west London, pleaded guilty to driving at 78mph on the A40 Western Avenue which has a 50mph limit.

He told the court that on October 31 he had been rushing to see his pregnant ex-girlfriend in Hammersmith Hospital when he was caught on film.

He said: 'It was 1.15am in the morning. There were hardly any cars on the road. I thought it would be all right.'

He was fined Pounds 156, plus costs of Pounds 25, and given six penalty points.

The chairman of the bench Wiktor Lewanski said the fine 'reflects the seriousness with which this offence is being viewed'.

Afterwards Mr Quashie said he was surprised at the size of the fine but philosophical about the use of cameras.

He added: 'They are there to do the job and they have done their job.'

But he admitted he did not think he had been caught as he did not think there was a camera in spite of the police signs.

Afterwards the police said: 'Since their introduction on October 15 there has been a 38 per cent drop in accidents, a 46 per cent drop in casualties and most spectacularly a 60 per cent drop in those killed or seriously injured.'

He went on: 'Motorists have reduced their speed by about 10 per cent so accidents are that much less serious.'

He denied they were being used to increase the number of drivers caught, pointing out their presence obviously reduced speed.

On average 250 cases are being detected each week by the four cameras rotated in the 42 sites in west London.

United Kingdom, EC P9221 Police Protection P9229 Public Order and Safety, NEC GOVT Legal issues P9221 P9229 The Financial Times London Page 8 356
Migraine costs at more than Pounds 600m Publication 930209FT Processed by FT 930209

WORKERS who suffer from migraines cost their employers between Pounds 611m and Pounds 741m a year in lost working time and reduced productivity, according to research led by Dr Roger Cull, a consultant neurologist at Edinburgh Royal Infirmary.

There are an estimated 3.5m adult migraine sufferers in the UK, of whom about 2.3m are in work. The cost to the National Health Service of dealing with migraine is relatively small - between Pounds 20m and Pounds 30m a year, says the Office of Health Economics.

The study of the cost to employers, published in the British Journal of Medical Economics, found male sufferers lost an average of 5.6 working days because of attacks. That comprised 1.5 complete days off work and the equivalent of 4.1 days lost through reduced efficiency. Female sufferers lost an average of 6.7 days.

The Economic Cost of Migraine, British Journal of Medical Economics, Vol 2, Brookwood Medical Publications, Orchard House, Connaught Road, Brookwood, Surrey GU24 OAT. By subscription.

United Kingdom, EC P8069 Specialty Hospitals, Ex Psychiatric PEOP Labour P8069 The Financial Times London Page 8 192
Lautro fines life group Pounds 80,000 Publication 930209FT Processed by FT 930209 By JOHN AUTHERS

LIBERTY LIFE, the life assurance group, has been fined Pounds 80,000 by Lautro, the life assurance regulator, for failing to screen its sales staff adequately before recruiting them, John Authers writes.

Lautro also said Liberty Life failed to control its internal affairs responsibly, and that it did not ensure its sales force was properly supervised.

Liberty Life stopped recruiting sales staff for three months in mid 1992 to demonstrate to Lautro that its screening procedures had been reviewed. The company has only 408 representatives compared with a high of about 750 at the beginning of the decade. It has paid Pounds 5,000 compensation to 46 investors who were sold the wrong products.

Mr David Pritchard, sales director of Liberty Life, said: 'We were very successful recruiting but that overswamped our personnel department.' It was right of Lautro to tighten up standards, he added.

Mr Pritchard admitted that previously the company had not checked the financial background of its recruits as thoroughly as it should have done. The fine is the latest in a series of penalties imposed on life groups for inadequate control of separately managed tied agents. London & Manchester was fined Pounds 80,000, Guardian Royal Exchange had to pay Pounds 100,000 and Scottish Widows was fined Pounds 120,000.

Liberty Life Assurance United Kingdom, EC P6311 Life Insurance COMP Company News PEOP Labour TECH Standards GOVT Legal issues INS Insurance P6311 The Financial Times London Page 8 253
Companies fight VAT decision Publication 930209FT Processed by FT 930209 By ANDREW JACK

A CONSORTIUM of British businesses plans an intensive campaign against Customs and Excise's decision late last year to restrict the value added tax that holding companies can claim back.

Coopers & Lybrand, the accountancy firm, proposes to orchestrate a Pounds 250,000 campaign involving lobbying and opposition in the courts.

Ms Penny Hamilton, a partner in Coopers' VAT unit, said: 'This is a legally unsound policy which is uncertain in application. We are not going to give up to it without a fight.'

Representatives of nearly 100 clients which are likely to lose tax rebates because of the decision, which comes into force in March, yesterday attended a campaign launch in London.

Coopers intends to identify one of the consortium members, press Customs into making an assessment under the new arrangements and then take an appeal as far as the European Court of Justice, with financial backing from the other members.

Customs issued a press release in October declaring that holding companies that own operating subsidiaries within a group would no longer be entitled to recover VAT incurred - mainly on professionals' fees - during their 'basic business activities'.

Acquiring and disposing of shares, mounting or defending against takeovers and managing the affairs of subsidiaries would all be excluded from VAT recoveries under the tougher approach.

The move by Customs followed interpretation by officials of the wider applications of a ruling by the European Court of Justice concerning a pure holding company called Polysar.

Customs claimed the court's ruling determined that the mere purchase and holding of shares was not an economic or business activity and its role was therefore no different from that of a private shareholder.

Opponents complain that Customs' new guidelines are unclear, inconsistent, highly costly and were announced only through press releases without any debate.

A Coopers' proposal document circulated yesterday says the firm will lobby industry groups, ministers, government officials in London and Brussels and the press as part of the campaign.

Coopers and Lybrand United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P9199 General Government, NEC GOVT Taxes GOVT Regulations P8721 P9199 The Financial Times London Page 8 367
Tecs aim to renew companies link Publication 930209FT Processed by FT 930209 By LISA WOOD, Labour Staff

A PRIVATE company is being established to act as a broker between Training and Enterprise Councils, which deliver government training schemes in England and Wales, and large providers of training for young people and unemployed adults.

Many national companies that had offered training, particularly to young people on Youth Training, pulled out of the scheme when Tecs took over responsibility for the government-funded programmes.

Companies including Midland Bank and the Debenhams and Dixons retail groups complained that they had to sign separate and often widely differing contracts with up to 82 Tecs if they wanted to take on trainees round the country. Previously the government had contracted with them centrally through its National Providers Unit. The Department of Employment said yesterday the unit had not been privatised. Tecs and providers had 'disengaged' the responsibility from the government.

According to an interview in Personnel Today, the magazine for specialist personnel staff, the new company will be called the National Training Partnership.

Mr Roger Shaw, president of the British Printing Industry Federation, who will be one of the directors of the new body, said companies that had dropped out of Youth Training were expressing fresh interest.

The government is expected within the week to announce the successor body to the National Training Task Force. The voluntary body, under the chairmanship of Sir Brian Woolfson, advised the government on establishing Tecs.

National Training Partnership United Kingdom, EC P8331 Job Training and Related Services P9441 Administration of Social and Manpower Programs P8611 Business Associations COMP Company News MKTS Contracts P8331 P9441 P8611 The Financial Times London Page 7 281
BR manager slams sell-off proposals: Separation of track and operations is 'folly' Publication 930209FT Processed by FT 930209 By RICHARD TOMKINS, Transport Correspondent

A SENIOR British Rail manager hoping to lead a buy-out of one of BR's busiest InterCity routes has publicly denounced the government's privatisation plans as unworkable.

Mr Brian Scott, director of InterCity's Great Western division, describes the proposed separation of track and operations as 'folly' and warns that a 'spiral of decline' caused by lack of investment will prevent anyone making profits from Great Western.

The attack is significant because it comes from the head of one of the seven BR routes last week designated by the government as the first candidates for privatisation in 1994. Mr Scott plans to lead a management bid for the franchise to operate Great Western's main line services from London Paddington to much of south-west England and Wales. In letter to Mr John MacGregor, the transport secretary, Mr Scott says he is not against privatisation but believes impediments to running a successful private railway must be removed.

His strongest criticisms are aimed at the government's plan to transfer control of the tracks from train operators to a new track authority.

'As an experienced, professional railway business manager I would not put my money into a train operating company - running a high-speed intensive service such as Great Western - without having day-to-day command and control of operations including signalling and track and track maintenance,' he said.

'Whoever runs the business would be committing an act of folly to buy into something with so little control of performance, and therefore, profit.'

Mr Scott also attacked the climate for investment, saying the private sector will have no incentive to invest in assets with a lifespan of up to 30 years if franchises last only five to 10 years.

Investment in Great Western, he says, needs to rise from Pounds 20m to Pounds 60m a year just to replace existing assets: 'If this increase in investment is not under way within three years, a spiral of decline will prevent anyone making profits on Great Western.'

British Rail yesterday tacitly supported Mr Scott's criticisms by distributing copies of his letter to the media and acknowledging that it had been seen by Sir Bob Reid, BR chairman, and Mr Chris Green, InterCity director. However, it said that Mr Scott was not writing on behalf of BR.

The attack comes as MPs begin their consideration of the Railways Bill today.

Observer, Page 17

British Rail United Kingdom, EC P4011 Railroads, Line-Haul Operating P9621 Regulation, Administration of Transportation COMP Company News GOVT Draft regulations Scott, B Director InterCity Great Western P4011 P9621 The Financial Times London Page 7 451
Heseltine gives pledge on environmental targets Publication 930209FT Processed by FT 930209 By BRONWEN MADDOX, Environment Correspondent

MR MICHAEL Heseltine, trade and industry secretary, yesterday told a Commons committee that the UK would meet international environmental targets, but declined to explain how they would be met because of the imminent publication of the white paper on the coal industry.

Mr Heseltine added that he could not promise the environment committee that emissions of carbon dioxide and other pollutants would not increase because of the review, which is examining whether any of the 31 coal mines listed for closure in October can be saved.

The UK is committed as part of EC policy and treaties signed at last July's Earth Summit in Rio de Janeiro to stabilising emissions of carbon dioxide at 1990 levels by the year 2000, and to curbing discharges of sulphur dioxide and of nitrogen oxides.

Coal-fired power stations produce more of these pollutants than gas-fired or nuclear power stations, and British coal produces more than overseas coal.

In answer to an accusation by Mr Nick Raynsford, Labour MP for Greenwich, that if the government reprieved some pits it would be 'virtually impossible' for it to keep to the targets, Mr Heseltine said that the white paper would address the issues and that they were also the responsibility of the environment and transport departments. He said the government targets were to reduce emissions of nitrogen oxides by 15 per cent of 1980 levels by 1993 and by 30 per cent by 1998. But he said the government was not convinced that the technology to reduce these discharges now mandatory in Continental countries was the best available.

Mr Tim Eggar, energy minister, added that the UK had spent Pounds 500m in the past five years on clean-coal technology.

Asked why his statement in October on the British Coal cuts did not mention environmental issues, Mr Heseltine replied: 'One was concerned . . . with the coal industry and the local communities.'

United Kingdom, EC P4911 Electric Services P9511 Air, Water, and Solid Waste Management P9611 Administration of General Economic Programs RES Pollution GOVT Government News Heseltine, M Trade and Industry Secretary (UK) P4911 P9511 P9611 The Financial Times London Page 7 372
Fight against move on VAT Publication 930209FT Processed by FT 930209 By ANDREW JACK

A CONSORTIUM of British businesses plans to campaign against Customs and Excise's decision late last year to restrict the value added tax that holding companies can claim back.

Coopers & Lybrand, the accountancy firm, proposes to orchestrate a Pounds 250,000 campaign involving lobbying and opposition in the courts.

Ms Penny Hamilton, a partner in Coopers' VAT unit, said: 'This is a legally unsound policy which is uncertain in application. We are not going to give up to it without a fight.'

Representatives of nearly 100 clients, which are likely to lose tax rebates because of the decision, which comes into force in March, yesterday attended a campaign launch in London. Coopers intends to identify one of the consortium members, press Customs into making an assessment under the new arrangements and then take an appeal as far as the European Court of Justice, with financial backing from the other members.

Customs ruled in October that holding companies which own operating subsidiaries within a group would no longer be entitled to recover VAT incurred - mainly on professionals' fees - during their 'basic business activities'.

Acquiring and disposing of shares, mounting or defending against takeovers and managing the affairs of subsidiaries would all be excluded from VAT recoveries under the tougher approach.

The move by Customs followed interpretation of the wider applications of a ruling by the European Court of Justice concerning a pure holding company called Polysar.

Customs claimed the court's ruling determined that the mere purchase and holding of shares was not an economic or business activity and its role was therefore the same as that of a private shareholder.

United Kingdom, EC P6719 Holding Companies, NEC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes COMP Company News P6719 P9311 The Financial Times London Page 7 309
London's water ring main to be completed on Thursday Publication 930209FT Processed by FT 930209

Tunnelling of the Pounds 250m ring main which is to supply London's water will be completed on Thursday, well ahead of schedule. It will form a continuous loop about 50 miles long at a depth of more than 100 ft - well below the deepest Underground stations

United Kingdom, EC P1623 Water, Sewer and Utility Lines MKTS Production P1623 The Financial Times London Page 7 79
Roadbuilders warned on contracts Publication 930209FT Processed by FT 930209 By GILLIAN TETT

CONSTRUCTION companies working for the government may have to take a greater share of the economic risks in roadbuilding contracts, Mr Patrick Brown, permanent secretary at the Department of Transport, warned yesterday.

He told members of the Commons public accounts committee that the cost of roadbuilding contracts had overshot their tender estimates by 28 per cent last year - equivalent to Pounds 85m.

Most of this cost - which was borne by the department - had been due to unforeseen ground conditions or mistakes in design and construction, he said.

Nevertheless, with the department facing criticism that it was failing to monitor these construction projects sufficiently, Mr Brown said pilot schemes were being run in which construction companies will bear the cost of any overrun themselves.

'We are not talking about simple cost overrun,' Mr Brown added, insisting that since roadbuilding was a 'dynamic piece of construction' it was impossible to assess the scale of these engineering risks at the time of the tender. Most of these overruns had occurred on the largest projects, he said.

Additional sources of finance to fund Britain's roadbuilding programme may be needed by the end of the century if congestion on motorways and trunk roads is to be avoided, Mr John MacGregor, transport secretary, told MPs yesterday. 'We have to see whether private finance can augment public finance,' he said, responding to opposition calls to clarify whether the government was considering introducing road tolls as an environmental measure or to raise Treasury revenues.

United Kingdom, EC P1611 Highway and Street Construction P9621 Regulation, Administration of Transportation MKTS Contracts GOVT Government News P1611 P9621 The Financial Times London Page 7 287
Profit-related pay schemes increase Publication 930209FT Processed by FT 930209 By ANDREW JACK

THE NUMBER of profit-related pay schemes jumped by more than a quarter in the final three months of last year, according to figures released yesterday by the Inland Revenue.

The number of schemes increased by 27 per cent from 3,268 to 4,149 by the end of December. Over the same period, the number of employees participating in registered schemes rose by 24 per cent from 780,600 to 973,000.

The sharp rise comes after a long period of stability in the figures. However, the rise had been anticipated as anecdotal evidence had pointed to a substantial increase in inquiries about the schemes to accountants in the past few months.

The new figures follow changes in the 1991 Budget which significantly increased the tax-free profit payments allowed under approved schemes. These are now possible up to either 20 per cent of pay or Pounds 4,000, whichever is lower.

It may also reflect the fact that companies can use the schemes as a highly tax-efficient way to increase benefits to their employees at a time when profits are stagnating.

Mr Stephen Dorrell, financial secretary to the Treasury, said: 'These figures are very good news and strongly indicate that many employers are seeing the benefit of involving their employees in the running of the business.'

Profit-related pay schemes were first introduced in 1988, and the formula by which each one increases employee pay has to be approved by the Revenue. Officials clamped down late last year on the abuse of some of these formulas.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy COMP Company News PEOP Labour GOVT Taxes STATS Statistics P9311 The Financial Times London Page 7 287
Mortgage cut Publication 930209FT Processed by FT 930209

CLYDESDALE Bank is reducing its mortgage rate to 7.99 per cent per annum, it announced yesterday. For new loans the rate will apply immediately and for existing loans it will be effective from March 1.

Clydesdale Bank United Kingdom, EC P602 Commercial Banks COSTS Service prices P602 The Financial Times London Page 7 61
Road contract Publication 930209FT Processed by FT 930209

COSTAIN, the civil engineering group, has won a Pounds 23.4m contract to build a motorway link to the planned second Severn bridge. The link will be from the M4 at Magor, Gwent, to the three-mile crossing.

Costain Civil Engineering United Kingdom, EC P1611 Highway and Street Construction MKTS Contracts P1611 The Financial Times London Page 7 64
Unions fear worst for Daf vans Publication 930209FT Processed by FT 930209 By ROBERT TAYLOR and KEVIN DONE

UNIONS FEAR that Leyland Daf's van production plant in Birmingham will close, although they believe its axle plant in Glasgow and its truck assembly plant in Leyland, Lancashire will be saved.

The fears were voiced as the Dutch administrators of Daf, the beleaguered Anglo-Dutch commercial vehicle maker, warned that more than half of the jobs at the Dutch and Belgian operations would be eliminated.

Mr Louis Deterink and Mr Friso Meeter, the court-appointed administrators, said the jobs would be cut as part of a rescue plan aimed at forming a new limited company - 'New Daf' - comprising the 'core operations' of Daf's Dutch and Belgian medium and heavy duty truck activities.

The Dutch administrators said consultations had taken place with Mr John Talbot and Mr Murdoch McKillop, the joint UK administrative receivers of Daf 'to see if - and if so how - activities in the UK can be absorbed by New Daf.'

It is understood that the Leyland plant would be the main candidate for inclusion in New Daf, although probably with a considerable cut in the 2,200 strong workforce.

The overall fate of the UK operations with more than 5,500 jobs therefore remains uncertain.

The receiver is expected to announce a decision this Friday, and the unions are preparing an intense lobbying campaign over the next few days.

Today Leyland Daf shop stewards are to meet Mr Michael Heseltine, the trade and industry secretary, and union officials tomorrow are due to have discussions with the receiver. On Thursday union leaders travel to Eindhoven for talks with the main Daf board in the Netherlands.

The Birmingham van plant with its 2,000 jobs appears most at risk - Daf was facing an investment of about Pounds 100m to modernise it for a new van range that had been under development with Renault of France.

But jobs are also at risk outside the UK. Daf has more than 5,000 employees at Eindhoven in the Netherlands and about 1,500 employees at Westerlo, Belgium, where it assembles cabs and axles.

The administrators said they expected the total number of these jobs to be 'at least halved'.

The administrators said Daf Finance, a wholly owned subsidiary of the Daf group, would be 'run down and closed'.

They did not specify if this included Leyland Daf Finance, its UK subsidiary, which is not in receivership in the UK but which last week closed its five UK regional offices.

British union leaders are particularly concerned about the prospect that members losing jobs in Daf's UK operations might receive no redundancy pay. The TGWU general union estimates that - if the company met its redundancy obligations - it would cost Pounds 27m for a complete closure of all the plants.

As Leyland Daf is in the hands of the receiver, no company redundancy money will be forthcoming. Workers will be able to receive only state redundancy help after 14 weeks.

Daf, which has more than 12,650 jobs mainly in the UK, the Netherlands and in Belgium, was forced to file for protection from its creditors last week after running up losses of more than Fl 800m in the past three years.

DAF Leyland DAF United Kingdom, EC Netherlands, EC Belgium, EC P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories RES Facilities COMP Company News PEOP Labour P3713 P3714 The Financial Times London Page 7 579
Builders 'forced to bid 10% below cost' Publication 930209FT Processed by FT 930209 By ANDREW TAYLOR, Construction Correspondent

CONSTRUCTION companies desperate to win work and generate cash are bidding prices on average 10 per cent below what jobs are expected to cost, Gardiner & Theobald, the leading firm of quantity surveyors, said yesterday.

Gardiner & Theobald warned that customers which accepted unrealistic prices could suffer as contractors then sought to recover their costs as work progressed.

Mr Tony Burton, a partner, said: 'Either contractors will go bust or they will have to find another way of squeezing cash out of the job. This could be achieved by trying to pass the pain on to subcontractors which themselves could fail; or, by pursuing legal claims for extra payments because of variations introduced to original designs which arise on almost every job. Either way it is unlikely to be good news for the customer.'

Gardiner & Theobald, which publishes price indices that are quarterly based on reports from more than 2,000 specialist contractors, warned that fixed-price jobs could come under pressure if building material prices rose because of sterling's devaluation or reduced capacity among domestic suppliers.

The firm estimated that imported materials accounted for between 20 per cent and 30 per cent of the cost of a commercial development.

It said: 'In theory the devaluation of the pound could add 4 per cent to 5 per cent to the cost of a project. It is unlikely, however, that the full effect will be passed on and there is evidence that overseas contractors are finding that they can no longer afford to tender in sterling in the UK market.'

The recession had led to closures and mothballing of plants by building material suppliers and the erosion of over-capacity should see prices rise, they added.

Mr Burton said: 'One cladding company recently reported that it had reduced its operations so much that if they were to win one more large project they would be at full capacity and therefore able to consider raising their prices.

'A steel contractor reported that his sector of the industry was at last getting the message that buying business is a fruitless exercise and that prices are tending to rise as a consequence.'

Gardiner & Theobald forecasts that tender prices would rise by 3 per cent this year after a fall of 1 per cent last year. It said that construction tenders had fallen by an average 30 per cent in real terms since 1989. Increases in the price of steel, glass and plasterboard have been announced by building material producers in the past month.

Of these, the plasterboard increases, announced by BPB Industries, Europe's biggest producer, seem most likely to stick. Rises announced by British Steel and Pilkington are likely to face opposition from contractors which will seek alternative suppliers overseas.

United Kingdom, EC P15 General Building Contractors P16 Heavy Construction, Ex Building P17 Special Trade Contractors P87 Engineering and Management Services COSTS Costs & Prices MKTS Contracts P15 P16 P17 P87 The Financial Times London Page 6 509
Pressure mounts over reform of leasehold Publication 930209FT Processed by FT 930209 By ALISON SMITH

PRIVATE LANDLORDS and tenants with long leases will today renew their battle to swing the government's leasehold reforms in their favour, when all MPs have their first chance to discuss and vote on the details of the plans.

Groups of Tory backbenchers on both sides of the argument have put down amendments to the Housing and Urban Regeneration Bill, which includes giving tenants the right to club together to buy the freehold of their block of flats or the right to extend their leases.

Labour is unlikely to support changes to favour the landlords, so it is the moves on behalf of the tenants' lobby that threaten the government's 21 majority. Potential Tory rebels say up to 20 backbench Tories are sympathetic to their cause.

The point on which ministers are most likely to give way - and most are reconciled to doing so - is abandoning the low-rent test provision. This is one of the proposed criteria to determine whether leaseholders qualify for the right to buy the freehold of the property, but the rebels argue that the rule is artificial.

Ministers have argued that the purpose of the low-rent rule is to distinguish between long leases where the tenant pays a premium at the beginning and then pays a low ground rent, and the different sort of interest held by a tenant who is on a long lease but paying a market rent. Only properties with a low ground rent qualify under the proposals.

The tenants' lobby is also renewing its pressure on the government to change the rule which means that tenants would not qualify if more than 10 per cent of the property was in non-residential use.

On the landlords' side, Tory MPs led by former ministers including Sir Jerry Wiggin and Mr Kenneth Baker have proposed changes that restrict the new rights to flats which are the principal residence of tenants. However, ministers are unlikely to accept the change.

In spite of the prospect of rebellions, government whips do not believe that the legislation itself is in jeopardy because it fulfils so many manifesto commitments. Instead, the landlords' lobby will simply step up their efforts to win changes in the Lords, where the bill will be discussed shortly.

United Kingdom, EC P9531 Housing Programs P6519 Real Property Lessors, NEC GOVT Government News P9531 P6519 The Financial Times London Page 6 409
MPs seek wider Budget debate Publication 930209FT Processed by FT 930209 By EMMA TUCKER

MPS ARE considering plans to invite more open discussion of Budget proposals by publishing draft clauses of the legislation weeks ahead of the official announcement.

The all-party Treasury and Civil Service committee, said yesterday that the idea of a 'budgetary green paper' will be among the issues it will consider ahead of the unified Budget in December.

'A great chunk of every finance bill is taken up with merely correcting mistakes of the past Budget,' said Mr John Watts, Conservative chairman of the committee. 'Obviously some things would have to be kept secret but much of the finance bill is about technical changes which involve no pecuniary advantage for anyone.'

The committee will also consider the impact of the unified Budget - the Budget and Autumn Statement combined - on the timing of taxation decisions, the implications for Treasury forecasting, the timing of the financial year and the timing and progress through parliament of the finance bill, which implements the Budget proposals.

In particular the committee will discuss what the December Budget means for the timing of the local authority financial settlement announcement. Mr Watts said MPs were worried that councils might receive very late notification of what resources were available to them, making it difficult to plan for the future.

The UK's longer leading index, which indicates turning points in the economy about 11 months in advance, rose slightly in December. The Central Statistical Office said the rise was due to the reduction in interest rates since sterling left the European exchange rate mechanism last September. Higher share prices and an improvement in business optimism also boosted the index.

The shorter leading index, pinpointing turning-points about four months in advance, has also risen. This followed increases in new car registrations and the results of the Confederation of British Industry survey of new orders and expected changes in stocks of materials.

The coincident index, which tracks the business cycle, has hesitated, according to the CSO, following its rise since spring 1992.

United Kingdom, EC P9121 Legislative Bodies P9611 Administration of General Economic Programs GOVT Government News ECON Economic Indicators P9121 P9611 The Financial Times London Page 6 370
Merseyside will seek the same EC status as Corsica Publication 930209FT Processed by FT 930209 By IAN HAMILTON FAZEY, Northern Correspondent

OFFICIALS from the five local authorities in Merseyside are pressing for the region to be made a special case for development by the European Commission because they say it is as economically weak as Corsica, Northern Ireland, the Scottish Highlands and Molise in southern Italy - and getting weaker.

The officials want the EC to award the region with 'Objective 1' status so that it qualifies for large-scale investment of community funds over the next eight years. The money would be for economic development to counter 25 per cent male unemployment.

Objective 1 status is reserved for the EC's weakest areas. These are defined as those that have a gross domestic product a head of only 75 per cent of the EC average over a three-year period. Merseyside's GDP a head fell to an average of 79 per cent of the EC average in 1989-90, the latest review period, from 86 per cent in the mid 1980s.

The EC can award the status above the 75 per cent level in exceptional circumstances. This has already happened in Northern Ireland (currently at 76 per cent) and the Highlands and Islands of Scotland (79 per cent).

Although GDP a head in Merseyside is rising at present, the growth is at a slower rate than elsewhere in the community, hence the region is falling further behind.

Almost one-third of manufacturing jobs in Merseyside were lost between 1979 and 1990. One in four men is now unemployed and overall employment is 70 per cent lower than the EC average and 50 per cent less than in the rest of the UK.

Latest census data shows a 9 per cent drop in population between 1981 and 1991, against a rise of 2 per cent for the UK as a whole. Much of the migration away from the region is of skilled or adaptable younger people.

The officials from the local authorities of Liverpool, Bootle, St Helens, Wirral and Sefton, say that forecasts for employment and population in the region to the end of the century suggest a greater decline than anywhere else in the UK. The situation is therefore projected to worsen.

Objective 1 status is currently automatic for the whole of the Republic of Ireland (65 per cent), Portugal (55 per cent) and Greece (48 per cent). It also applies in Corsica and Molise - both 79 per cent - and Abruzzi, also in southern Italy, where regional GDP is 88 per cent of the EC average.

The authority officials have made their case to the UK government, which is reviewing the amount of assistance given to the region. It is hoped that Merseyside's position will be considered by the EC's Council of Ministers in June.

United Kingdom, EC P9532 Urban and Community Development P9121 Legislative Bodies GOVT International affairs P9532 P9121 The Financial Times London Page 6 494
Consumers increase borrowings: 'Wise men' disagree about taxes and interest rates; Statistics point to a slight improvement in the economic outlook Publication 930209FT Processed by FT 930209 By EMMA TUCKER, Economics Staff

BORROWING BY individuals for consumer purchases rose for the second consecutive month in December, pointing to a slight improvement in willingness to take on new debts.

Official figures out yesterday showed that consumers borrowed a net Pounds 56m in December, compared with net borrowings of Pounds 13m in November and a net repayment of Pounds 138m in December 1991.

The better-than-expected figures were released as the latest consensus forecast for UK growth this year crept upwards. Average GDP forecasts among 34 economists, provided by Consensus Economics, a consultancy company, was for growth of 1 per cent this year and 2.4 per cent next year. This year's forecast has been revised upwards from last month's mean of 0.9 per cent. Forecasts for France, Germany and Italy have been revised downwards.

The Central Statistical Office said the total rise in net credit in the three months to the end of December was Pounds 136m compared with a net repayment of Pounds 11m in the previous quarter. This suggests that lower interest rates encouraged consumers to borrow more but did not stimulate a rapid recovery in consumer spending.

The Treasury said the figures were encouraging: 'The figures suggest a rise in borrowing by consumers in December accompanied by prudent reductions in indebtedness.'

The seasonally adjusted figures - which do not include mortgages and account for only about 15 per cent of total private sector debt - also showed a small increase in the amount of new credit advanced to consumers by finance houses, building societies and on credit cards that are part of the Visa or Mastercard system. In December new credit advanced was Pounds 4.67bn, slightly higher than November's Pounds 4.06bn.

Although the latest figures are slightly more optimistic, the level of consumer borrowing remains depressed. A broader measure of credit growth, which includes bank loans on personal accounts and lending by non-bank credit cards, painted a more sombre picture. This showed a slowing in net consumer credit growth in the latest quarter compared with the third quarter last year. In the three months to the end of December, consumer lending according to this measure expanded by Pounds 153m compared with Pounds 392m in the previous three-month period.

The figures underlined expectations for a slow economic recovery as consumers continue to make debt repayment a priority.

United Kingdom, EC P8811 Private Households P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories ECON National income P8811 P9311 P601 The Financial Times London Page 6 443
Crime Concern says social factors increase risk of young people becoming involved in crime Publication 930209FT Processed by FT 930209 By ALAN PIKE

POVERTY, unemployment and homelessness increase the risk of young people becoming involved in crime, the national crime prevention organisation Crime Concern said yesterday, Alan Pike writes.

In evidence to a Commons home affairs committee investigation, the charity said social factors such as poor parenting, family conflict and breakdown, school failure and inadequate play provision affect crime.

Some inner-city areas and housing estates had a high proportion of persistent youth crime and it was 'very difficult to bring up children in such multi-disadvantaged neighbourhoods', it said.

United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 6 126
Treasury advisers meet to mend strategy rift: 'Wise men' disagree about taxes and interest rates; Statistics point to a slight improvement in the economic outlook Publication 930209FT Processed by FT 930209 By PETER MARSH, Economics Staff

THE first policy meeting today of the Treasury's new panel of economic advisers will seek to resolve serious splits among members on subjects such as interest rates and possible tax increases.

The seven-strong group will also be divided on whether there should be large cuts in public spending and on the best targets with which to monitor the economy.

Several panel members say they want to find as many areas of consensus as possible in their report on the economy, which will be handed to Mr Norman Lamont, the chancellor, on February 18. It will be made public the next day.

Today's meeting will be chaired by Mr Alan Budd, the Treasury's chief economic adviser. It will discuss a range of subjects, including numerical forecasts and policy suggestions.

The panel was set up by Mr Lamont at the end of last year to inject greater openness into Treasury decision-making. Its reports will be published about every four months.

Professor Patrick Minford of Liverpool University is the keenest supporter of lower base rates. He wants a cut from 6 per cent to 3 per cent by March 17, the day after the Budget.

Mr Gavyn Davies, chief UK economist at Goldman Sachs, the investment bank, favours base rates of 5 per cent by the late spring, with more cuts possibly later in the year.

But Mr Andrew Britton, director of the National Institute of Economic and Social Research, the private-sector think tank, and Mr Andrew Sentance, economics director at the Confederation of British Industry, support the government in keeping interest rates stable at least until the Budget.

The other three members - Professor Tim Congdon, managing director of Lombard Street Research, Professor Wynne Godley of Cambridge University and Professor David Currie of London Business School - refrained from revealing their views on interest rates ahead of the Budget.

While Mr Davies and Prof Congdon favour large tax rises over the next two years to tackle the growing government deficit, most of the others oppose any immediate action. Mr Britton said: 'The scare stories about the likely large rise in the public sector borrowing requirement may be a poor guide to policy.' Prof Minford said the government should cut taxes over the next few years as part of 'supply side' reforms to strengthen the economy.

And while both the monetarists on the panel, Prof Minford and Prof Congdon, want large cuts in public spending, Mr Britton thinks this might have to rise above Treasury targets to accommodate 'overshooting'.

Mr Britton is the most optimistic about growth prospects this year, predicting expansion in gross domestic product of about 2 per cent. Prof Minford thinks that if interest rates stay relatively high and the international economy remains fragile, UK output could fall by 0.5 per cent, making 1993 the third successive year of economic decline.

Most panel members are extremely gloomy about unemployment, believing the registered jobless total is unlikely to fall below 3m for some years.

Although several on the panel think the government's 4 per cent limit for underlying inflation may be breached this year, most are generally sanguine about inflationary trends.

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9121 Legislative Bodies GOVT Government News P9311 P9121 The Financial Times London Page 6 578
Argentina putting privatisation in train: John Barham explains how the country is preparing its railway system to be sold off Publication 930209FT Processed by FT 930209 By JOHN BARHAM

ARGENTINA'S taxpayers pay Dollars 1.6m (Pounds 1.05m) a day for their filthy, overcrowded, crime-ridden, unreliable and dilapidated rail system, which is not greatly different from what it was when it was nationalised in 1946-47.

But in less than three months, it will be all change.

When private operators start running the trains in May, the government hopes that fares will stay low and service will improve, with more trains carrying more passengers and freight in greater safety and comfort. It also hopes subsidies will fall to Dollars 100m-150m a year.

Mr Jorge Kogan, an Argentine transport consultant retained by the World Bank to design and carry out the privatisation, began by splitting up the rail network, which was built by mainly British companies in the 19th century.

He is axing intercity passenger services, which will only survive if local governments subsidise them. He split the long-distance freight service into six lines and sold each as a separate 30-year concession that includes lines and rolling stock.

But he realised he could hardly shut down the Buenos Aires commuter system, which includes the underground network. Its 899km of track, 267 stations, and more than 1m daily passengers costs Dollars 150-200m a year in subsidies.

So Mr Kogan divided the network into seven lines, one of them including the underground, to be sold as 10-year concessions. He established investment and service targets and attracted seven contenders, which first had to qualify on technical grounds, allowing him to weed out undesirables. Remaining candidates then presented a business plan and finally bid against one another, with the concession going to bidders requiring the lowest subsidy.

Three groups won the bidding by demanding subsidies estimated at Dollars 993m over the concessions' 10-year lives. The Dollars 753.3m investment subsidy will peak in the third and fourth years of the concession.

The Dollars 239.7m operating subsidy will disappear in the eighth year, when the government will start charging Dollars 10m-worth of fees a year.

The government hopes to develop property along rail lines and revitalise the rail terminals - which will all remain under its control - generating cash to pay for the rail subsidies.

Mr Kogan says operators should find it easy to meet their targets by 'organising a system where people get what they want'. This means increasing traffic - which fell to 4.5m journeys in 1991 from 6m in 1990 - by raising the number of trains, and making them safer and more reliable.

This will lift revenues, which operators can also improve by halting the estimated 30-50 per cent fare evasion.

The concession containing the underground is for 20 years and should be profitable. The government will subsidise investments worth almost Dollars 400m, but will take in about the same amount in fees.

Meanwhile, the government has spent about Dollars 400m in severance pay to sack half the system's 91,000 employees, with more job cuts still to come. The World Bank lent Dollars 300m towards this. Mr Kogan said once-militant unions 'realised it would be better to keep 25-30 per cent of their jobs than losing all their jobs. Those remaining will be better paid and have better working conditions.'

The government is setting up a regional authority to establish transport policy and regulate the companies. Curiously, one the three consortia includes Buenos Aires' independent bus operators - who should be the last people to be interested in improving rail services.

However, Mr Kogan says they will reorganise their networks to feed the trains, rather than competing with them. He insisted all operators should have an established reputation, so the operators are all are foreign, such as San Francisco's BART and Chicago's Burlington Northern Railroad.

Critics say the consortium's local members fail to inspire confidence. They include little-known construction, consulting and electronics companies as well as bus operators.

And unlike most of Argentina's recent sell-offs, the Buenos Aires commuter privatisation has been mired in accusations of double-crossing and corruption. One of the four losing consortia - which included British Rail - claims the absence of effective World Bank oversight allowed winners to get away with irresponsible underbidding. One loser doubts the undercapitalised winners can comply with their targets, and predicts the network will eventually return to the government.

Argentina, South America P4111 Local and Suburban Transit P9621 Regulation, Administration of Transportation TECH Services TECH Standards P4111 P9621 The Financial Times London Page 4 757
World Trade News: Romanians in deal to build 11 BAC 1-11s Publication 930209FT Processed by FT 930209 By VIRGINIA MARSH BUCHAREST

ROMAERO, Romania's state-owned aircraft manufacturer, has won a contract to make 11 BAC 1-11 jets, from Kiwi International Airlines, a US domestic air carrier.

The contract is Romania's first order from a western company for the BAC 1-11 since it began making the medium-to-short haul jets under licence from British Aerospace in 1982, Romaero said yesterday. Romaero, formerly known as IRMA, is to update the BAC 1-11, using components and technical support from British Aerospace, Alenia and Dee Howard, with Rolls-Royce supplying the aircraft's engines.

The first delivery is due in November 1994. Kiwi has an option to buy five more BAC 1-11s with delivery by June 1998, Romaero said. The companies have not disclosed the value of the order.

Kiwi International, based in Newark, New Jersey, was set up by former employees of Pan-Am, Eastern and Midway airlines.

It began operating last September with two leased Boeing 727 jets and flies from Newark to Chicago, Detroit and Orlando, Florida.

Romaero said Kiwi planned to use the 104-seater jets to expand its services to Los Angeles and possibly to medium-haul international destinations.

The deal is a boost to Romania's ailing aircraft manufacturing industry. The nine BAC 1-11s produced since 1982 at Romaero's Baneasa plant outside Bucharest were sold on the domestic market.

But Tarom, Romania's state-owned airline, has switched to foreign manufacturers since the end of communist rule in 1989. It recently took delivery of two Airbus Industrie A-310s and has placed orders for up to 13 Boeing 737-300s.

Romaero's other main activity is the manufacture of nine-seater Islander aircraft under licence from Pilatus Britten-Norman, the Isle of Wight-company. Romaero said it had produced around 500 Islanders since 1969, including 11 last year.

Romaero Kiwi International Airlines Romania, East Europe United States of America P3721 Aircraft MKTS Contracts P3721 The Financial Times London Page 4 326
World Trade News: EC, Japan 'far apart' on car imports Publication 930209FT Processed by FT 930209 By ANDREW HILL BRUSSELS

JAPAN and the European Community have failed to agree a forecast for the evolution of the EC car market in 1993, increasing the possibility of a damaging dispute between the two partners over Japanese car imports.

Officials met last week to discuss the outlook for 1993, but broke up inconclusively.

In November, the Japanese suggested EC sales might increase during 1993. Since then, they have conceded that the outlook is more pessimistic, but EC officials said yesterday the two sides were still far apart. The officials will meet again in Tokyo early next month for further discussions.

Under the 1991 EC-Japan agreement on car imports, agreed forecasts form the basis for Japan to 'monitor' its exports to the EC. The monitoring is part of a deal to open the EC market gradually to full competition from Japan by the end of the century.

European Commission officials said yesterday they hoped a delay of about a month would allow them to collect more data on the first weeks of 1993.

Neither the Commission nor the Japanese would indicate how much they expected EC car sales to decrease this year, but European manufacturers expect them to decline by as much as 7.5 per cent.

According to the European industry, January sales dropped sharply compared with 1992, partly because people bought new cars in December, to avoid January tax increases in some EC countries. Germany's sales last month fell by 30 per cent compared with the equivalent period in 1992, French sales slipped by 37 per cent, Italian by 15 per cent and Spanish by 50 per cent; British sales increased by 8 per cent.

But even if the two sides can agree on a 1993 forecast next month they are still likely to argue about what action should be taken. Tokyo has always disputed the EC's interpretation that in a shrinking market Japan should absorb three-quarters of the reduction, by limiting exports.

European Economic Community (EC) Japan, Asia P3711 Motor Vehicles and Car Bodies P9721 International Affairs MKTS Sales MKTS Foreign trade P3711 P9721 The Financial Times London Page 4 367
Clinton may increase corporation taxes Publication 930209FT Processed by FT 930209 By JUREK MARTIN WASHINGTON

PRESIDENT Bill Clinton's economic package may embrace an increase in corporation taxes and some reductions in government employment, but will almost certainly not include any freeze in the indexation of social security pensions.

Seeking to regain the initiative after the controversy surrounding the withdrawal of Judge Kimba Wood as a prospective attorney general, assorted administration officials dropped hints about the composition of the president's new programme, to be unveiled in next week's state of the union message and in his first budget, due for March 23.

Mr George Stephanopoulos, White House communications director, said yesterday it was 'very unlikely' that Mr Clinton would freeze pension cost-of-living adjustments. 'That is something he has never wanted to do,' he added, blaming unsubstantiated 'leaks' for implying that this was under consideration.

He said increasing income taxes on pensions on wealthier older Americans, another widely canvassed alternative to raise revenue and thus reduce the budget deficit, was 'possible', if it could be made fair.

Mr Clinton was also going to call for an extension of long-term unemployment benfits during a meeting yesterday with his economic advisers, Mr Stephanopolous said.

Ms Dee Dee Myers, White House press secretary, also said yesterday that an increase in the corporation tax - now 34 per cent - was under review. She placed this in the context of the need to raise tax rates on both individuals and corporations 'whose incomes went up the most and whose taxes went down' during the 1980s.

She added that the administration was also looking into raising the federal minimum wage - currently Dollars 4.25 an hour - but stressed that no decisions had been made.

Ms Myers also echoed comments made over the weekend by Mr Robert Reich, the labour secretary, that substantial cuts might be made in the White House staff, partly to encourage other departments and Congress similarly to reduce their payrolls.

Mr Reich had predicted that the White House staff cuts would be 'dramatic', as much as 20-25 per cent. Already some lower-level bureaucrats in the executive offices, handling routine matters like mail sorting, have been given redundancy notices.

The thrust of all the comments was on the need to reduce the federal deficit by eliminating waste. However, over the weekend, Mr Reich, Vice-President Al Gore and Mr Ron Brown, the commerce secretary, all spoke of the equivalent imperative to create more jobs in the economy.

United States of America P9611 Administration of General Economic Programs GOVT Taxes P9611 The Financial Times London Page 4 430
World Trade News: 'Fast track' link with rice attacked Publication 930209FT Processed by FT 930209 By ROBERT THOMSON TOKYO

JAPAN'S Agriculture Ministry yesterday condemned suggestions that the extension of the US 'fast-track' trade mechanism should be linked to the opening of the country's rice market to imports, writes Robert Thomson in Tokyo.

Mr Akio Kyoya, a vice-minister of agriculture, said the ministry had heard US officials wanted the rice market opened to ensure that the 'fast-track' mechanism was extended beyond the end of May.

'The issues are totally irrelevant,' Mr Kyoya said, stressing that rice should be discussed in multilateral negotiations, not in the context of US domestic policy. The 'fast track' forces US Congress to accept or reject agreements without clause-by-clause amendments, and aims to ensure speedy passage of a Uruguay Round trade pact.

Japan's ruling Liberal Democratic Party has already decided, privately, that rice imports are inevitable.

But the Agriculture Ministry was surprised last week when a senior official of the Social Democratic Party, the largest opposition party, also said imports might be allowed.

Japan, Asia P0112 Rice P9641 Regulation of Agricultural Marketing P9721 International Affairs GOVT Government News P0112 P9641 P9721 The Financial Times London Page 4 199
Environment wins higher priority in White House Publication 930209FT Processed by FT 930209 By GEORGE GRAHAM WASHINGTON

PRESIDENT Bill Clinton yesterday announced an overhaul of the White House's environmental policy structure and a move to turn the Environmental Protection Agency (EPA) into a full cabinet-level department.

'The days of photo-op environmentalism are over,' he said, announcing his intention to abolish the Council on Environmental Quality, a White House agency set up in 1969 to review environmental policies and report each year on the condition of the environment.

He had already abolished the Competitiveness Council, another White House agency which under the chairmanship of former Vice-President Dan Quayle became one of the most important channels for setting environmental policy in the Bush administration, and often blocked efforts by the EPA to implement environmental protection regulations.

Vice-President Al Gore's views on environmental issues are almost diametrically opposed to those of his predecessor, and he is expected to remain the administration's most prominent spokesman in the field. About half the employees of the Council on Environmental Quality are expected to be kept on, in a streamlined environmental team merged into the general White House policy structure.

Environmentalist groups appear happy with the decision, since they believe integrating the environmental policy team into the White House structure may lead to environmental issues being treated as less of an afterthought.

Mr Clinton has given cabinet status to Ms Carol Browner, EPA director. But transforming the agency into a full cabinet-level department will require legislation.

United States of America P9511 Air, Water, and Solid Waste Management GOVT Government News P9511 The Financial Times London Page 4 269
Brazil renews talks with IMF in hope of stand-by loan Publication 930209FT Processed by FT 930209 By CHRISTINA LAMB and REUTER RIO DE JANEIRO, WASHINGTON

BRAZIL yesterday reopened talks with the International Monetary Fund in the hope of obtaining a new stand-by loan pact. Far from a certainty, given the country's continuing economic instability, an IMF accord is crucial for concluding an agreement with foreign bankers over restructuring Dollars 44bn (Pounds 29bn) of commercial debt and for obtaining much-needed new resources.

After spending yesterday with IMF staff, Mr Paulo Haddad, economy minister, will today meet Mr Michel Camdessus, IMF managing director, the first encounter between a representative of Brazil's new government and a top Fund official.

Mr Haddad is unlikely to get a warm reception. Mr Camdessus has been sympathetic to Brazil but patience with Latin America's biggest economy seems to be wearing thin. The rapid collapse of Brazil's last stand-by accord, agreed in January last year for Dollars 2.1bn, followed nine letters of intent and two accords in 11 years.

Talks originally planned for December were cancelled because Mr Haddad had no programme to present. The government is still developing its anti-inflation plan, but Mr Haddad has a little more to show with the recent passage of a fiscal reform bill through the lower house of Congress.

Rather than starting from scratch negotiating a new letter of intent, he hopes to adapt the old agreement negotiated by his predecessor, Mr Marcilio Marques Moreira. It is not likely to be easy. Unlike Mr Moreira, a close friend of Mr Camdessus, Mr Haddad is unknown in Washington, and inflation appears to be moving out of control.

Figures released by Sao Paulo University put inflation for January at 27.45 per cent, more than 2 percentage points up on December and more than the previous accord predicted for the whole of this year.

Reuter adds from Washington: Mr Haddad said he was seeking Dollars 2bn from the IMF and another Dollars 2bn from the World Bank and the Inter-American Development Bank this year.

He said Brazil needed Dollars 1.6bn to guarantee debt restructuring negotiations with foreign banks; Dollars 1bn of that would come out of the agencies' loans and the other Dollars 600m from Brazil's hard currency reserves.

Brazil, South America P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs GOVT Government News P9311 P9721 The Financial Times London Page 4 397
US intends to push for fair trade says Espy Publication 930209FT Processed by FT 930209 By REUTER and NANCY DUNNE WASHINGTON

THE US agriculture secretary, Mr Mike Espy, said yesterday that the Clinton administration's decision to slap duties on billions of dollars of imported steel was just the start of its push to open markets and seek fair trade, Reuter reports from Washington.

'This administration will insist that our trading partners and competitors comply with trading rules that are fair and equitable,' Mr Espy told a conference of the US Feed Grains Council.

'You've already seen some of the tough actions on steel import quotas and other areas from our new trade representative, Mickey Kantor, and you can expect more such decisions. The door to trade must swing both ways, and we will tighten the hinges,' he said.

Mr Espy said that in agriculture he would 'move forcefully' to convince countries protecting their grain markets that they should change those polices.

He also restated - in stronger terms - that he wants to use US farm export programmes full tilt until a global trade reform deal is struck under the General Agreement on Tariffs and Trade. He said 'it would be in my judgment a serious mistake' to cut those programmes to try to reduce the deficit unless the Gatt agreement is reached.

Nancy Dunne in Washington adds: US trade officials yesterday assured Mr Michael Wilson, Canadian trade minister, of their determination to pursue an early conclusion to Gatt's Uruguay Round and side agreements to the North American Free Trade Agreement (Nafta).

After meeting Mr Ron Brown, commerce secretary, and Mr Mickey Kantor, the US trade representative, Mr Wilson said that the Clinton administration would soon seek an extension of the 'fast track' negotiating authority, which expires in May. 'It is being discussed with Congress right now,' Mr Wilson said.

The authority blocks Congress from amending trade agreements.

United States of America P33 Primary Metal Industries P9721 International Affairs GOVT Government News P33 P9721 The Financial Times London Page 4 339
World Trade News: EC-Japan row over car imports likely - Drive to agree market forecast fails Publication 930209FT Processed by FT 930209 By ANDREW HILL BRUSSELS

JAPAN and the European Community have failed to agree a forecast for the evolution of the EC car market in 1993, increasing the possibility of a damaging dispute between the two partners over Japanese car imports.

Officials met last week to discuss the outlook for 1993, but broke up inconclusively.

In November, the Japanese suggested EC sales might increase during 1993. Since then, they have conceded that the outlook is more pessimistic, but EC officials said yesterday the two sides were still far apart. The officials will meet again in Tokyo early next month for further discussions.

Under the 1991 EC-Japan agreement on car imports, agreed forecasts form the basis for Japan to 'monitor' its exports to the EC.

The monitoring is part of a deal to open the EC market gradually to full competition from Japan by the end of the century.

European Commission officials said yesterday they hoped a delay of about a month would allow them to collect more data on the first weeks of 1993.

Neither the Commission nor the Japanese would indicate how much they expected EC car sales to decrease this year, but European manufacturers expect them to decline by as much as 7.5 per cent.

According to the European industry, January sales dropped sharply compared with 1992, partly because people bought new cars in December, to avoid January tax increases in some EC countries.

Germany's sales last month fell by 30 per cent compared with the equivalent period in 1992, French sales slipped by 37 per cent, Italian by 15 per cent and Spanish by 50 per cent; British sales increased by 8 per cent.

But even if the two sides can agree on a 1993 forecast next month they are still likely to argue about what action should be taken. Tokyo has always disputed the EC's interpretation that in a shrinking market Japan should absorb three-quarters of the reduction, by limiting exports.

A year ago, the two sides agreed there would be a slight decline in EC sales during 1992 and Japanese imports were held back in line with EC wishes. In the event, the December surge meant slightly more cars were sold in the EC during 1992 than in 1991.

European Economic Community (EC) Japan, Asia P3711 Motor Vehicles and Car Bodies P9721 International Affairs MKTS Sales MKTS Foreign trade P3711 P9721 The Financial Times London Page 4 422
World Trade News: India's private thoughts on power - Delhi recognises that without improved electricity supply, the reform programme will falter Publication 930209FT Processed by FT 930209 By STEFAN WAGSTYL

FREE electricity is one of life's few blessings for slum dwellers in Shahdara, east Delhi. It is easily obtained by scrambling up an electricity pole and attaching a wire to the overhead mains. Occasionally someone gets electrocuted in the process, but not often.

Electricity board officials turn a blind eye to such pilfering, which happens all over India. The effort of collecting payment from slums is not worth the revenues. Also, decades of socialist thinking have encouraged many Indians to regard the mostly state-owned electricity distribution boards as welfare agencies. Farmers in Karnataka state, south India, pay just 5 per cent of cost for their current. In neighbouring Tamil Nadu they pay nothing. The result is chronic losses for the industry and electricity shortages leading to frequent power cuts for consumers.

However, the government of Mr P V Narasimha Rao, the reform-minded prime minister, is committed to overhauling the industry: it recognises that without improved electricity supplies, the economic modernisation programme will grind to a halt.

After years of relying on state-owned industry, Mr Rao is calling on private companies - including foreign groups - to build and operate 100 per cent privately owned power plants.

But business has so far been slow to respond. In the last year, the ministry of power has attracted inquiries from 40 companies, including 25 from abroad, interested in building and operating power stations with a total capacity of 20,000 MW. But only four small-scale plants with a combined capacity of 1,300 MW are under construction, all by Indian-owned companies; four large projects totalling 8,000 MW and involving foreign capital, have been approved by the government, but none is yet under way.

The cautious response is partly due to the huge scale of the proposed investments and partly to doubts about the government's ability to overhaul the industry's anti-commercial practices. Though ministers in Delhi are committed to reform, many local politicians, who use cheap electricity to buy farmers' votes, are not. As Mr S V Joshi, director of power distribution at the Indian affiliate of Siemens, the German engineering group, says: 'It took the US 10 years to switch from public to private sector power generation. India can't do it in two or three.'

The government's 1992-1997 economic plan calls for the addition of 31,000 MW of public sector generating capacity to the existing total 78,000 MW (which includes 9,000 MW from private plants). But the public sector does not have the funds to implement the plan. Even if it did, India would still be short of electricity. Hence the need for private investors. As the head of the Delhi office of a European engineering group says: 'If we can get it right, the opportunities are limitless.'

Getting it right involves getting the finance right. With a large power station costing Dollars 1bn and more, the only viable way for private companies to fund such projects is to split the cost between different equity partners and lenders, including multilateral institutions such as the World Bank.

For example, Enron, the US energy group, is planning a Dollars 2bn plant for Maharashtra state to supply Bombay. Enron is considering asking lenders for 80 per cent of the funds, with 20 per cent in equity split between three partners - Enron, the Maharashtra State Electricity Board and General Electric, the US engineering group which would supply much of the equipment.

The World Bank, which has funded much of India's existing power capacity, says it would support schemes involving private companies. Officials believe public sector boards are generally poor managers - because of breakdowns, Indian power plants run at an average of 60 per cent of their full capacity and 23 per cent of their output is lost during transmission.

However, money alone will not persuade private companies to invest. They also want to be certain their investments will be safe and they will get an adequate return. The Indian government has proposed contracts which would allow generating companies to pass on increases in fuel costs (the main variable cost) and earn a minimum net annual profit of 16 per cent.

But most foreign companies say this is not enough. They are asking for central government guarantees that they will be paid by the state-level electricity boards, which are the main distributors. The companies are worried because the electricity boards are controlled by local state governments, which use electricity supply as a political tool. Foreign companies are also concerned about the security of fuel supplies since most plants will rely on coal from state-owned mines.

However, the central government has so far ruled out guarantees, saying the answers lie mainly in watertight, legally enforceable contracts. The most the power ministry will entertain is indirectly endorsing guarantees offered by state governments. This may not be enough even for Enron.

Aware of such doubts, the power ministry this month ordered state governments to permit private companies to enter into power distribution as well as generation. This would allow private companies to supply, for example, a selected group of consumers, such as factories on an industrial estate - potentially an attractive option.

The ministry is considering further incentives to tempt foreign companies. Officials also point to the success of the four Indian private companies in the industry - the Bombay Suburban Electric Supply Company, the Calcutta Electric Supply Company, Ahmedabad Electricity and Tata Electric Companies. All are profitable and most are expanding capacity. Mr Joshi of Siemens says: 'This proves India can do it.'

But no-one expects a quick transformation. Mr M Ranji, a senior power ministry official says: 'There are no easy solutions. That's the cost of democracy in India.'

India, Asia P4911 Electric Services P9631 Regulation, Administration of Utilities GOVT Government News P4911 P9631 The Financial Times London Page 4 990
World Trade News: Japanese condemn linking 'fast track' to rice market Publication 930209FT Processed by FT 930209 By ROBERT THOMSON and REUTER TOKYO

JAPAN'S Agriculture Ministry yesterday condemned suggestions that the extension of the US 'fast-track' trade mechanism should be linked to the opening of the country's rice market to imports.

Mr Akio Kyoya, a vice-minister of agriculture, said the ministry had heard US officials wanted the rice market opened to ensure that the 'fast-track' mechanism was extended beyond the end of May.

'The issues are totally irrelevant,' Mr Kyoya said, stressing that rice should be discussed in multilateral negotiations, not in the context of US domestic policy. The 'fast track' forces US Congress to accept or reject agreements without clause-by-clause amendments, and aims to ensure speedy passage of a Uruguay Round trade pact.

Japan's ruling Liberal Democratic Party has already decided, privately, that rice imports are inevitable. But the Agriculture Ministry, representing farmers' interests, was surprised last week when a senior official of the Social Democratic Party, the largest opposition party, also said imports might be allowed.

Until then, the opposition party had publicly argued that the rice market must remain closed in the interests of 'food security', and the party is courting the farm vote for a general election, expected late this year.

Recent public opinion polls have shown most Japanese support a lifting of the ban on imported rice, but the Agriculture Ministry has argued it would be foolish to make a concession while the European Community and the US cannot settle their disputes.

But the ministry has also begun investigating means of compensating rice farmers who will be affected by imports. The policy is likely to include subsidies to encourage farmers to switch crops, as well as increased funds for farmers' co-operatives nationally.

Meanwhile, Mr Michio Watanabe, foreign minister, is preparing for a visit to Washington on Thursday which he would like to centre on Japan's growing international role, but which will probably deal with trade issues, including rice.

Reuter adds from Tokyo: Japan strongly opposes a US proposal for a tenfold rise in import duty on minivans, Mr Yuji Tanahashi, vice-minister at the Ministry of International Trade and Industry, said. 'We strongly oppose (the idea that) the US raise the import duty tenfold to 25 per cent. It might violate (Gatt rules).'

Japan, Asia P0112 Rice P9641 Regulation of Agricultural Marketing P9721 International Affairs GOVT Government News P0112 P9641 P9721 The Financial Times London Page 4 410
Chung faces his toughest ordeal: John Burton assesses the election funding indictment of Hyundai's founder Publication 930209FT Processed by FT 930209 By JOHN BURTON

MR CHUNG Ju-yung, the founder of South Korea's Hyundai business group, may have to revise the title of his autobiography, Ordeals But No Failures. His recent foray into politics, a source of further ordeals for the 77-year-old industrialist, now threatens failure.

It has been a disastrous time for Mr Chung. He performed unexpectedly poorly in the presidential election in December, finishing a distant third after a lavish and expensive campaign.

He was then subject to a highly publicised and humiliating investigation for alleged election violations that concluded with an indictment at the weekend.

If Mr Chung is convicted of illegally receiving more than Dollars 60m (Pounds 39.7m) in secret election funds from his shipbuilding subsidiary, he could be stripped of his seat in the National Assembly and forced to withdraw from politics.

Moreover, the United People's party (UPP), the opposition group he formed a year ago, is already weakened by internal dissension after his failed presidential bid. His departure as party leader could cause the UPP to split or disintegrate.

Prosecutors say they have a strong case against Mr Chung, but the indictment is still regarded as a government vendetta. Korean politics is notoriously corrupt, with politicians often receiving secret corporate donations.

Mr Chung claims the money came from the sale of shareholdings in Hyundai Heavy Industries, the shipbuilding unit.

Mr Chung greatly irritated the government when he launched his political career last year. Officials, accustomed to giving orders to the nation's large conglomerates or chaebol, did not like to see their authority challenged.

They also suspected that Mr Chung was trying to win political power to prevent the government from reducing the chaebol's economic clout, although the Hyundai founder argued that he was campaigning for economic deregulation and promised to break up the chaebol as part of this programme.

In addition, Mr Chung posed a political threat to the ruling Democratic Liberal party by attracting conservative middle-class voters away from it and possibly denying the presidential election to its candidate, Mr Kim Young-sam.

This threat was blunted after the government revealed not long before the election that it was investigating whether Hyundai was illegally diverting funds to Mr Chung. Mr Kim won the election by a comfortable margin.

The prosecution of Mr Chung, if successful, would serve as a warning to other chaebol not to get involved in politics. It could also prove politically beneficial to the DLP since it may attract some of the UPP's 34 mainly conservative parliamentary members if Mr Chung's party collapses. The switching of party affiliation is a common practice in Korean politics.

Defecting UPP members would increase the ruling party's slim parliamentary majority of 163 seats in the 299-member chamber, while leaving the Democratic party as the only main opposition group.

The UPP is already showing signs of splintering. Mr Chung's autocratic style has been blamed by some party executives for the UPP's defeat. Several prominent members, including Mr Kim Dong-gil, a popular academic who helped establish the UPP, have threatened to leave unless Mr Chung steps down as party chairman.

If Mr Chung is forced to retire, he may no longer be willing to fund the UPP, depriving the party of its main financial support. He has already failed to fulfil a promise to give another Won200bn (Pounds 170m) to the party this year.

It is unlikely that the government will also try to punish Hyundai if it manages to destroy the UPP with the indictment against Mr Chung. Hyundai was the subject of tax penalties and credit squeezes last year in a government attempt to intimidate Mr Chung to withdraw from the presidential election.

However, the government is trying to revive the flagging economy and reprisals against Hyundai would harm that effort. Hyundai is Korea's largest business group and its biggest motor vehicle maker, shipbuilder and construction company.

United Peoples Party (South Korea) South Korea, Asia P8651 Political Organizations P50 Wholesale Trade-Durable Goods P3731 Ship Building and Repairing PEOP Personnel News Chung, J Founder of Hyundai Corp P8651 P50 P3731 The Financial Times London Page 3 700
Afghan factions resort to arms: Tribal warlords may disregard external attempts to achieve lasting peace Publication 930209FT Processed by FT 930209 By FARHAN BOKHARI

PROSPECTS for lasting peace in Afghanistan have been considerably damaged by three weeks of violence in which hundreds have been killed in rocket attacks on Kabul, the capital.

Mujahideen guerrillas led by Mr Gulbuddin Hekmatyar yesterday launched the heaviest bombardment of the recent fighting, killing and injuring dozens of Kabul residents. Last week four United Nations workers were killed in an ambush in eastern Afghanistan.

The escalation began after the interim president, Mr Burhannuddin Rabbani, extended his term of office for two years through a vote of confidence from a controversial shoora, or council of elders. Only four of the nine main mujahideen factions attended the shoora and confirmed its decision.

Rivals of Mr Rabbani who are trying to remove him include Mr Hekmatyar, leader of the fundamentalist Hezb-i-Islami party, and the Iranian-backed Hezb-i-Wahdat group. The country's most powerful army general, Uzbek commander Rashid Dostum, is also expected to join Mr Rabbani's opponents if they win sufficient ground to form a government.

Yesterday, as Mr Hekmatyar stepped up his attacks, government jets circled overhead on bombing raids against his headquarters to the south of Kabul. Tanks patrolled the streets, according to a Reuters newsagency report from Kabul.

Mr Hekmatyar has refused to stop fighting unless Mr Rabbani agrees to elections within a year and formation of an interim government acceptable to all mujahideen parties.

Regional powers are anxiously seeking an end to the fighting. Iran and Pakistan want to see a stable government in Kabul so that more than 4.5m Afghan refugees can return home. King Fahd of Saudi Arabia has invited all Afghan groups to the kingdom for discussions on a peaceful solution and Pakistan has backed this proposal.

However, groups opposed to Mr Rabbani have said they will accept his presence there only if he attends as head of his Jamiat-i-Islami party rather than as president. He is not expected to agree.

Western diplomats and Pakistani officials say Mr Rabbani's continuation in office is the biggest obstacle to negotiations. A government spokesman in Islamabad says: 'We have conveyed to President Rabbani our deep anguish that fighting has broken out and that it has not been possible to evolve a consensus on political arrangements in Kabul.'

The crisis has dampened prospects for badly needed international assistance in relief and reconstruction work.

The UN has launched an international appeal seeking Dollars 138m (Pounds 91.3m) in assistance. But Mr Sotorios Mousouris, the secretary general's representative for Afghanistan, says: 'What I am worried about is that if this situation continues for very long, the donors may be discouraged from going along. If a country is put on the shelf, then it is with great difficulty it comes out of the shelf again, given the other demands on donors' attention.'

The UN says that it will continue with its efforts for rehabilitation. Mr Mousouris says: 'We will not abandon Afghanistan in spite of acts of violence, in spite of obstacles erected by followers of leaders who have chosen violence as part of instruments of political antagonism.'

The prospects appear bleak. Western defence experts estimate that the opposing sides can continue a sustained effort for six to 12 months, even if no military supplies reach them. Afghanistan is a leading exporter of narcotics and attempts to introduce crop substitution programmes have little chance of success under present circumstances.

Despite external attempts to bring about peace, Afghanistan may be set on a course where tribal warlords call the shots until one side emerges with clear control.

Afghanistan, Asia P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 3 622
China signs accounting standards contract Publication 930209FT Processed by FT 930209 By ANDREW JACK

THE international accounting network, Deloitte Touche Tohmatsu (DTT), has won a Dollars 2.6m (Pounds 1.7m) contract to develop accounting standards for China.

The award has been signed with the Chinese Ministry of Finance, and is designed to bring accounting and auditing practices 'into harmony with international standards' over the next three years.

DTT consultants will work with a Chinese team to develop general and industry-specific standards, and to establish a system of continuing education for the country's 10,000 certified public accountants.

Mr Ted Lee, managing director of the firm in China, said that existing standards in the country were suitable for a centrally-planned economy with limited decision-making by individuals or enterprises.

He stressed that the new standards would help provide transparency in financial information, but would also reflect the unique characteristics of business in China.

The contract has been funded through a World Bank credit to China, and is part of the Bank's financial sector technical assistance project.

Ms Heather Skilling, from DTT's office in Washington, said the firm would be devising a work-plan over the next few months, but expected to develop up to 30 general accounting standards.

She said the aim was to bring them in line as far as possible with the standards published by the International Accounting Standards Committee.

Deloitte Touche Tohmatsu China, Asia P9651 Regulation of Miscellaneous Commercial Sectors P8721 Accounting, Auditing, and Bookkeeping Services MKTS Contracts GOVT Government News P9651 P8721 The Financial Times London Page 3 257
World Bank set to lend India Dollars 3.2bn Publication 930209FT Processed by FT 930209 By SHIRAZ SIDHVA NEW DELHI

THE WORLD BANK is expected to lend India more than Dollars 3.2bn (Pounds 2.1bn) in the year beginning April 1993, including concessional assistance of Dollars 1.3bn from the International Development Association (IDA), the Indian Finance Ministry said yesterday.

Mr Ernest Stern, the World Bank's managing director, said after an hour-long meeting with Dr Manmohan Singh, the Indian finance minister, that the bank would also grant India's request for an annual Dollars 2.5bn in exceptional financing over the next three years.

Mr Stern, who is in New Delhi for a fortnight, said that India was meeting the conditions of a World Bank structural adjustment loan.

The World Bank is also providing a Dollars 500m loan to support reforms in the trade sector. Bank officials said India's tariffs were among the highest in the world. But a tax reforms committee, headed by noted economist Dr Raja Chelliah, has already recommended a substantial reduction in the average tariff rate to 25 per cent by the fiscal year 1997-1998, and a maximum rate of 50 per cent.

India's aid donors and the Bank's management have also given overwhelming support to a Dollars 500m loan, approved in December, to provide a social safety-net programme for former workers in India's unviable public sector enterprises.

This, said Mr Stern, represented the continued commitment of the international community to ensuring that the burdens of the transition process did not adversely affect the poorer sections of society.

World Bank India, Asia P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9721 P9311 The Financial Times London Page 3 281
Kenyan aid held up Publication 930209FT Processed by FT 930209 By REUTER NAIROBI

Britain will hold back financial aid to Kenya until the International Monetary Fund approves its economic performance, Baroness Lynda Chalker, British overseas development minister, yesterday told Kenyan President Daniel arap Moi, Reuter reports from Nairobi. Western donors suspended aid worth about Dollars 40m a month 16 months ago to pressure Mr Moi into embracing radical political and economic reforms. An IMF team is due in Kenya on February 21 to make a report.

Kenya, Africa P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9721 P9311 The Financial Times London Page 3 107
Algiers extends emergency Publication 930209FT Processed by FT 930209 By FRANCIS GHILES

Algerian leaders have extended indefinitely the state of emergency, imposed a year ago after suspended elections which the Islamic Salvation Front was poised to win, writes Francis Ghiles.

The country's five-man presidency, meeting under head of state Mr Ali Kafi, said at the weekend that it had extended the emergency, in what was interpreted as a demonstration of its determination to crush Islamic fundamentalism.

Algeria, Africa P9229 Public Order and Safety, NEC GOVT Government News P9229 The Financial Times London Page 3 93
Kuwait investment probe Publication 930209FT Processed by FT 930209 By MARK NICHOLSON CAIRO

A team of Kuwaiti parliamentarians flew to London yesterday to begin a two-week investigation into Kuwait's overseas investments and suspected fraud in the management of its Spanish holdings, Mark Nicholson writes from Cairo.

Three members of the National Assembly, led by Mr Ismail Al-Shatte, chairman of the parliament's economic and financial committee, will also visit Madrid. The assembly set up the inquiry into the London-based Kuwait Investment Office late last year, after the collapse of Grupo Torras, the KIO's Spanish holding company, with losses of around Dollars 4bn.

Kuwait Investment Office Grupo Torras Kuwait, Middle East P672 Investment Offices COMP Company News GOVT Legal issues P672 The Financial Times London Page 3 125
S Africa cuts interest rates Publication 930209FT Processed by FT 930209 By PHILIP GAWITH JOHANNESBURG

The South African Reserve Bank, the central bank, yesterday announced a one percentage point cut in interest rates following a sharp decline in the inflation rate recently, Philip Gawith writes from Johannesburg. The rate of increase in the Consumer Price Index was 9.6 per cent in the 12 months to December - the first time inflation has fallen into single digits in 14 years.

The rate at which the bank lends to the banking sector has been cut from 14 to 13 per cent and the prime lending rate is likely to fall by a similar margin to 16.25 per cent.

South African Reserve Bank South Africa, Africa P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories ECON Balance of payments ECON Inflation P9311 P601 The Financial Times London Page 3 147
Iranian air crash leaves 132 dead Publication 930209FT Processed by FT 930209 By REUTER NICOSIA

All 132 people aboard an Iranian-chartered airliner were killed yesterday when it collided with a military aircraft just minutes after leaving Tehran's main airport, Reuter reports from Nicosia.

The airliner was bound for the holy city of Mashed when the collision occurred, killing all 119 passengers and the crew of 13, including a Russian pilot. No foreign passengers were on board, according to the passenger list.

Iran, Middle East P3721 Aircraft TECH Safety PEOP Personnel News P3721 The Financial Times London Page 3 97
Israeli troops kill three Palestinians in occupied territories Publication 930209FT Processed by FT 930209 By HUGH CARNEGY JERUSALEM

Israeli troops shot dead three Palestinians in the West Bank yesterday, bringing to 10 the number of Palestinians killed in the occupied territories since last Friday and raising the death toll since Israel's expulsion of 400 alleged Islamic militants to Lebanon in mid-December to 41, Hugh Carnegy writes from Jerusalem.

Some ministers have expressed alarm at the casualty rates and called for tougher rules for the use of live fire. But Mr Yitzhak Rabin, prime minister, said the army wanted more, not fewer, tools to combat the Palestinian uprising. The army yesterday released on bail two reporters for Reuters news agency in the Gaza Strip arrested on Sunday while filming unrest.

Meanwhile, Mr Rabin said Israel has 'more than a right' to continue to receive Dollars 3bn (Pounds 1.9bn) in annual economic and military grants from the US despite pressures in Washington for cuts in foreign aid. He spoke after meeting Senator Patrick Leahy, head of a senate sub-committee on foreign aid.

Israel, Middle East P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 3 198
Tokyo orders more small business loans Publication 930209FT Processed by FT 930209 By EMIKO TERAZONO TOKYO

JAPAN'S Ministry of Finance yesterday ordered the country's banks to expand lending to small and medium businesses, which have been suffering from the downturn in the economy.

The unprecedented move follows mounting criticism from businesses that banks, which are trying to reduce their bad loans, are increasingly reluctant to make loans. Complaints of excessively restrictive lending policies prompted the ruling Liberal Democratic party to call for lower lending rates in tandem with last week's cut in the official discount rate.

Mr Yoshiro Hayashi, finance minister, said the formal request was intended to maximise the effects of last week's 0.75 percentage point rate cut. Financial authorities are desperately trying to avert complaints that the discount rate cut was aimed at shoring up profit margins of the struggling banking sector.

Mr Yuji Tanahashi, vice-minister of international trade and industry, yesterday insisted the main purpose of the rate cut was not to improve earnings at financial institutions. He urged banks to reduce loan rates to manufacturing companies in order to lead Japan out of the current slump.

Small companies, which are in general dependent on a narrower product range than larger companies, have been hard hit by falling cash flows in the current recession. A sharp rise in bankruptcies among smaller businesses, which are more dependent on bank lending than large companies, added to worries about a credit crunch.

Leading commercial banks are moving to cut short-term prime lending rates, or the key rate charged on most creditworthy customers, in response to falling money market rates following the discount rate reduction. Yesterday, Sumitomo Bank, Mitsubishi Bank, and Fuji Bank announced a 0.5 percentage point cut in their short-term prime rates to 4 per cent.

However, businesses claim that banks are increasingly reluctant to apply lower rates to smaller companies, and are even trimming their lists of eligible corporations for the more attractive prime rates.

Japan, Asia P9651 Regulation of Miscellaneous Commercial Sectors P602 Commercial Banks GOVT Government News P9651 P602 The Financial Times London Page 3 348
Big stick from Rabin gets in the way of the carrot: Hugh Carnegy on the battered hopes of an era of conciliation under an Israeli PM with a vision of peace Publication 930209FT Processed by FT 930209 By HUGH CARNEGY

LITTLE more than six months after Prime Minister Yitzhak Rabin took office proclaiming a vision of at last achieving peace between Israel and its Arab foes, the self-inflicted crisis over Palestinian expulsions has battered hopes of his presiding over an era of conciliation.

Instead, many Israeli supporters of Mr Rabin's centre-left coalition fear that what they regard as his dictatorial style of government has led the country into an impasse in the Middle East peace talks which will be hard to resolve.

From the Palestinian point of view, the expulsions and accompanying violence, such as the seven killings in the occupied territories over the weekend, have compounded anger over what they say has been a sharp deterioration in human rights abuses by Israel under Mr Rabin, in particular in the Gaza Strip. Palestinians express increasing scepticism about carrying on negotiations for self-rule that have so far yielded no tangible improvement in their lot.

Last week, complaints about Mr Rabin from the left wing of his own Labour party burst into the open when Mr Hagai Merom, a Labour MP, attacked him in the Knesset. Mr Merom said Mr Rabin failed to consult his ministers and then suppressed criticism, first over the December decision to expel 400 alleged Islamic militants, and then over a compromise deal with the US to allow 100 to return.

'Recently, Mr Prime Minister, there is fear in the cabinet. It is not good that there is fear in the cabinet. I don't think a minister who disagrees should be attacked, especially if he is the justice minister,' Mr Merom said.

He was referring to Mr David Liba'i, the minister of justice, who was given just 10 minutes notice of the December deportation orders by Mr Rabin. When he tried to raise his objections at a subsequent cabinet meeting he was abruptly overruled by the prime minister.

There is a certain disingenuous quality to this criticism as every minister except Mr Liba'i, including the cabinet's most noted doves, voted in favour of the deportations when Mr Rabin informed them of his intentions.

But Mr Rabin's critics say the diplomatic and political mess precipitated by the expulsions was the consequence of his preference for keeping decision-making firmly within a small circle of aides in the prime minister's office and the military establishment. Mr Rabin holds the powerful defence portfolio as well as the premiership.

An important part of the miscalculation was the assumption that, at least privately, leaders of the Palestine Liberation Organisation would welcome tough action against their Islamic fundamentalist rival, Hamas, and would not stay away from Middle East peace talks in protest. This ignored the deep Palestinian fear of arbitrary expulsion that transcends narrower affiliations with political factions.

The mass deportations also hit the Palestinians at a time when resentment against Mr Rabin's tough security policies was already running high in the occupied territories. A former army chief of staff, Mr Rabin has long been an advocate of wielding a big stick in concert with the carrot of peace talks.

According to figures from Betzelem, an Israeli human rights group, Palestinian fatalities rose by 20 per cent in the first six months of Mr Rabin's rule to 76 dead, compared with 63 in the first six months of the year. The number of children under 15 years of age killed almost trebled to 18. Two-thirds of all deaths did not involve circumstances in which soldiers' lives were in danger, also a sharp rise over the preceding period.

'I think we have witnessed the worst period since Rabin was defence minister (up to mid-1990). People are being killed at a very high rate, houses are now being destroyed by anti-tank missiles and hundreds of people have been deported,' says Mr Saeb Erekat, a member of the Palestinian delegation to the peace talks. 'This is having a great impact. People are blaming the peace process for Rabin's actions - saying the talks give him the cover to do these things.'

Mr Rabin responds to such criticism with characteristic disdain towards Israeli doves and Palestinians alike. He insists he has not retreated from his commitment to make compromises for peace and is anxious for negotiations to resume. But he has made no secret of his regret that he has not been able, due to a combination of political rivalries and Knesset mathematics, to bring right-wing parties into the government to balance the left-liberal Meretz coalition partner.

'He definitely has mixed feelings about (his coalition), but he is caught in a situation which he can't change,' says Prof Avraham Diskin, head of the political science department at Hebrew University. 'Part of his behaviour towards the doves in the coalition is because of that.'

The question now is whether Mr Rabin can pull his government through the expulsions crisis and, assuming the peace negotiations can be rebuilt, retain the domestic political authority required to make the concessions demanded of Israel.

Prof Diskin thinks he can. 'However you look at it, the government is weakened. It cannot afford many more errors. But after all Labour is still the pivotal party. It can still go forward.'

Israel, Middle East P91 Executive, Legislative and General Government P9721 International Affairs GOVT Government News PEOP Personnel News Rabin, Y Prime Minister Israel P91 P9721 The Financial Times London Page 3 925
French outburst over UK may be a cry for help: Prime Minister Beregovoy's attack on British policies was not solely for home consumption Publication 930209FT Processed by FT 930209 By WILLIAM DAWKINS

THE outburst against Britain last week by Mr Pierre Beregovoy, the French prime minister - triggered by Hoover's decision to close a vacuum cleaner factory in Dijon and shift production to Scotland - was one of the stiffest public criticisms ever heaped by one European Community head of government upon another. But there is more to it than meets the eye.

French officials stressed that while they did not want to spark a diplomatic row, Mr Beregovoy's statement - that Britain was heading down a dead-end - was not only heartfelt, but it was a symptom of a general malaise, deeper than the Hoover problem.

This includes anxiety over Britain's refusal to sign the EC social charter - designed to reduce differences in labour conditions between community countries - its delay in ratifying the Maastricht treaty on monetary and political union, and the competitive advantage accorded to British exports by the fall in sterling's value after its exit from the European monetary system. A few days earlier, Mr Michel Sapin, the finance minister, had criticised Britain's policies of 'every man for himself'.

In short, Britain looks a decreasingly reliable friend at a time when France needs all the help it can get to counterbalance growing German power. 'We need Britain, but it is not always there, especially on many European issues. This weighs on many other subjects,' said a French foreign office official. As Mr Beregovoy said a day earlier: 'One must know if Great Britain wants to be a full part of Europe. . . Great Britain must be placed in front of its responsibilities.'

The shadow of next month's parliamentary elections, in which the ruling Socialists are set for a humiliating defeat, helps to explain why the government is in no mood to make friendly gestures to London.

One of Mr Beregovoy's officials explained that the fight over Hoover was all part of the government's attempts to defend its European policies in the face of sceptics in the opposition Gaullist RPR.

The Gaullists based their Maastricht referendum campaign on the theme of how the EC could harm powerless French citizens. 'I recognise it was a bit quick tempered. . . but Britain has been taken a bit as a counter-model in an election campaign in which, to put it very bluntly, social policy on the left stands against economic liberalism on the right,' the Beregovoy aide explained.

Just how much relations with Britain have become part of the election campaign was underlined when Mr Philippe Seguin, the RPR member of parliament who led the anti-Maastricht campaign, told the newspaper Le Monde that France and Britain should seek more common positions on European policy.

But how serious are the other sore points? Mr Beregovoy cares deeply about the social charter, which he said was essential to getting ordinary people to support European construction. He even claimed that Mr Major could increase his parliamentary majority by signing the charter, an idea likely to cause merriment in Westminster.

He made no reference to the attacks on the franc in his criticism of Britain, but there is a general suspicion in French government and opposition circles that there is US and UK political pressure to break the link between the franc and the D-Mark, defence of which has the status of a religious crusade among mainstream French politicians. Even the mild Mr Raymond Barre, a former prime minister, last week denounced 'a political assault' from 'Anglo-Saxon circles' against the franc/D-Mark parity and the Franco-German alliance.

Meanwhile, France has just started to feel the effects of sterling's competitive devaluation. This is unlikely to improve tempers in the government.

UK exports to France rose 5.3 per cent in the final quarter of last year, according to the British government.

Yet all this is unlikely to spark a serious diplomatic row. Neither side wants one, as French and British diplomats in Paris emphasised. Some British Conservative MPs did react angrily, accusing Mr Beregovoy of electioneering.

If he was indeed electioneering, it fell on deaf ears. The day after, not a single French national newspaper reported his outburst.

France, EC United Kingdom, EC P96 Administration of Economic Programs GOVT International affairs P96 The Financial Times London Page 2 733
Russian privatisation gathers pace Publication 930209FT Processed by FT 930209 By LEYLA BOULTON

RUSSIA stepped up the pace of its ambitious privatisation programme yesterday with sales of shares in the historic GUM department store in Moscow and factories in the industrial city of Volgograd, formerly Stalingrad.

Nearly 6,000 individual investors or investment funds expressed interest in buying shares in GUM, according to Mr Yuri Samonov, a member of the GUM board. About 15.5 per cent of the store was offered for sale in the past two weeks; two-thirds of its shares are already in private hands.

In Volgograd, enterprises being sold include a tractor plant, a margarine factory, and an aluminium plant.

GUM Russia, East Europe P5311 Department Stores P9611 Administration of General Economic Programs COMP Company News P5311 P9611 The Financial Times London Page 2 136
Bank of Italy chief anxious to step down Publication 930209FT Processed by FT 930209 By ROBERT GRAHAM ROME

AFTER nearly 14 years as governor of the the Bank of Italy, Mr Carlo Azeglio Ciampi has reminded the government of Mr Giuliano Amato he is anxious to step down.

Mr Ciampi, who will be 73 this year, yesterday confirmed weekend reports he had offered his resignation but had been persuaded to stay on. It remains unclear how long he is prepared to remain in office.

Rumours of his desire to retire shortly were fuelled by an apparently unsolicited statement from the prime minister's office thanking him for his role in defending the lira and giving him Mr Amato's full backing.

When asked yesterday about his offer to resign, Mr Ciampi said: 'If a person is asked to stay on, it means that the same person has requested to go.'

Last week he was attacked by Mr Umberto Bossi, the leader of the populist Lombard League, for being out of touch with events. This attack immediately provoked expressions of support from all the other political parties.

Yesterday, Mr Ciampi said he had no desire for the succession to the governorship to become an issue. Yet with the lira floating, the heavily indebted economy in recession and the political parties in disarray as a result of corruption scandals, the governor of the Bank of Italy has become a figure of stability. The bank itself is the sole institution, along with the state presidency, not to have been tainted by the corruption scandals.

With the bank due to celebrate its 100th anniversary in August, a number of bankers have seen this as a natural occasion for Mr Ciampi to leave.

Bank of Italy Italy, EC P6011 Federal Reserve Banks P9311 Finance, Taxation, and Monetary Policy PEOP Personnel News Carlo Azeglio Clampi, Governor Bank of Italy P6011 P9311 The Financial Times London Page 2 320
France threatens to fine Hoover Publication 930209FT Processed by FT 930209 By ALICE RAWSTHORN

THE French government yesterday stepped up the political pressure on Hoover by threatening to fine the US domestic appliance company for its decision to switch production from its plant at Dijon in eastern France to Cambuslang in Scotland.

Ms Martine Aubry, employment minister, said the Labour Inspectorate would fine Hoover for breaching French employment law. She claimed that the company, whose closure plans involve the loss of 600 French jobs, had failed to notify the company's works committee before announcing a plant closure. 'The very least a company should do is to respect the laws of the countries where it operates,' said Ms Aubry. 'Hoover did not conform with French law.'

She said she also intended to check whether Hoover had broken European Community legislation, although this is unlikely. Hoover's action has been condemned by Mr Jacques Delors, the Commission president who is also Ms Aubry's father.

However, the Socialist government, acutely aware of its poor record on employment, is trying to keep the Hoover issue in the spotlight in the run-up to next month's legislative elections.

Hoover France, EC P3635 Household Vacuum Cleaners P9441 Administration of Social and Manpower Programs RES Facilities PEOP Labour GOVT Legal issues P3635 P9441 The Financial Times London Page 2 220
Vassiliou emerges poll favourite Publication 930209FT Processed by FT 930209 By KERIN HOPE NICOSIA

President George Vassiliou of Cyprus yesterday appeared well placed to win re-election after Greek-Cypriot voters gave him a substantial lead in the first of two presidential ballots, writes Kerin Hope in Nicosia.

Mr Vassiliou, an independent supported by the still powerful Communist party, secured 44.2 per cent of the vote on Sunday, against 36.7 per cent for Mr Glafcos Clerides, leader of the right-wing Democratic Rally party. Centrist Mr Paschalis Paschalides won 18.6 per cent.

Cyprus, Middle East P9111 Executive Offices PEOP Personnel News Vassiliou, G President Cyrprus P9111 The Financial Times London Page 2 109
Brussels holds steel summit Publication 930209FT Processed by FT 930209 By REUTER BRUSSELS

European Community officials were set to meet European steel company heads last night to discuss the sensitive issue of how much production should be cut as part of an EC rescue plan, Reuter reports from Brussels. EC officials said they would consider the findings of a report submitted last week on plant closure plans.

European Economic Community (EC) P331 Blast Furnace and Basic Steel Products P9611 Administration of General Economic Programs MKTS Production GOVT International affairs P331 P9611 The Financial Times London Page 2 96
Germans play down effects of rate cuts Publication 930209FT Processed by FT 930209 By AP-DJ BASLE

BUNDESBANK president Helmut Schlesinger said yesterday that he did not expect money market rates to react significantly to key interest rate cuts made by the German central bank last week, AP-DJ reports from Basle.

'The interest rate cuts themselves were part of a process in which we have been for a long time,' he said. 'The current interest rates in the money markets will probably, in the short term, be little affected' by the reductions in the official rates.

Speaking after a meeting of the Bank for International Settlements, Mr Schlesinger also denied that the Bundesbank acted under domestic or foreign pressure when it announced its rate cuts.

Germany, EC P6011 Federal Reserve Banks P9311 Finance, Taxation, and Monetary Policy GOVT Government News P6011 P9311 The Financial Times London Page 2 146
Karadzic under growing pressure to accept plan Publication 930209FT Processed by FT 930209 By ROBERT MAUTHNER NEW YORK

THE BOSNIAN Serb leader, Dr Radovan Karadzic, came under pressure yesterday from Russia, Serbia and the Yugoslav federal government, to make concessions over the proposed map dividing Bosnia into 10 semi-autonomous provinces.

As the United Nations Security Council met for its first review of negotiations on the peace plan drawn up by Mr Cyrus Vance and Lord Owen, both the Russian and Yugoslav governments made clear they fully supported the plan.

Meanwhile, President Bill Clinton's new US administration, which has criticised it for allegedly being too favourable to the Bosnian Serbs, was still working on its own proposals. These are expected later this week and are thought unlikely to be as radically different as was first thought.

The public support given by Mr Andrei Kozyrev, Russia's foreign minister, to the Vance-Owen plan will complicate the task of the US administration, which has made clear it wants the Russians to be closely associated with any US initiative.

Mr Ilija Djukic, the federal Yugoslav foreign minister, issued a special statement here yesterday saying his government supported the mediators' plan 'as the most complete and realistic framework for establishing just and lasting peace in Bosnia-Hercegovina'.

Mr Djukic told the FT that he had made clear to Dr Karadzic that 'this is the time when he should say 'yes''.

However, it is the Bosnian Moslems who are currently deemed the biggest obstacle to a settlement. Confident the US will not force them to accept an agreement they oppose, they are refusing to discuss the map altogether.

Mr Vance, in his report to the Security Council, said the mediators had constantly sought to maintain and reinforce the status of Bosnia-Hercegovina as a sovereign, independent, integral and multi-ethnic state.

He stressed the map the mediators proposed would require Bosnian Serbs to give up large areas of territory.

The UN yesterday resumed its humanitarian airlift to Sarajevo amid heavy fighting in eastern Bosnia and western Croatia.

Bosnia-Hercegovina, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 352
Bonn prepares a new round of defence cuts Publication 930209FT Processed by FT 930209 By QUENTIN PEEL BONN

MR Volker Ruhe, the German defence minister, will announce a new round of defence cuts this week, including reductions in garrison strengths and a delay in building new barracks in east Germany, as a first step in his planned defence review.

A reconsideration of contracts for arms and equipment, promised for the end of March, is likely to be an open-ended process without a firm deadline, defence officials say. Meanwhile, a freeze on new contracts ordered by Mr Ruhe last week, will remain in force.

As for a review of manning levels in the Bundeswehr, confirmed by Chancellor Helmut Kohl at the weekend, it will be completed in the course of the year. The aim is to see what personnel cuts can be made beyond the current target of reducing to 370,000 men by 1995, without abolishing conscription. Mr Kohl yesterday sought to head off rising criticism from defence experts, and from Nato, about the government's plan to find further urgent savings as part of its 'solidarity pact' for east Germany. Savings of DM860m (Pounds 358.3m) this year, and DM700m a year for the next three years, have been ordered.

Mr Kohl said the Bundeswehr and its soldiers 'will receive all the necessary equipment and support they need to fulfil their new tasks'.

He also promised that all cuts would be carried out in close consultation with Nato, in order to maintain all Germany's commitments to the alliance.

His reassurance followed criticism from Mr Manfred Worner, the secretary-general of Nato and former German defence minister, who warned that planned defence cuts were in danger of undermining the alliance's basic defence capability. In a weekend television interview, Mr Ruhe also attacked the extent of the cuts in his budget, saying that defence was having to bear an unequal share of the burden of savings needed to finance subsidies for the east German economy.

He announced his defence review last week, while at the same time cancelling a DM3bn contract with the US for a high-altitude electronic reconnaissance system known as Lapas.

Defence Ministry officials said that all contracts would be reviewed to see where savings could be made without suffering penalty clauses. If the cuts have to be made by the end of March, they fear that the result will be a haphazard, rather than carefully structured, savings programme.

Germany, EC P9711 National Security RES Facilities PEOP Labour GOVT Government spending Ruhe, V Defence Minister Germany P9711 The Financial Times London Page 2 430
Mitterrand will pick pro-Europe PM Publication 930209FT Processed by FT 930209 By ALICE RAWSTHORN PARIS

PRESIDENT Francois Mitterrand indicated yesterday he would choose a politician who favoured closer European unity as France's new prime minister after next month's legislative elections.

The president, whose governing Socialist party faces defeat in the elections, is entitled under French law to choose the next prime minister providing he or she can command a parliamentary majority. This means he will almost certainly have to choose a candidate from the conservative RPR and UDF alliance coalition, which has a clear lead in the opinion polls.

However, President Mitterrand, a staunch supporter of European unity, said in an interview with Le Monde newspaper that 'it is obvious I will not call on a prime minister who would be against the construction of Europe', he said.

The obvious casualty of the presidential veto is Mr Philippe Seguin, the RPR politician who was one of the most active campaigners against ratifying the Maastricht treaty in last autumn's referendum. Mr Seguin yesterday announced his candidature for the premiership.

Front-runners for the premiership with pro-European views include Mr Edouard Balladur, the finance minister in the previous cohabitation government from 1986 to 1988, Mr Valery Giscard d'Estaing, former French president and now leader of the UDF, and Mr Jacques Chirac, head of the RPR who was Mr Mitterrand's choice as premier for the 1986-1988 government.

President Mitterrand, who devoted his considerable political skills to out-manoeuvring Mr Chirac in the last period of cohabitation, said in the interview with Le Monde that he would co-operate with a future conservative administration and would share control of defence and foreign affairs. 'When one is not made for it, working together requires a modus vivendi,' he said.

Yesterday's declaration from Mr Seguin marked the start of the public jostling for position among the conservative candidates for the premiership. Although there are only six weeks before the first round of the elections on March 21 the campaign has yet to hot up. The RPR and UDF are expected this week to announce joint proposals for the economy which will include continuing the Socialists' franc fort policy of preserving a strong currency.

France, EC P9111 Executive Offices PEOP Appointments Mitterand, F President France P9111 The Financial Times London Page 2 382
France threatens to fine Hoover Publication 930209FT Processed by FT 930209 By ALICE RAWSTHORN and ROBERT TAYLOR, Labour Correspondent

THE French government yesterday stepped up the political pressure on Hoover by threatening to fine the US domestic appliance company for its decision to switch production from its plant at Dijon in eastern France to Cambuslang in Scotland.

Ms Martine Aubry, employment minister, said the Labour Inspectorate would fine Hoover for breaching French employment law.

She claimed that the company, whose closure plans involve the loss of 600 French jobs, had failed to notify the company's works committee before announcing a plant closure.

'The very least a company should do is to respect the laws of the countries where it operates,' said Ms Aubry. 'Hoover did not conform with French law.'

She said she also intended to check whether Hoover had broken European Community legislation. Hoover's action has been condemned by Mr Jacques Delors, the Commission president who is also Ms Aubry's father.

But EC officials privately acknowledge that Hoover does not appear to have infringed EC regulations. Mr Delors himself said as much last week.

However, the Socialist government, acutely aware that rising unemployment is one of the main reasons for its poor showing in opinion polls in the run-up to next month's legislative elections, is trying to keep the Hoover issue in the spotlight.

One of the French government's main weapons against Hoover is new employment legislation which imposes stringent restrictions on companies planning to shed labour in France. It compels French employers to produce plans for alternative jobs for redundant workers and to seek government approval for redundancies.

The Scottish Trades Union Congress and the French Confederation du Travail (CGT) issued a joint statement yesterday over the Hoover affair, writes Robert Taylor, Labour Correspondent. Demanding new rights for workers in transnational corporations, it called for the creation of European group committees in each company to enable consultations and collective discussions before economic decisions were taken.

Hoover France, EC P3635 Household Vacuum Cleaners P9441 Administration of Social and Manpower Programs RES Facilities PEOP Labour GOVT Legal issues P3635 P9441 The Financial Times London Page 2 356
US plan for Bosnia holds key to next move on peace Publication 930209FT Processed by FT 930209 By ROBERT MAUTHNER and LAURA SILBER NEW YORK, ZAGREB

THE United Nations Security Council was due yesterday to conduct its first review of the international mediators' efforts to broker a peace settlement for Bosnia-Hercegovina, but was not expected to take any decisions before the US comes up with its promised alternative plan, probably later this week.

The mediators, Mr Cyrus Vance for the UN, and Lord David Owen, representing the European Community, continued without success their efforts at the weekend to win the approval of all the warring factions for their proposals to divide Bosnia into 10 semi-autonomous provinces. So far, only the Bosnian Croats have endorsed all three parts of the peace plan and are also the only ones to have subscribed to the mediators' proposed map.

The Bosnian Moslems, confident that the US would not subscribe to any solution which would force them to make territorial concessions, declined to discuss the map during the weekend talks and concentrated on the proposed ceasefire arrangements.

Over the past few days, however, there have been growing indications that it will be possible to find common ground between President Bill Clinton and the mediators, particularly given the strong international support for the Vance-Owen plan. The UN yesterday resumed its humanitarian airlift to Sarajevo amid heavy fighting in eastern Bosnia and western Croatia. Fourteen flights arrived with 131 tonnes of emergency relief, Laura Silber writes from Zagreb.

They took off from Frankfurt and Split, the Croatian port, after Serb anti-aircraft fire hit a German relief aircraft bound for Zagreb at the weekend.

In eastern Bosnia, heavy fighting was reported around Srebrenica, despite a UN-brokered ceasefire which was supposed to come into force at noon yesterday.

In Croatia's Dalmatian hinterland, Serb forces claimed to have seized Pridraga and Novigrad, strategic towns near the vital Maslenica bridge. Belgrade radio said Serb forces were advancing towards the bridge, which links Croatia with its Dalmatian coast.

United Nations Security Council Bosnia-Hercegovina, East Europe Croatia, East Europe P97 National Security and International Affairs GOVT International affairs P97 The Financial Times London Page 2 362
Sell-off begins in Volgograd Publication 930209FT Processed by FT 930209 By LEYLA BOULTON MOSCOW

AUTHORITIES in the Russian city of Volgograd, formerly Stalingrad, yesterday began auctioning off large and medium-sized enterprises as part of the government's mass privatisation campaign.

Some 350,000 shares - representing for the most part minority stakes after the acquisition of majority stakes by employees - were put on offer in exchange for privatisation vouchers distributed to every citizen. Bids for shares close in three weeks.

Enterprises in the first of 200 planned offerings in the southern city include a tractor plant which produced tanks during the Second World War, a margarine factory, a brewery and an aluminium plant.

Russia, East Europe P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 2 130
Kravchuk set for tough UK talks Publication 930209FT Processed by FT 930209 By CHRYSTIA FREELAND and ANTHONY ROBINSON KIEV, LONDON

A HIGH-PROFILE public welcome, accompanied by tough talking on nuclear, economic and non-nuclear security issues, awaits Mr Leonid Kravchuk on a three-day state visit to Britain as the first president of the newly independent Ukrainian state.

Speaking in Kiev on the eve of his visit, which starts today, Mr Kravchuk called on the west to provide greater economic assistance soon or face dangerous consequences. 'Western aid will determine which path Ukraine and other former republics choose, whether or not our countries become democratic,' he said.

But if he repeats recent calls for billions of dollars to finance the scrapping of nuclear weapons, improve the safety of nuclear plants and kick-start the ailing Ukrainian economy when he meets Prime Minister John Major, senior political and business leaders and Mr Jacques Attali, head of the European Bank for Reconstruction and Development, he will be told bluntly that billions are not on offer.

He will also be warned that Ukraine, whose previous government mishandled the issue of a new Ukrainian currency and made little progress in reforming inherited communist structures and power networks, will only attract serious private investment when it starts to tackle macro-economic imbalances. The point has already been taken by the present government led by Mr Leonid Kuchma.

The Ukrainian leader will also be urged to ratify the Start 1 strategic arms reduction agreement treaty as soon as possible.

In Kiev yesterday Mr Kravchuk confirmed that Ukraine remains committed to becoming a non-nuclear power but insisted that ratification would depend on financial aid and security guarantees from the nuclear powers. Mr Major and other senior officials are expected to emphasise the need for Ukraine to make the best use of what assistance is realistically available from the west and take a more flexible line with Russia over co-operation in the destruction of nuclear weapons.

In the past, Ukrainian leaders have tended to play down the importance - and the likelihood - of substantial western financial aid. But Mr Kravchuk, a former senior communist official who successfully transformed himself into a Ukrainian nationalist and won last year's presidential elections with a big majority, now appears to be counting on a high level of western aid after last year's sharp economic decline.

The UK visit comes as the Ukrainian government is poised for talks with the International Monetary Fund about a stabilisation fund.

Ukraine, East Europe United Kingdom, EC P9721 International Affairs PEOP Personnel News GOVT Government News Kravchuk, L President Ukraine P9721 The Financial Times London Page 2 437
Military staff for UN urged Publication 930209FT Processed by FT 930209 By DAVID WHITE, Defence Correspondent

THE United Nations should have a permanent military staff as the requirements for intervention move beyond traditional peacekeeping operations, according to a report by the Royal United Services Institute,

The London-based defence studies organisation calls for the UN's 'largely symbolic' Military Staff Committee, comprising the military heads of the five permanent members of the Security Council, to be regenerated with a full-time chairman and representatives of all the Security Council countries.

This body would determine the principles for military intervention and outline the logistics necessary for sending forces. A control centre would also be required to provide political and military guidance to commanders in the field.

In the first issue of a new annual International Security Review, the institute forecasts increasing pressure on the US, Britain and France to provide UN forces. The shift in emphasis to peace-enforcement will increasingly require heavily armed professional soldiers from countries skilled in high-level command, it says.

It warns that much of this burden may be placed on America's allies since Washington will be reluctant to commit ground forces where no US national interest is at stake.

There is strong case for a UN military staff to establish operating procedures and rules of engagement, it says, especially if eastern European or other non-Nato countries are to be accommodated into a Nato-style operation.

However, it rejects as unrealistic the proposal by Mr Boutros Boutros Ghali, the UN secretary-general, for forces to be made permanently available on standby for the UN.

The report is highly critical of western, and particularly European, responses to the crisis in former Yugoslavia, saying 'much could have been done' to avert the disaster in Bosnia. It accuses western governments of now playing a 'cynical' game, officially rejecting the carve-up of Bosnia while not intending to take any action that would reverse the territorial gains made by Serb forces.

International Security Review, RUSI, Whitehall, London SW1A 2ET. Members Pounds 17.50, non-members Pounds 25.

United Nations World P97 National Security and International Affairs TECH Research P97 The Financial Times London Page 2 355
Bank of France lowers rate of 24-hour emergency lending facility Publication 930209FT Processed by FT 930209 By ALICE RAWSTHORN PARIS

THE BANK of France yesterday lowered its 24-hour emergency lending facility rate by one eighth of a percentage point to 11.5 per cent, writes Alice Rawsthorn in Paris. It was the third cut in a week and was part of its attempts to alleviate pressure on the banking system by bringing down French money market rates,

The French authorities were forced to raise short-term interest rates early last month to protect the franc. However, the currency's recent stability, combined with last week's cut in German interest rates, has enabled the central bank to take a more relaxed stance.

Bank of France France, EC P6011 Federal Reserve Banks COSTS Service prices P6011 The Financial Times London Page 2 137
Vassiliou ahead in Cyprus poll Publication 930209FT Processed by FT 930209 By KERIN HOPE NICOSIA

PRESIDENT George Vassiliou of Cyprus yesterday appeared well placed to win re-election after Greek-Cypriot voters gave him a substantial lead in the first of two presidential ballots.

Mr Vassiliou, an independent supported by the still powerful Communist party, secured 44.2 per cent of the vote on Sunday, against 36.7 per cent for Mr Glafcos Clerides, veteran leader of the right-wing Democratic Rally party.

Mr Paschalis Paschalides, backed by the centre-right Diko party and the small Socialist party, won only 18.6 per cent of the vote.

Mr Vassiliou and Mr Clerides will contest the second ballot next Sunday.

Both men will try to forge alliances with prominent Diko members, but Mr Vassiliou is already assured of the Socialists' backing.

Cyprus, Middle East P9111 Executive Offices PEOP Personnel News Vissiliou, G President Cyrpus P9111 The Financial Times London Page 2 153
NatWest cuts 4,000 staff as high street bank job losses rise Publication 930209FT Processed by FT 930209 By JOHN GAPPER, Banking Correspondent

NATIONAL Westminster Bank is to cut about 4,000 jobs, mostly from its branch network, taking the number of jobs to be lost in high street banks this year to at least 10,000.

National Westminster said it expected only a 'minimal' number of compulsory redundancies this year because cuts would be spread across a wide number of grades. Last year it dismissed 1,500 staff compulsorily out of a total loss of 5,500 jobs.

Other banks expecting to shed jobs this year because of new technology, branch closures and recession include Barclays, which is expecting to lose 3,000 jobs, and Royal Bank of Scotland, which is cutting 3,500 posts by 1995. More banks are expected to make cuts over the course of the year.

Mr Stuart Chandler, NatWest's general manager for human resources, said changing technology and cost pressures meant job levels would be cut further in coming years. 'This process will continue for some years ahead,' he said.

The announcement was criticised by unions, which will meet the bank today to discuss the cuts. However, the NatWest Staff Association, which represents 41,000 NatWest staff, said it welcomed the bank's assurance that there would be fewer compulsory redundancies.

National Westminster, which employs 95,000 staff, 63,000 in its branch network, has been attacked by unions for selecting staff for redundancy by comparing individuals' job performance, disciplinary record and attendance.

About 3,200 jobs are expected to go in the branch network, 600 in the group services division which handles technology, and 250 jobs in the NatWest Markets investment bank, of which 150 will be in NatWest Markets' British operations.

Unions have pressed NatWest to establish a register of people willing to take voluntary redundancy, but Mr Chandler said the bank would 'use every means at our disposal to avoid compulsory redundancy short of a voluntary register'.

Mr Martin Gray, head of branch banking, said there were likely to be few compulsory redundancies because cuts would affect a larger number of managers as well as clerical staff, and so there would be more early retirements.

National Westminster Bank United Kingdom, EC P602 Commercial Banks PEOP Labour P602 The Financial Times London Page 1 380
Pits rescue may hinge on power deal: Government favours subsidising coal Go-ahead likely for electricity market reforms Publication 930209FT Processed by FT 930209 By MICHAEL SMITH

THE GOVERNMENT is expected to reject proposals to delay reforms of the electricity industry as a way of expanding the market for coal in order to save threatened pits.

Postponing plans for more electricity market competition from next year was proposed in a cross-party Commons committee report to rescue at least a dozen of the 31 pits facing closure.

Instead, the government favours an alternative pit rescue plan. This would involve the two largest electricity generators for England and Wales buying larger amounts of British-produced coal at subsidised prices even though there would be no guaranteed market for it.

In return for asking the generators to buy up to 60m tonnes of coal over five years, the government would offer subsidies of up to Pounds 10 a tonne. This would bridge the gap between cheaper imported coal and the domestic product. It could cost up to Pounds 150m in the first year but far less later.

Mr Michael Heseltine, trade and industry secretary, and Mr Tim Eggar, energy minister, who have been reviewing the controversial pit closure plan, are keen not to slow the impetus of electricity privatisation.

Although slowing the pace of liberalisation could return to the agenda, a deal on extra tonnage with the generators is thought likely. The generators are, however, believed to be balking at the possible amounts.

On top of the 40m tonnes next year and 30m in the subsequent four years which the generators have already tentatively agreed to buy, the government is thought to be pressing for them to take an extra 60m tonnes over the five years. This would save about 10 of the 31 threatened pits, initially at least.

Talks with the generators are unlikely to produce a deal to provide all the tonnage needed to persuade MPs to support a government plan. However, a successful outcome would make a delay in market liberalisation unnecessary. Under the liberalisation plans, regional electricity companies (Recs) would be forced to compete from April for the custom of about 50,000 of the largest customers in England and Wales.

Competition is currently restricted to the 5,000 largest customers in the country who use 1 megawatt of electricity in any half-hour; under the liberalisation plans the threshold would be lowered to 100 kilowatts.

Expanding the competitive market would, however, make the Recs less sure about future markets and this is one reason they have been reluctant to buy as much coal-fired power as in the past.

Delaying liberalisation would be a way of expanding the coal market and saving some pits designated for closure.

However, Professor Stephen Littlechild, electricity regulator, has advised the government against adopting this course.

A final decision on liberalisation will not be taken until the government succeeds or fails to negotiate a deal with the generators to buy extra coal.

The white paper on coal is expected this month, possibly next week.

Gas prices freeze, Page 18

United Kingdom, EC P4911 Electric Services P9631 Regulation, Administration of Utilities P12 Coal Mining MKTS Contracts RES Energy use P4911 P9631 P12 The Financial Times London Page 1 537
Stock and Currency Markets Publication 930209FT Processed by FT 930209

--------------------------------------------------------- STOCK MARKET INDICES --------------------------------------------------------- FT-SE 100: 2,870.0 (+7.1) Yield 4.26 FT-SE Eurotrack 100 1,131.12 (+1.6) FT-A All-Share 1,398.63 (+0.2%) FT-A World Index 142.01 (same) Nikkei 17,281.73 (-51.17) New York: Dow Jones Ind Ave 3,437.54 (-4.6) S&P Composite 447.85 (-1.08) --------------------------------------------------------- US CLOSING RATES --------------------------------------------------------- Federal Funds: 2 15/16% (2 7/8%) 3-mo Treas Bills: Yld 2.971% (2.962%) Long Bond 105 3/16 (105 23/32) Yield 7.193% (7.152%) --------------------------------------------------------- LONDON MONEY --------------------------------------------------------- 3-mo Interbank 6 3/16% (6 1/8%) Liffe long gilt future: Mar 101 5/16 (Mar101 19/32) NORTH SEA OIL (Argus) Brent 15-day (Mar) dollars 18.42 1/2 (18.53) Gold New York Comex (Feb) dollars 328.9 (328.5) London dollars 328.15 (328.0) --------------------------------------------------------- STERLING --------------------------------------------------------- New York: dollars 1.439 (1.4445) London: dollars 1.4395 (1.447) DM 2.3825 (2.395) FFr 8.0575 (8.095) SFr 2.205 (2.21) Y 178.5 (180.0) pounds Index 77.2 (77.7) --------------------------------------------------------- DOLLAR ---------------------------------------------------------

New York: DM 1.657 (1.66025) FFr 5.606 (5.6125) SFr 1.536 (1.5325) Y 123.8 (124.4) London: DM 1.6545 (same) FFr 5.5975 (5.595) SFr 1.532 (1.5265) Y 123.95 (124.35) dollars Index 67.4 (67.2) Tokyo open Y 123.93 ---------------------------------------------------------

World P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 216
World News in Brief: Snapped Publication 930209FT Processed by FT 930209

The first motorist to be prosecuted for speeding based on evidence from a speed-trap camera appeared in court at Ealing, west London. He pleaded guilty to driving at 78mph where the limit was 50 and was fined Pounds 156.

United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 68
World News in Brief: Two charged after quarry arrests Publication 930209FT Processed by FT 930209

Two Irishmen are to appear in court in London today charged with conspiracy to cause explosions. They were arrested during a surveillance operation at a quarry near Wells, Somerset. A third man is being sought.

United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 68
World News in Brief: Pound settles after 3 pfennig fall Publication 930209FT Processed by FT 930209

Sterling fell by nearly 3 pfennigs against the D-Mark in London yesterday morning as dealers remained concerned about the UK currency's immediate prospects. After recovering initially from last week's lows, the pound dropped from around DM2.403 to DM2.375. It later gained some ground to close at DM2.3825, down more than a pfennig on the day. Against the dollar, it closed at Dollars 1.4395, down nearly a cent on Friday's close. In New York, it closed at DM2.3855 and Dollars 1.439. Lex, Page 18; Currencies, Page 27

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 119
World News in Brief: Qantas sale date Publication 930209FT Processed by FT 930209

The Australian government is to postpone the sale of its 75 per cent interest in Qantas Airways to the autumn. British Airways took a 25 per cent stake in the carrier last year.

Qantas Airways Australia P451 Air Transportation, Scheduled P6719 Holding Companies, NEC GOVT Government News COMP Disposals P451 P6719 The Financial Times London Page 1 70
World News in Brief: British mercenaries executed Publication 930209FT Processed by FT 930209

The bodies of two British mercenaries who had been training Moslem forces were found in central Bosnia. They had been kidnapped, tortured and executed.

Key to next move on peace, Page 2

Bosnia-Hercegovina, East Europe P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 63
World News in Brief: The FT500 Publication 930209FT Processed by FT 930209

Tomorrow The FT500, a list of Europe's top 500 companies by market capitalisation, will be published tomorrow. The survey also includes the top 500 companies in the UK and those with the biggest profit rises and falls. It points to companies on the way up and others on the way down.

Financial Times United Kingdom, EC P2711 Newspapers TECH Services P2711 The Financial Times London Page 1 79
Spending review to shape early budget decisions Publication 930209FT Processed by FT 930209 By RALPH ATKINS and EMMA TUCKER

THE GOVERNMENT'S sweeping review of public spending will affect expenditure decisions to be taken as early as this year, Mr Michael Portillo, chief secretary to the Treasury, announced yesterday.

First results will be available by the summer - when the cabinet will have to agree spending totals for the following financial year. The public sector borrowing requirement then is forecast to be running at more than Pounds 50bn a year.

Mr Portillo confirmed that the government would look initially at health, social security, education and Home Office budgets. He began talks with the relevant ministers yesterday. But he failed to impress City economists that borrowing was about to be brought under firmer control.

The focus of the departments' reviews, Mr Portillo said, 'will be on the medium to longer term, though our aim is that that their provisional findings should inform the next spending round in the summer'.

Mr Portillo hinted that the National Health Service's Pounds 2.5bn drugs bill, which was rising at four times the rate of inflation, could be an early target. All departments will be covered by the review during the lifetime of the Parliament.

On Channel Four news last night, Mr Portillo said he wanted, over the longer term, to reduce the number of civil servants. He was looking to spending levels beyond the end of the century and signalled that tackling the increased spending burden created by an ageing population was high on his agenda.

In spite of clear signs from Tory MPs of the political difficulty of a radical shift from public to private provision, Mr Portillo said no spending was sacrosanct. 'We will be seeking to identify areas where better targeting can be achieved or from which the public sector can withdraw altogether,' he told the Commons.

In the City, Mr Peter Spencer, chief economist at Kleinwort Benson, said: 'It is just another question of promises, promises, rather like the inflation ceiling of 4 per cent.' Previous reviews of public spending had come to nothing, he said.

Mr Roger Bootle, chief economist of Greenwell Montagu, said there was 'nothing magical' about announcing a general review of public spending.

The government would have to set out a clear framework for cutting spending or raising taxes in the March Budget to convince markets it was serious about cutting public spending, Mr Bootle said.

Ms Harriet Harman, Labour's Treasury spokeswoman, said the review was a 'panic response in reaction to the government's economic mismanagement and appalling and unacceptable levels of unemployment'.

Conservative MPs warned Mr Portillo against hitting pensioners or ending the principle of free health care.

The review has already triggered divisions within the party over the future of contributory benefits - particularly invalidity and unemployment benefit - following signals at the weekend from Mr Peter Lilley, social security secretary, that 'contracting out' of pensions from the state scheme to private insurance could be extended.

MPs seek views on Budget plans, Page 6 Parliament, Page 9 Lex, Page 18

United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9411 Administration of Educational Programs P9431 Administration of Public Health Programs P9441 Administration of Social and Manpower Programs P92 Justice, Public Order, and Safety GOVT Government spending CMMT Comment & Analysis P9311 P9411 P9431 P9441 P92 The Financial Times London Page 1 564
Daf set to shed 1,000 workers in Britain Publication 930209FT Processed by FT 930209 By KEVIN DONE and ROBERT TAYLOR

MORE THAN half of the 6,500 jobs at the Dutch and Belgian operations of Daf, the beleaguered Anglo-Dutch commercial vehicle maker, are to be eliminated, and it is understood that a first round of more than 1,000 job losses in the UK will be announced shortly.

Mr Louis Deterink and Mr Friso Meeter, the Dutch-appointed administrators, said yesterday the jobs in Holland and Belgium would be cut as part of the main Daf rescue plan currently under discussion with the Dutch government and Daf's international bank consortium.

The plan calls for the creation of a new limited company, called New Daf, to salvage the 'core operations' of Daf's Dutch and Belgian medium and heavy duty truck activities.

New Daf could also absorb some of the UK operations of Leyland Daf, most probably the light truck assembly plant at Leyland, Lancashire, said Mr John Talbot and Mr Murdoch McKillop, joint administrative receivers for Leyland Daf.

The UK receivers warned last night in a letter to the 5,500-strong Leyland Daf workforce that job losses in the UK were 'inevitable'.

It is understood that Daf had already planned to cut around 1,100 jobs in the UK as part of its earlier restructuring package, before it was forced to file for protection against its creditors last week after running up losses of more than Fl 800m (Pounds 296m) in the last three years.

The UK receivers are also in urgent discussion with Renault, the French vehicle maker, about the future of its joint venture with Daf to develop a new range of vans, code-named Excel. There are around 270 Leyland Daf workers on the Excel project in the UK, mainly in Birmingham.

Leyland DAF shop stewards are to meet Mr Michael Heseltine, trade and industry secretary, today, while union officials are due to have discussions tomorrow with the receivers on the future of Leyland DAF. Union leaders are due to travel to Eindhoven on Thursday for talks with the main DAF board in Holland.

The UK receivers, who will meet more than 200 representatives of the Leyland Daf UK dealer network today, said last night they believed there was 'a future for Leyland Daf albeit at a reduced size'.

The Dutch administrators said in a letter to the company's workforce in continental Europe that discussions about the formation of a new limited company, with the working name of New Daf, had been under way since last Wednesday.

The move to transfer the core Dutch and Belgian activities to the new company had to be completed 'in the next three weeks'. The scale of the jobs cuts in the Netherlands and in Belgium was much greater than foreseen in the company's original restructuring plan, said the administrators. 'The expectation is that in Westerlo in Belgium and Eindhoven in the Netherlands the total number of jobs will be at least halved.'

Daf has more than 5,000 employees at Eindhoven and around 1,500 at Westerlo.

The administrators said Daf Finance, a wholly-owned subsidiary of the Daf group, would be 'run down and closed'. Leyland Daf Finance, its UK subsidiary, last week closed its five UK regional offices. They said they would rationalise and sell off 'as soon as possible' the troubled Daf Special Products subsidiary in the Netherlands, which manufactures some military vehicles and aerospace components.

Letter, Page 16 VW to cut 36,000 jobs, Page 18 GM to sue NBC, Page 18

DAF Leyland DAF Netherlands, EC Belgium, EC United Kingdom, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories PEOP Labour COMP Company News P3711 P3713 P3714 The Financial Times London Page 1 626
World News in Brief: Fifty die in bus fire Publication 930209FT Processed by FT 930209

At least 50 passengers were burnt to death when their bus caught fire in Lagos.

Nigeria, Africa P4119 Local Passenger Transportation, NEC PEOP Personnel News P4119 The Financial Times London Page 1 46
London Stock Exchange: Strong session for ICI Publication 930209FT Processed by FT 930209 By CHRISTOPHER PRICE, JOEL KIBAZO, PETER JOHN and STEVE THOMPSON

CHEMICALS and pharmaceut-icals giant ICI saw its shares enjoy their biggest leap since July last year, confusing critics who argue that the proposed split-up of the group will entail a very big rights issue. ICI has said it intends to launch its drugs arm as a separate entity, Zeneca, some time this year.

The impetus for yesterday's share jump of 46 to 1175p appeared to come principally from the US. As the company is now in its closed period ahead of the announcement of results on February 25, the rise could be ascribed to technical trading rather than fundamental news.

One dealer said US investment bank Goldman Sachs had been telling clients it had finally offloaded the famous Hanson stake which it took on board last May. Goldman was unable to comment on the rumour.

There was talk that NatWest Securities, in spite of its negative stance on the stock, had a big buyer in the US, where investors have been keen buyers of several blue chips. Chemicals shares had risen sharply in New York on Friday following recommendations from broker PaineWebber.

Finally, ICI has a strong exposure to the D-Mark, which gained two pfennigs against sterling yesterday.

Mirror Group falls

The rise and rise of Mirror Group Newspapers was checked yesterday following a dip in bid rumours and stories in the Sunday press which prompted concern of a strike by the workforce. The shares fell nearly 6 per cent, against the market trend, to close 7 lower at 110p.

The fall was also prompted by a statement from Lord Hollick, the managing director of investment group MAI, that he was not seeking to take over the newspaper group.

Also, it was reported in the UK weekend press that the Mirror might move its headquarters and that such a move would be accompanied by heavy job losses, threatening a workforce confrontation and possibly a strike. However, one analyst believed that the Mirror had prepared itself for industrial action by establishing a ghost workforce which would swing into action at short notice.

Eurotunnel improves

Shares in Channel tunnel operator Eurotunnel moved sharply ahead after the com-pany's broker reiterated its positive stance on the stock and a press report said the company was about to reach a settlement in its dispute with tunnel constructor TML. At the day's best the shares were up 15 at 468p, before coming off the top following an afternoon bout of profit-taking to close 12 ahead at 468p.

The French press report indicated that a settlement of the tunnel's cost overrun dispute was 'within reach', but sources close to the company later denied there had been any such breakthrough in the talks.

SG Warburg, Eurotunnel's broker, repeated its buy stance on the stock in an internal note on Friday which came to the market's attention yesterday. Turnover in the UK was healthy and the shares were heavily traded in Paris.

There was further whispering around Kingfisher, which last week admitted it was in talks with Darty, the leading French electrical retailer. Fears over a Pounds 1bn-plus rights issue had weakened the shares, but sentiment improved yesterday, with some in the market suggesting that Kingfisher was more likely to take on more debt, so that only around Pounds 300m might be raised by way of rights.

However, Kleinwort Benson yesterday issued a buy note on the stock, arguing that if the deal goes ahead Kingfisher will get Darty, which the broker believes undervalued, cheaply. It also says that if agreement is not reached the shares will look cheap on the back of the rights issue fears. The stock added 4 at 531p.

Bid favourite Alexon had a roller coaster ride as a variety of stories were heard. Weekend press speculation that executive heads would roll were spiced further by market talk that the clothes group was still in play and that a bid may still be forthcoming. The shares dropped 8 at the opening, jumped 16 by noon and weakened at the close to finish 5 ahead at 82p.

There was very little pressure on British Gas shares ahead of the Ofgas report today, the stock closing unaltered at 290p. There was, however, renewed buying of BP from the US, where there were suggestions that Salomon Brothers had turned to be a strong buyer of the stock. BP shares managed a minor gain at 267 1/2 p, ahead of the fourth-quarter numbers scheduled for Thursday.

The sale by Enterprise Oil of its interests in the Hudson, Hutton and North West Hutton oil fields in the North Sea to C Itoh, of Japan, for Dollars 106m in cash came as no surprise to the market but was nevertheless greeted with a 4 rise in Enterprise shares to 465p.

Not surprisingly, Clifford Foods attracted buyer attention and climbed 8 to 513p following Friday's disclosure that it had received an approach. Northern Foods, a possible predator, saw large turnover of 4.7m as the shares put on 4 to 266p. Another candidate, Unigate, rose 2 to 327p. Warburg was also said to be recommending the stock.

Food retailers were dull, VAT worries continuing to cloud the sector. Goldman Sachs recommended a switch out of Tesco, off 6 1/2 at 243 1/2 p, and into Argyll Group, steady at 374p. Tesco was also depressed by a reported downgrade and overvalued stance from Hoare Govett.

The spectre of heavy rights issues continued to dog the banking and insurance areas of the market. Both sectors have recently come under pressure, having previously substantially outperformed the market.

Lloyds, which begins the banks' preliminary reporting season this Friday, lost 3 more to 534p on 2.8m traded. Many analysts, however, expect Lloyds to register the biggest dividend increase of all the high street banks - a rise of 10 per cent to around 18.5p is viewed as the minimum the City expects - and profits are seen rising to as much as Pounds 800m, compared with Pounds 645m last time.

The cash-call stories continued to impact heavily on National Westminster, which slipped 6 to 442p after announcing another 4,000 job losses.

Some banks managed to register modest improvements but rises were achieved more by the closing of large short positions than any great weight of buying. The technical argument was borne out by the exceptionally low levels of activity in the sector.

Barclays, due to report on March 4, picked up 5 to 434p and HSBC put on 5 at 574p. Royal Bank of Scotland (RBoS) settled a penny harder at 236p following confirmation that the bank had disposed of a 90 per cent stake in its merchant bank, Charterhouse, for Pounds 235m. Worries about the price RBoS received were not translated into selling pressure in the market, dealers said.

Lloyds Abbey Life, expected to report marginally lower preliminary figures tomorrow, edged up 6 to 450p.

Goldman Sachs reiterated its switch recommendation out of Ladbroke Group, 3 ahead at 206p, and into Rank Organ- isation, 5 firmer at 718p.

Queens Moat Houses remained friendless, dipping 3 to 49p in big turnover of 10m.

Speculation that Trafalgar House would soon be making a rights issue intensified and the shares gave up 4 to 87p. A bullish statement from the chairman at Avon Rubber's agm sent shares in the tyre and rubber goods manufacturer climbing 15 to 553p.

James Wilkes appreciated 9 to 53p on bid speculation. Selling continued in British Steel and the shares eased 1 1/2 to 77p on volume of 7.4m.

MARKET REPORTERS:

Christopher Price,

Joel Kibazo, Peter John,

Steve Thompson.

Other market statistics,

Page 25

NEW HIGHS AND LOWS FOR 1992/93

NEW HIGHS (279).

BRITISH FUNDS (1) Treas. 2 1/2 pc I-L 2003, OTHER FIXED INTEREST (3) Birmingham 11 1/2 pc 2012, Met. Water 3pc B, Utd. Mexico States 16 1/2 pc Ln. 2008, AMERICANS (15) Bethlehem Steel, Bowater, Chase Manhattan, Chrysler, Contl. Bank, Eaton, Gen. Electric, Houston Inds., Ingersoll-Rand, Lowe's, NYNEX, Pennzoil, Texaco, Varity, Whirlpool, CANADIANS (2) Amer. Barrick Res., Nova Corp. of Alberta, BANKS (5) ABN Amro, Asahi, Banco Bilbao Vizcaya, Dai Ichi, Natl. Aust. Bk., BREWERS (1) Boddington, BLDG MATLS (6) Albrighton, Anglian, Kalon, Lafarge, Lilleshall, Marshalls 6 1/2 pc Pf., BUSINESS SERVS (5) Brit. Data Mngemt., Capita, Inchcape, Johnson Cleaners, Wills, CHEMS (9) Akzo, BASF, BTR Nylex, Bayer, Croda, Engelhard, Hoechst, Sutcliffe Speakman, Yule Catto, CONGLOMERATES (1) Wassall, CONTG & CONSTRCN (3) Bellway, Bryant, Crest Nicholson 5 1/2 pc Pf., ELECTRICALS (6) Arcolectric A, Bulgin A, Dewhurst A, Pifco, Do. A, Toshiba, ELECTRICITY (2) Northern, South Western, ELECTRONICS (12) Acorn Computer, Admiral, Diploma, Domino Printing, Electron Hse., Eurotherm, Forward, Gresham Telecomputing, ISA, Learmonth & Burchett, Racal El., Siemens, ENG GEN (5) Fairey, Halma, Powerscreen, Ransomes 8 1/4 p Pf., Siebe, FOOD MANUF (2) Acatos & Hutcheson, Armour Tst., FOOD RETAILING (1) Iceland, HEALTH & HSEHOLD (1) Mayborn, HOTELS & LEIS (3) Granada Pf., Pelican, Prism Leis., INSCE COMPOSITE (4) Aegon, Allianz, Aon, Domestic & Gen., INV TRUSTS (107) MEDIA (18) Abbott Mead, Avesco, Dorling Kindersley, Elsevier, GWR, Gold Greenlees Trott, Grampian TV A, Haynes Publg., Headline Book, LWT Cv. Pf., MMI Warrants, Scot. TV, Sterling Publg., TVS Ent., Do. 7.4pc Pf. 2008, Ulster TV, United News., Watmoughs, MERCHANT BANKS (4) Close Bros., Hambros, Kleinwort Benson, Schroders, MTL & MTL FORMING (1) Downiebrae, MISC (9) Aspen Comms., Birkby, Black (P), Bluebird Toys, Great Southern, LGW, Laser-Scan, Norbain Elects., Silentnight, MOTORS (6) Avon Rubber, Cowie, Davenport Vernon, First Tech., Lex Serv., Quicks, OIL & GAS (8) Aran Energy, Chevron, Mobil, Monument, Occidental, Ramco, Royal Dutch, Shell Trans., OTHER FINCL (7) AAF Inds., Bancaire, Lon. Forfaiting, M & G, Perpetual, Secure Tst., Smith New Court, OTHER INDLS (6) Amber Indl., BH Prop., Hewitt, Pacific Dunlop, Scapa, Vinten, PACKG, PAPER & PRINTG (5) Boxmore, Filofax, Macfarlane, SCA B, Serif, PROP (2) Frogmore Ests., Town Centre, STORES (3) Essex Furn., Hughes (TJ), Menzies, TELE NETWORKS (1) Telefonica, TEXTS (4) Alexandra Workwear, Hollas, Leeds, Yorklyde, WATER (4) Cheam A, Severn Trent, South Staffs., Southern, SOUTH AFRICANS (1) Tiger Oats, PLANTATIONS (1) Rowe Evans, MINES (5) Anglo Pacific Res., Antofagasta, Cape Range, Normandy Poseidon, PosGold.

NEW LOWS (5).

BLDG MATLS (1) Chieftain, CONTG & CONSTRCN (1) Westminster Scaffolding, INV TRUSTS (1) JF Fledgeling Japan warrants, OTHER FINCL (1) Cambridge, STORES (1) Arnotts.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 36 1745
London Stock Exchange: Early gains trimmed in slow trading Publication 930209FT Processed by FT 930209 By TERRY BYLAND, UK Stock Market Editor

IT WAS left to Glaxo and ICI, two of the more heavily weighted stocks in the London market, to keep the equity sector firm at the close of a lacklustre session yesterday. Expectations of another cut in domestic interest rates at Budget time also helped, and optimistic views on UK retail trading benefited from news of a stronger rise in December's consumer credit than expected.

In early deals, the FT-SE 100 Index gained 18.2 points, largely in response to Wall Street's record close ahead of the weekend. Trading volume was disappointing in London, however, and it was a firm opening in stock index futures which provided the impetus for the equity market. Initial weakness in sterling failed to dent base rate hopes but encouraged demand for shares in Britain's export companies.

There was little heart behind London's advance, and share prices came off the top when Wall Street made a sluggish start to the new session, shedding 5.41 Dow points in UK trading hours.

By the close, the gain on the FT-SE 100 had been cut to 7.1 for a final reading on the day of 2,870. The peak of 2,900, traded briefly in the wake of last week's unexpected reduction in rates by the Bundesbank, appears a solid barrier, at least until interest rates fall again or there is more convincing evidence that the domestic economy has steadied. Yesterday brought news of further job cuts by National Westminster Bank and gloom deepened over prospects for the UK operations of Daf, the truck manufacturer struggling with financial collapse.

US buying of pharmaceutical issues provided one of the firmer spots in the London market. The rise in Glaxo shares made up 3.5 points of the day's rise in the Footsie, with ICI's gain on currency factors providing a further 2 points. Investors continued to buy the construction stocks, which have been perceived as the backbone of the interest rate-sensitive sector. Properties, too, held on to their recent advance. There were further gains among the utility shares, where dividends are seen as attractive.

Among the weaker features, food retailers continued to shy away from strengthening fears that the sector may be targeted for increased VAT in the Budget, due in March. Banks, now on the eve of their corporate reporting season, held steady, although the sector is prominent in the list of rights issue predictions.

Trading volume proved disappointingly modest, with the US houses active at first but failing to follow through when Wall Street opened. The day's Seaq total of 545.8m shares compared with 694.6m on Friday, when retail business lived up to its recent buoyancy to record a value total of Pounds 1.47bn.

Non-Footsie volume jumped sharply yesterday, comprising nearly 70 per cent of the day's business. In the early part of the session, the FT-SE Mid 250 Index, which tracks the impact of second line stocks, moved up smartly. But profit-taking in the smaller stocks increased significantly and by the close the Mid 250 Index was a mere 0.9 up on the day at 3,051.4.

The FT-SE Mid 250 outperformed in January, rising by 3.2 per cent, compared with the fall of 1.4 per cent in the FT-SE 100 Index. According to the Stock Exchange, turnover in domestic equities increased by 9.8 per cent on the month and by 17.8 per cent on the year.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 36 597
London Stock Exchange: Equity Futures and Options Trading Publication 930209FT Processed by FT 930209 By JOEL KIBAZO

DEALERS IN stock index futures reported a dull but volatile session, with little in the way of features or economic data on which to focus, writes Joel Kibazo.

Trading in the March contract on the FT-SE 100 got under way at 2,872, just below Friday's close. It soon went into retreat on selling from a leading UK house and independent traders, falling to the day's low of 2,866 within the first half-hour of business.

The downward trend was reversed by buying from another UK house, and March then continued to move forward to reach the day's high of 2,895 at around 2pm. The poor opening on Wall Street once again led to a decline in the contract and it closed at 2,874, up 3 from its previous close and at a four-point premium to the cash market. The premium had moved between 16 and nil during the session. Turnover was poor, reaching only 6,198 lots.

The volume in the traded options indicated a more active sector. It reached 30,165 by the close, with the FT-SE 100 option trading 7,037 contracts and the Euro FT-SE 100 option 1,954.

In the stock options, British Steel was the most active with a day's total of 3,900 lots. It was followed by BP at 2,542, with the April 300 calls the busiest series. Trafalgar House was also active as talk of a rights issue continued to circulate, and some 1,580 contracts had been dealt by the close.

United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 36 279
World Stock Markets (America): Hopes of lower Opec production boost Oils Publication 930209FT Processed by FT 930209 By KAREN ZAGOR NEW YORK

Wall Street

US EQUITIES were narrowly mixed yesterday as the market took a breather after last week's record-breaking performance, writes Karen Zagor in New York.

The Dow Jones Industrial Average closed 4.60 down at 3,437.54, after gaining more than 8 points in the late afternoon. The Standard & Poor's 500 eased 1.08 to 447.85, while the Nasdaq composite lost 2.54 to 698.44. Trading volume on the New York SE amounted to 243.4m shares, and declining issues outnumbered rises by 944 to 939.

The Dow, which rose 25.40 to a record 3,442.14 on Friday, added more than 132 points last week. In spite of the market's slight decline yesterday, the sell-off that some investors had feared would follow last week's stellar performance did not materialise.

Oil shares benefited from speculation that Opec will agree to cut production when it meets at the weekend.

An analyst at Salomon Brothers increased his investment ratings on British Petroleum, Chevron, Mobil and Texaco to reflect anticipated price improvements as well as bottom-line improvements following cost-cutting measures taken last year. BP was Dollars 3/4 higher at Dollars 47 5/8 , Chevron up Dollars 1 to a 52-week peak of Dollars 76, Mobil ahead Dollars 7/8 at Dollars 65 7/8 and Texaco Dollars 1 firmer at Dollars 62 3/4 .

Auto company issues continued to see heavy NYSE trading, with General Motors rising Dollars 7/8 to Dollars 38 7/8 and Chrysler off Dollars 1/2 to Dollars 40 3/8 .

Among other active stocks, Merck was up Dollars 1/8 to Dollars 38 1/2 , International Business Machines rose Dollars 7/8 to Dollars 52 7/8 and Philip Morris eased Dollars 3/4 to Dollars 74 1/2 .

Supermarket group Kroger gained Dollars 7/8 at Dollars 17 3/4 on the back of fourth-quarter operating income of 74 cents a share, up from 46 cents the previous year.

Morrison Knudsen, the construction and engineering company, climbed Dollars 1 3/8 to Dollars 22. On Friday it posted fourth-quarter net income of 23 cents a share, against 19 cents a year earlier.

Wheeling-Pittsburgh hit a 52-week high of Dollars 9 1/2 , up Dollars 2. Although the steel company last week turned in a fourth-quarter and annual deficit and predicted a first-quarter loss, investors were encouraged by predictions that the company expects to show a profit in subsequent quarters.

In the Nasdaq market, declines in big stocks in the technology sector drove the composite index lower. Intel slipped Dollars 3/4 to Dollars 106 1/8 , Apple Computer receded Dollars 3/4 to Dollars 56 1/2 and Microsoft dropped Dollars 3 1/4 to Dollars 85 3/4 .

Biotechnology shares also took a battering. Biogen tumbled Dollars 4 5/8 to Dollars 32 1/8 after Prudential Securities cut its rating on the stock from 'buy' to 'hold'. Amgen weakened Dollars 4 1/8 to Dollars 49 3/4 .

Canada

THE TORONTO market continued its early-February rally, moving higher in heavy trading as the transportation sector led the way.

The TSE 300 index ended 16.92 ahead at 3,394.83 and advancing issues outpaced declines by 346 to 297 after volume of 49.5m shares valued at CDollars 455.8m.

The market has gained almost 90 points so far this month on large volume, showing signs of a solid rebound after suffering a stagnant January. Eleven of the 14 stock groups gained ground yesterday, with the transportation index up 3.3 per cent, forest products ahead 1.7 per cent, conglomerates 1.2 per cent higher and consumer products gaining 1.1 per cent.

American Barrick declared a two-for-one stock split and boosted its dividend by about 23 per cent, but it closed CDollars 1/4 down at CDollars 39 1/2 .

United States of America Canada P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 33 644
World Stock Markets (Asia Pacific): Hong Kong gains ground as Tokyo throttles back Publication 930209FT Processed by FT 930209 By EMIKO TERAZONO TOKYO

THE NIKKEI average lost ground on small-lot profit-taking, while overall activity remained low due to the lack of fresh news, writes Emiko Terazono in Tokyo.

The 225-issue average was finally down 51.17 at 17,281.73 after moving between 17,393.20 and 17,247.82. Selling by investment trusts outpaced buying by public fund managers in the afternoon.

Volume fell to 200m shares from 322m. However, rises still led declines at the close by 492 to 457, with 188 issues unchanged, while the Topix index of all first section stocks gained a slight 1.12 at 1,309.59. In London the ISE/Nikkei 50 index firmed 0.26 to 1,058.98.

In spite of the fall in some shares, traders said sentiment remained firm due to last week's Wall Street rise and cuts in Japanese and German interest rates. Some leading commercial banks announced a reduction in short-term lending rates, encouraging hopes of a boost in money supply.

Semiconductor-related issues were bought on hopes of a recovery in the US market. Advantest, a semiconductor testing device maker, rose Y180 to Y2,550 and Tokyo Seimitsu, a semiconductor manufacturing equipment maker, climbed Y35 to Y905. NGK Spark Plug, a ceramic package maker, put on Y5 at Y955.

Recent reports that Tonen, an oil refiner affiliated with Exxon and Mobil Oil, was under pressure to raise dividends after claims from the US oil companies, pushed up General Sekiyu (47 per cent owned by Exxon) by Y11 to Y976. Tokyo Electric Power gained Y20 at Y2,580. Traders said some investors found the company's 1.9 per cent dividend yield attractive.

Isuzu Motors, the day's most active issue, dipped Y6 to Y381 on profit-taking by dealers who had bought the stock on the restructuring theme. Oki Electric, also seen as a beneficiary of corporate restructuring, eased Y1 to Y410.

Sasebo Heavy Industries, also bought by dealers on hopes of higher sales due to proposed requirements of double hulls for tankers, receded Y13 to Y510 on profit-taking.

In Osaka, the OSE average relinquished 11.45 to 18,661.53 in volume of 28.1m shares. Aoyama Trading, the men's clothing discounter, strengthened Y130 to Y8,300 on brisk sales in spite of a recent fall in consumer spending.

Roundup

WALL Street's record close on Friday supported the region.

HONG KONG recovered from early losses and the Hang Seng index finished a net 39.44 ahead at 5,786.65 after touching 5,706.61. Turnover was low at HKDollars 1.43bn.

HSBC Holdings was the most active stock of the day in turnover of HKDollars 121m but ended steady at HKDollars 61.

AUSTRALIA responded to the announcement that the federal election will be held on March 13 with a 16.10 gain in the All Ordinaries index to 1,559.40. Turnover was ADollars 552m.

Westpac's sale of stakes in ANZ and Bank of Melbourne, to local and overseas institutions and by tender, saw ANZ slip 6 cents to ADollars 2.99 while Westpac was steady at ADollars 3.03.

National Australia Bank advanced 9 cents to ADollars 7.74 and Commonwealth Bank was 3 cents higher at ADollars 6.07. Elsewhere, BHP appreciated 16 cents to ADollars 13.84.

MANILA registered its biggest one-day rise since the beginning of the year, the composite index gaining 37.88, or 2.8 per cent, at 1,379.89. Turnover fell to 389.7m pesos from Friday's 445.9m pesos. PLDT added 10 pesos at 915 pesos.

SINGAPORE lost ground as profit-taking continued from Friday. The Straits Times Industrial index eased 2.91 to 1,615.73 in volume of 63.7m shares.

UOB Foreign fell 35 cents to SDollars 8.80 and SIA Foreign declined 20 cents to SDollars 9.40.

TAIWAN saw some profit-taking after last week's gains but the weighted index managed to add 3.34 at 3,648.75 in turnover of TDollars 21.8bn.

KUALA LUMPUR weakened slightly as Tenaga lost 20 cents to MDollars 9.25 and Telekom dipped 10 cents to MDollars 13.20. The composite index ended 3.23 off at 641.60 in turnover of MDollars 348m.

NEW ZEALAND put in a strong performance, the NZSE index rising 15.40 to 1,569.95. Fletcher Challenge improved 5 cents to NZDollars 2.45 and Telecom gained 4 cents at NZDollars 2.57.

SEOUL saw late institutional buying in Kepco, up Won500 at Won186,000, help to lift the composite index 0.76 to 672.18 in an otherwise uneventful day. Turnover was Won381.2bn, against Saturday's Won319.8bn.

BOMBAY was strong on the first day of the new account and the BSE index rose 63.26 to 2,712.15. BANGKOK closed off the day's high on late profit-taking but gains in some large-capitalisation issues helped the SET index up 0.88 to 980.93 in turnover of Bt8.1bn.

Japan, Asia Australia Hong Kong, Asia Philippines, Asia Singapore, Asia Taiwan, Asia Malaysia, Asia New Zealand South Korea, Asia India, Asia Thailand, Asia P6231 Security and Commodity Exchanges CMMT Comment & Analysis COSTS Equity prices P6231 The Financial Times London Page 33 809
World Stock Markets (Europe): Continent opens the week on a quieter note Publication 930209FT Processed by FT 930209 By Our Markets Staff

BOURSES had a quieter day after last week's excitements, writes Our Markets Staff.

FRANKFURT overturned early losses to close at a new six-month high, but weakness in banks and carmakers kept its gains within bounds.

The DAX index ended 5.79 higher at 1,647.16. Turnover was reported to be low compared with Friday's DM9.9bn.

Siemens stood out with a gain of DM10.50 to DM635.20, its highest close since mid-July. Last week Robert Fleming reiterated its buy recommendation for the electricals major, with qualifications about the speed and extent of measures which it is taking to improve its competitiveness.

Volkswagen dropped by DM2.80 to DM291.70 as analysts said that there is bad news to come. In banks, following last week's gains on interest rate sensitivity, Bayernhypo and Bayernverein each shed DM2.70, to DM415.30 and DM432.70 respectively.

The day's biggest mover was Lufthansa, up DM4.50 or 3.7 per cent to DM113.50 on newspaper reports of talks with Europe's largest tour operator, Touristik Union International, over combining the two companies' air tour operations.

PARIS concentrated on Eurotunnel after reports in the local press that a settlement in its dispute with the contractor, TransManche Link, was imminent. The shares improved by FFr1.20 to FFr38.85 in heavy volume of 3.5m shares. The CAC-40 index, however, lost 3.45 to 1,904.73, off the day's high of 1,915.41.

Cap Gemini Sogeti was another big riser, gaining FFr10.30 or 6.5 per cent to FFr169.50 in spite of France Telecom denying reports that it was negotiating to take a stake in the computer services group.

Axa slipped by FFr43, or 3.6 per cent to FFr1,142 on speculation that it might announce a rights issue today.

MILAN opened strongly but some corporate blackspots trimmed the market's advance later in the day, and the Comit index finished 4.91 higher at 509.12.

Foreigners remained active buyers, particularly of telecommunications stocks after Friday's confirmation that the government planned to reorganise the sector.

Sip added L51 to close at L1,715 before trading up to L1,728 after hours and Stet rose L75 to L2,345. Montedison gained L16 to L1,257 on continued buying sparked by last week's news of negotiations with Sweden's Kabi.

Italmobiliare and its Italcementi subsidiary were both marked down after worse than expected results late on Friday from the former's French unit, Ciments Francais, and weekend newspaper reports that another Pesenti group company had been mentioned in investigations into bribes paid to political parties.

Italmobiliare closed L345 higher at L38,320 but sank to L36,500 after hours and Italcementi fell L270 to L8,893.

AMSTERDAM was strong in the major blue chips with Royal Dutch gaining Fl 2.40 to Fl 156.10 and Akzo Fl 1.60 higher at Fl 143.00. The CBS Tendency index put on 0.3 to 98.0.

There was no respite for KLM and Fokker although Dasa indicated that it still hoped to complete a deal with the latter on taking a 51 per cent stake: the shares slipped Fl 1.30 and 20 cents respectively to Fl 26.70 and Fl 10.40.

Disappointing provisional 1992 results from paper and packaging groups KNP, Buhrmann-Tetterode and VRG, which announced late last year that they were to merge, had varying effects on the shares: KNO lost 40 cents to Fl 29.60, Buhrmann-Tetterode shed 70 cents to Fl 29.40 while VRG gained 60 cents to Fl 23.60.

ZURICH ended a quiet day slightly firmer. The SMI index closed 3.6 higher at 2,137.2.

Among industrials, bearers in cement producer Holderbank, the most active stock, rose SFr6 to SFr594 following recent recommendations by brokers. Oerlikon-Buhrle bearers jumped SFr39 to SFr490. Last week the Swiss government said 60 training aircraft ordered by South Africa from Oerlikon's Pilatus subsidiary were not regarded as arms, and were therefore not subject to an export embargo.

ISTANBUL resumed its upward trend and the 75-share index advanced 191.33 or 4.1 per cent to 4,863.15 after profit-taking on Friday left the market 3 per cent weaker.

ATHENS continued its impressive upward surge with the general index adding 32.56 to 833.63, a 24 per cent rise since the start of the year.

Analysts point to lower inflation and the prospect of cuts in domestic interest rates as underpinning the market, which will also benefit from the expected strong performance of the agriculture and tourism sectors this year.

----------------------------------------------------------------------- FT-SE Actuaries Share Indices ----------------------------------------------------------------------- February 8 THE EUROPEAN SERIES ----------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 FT-SE Eurotrack 100 1130.16 1129.09 1129.16 1130.78 FT-SE Eurotrack 200 1189.79 1189.65 1188.94 1188.81 ----------------------------------------------------------------------- Feb 5 Feb 4 Feb 3 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1129.52 1113.35 1097.03 FT-SE Eurotrack 200 1189.21 1183.60 1171.25 ----------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close FT-SE Eurotrack 100 1131.53 1132.43 1131.62 1131.12 FT-SE Eurotrack 200 1190.38 1192.90 1191.05 1190.15 ----------------------------------------------------------------------- Feb 2 Feb 1 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1089.43 1088.01 FT-SE Eurotrack 200 1155.59 1158.83 ----------------------------------------------------------------------- Base value 1000 (26/10/90) High/day: 100 - 1133.09 ; 200 - 1193.14 Low/day: 100 - 1128.87 200 - 1187.61 . -----------------------------------------------------------------------

Germany, EC Italy, EC France, EC Netherlands, EC Switzerland, West Europe Turkey, Middle East Greece, EC P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 33 869
World Stock Markets: France benefits from German rate cut Publication 930209FT Processed by FT 930209 By MICHAEL MORGAN

The Bundesbank's unexpected decision on Thursday to cut interest rates encouraged strong performances by some of the European bourses last week. The FT-Actuaries World Index rose by 2.1 per cent in local currency terms, with Europe 3.5 per cent ahead.

The strength of the dollar provided the second element to the story, trimming some advances in US currency terms and leaving others showing declines on the week.

The Bundesbank's decision to cut its discount and Lombard rates came after a week in which all the indications were that no such move was planned. Analysts speculate that the decision was taken during the 24 hours before the announcement was made, with the problems experienced by the weak Danish krone providing the final incentive for the German move.

Mr Sushil Wadhwani, director of UK and European equity strategy at Goldman Sachs, says the expected date for a cut in German rates had been March 18. He saw the Bundesbank's move as the first instalment of a reduction and believes that the markets might well have to wait until the middle of next month for the next piece of the action.

Mr Andrew Bell, director of European strategy at Barclays de Zoete Wedd, also cautions against expectations that the German move heralds more cuts in the immediate future.

France was the principal beneficiary of the German initiative. Its equity market advanced by 7 per cent in local currency terms on the week as pressure for a devaluation of the franc eased and hopes rose that the way might now be open for lower French rates. In dollar terms, the rise was trimmed to 4.1 per cent.

German shares, with financials particularly strong, climbed 4.8 per cent and Italy, also benefiting from the Bank of Italy's decision to lower its discount rate by 1/2 percentage point - before Germany acted - rose by more than the European average.

There were lower than average gains among the more defensive markets: in Switzerland, with its interest rates already low, and in the Netherlands, which still managed to rise above the corporate traumas suffered at Daf and Fokker during the week.

Ireland was the latest country to demonstrate devaluation arithmetic. It gained 6.6 per cent in local currency terms in the wake of its devaluation of the punt; but in dollar terms, it emerged with a 3.9 per cent decline.

The US was 2.3 per cent higher as Wall Street, firm for much of the week, marched into record territory on Thursday and Friday. Japan, itself the beneficiary of a 75 basis points reduction in its discount rate, was the laggard among the big battalions as analysts agreed that government inspired buying by public funds, designed to stabilise the Tokyo market, was no basis for an extended equity revival.

------------------------------------------------------------------------ MARKETS IN PERSPECTIVE ------------------------------------------------------------------------ % change % change % change in local currency** sterling** in US dollars** 1 Week 4 Weeks 1 Year Start of Start of Start of 1993 1993 1993 ------------------------------------------------------------------------ Austria +3.58 +6.36 -17.96 +3.06 +4.87 +0.23 Belgium +2.78 +6.49 +2.15 +8.20 +10.39 +5.50 Denmark +0.27 +7.63 -20.91 +11.29 +15.75 +10.63 Finland +3.62 -2.39 +1.52 +6.53 +2.55 -1.98 France +6.95 +3.63 +2.53 +3.61 +7.04 +2.30 Germany +4.78 +7.62 -5.92 +6.92 +9.50 +4.66 Ireland +6.57 +3.79 -9.20 +10.88 +4.97 +0.32 Italy +4.55 +12.90 -2.07 +15.78 +16.88 +11.70 Netherlands +2.83 +3.66 +4.88 +4.78 +7.12 +2.38 Norway +1.14 -2.15 -14.59 +2.60 +6.09 +1.39 Spain +4.67 +10.23 -4.86 +13.26 +16.24 +11.09 Sweden +4.13 -3.72 +7.50 -0.86 -1.26 -5.64 Switzerland +2.26 +3.64 +18.02 +2.94 +3.41 -1.18 UK +2.16 +2.62 +13.81 +1.52 +1.52 -2.97 EUROPE +3.49 +4.20 +5.58 +4.14 +5.37 +0.71 ------------------------------------------------------------------------ Australia +0.92 +2.00 -5.92 -1.10 +1.39 -3.10 Hong Kong -0.09 +2.82 +17.84 +3.30 +8.20 +3.41 Japan +0.62 +1.70 -18.06 +0.18 +5.24 +0.59 Malaysia +3.94 +5.21 +18.56 +3.46 +7.71 +2.95 New Zealand +3.62 +3.07 +0.18 +0.81 +5.17 +0.51 Singapore +1.02 +2.67 -0.62 +3.60 +7.70 +2.94 Canada +2.10 +1.73 -8.91 +0.16 +5.67 +0.99 USA +2.28 +4.59 +8.52 +2.99 +7.77 +2.99 Mexico -0.36 -8.53 +4.68 -5.25 -0.19 -4.61 South Africa +1.12 +2.32 -7.65 +6.48 +16.56 +11.40 WORLD INDEX +2.08 +3.55 -0.83 +2.44 +6.43 +1.72 ------------------------------------------------------------------------ ** Based on February 5, 1993. Copyright, The Financial Times Limited, Goldman Sachs & Co, and NatWest Securities Limited. ------------------------------------------------------------------------

Germany, EC European Economic Community (EC) United States of America P6231 Security and Commodity Exchanges P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis COSTS Equity prices P6231 P9311 The Financial Times London Page 33 757
World Stock Markets: South Africa Publication 930209FT Processed by FT 930209

JOHANNESBURG weakened as a lower bullion price helped to depress the gold shares index, which shed 4 to 867. De Beers declined 75 cents to R69.75. The overall index fell 21 to 3,452, while the industrial index lost 16 to 4,581.

South Africa, Africa P6231 Security and Commodity Exchanges COSTS Equity prices P6231 The Financial Times London Page 33 69
Foreign Exchanges: Tough morning for sterling Publication 930209FT Processed by FT 930209 By JAMES BLITZ

STERLING fell by more than 2 pfennigs against the D-Mark in half-an-hour of London trading yesterday, as dealers remained concerned about the UK currency's immediate prospects, writes James Blitz.

The pound hovered at DM2.41 at 8am in London yesterday, having bounced back from an historic low against the D-Mark last week after the Bundesbank's interest rate cut on Thursday.

But between 9am and 9.45am London time, the currency dropped from around DM2.4030 to DM2.3800. It stabilised for a while, before suffering another fall from DM2.3840 to a low for the day of DM2.3750 between 11.30am and midday.

The pound subsequently rallied to finish in London at DM2.3825, down more than a pfennig on the day. Against the dollar, it ended at Dollars 1.4395, off 3/4 cent, and later closed in New York at Dollars 1.4390.

Mr Mark Brett, an economist at BZW in London. was concerned by the speed and scale of the morning's fall. 'It is very unusual to see a currency go down like that,' he said. 'People have shorted the pound, and you would expect dealers to buy back the currency as it falls, giving it a bit of a boost. All in all, it is very destabilising.'

Several dealers suggested that the currency had fallen victim to two very large sell orders, although there were also reports of very heavy selling of the currency in general.

One London dealer said his bank had executed what were regarded as two large buy orders for the pound. But he had been astonished at the tiny impact of these counter-flows on the price action.

Another dealer believed the pound would probably creep back up to DM2.40 in the next few days because of signs yesterday afternoon that large institutions were demanding the currency once more. 'The pound could fall to DM2.20 or DM2.30 in the next few months,' he said. 'But the fall should be gradual because all the bad news has been factored in by the market.'

There was a growing feeling in London that the problems of the European exchange rate mechanism were far from over, in spite of Thursday's easing by the Bundesbank.

The French authorities cut the overnight rate for lending francs by 1/8 percentage point, but the franc simply lost ground on the move, bottoming out at a bid rate of FFr3.3880 to the D-Mark and ending in London at FFr3.3810. It closed at the bottom of the ERM grid, with a divergence of -35 per cent from its central Ecu rate.

The Danish krone, which rebounded dramatically against the D-Mark following the cut in German rates, closed yesterday at around DKr3.8075 to the D-Mark, comfortably within its ERM bands.

But problems linger for the Danish authorities. Three-month krone were quoted yesterday at 17 per cent. Some dealers also believe a large proportion of the recent outflow of krone is yet to be repatriated.

United Kingdom, EC P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6231 The Financial Times London Page 27 513
Money Markets: Buoyancy is fading Publication 930209FT Processed by FT 930209 By JAMES BLITZ

THE buoyancy that followed last week's cut in the Bundesbank's officially posted rates showed signs of fading yesterday, in spite of another cut in the rate at which the Bank of France lends money overnight to commercial banks, writes James Blitz.

Last week's 25 basis points reduction in the Bundesbank's discount rate to 8.00 per cent encouraged France to ease monetary policy yesterday without adversely affecting the French franc.

At the start of trading, the French authorities announced that they would be offering overnight money at 11 1/2 per cent, against 11 5/8 per cent on Friday. However, the move was not received enthusiastically by the markets. After lunchtime in London, the franc gradually fell back beyond the FFr3.3850 level against the D-Mark, having opened near to FFr3.38.

Three-month French franc interest rates, which were bid at around 11.10 per cent after the overnight rate move, also appreciated, creeping up to 11.31 per cent towards the close of French trading. The March French franc contract finished at 89.14, down 10 basis points on the day.

The bearishness in the French market was partly due to evidence that conditions in the German market were not getting any easier. German call money yesterday hovered unchanged on Friday's levels, at around 8.60 per cent.

The Bundesbank's repo allocation rates should ease at tomorrow's tender. One London based dealer was looking for a cut of about 10 basis points. But any downward move in call money rates will be checked if, as some dealers expect, the Bundesbank drains liquidity from the market on Wednesday.

As the March Euromark contract moves towards maturity in a little over one month's time, it becomes highly sensitive to events in the cash market. Yesterday, it retreated 10 basis points on the day to 92.05. But it is still discounting a further 40 basis points off three-month money in the next four weeks.

However, the underlying tone was downbeat. One London based money dealer said: 'The Bundesbank's move last week may have underlined the current level of money market rates, rather than re-establishing new ones.'

The overnight rate for cash in the sterling money market peaked at 11 per cent yesterday after dealers failed to remove a Pounds 1.25bn in normal operations.

There was late assistance of Pounds 755m and three-month money closed unchanged on the day at 6 1/8 per cent.

European Economic Community (EC) P6231 Security and Commodity Exchanges CMMT Comment & Analysis COSTS Equity prices P6231 The Financial Times London Page 27 429
Commodities and Agriculture: Gas chief vows to repel boarders - Deborah Hargreaves on a growing trend against foreign investment Publication 930209FT Processed by FT 930209 By DEBORAH HARGREAVES

THE RUSSIAN gas industry is not going to make the same mistake as the oil industry and sign over its resources to foreign companies, according to Mr Rem Vyakhirev chairman of the Russian state gas production company, Gazprom.

Mr Vyakhirev's voice carries much political clout in Russia as he presides over one of the country's most important sources of hard currency and one of Russia's few - perhaps its only - success stories. He also has the ear of Mr Viktor Chernomyrdin, ex-Gazprom chairman who is now prime minister and was once deputy to Mr Vyakhirev at an oil refinery in Siberia.

His resistance to foreign involvement in joint venture gas production and transportation marks another blow to many western oil and gas companies, which have seen their ambitions in Russia increasingly frustrated.

Mr Vyakhirev, who left the oil industry because of its rush to involve foreign investors, believes a lack of strategic thinking has left the industry without the wherewithal to solve its own problems. Russia could be forced to import oil in two to three years.

Gazprom, on the other hand, has managed to maintain gas production in spite of a chronic lack of capital. Russia has 40 per cent of the world's gas reserves, much of which is in shallow, uncomplicated geological formations that can be developed fairly easily.

Mr Vyakhirev admits that Gazprom may approach foreign companies for specific, small-scale investment projects, but he would rather see domestic gas prices raised more quickly in line with inflation to provide investment funds. The country recently raised gas prices by 200 per cent but this still leaves them way below world prices at Rbs600 (70p) per 1,000 cubic metres.

'These prices will be in place for five months and I'd like to see prices increased automatically. If not, all these additional rises will be worth a glass of vodka by the end of the year,' Mr Vyakhirev says. Inflation in Russia was running at a rate of 2,200 per cent last year.

Gazprom's production chiefs agree: 'Gas prices are ridiculous; they don't even cover our costs of production', says Mr Reim Suleimanov, director general of Urengoi Gazprom in western Siberia. 'We can't invest with prices at this low level - we can barely survive.' Mr Suleimanov runs the world's biggest gas field, in Urengoi, which last year produced 280bn cubic metres of gas. Much of this is sent to western Europe via pipeline across the Ukraine.

But he is painfully aware of the need to invest in new satellite fields in order to keep production steady. Otherwise it will begin to drop off from 1997. Mr Suleimanov wants to develop neighbouring fields in the giant Urengoi cluster such as Pitsovoye, Yen Yakha, North Urengoi and eventually Zapolyarnoye.

He realises that these fields must be developed now in order to come on stream in four years' time, when output is falling from the main Urengoi deposit. But Mr Suleimanov does not have the funds to put into investment and Gazprom's headquarters in Moscow have so far come up with little cash.

A feasibility study on the north Urengoi field has estimated development costs of between Dollars 200m and Dollars 350m. The total cost of bringing all the satellite fields into production would be more than Dollars 1bn.

Mr Vyakhirev estimates that Gazprom as a whole requires Dollars 8bn to Dollars 9bn for its development plans over the next five years. The company has secured about a third of its needs in foreign bank credits and is in discussions with more banks.

There is an alternative for Mr Suleimanov: he can sell gas condensate and oil on the world market for hard currency - these are produced as by-products from his gas field. Gazprom centrally receives about Dollars 4bn from these sales - half of which is allocated to the government partly to pay off debts since Gazprom was set up as a joint stock company last November.

But Mr Suleimanov is not allowed to keep most of his hard currency receipts and he believes his investment funds will be slow in coming: 'It is my personal point of view that without foreign involvement, those fields will not be developed,' he says.

The problem for Mr Suleimanov and other heads of production at Gazprom is that Moscow wants to retain a tight rein on their activities. 'The unified gas system was not invented; it was designed like an aircraft and it operates like a single organism,' Mr Vyakhirev says.

In spite of Gazprom's transformation into a joint stock company with sales of shares planned to employees, Moscow is not offering much local autonomy. 'What is this freedom everyone is crying about? - it's like a disposable napkin. Liberty is a notion to be used for clever people, but for simple people it's just a waste,' Mr Vyakhirev believes.

Urengoi Gazprom has been working to a limited extent with Bechtel Energy Resources on specialised drilling technology that will enable the company to reach deeper layers within its gas fields. So far, Bechtel has drilled two test wells at a cost of Dollars 2m each, but the company is minimising its spending until it receives a clearer message about foreign investment.

Mr Alexander Margulov, director general of Yamburggasdobycha - Gazprom's production association on the giant Yamburg field 200 km (125 miles) inside the arctic circle points to certain areas for foreign investment. 'We are badly lagging behind in ecological care, completion of wells, and hi-tech equipment.'

Production in Yamburg is still increasing - at a level of 178bn cubic metres a year and rising to 205bn cu m by 1995. This level can be maintained for 10 to 15 years. The role Mr Vyakhirev foresees for foreign companies is as providers of equipment and technology that is not available in Russia. 'We don't need extensive scientific assistance, but we've certainly identified certain problems that can be helped from outside,' he says

Gazprom needs large diameter pipes, horizontal drilling technology, welding equipment and insulation. In addition, the company is inviting tenders from international construction companies to build a Dollars 550m PVC plant at Urengoi which would be run on local gas.

'We want to be as self-sufficient as possible: we're not planning any large-scale involvement of foreign companies,' says Mr Vladimir Rezunenko, a Gazprom board director. But Mr Rezunenko goes on to point out that even Gazprom's smaller projects such as that for the production of 5.5m tonnes of oil from the Yamburg field are large by world standards.

Indeed, the tide appears to be turning in Russia against foreign involvement in joint venture gas production projects. Many foreign companies are now targeting Kazakhstan and other independent republics that are opening up to outside investment.

Gazprom Russia, East Europe P1311 Crude Petroleum and Natural Gas P4924 Natural Gas Distribution COMP Company profile Vyakhirev, R Chairman Gazprom P1311 P4924 The Financial Times London Page 26 1180
Commodities and Agriculture: Sugar market lacks volatility Publication 930209FT Processed by FT 930209 By DAVID BLACKWELL

OVER THE last nine months the sugar market has experienced the lowest monthly average price volatility since 1974, according to the latest sugar report from ED & F. Man, the London trade house.

The nearby New York raw sugar futures contract has been stuck in a range between 8 and 10 cents a lb.

Man suggests that three seasons of production surpluses have reduced speculative interest in the sugar market, while the rapid demise of central buying agencies has eliminated significant participation by final buyers on the terminal markets.

'The disparate nature of the emerging buyers in East and Central Europe is leaving the speculators uninformed and the trade, in many instances, reacting in a piecemeal fashion as cargoes are sold and funds are organised,' says the report.

Man has reduced its estimate for the 1992-93 production surplus from 3.4m tonnes to 1.5m tonnes, with production at 114.91m tonnes compared with an earlier forecast of 116.95m tonnes and consumption at 113.45m tonnes - only just below the earlier prediction.

FO Licht, the German statistician, recently cut its 1992-93 production forecast from 116.19m tonnes to 113.94m tonnes.

Demand for vegetable oils will remain buoyant, but prices are unlikely to benefit for the next two years, according to a report from the Economist Intelligence Unit. Although stocks will decline, lower stock to consumption ratios will be tolerated because of more efficient management.

The EIU expects is basket of vegetable oil prices (half soyabean, half palm oil) to reach Dollars 721 a tonne in 1996-97, up from Dollars 410 a tonne in 1991-92 and Dollars 391 in 1992-93. The outlook is more bullish for oilmeals, which will follow a similar pattern, dipping from Dollars 209 to Dollars 197 a tonne in 1992-93 before rising to Dollars 265 a tonne in 1996-97.

Oils and Oilseeds to 1996. Special Report No M703. Pounds 175 from 40 Duke Street, London W1A 1DW.

World P0133 Sugarcane and Sugar Beets P6231 Security and Commodity Exchanges P011 Cash Grains P207 Fats and Oils COSTS Commodity prices MKTS Market data P0133 P6231 P011 P207 The Financial Times London Page 26 365
Commodities and Agriculture: Government of Bahia state promises dollars 1.5m to fight disease Publication 930209FT Processed by FT 930209 By REUTER RIO DE JANEIRO

The government of Brazil's Bahia state has promised Dollars 1.5m to help fight a disease that is threatening to halve the state's cocoa crop, the Brazil Cocoa Trade Commission (Comcauba) said, reports Reuter from Rio de Janeiro.

The money will be given to Fundecau, a fund set up by producers and exporters in Bahia to combat witch's broom disease, which producers say has affected at least 70 per cent of the Bahia growing region. They estimate that output could be slashed by 50 per cent in three years if nothing is done.

Brazil Cocoa Trade Commission Brazil, South America P0179 Fruits and Tree Nuts, NEC P9611 Administration of General Economic Programs RES Capital expenditures P0179 P9611 The Financial Times London Page 26 146
Commodities and Agriculture: Russian oil shake-up raises foreign hopes Publication 930209FT Processed by FT 930209 By JOHN LLOYD MOSCOW

THE HEAD of Russia's state oil company is being sacked in a move that may herald yet another shake-up in the organisation and possibly a more open regime for foreign energy companies seeking to invest in the Russian oil sector.

The decision to dismiss Mr Lev Churilov, a former Soviet minister for oil and gas, from his post as head of Rosneftegaz was taken by Mr Victor Chernomyrdin, the prime minister and former Russian energy minister, at the end of last month while Mr Churilov was a business trip to Tokyo.

Mr Churilov's office confirmed the sacking yesterday and said he had been appointed Russian trade representative to Nigeria, an important oil producer.

His post as head of the state concern is being taken by Mr Ilya Leshenets, his former deputy. The sacking of Mr Churilov, an advocate of state development of the oil sector with as little as possible reliance on foreign investment, is seen as an encouraging sign for the major oil companies now seeking deals in the oil sector.

Mr Chernomyrdin, speaking at the World Economic Forum in Davos, Switzerland, last month, explicitly singled out the energy sector as the area in which he most wanted foreign investment.

However, the sacking is also seen as part of the struggle round the creation of a new state company - called Rosneft - that will take over some of the functions of Rosneftegaz. Rosneft was created last year by a decree of Mr Boris Yeltsin, the Russian president, to take over the management of the government shares in the oil companies which were to be privatised.

No agreement has yet been reached on the closing down of Rosneftegaz and the assumption of its responsibilities by Rosneft. According to one senior oil ministry official yesterday, the history of Rosneftegaz has been one of guerrilla warfare between its management and the energy ministry over the definition of powers and responsibilities.

One foreign analyst said that 'Churilov's sacking got him out of the way before they work out who will be the new leaders of the oil industry'.

The leadership of Rosneft is at present in the hands of Mr Oleg Alekperov, formerly the head of Lukoil, one of the new state production companies. Lukoil itself, with the other state oil companies Yukos and Surgutneftegaz, will be outside the jurisdiction of Rosneft, thus further weakening its effectiveness.

At the same time, privatisation of the oil industry, the key area as far as foreign investors are concerned, has gone slowly - and according to a report by the Interfax news agency yesterday, may have been stopped altogether. Interfax reported that Mr Pyotr Mostovoi, head of the State Property Management Committee, has sent telegrams to his regional branches telling them to cease to accept privatisation proposals from the oil corporations. It quoted Rosneftegaz officials as saying that the presidential decree ordering privatisation proposals to be ready by December 31 was 'unrealistic'.

Rosneftegaz Russia, East Europe P1311 Crude Petroleum and Natural Gas P9611 Administration of General Economic Programs PEOP Personnel News COMP Company News GOVT Government News Churilov, L Head Rosneftegaz P1311 P9611 The Financial Times London Page 26 544
Commodities and Agriculture: Time running short for coffee pact renegotiation - Lack of political will on the part of consumers is frustrating producers Publication 930209FT Processed by FT 930209 By DAVID BLACKWELL

COFFEE PRODUCING countries plan to meet in Mexico at the end of this month to try to salvage something from the latest round of negotiations on a new international pact.

Brazil, the world's biggest producer, obliquely blamed the US, the biggest consumer, for the deadlock at the end of last week's talks at the International Coffee Organisation's London headquarters. It issued a statement accusing 'some important consumer countries' of 'no longer showing the political will to reach an understanding' and thus 'threatening to undermine the very basis of negotiation'.

The statement - from Mr Rubens Barbosa, head of the delegation - expressed 'disappointment and frustration at the lack of progress in what was to be the decisive phase in the negotiation of a new international coffee agreement. This sense of frustration is shared by millions of people in Latin America, Africa and Asia who are dependent on coffee exports for their livelihood and see in the agreement an important factor in stabilising the market'.

The US is now likely to come under intense lobbying pressure from coffee producing countries, who are estimated to have lost about Dollars 10bn in revenues since July 1989, when the ICO's export quota system collapsed. Arabica coffee prices in New York fell from around 120 cents a lb to below 50 cents a lb in September last year - the lowest level for more than 20 years.

Some coffee producers believed that Mr Myles Frechette, the head of the US delegation, was operating with his hands tied because of the change-over in the US between the Bush to the Clinton administrations. But Mr Frechette strongly denied that he lacked a mandate to negotiate. 'I've had a mandate from the beginning,' he said last week. 'No new mandate is needed.'

Both sides have already agreed that any new agreement should be based on a universal quota system. This would cover all coffee exported, regardless of destination, so avoiding the development of a second, cheaper, market in coffee exports to consumers not party to the agreement. The so-called second tier-market was one of the main reasons for the breakdown of the quota system.

However, last week's talks foundered on the twin rocks of 'selectivity' and 'automaticity'.

Selectivity is the term used for dividing the coffee market into different areas ranging from robusta coffees, mainly grown in Africa and used for soluble coffee, and the top quality arabicas, grown in Latin America and favoured by Western consumers. The system would allow consumers to buy the coffee they wanted; under the previous system quota increases applied to both robustas and arabicas. However, producers proposed four types - a proposal which Mr Frechette said had convinced the US 'more than ever that three is the way to go'.

Automaticity would involve the rolling over of individual countries' export quotas at the end of each year, depending on the previous year's export performance. Producers argued that it was unlikely such a complex system could be set up perfectly from year one, and proposed a review after one year of operation. But the US argued that it was not beyond the wit of delegates to design a system that worked.

The ICO's self-imposed goal of concluding negotiations by March 31 now looks almost impossible to reach. Delegates return on March 22 for a further week of talks when they will have to agree not only on automaticity and selectivity, but also on the size of the universal quota, its distribution, and the price ranges to be defended. If they manage all that and sign a new agreement, it could just about be ratified by the end of September when the current, purely administrative agreement ends.

International Coffee Organisation Latin America Africa Asia P0179 Fruits and Tree Nuts, NEC P9721 International Affairs COSTS Commodity prices TECH Sales agreements P0179 P9721 The Financial Times London Page 26 675
World Commodities Prices: Market Report Publication 930209FT Processed by FT 930209 By REUTER

NICKEL extended earlier gains in afternoon trading on the LME to end near the highest level for four weeks. The move was largely underpinned by technical factors once early commission house and option buying lifted three-month prices above Dollars 6,000 a tonne. The market hit a high of Dollars 6,119 before profit-taking set in, but final kerb business of Dollars 6,100 was still around Dollars 165 up from Friday. Some dealers said Western European scrap was in short supply. Background support for COPPER came from news that workers at Poland's KGHM said they were ready to strike, but both union and management said a stoppage was unlikely soon. GOLD was set at Dollars 327.95 a troy ounce on the London bullion market in the afternoon after an earlier fix at Dollars 327.60, just above its lowest fix for seven years at Dollars 327.45 in January. Professionals tried to push the price through support at Dollars 327 earlier to trigger sell-stops thought to be around that level, but physical offtake provided support.

Compiled from Reuters

United Kingdom, EC P333 Primary Nonferrous Metals P6231 Security and Commodity Exchanges COSTS Commodity prices P333 P6231 The Financial Times London Page 26 209
Commodities and Agriculture: Cold comfort for Siberia's big earners Publication 930209FT Processed by FT 930209 By DEBORAH HARGREAVES

MR ZIMFIR Yabukov, a 32-year-old engineer, has moved from his home town in the Urals to monitor a gas gathering station in the Yamburg field in western Siberia, where he earns eight times more than he would at home.

Mr Yabukov has had to leave his wife and two children at home, 2,000 km away, much to his wife's distress, but he says the salary is so good he will do the job for at least three more years. He is employed by Gazprom, the Russian state gas production company at its Yamburg field inside the arctic circle.

The Yamburg settlement where he lives for two weeks before returning on a free flight for two weeks' home leave, has the wild-west feel of a pioneer town. No children under 18 years are allowed at the settlement and few workers bring their wives.

Gazprom must pay high salaries and entice its employees with a range of subsidised consumer goods in order to get engineers to work in the harsh conditions where temperatures can fall as low as minus 60 degrees centigrade (-76 F). Yamburg means 'end of the earth' in the language of the local Nenets people.

Mr Yabukov's salary has increased sharply in recent years as Gazprom must review payments monthly while inflation in Russia is rampant. His room and board in a employee apartment block are free.

Novy Urengoi, also in western Siberia but south of Yamburg, is a full-scale town set up by Gazprom 15 years' ago. Here, salaries are five times those in the rest of the country. Company officials say it was difficult to get people to work in Siberia, but it is getting easier as other companies make engineers redundant.

Gazprom The Financial Times London Page 26 307
World Commodities Prices: Tea Publication 930209FT Processed by FT 930209

There were 14,257 packages for the day, reports the Tea Brokers Association the market opened to fair general demand but weakened towards the close. Landed North Indians were often 5 to 8p lower. Brightest liquoring Africans attracted selective support at firm rates but mediums proved irregular and plainer descriptions 5p easier. Offshore teas met limited demand with prices 5 to 10p lower. The highest price this week was 212p for a Rwanda PFI. Quotations: quality 200p, good medium 165p,medium 148p, low medium 100p

United Kingdom, EC P0831 Forest Products P6231 Security and Commodity Exchanges COSTS Commodity prices P0831 P6231 The Financial Times London Page 26 114
Government Bonds: Spanish issues rally strongly on hopes of rate reduction Publication 930209FT Processed by FT 930209 By SARA WEBB and KAREN ZAGOR LONDON, NEW YORK

SPANISH government bonds rallied strongly with foreign investors buying on hopes that the Bank of Spain will lower interest rates later this week.

Dealers believe the Bank of Spain may cut the intervention rate, currently at 13.25 per cent, by about 25 basis points at Friday's repo.

The Bundesbank's decision to cut its official interest rates last Thursday helped to ease tensions within the European exchange rate mechanism and has paved the way for lower interest rates elsewhere in Europe, dealers said.

The yield on the Spanish benchmark bond due 2002 fell from Friday's close of 11.30 per cent to 11.22 per cent, while the futures contract rallied half a point.

Dealers noted that activity in the main European government bond markets was rather muted in the absence of important economic data or statements from the Bundesbank.

In the German market the Liffe bund futures contract, which opened at 93.22, traded in a range of 93.12-93.29 and ended the day at around 93.17 as investors took profits or switched into Spanish and Danish government paper.

UK government bonds closed slightly weaker in thin trading with the Liffe gilt futures contract slipping from 101.17 to 101.15 on volume of only about 9,000 contracts. Sterling weakness contributed to the weak tone of the gilt market, dealers said.

The market appeared to ignore news of the Treasury's review of government spending. Mr Michael Portillo, treasury chief secretary, told parliament the results of a public spending review could emerge by mid-1993.

AUSTRALIAN government bond prices fell on concern about the federal election, the government's planned financial package, and the weakness of the Australian dollar.

Prime minister Mr Paul Keating has set March 13 as the date for the national election and he is expected to unveil plans aimed at increasing employment in today's economic package. Mr Keating's announcement on Sunday took the markets by surprise, as the poll date was earlier than had been expected.

The Australian dollar weakened against the US currency, from 67.70 US cents on Friday to 67.10 yesterday. In the bond market, yields rose on fears that today's financial package would contain measures likely to lead to increased government spending.

Short-dated bonds were the worst hit, with the yield on the 13 per cent bond due July 1996 rising from 7.69 per cent to 7.82 per cent, while the yield on the 10-year issue, the 9 1/2 per cent bond due August 2003, increased from 8.74 per cent to 8.82 per cent.

JAPANESE government bonds rallied as money market rates fell and some of the commercial banks lowered their short-term prime rate by half a point.

The moves reflected last week's cut in the Official Discount Rate, but prices ended little changed on the day.

The March futures contract ended firmer on the day, rising from its opening level of 109.65 to a high of 109.84 before ending at 109.70. Dealers expect the June futures contract to take over as the benchmark shortly.

The yield on the benchmark No 145 moved in a range of 4.275 to 4.30 per cent, ending the day unchanged at 4.295 per cent.

Rates on three-month certificates of deposit dropped to a new historic low of 3.20 per cent, while the unsecured overnight call rate slipped 1/32 point to 3 3/32 per cent.

LONGER-dated US Treasury prices moved lower yesterday afternoon but trading was fairly subdued through most of the day before this week's important refunding auctions.

The Treasury will sell Dollars 15.5bn in three-year notes today, Dollars 10.75bn in 10-year notes on Wednesday and Dollars 9.25bn in 30-year bonds on Thursday.

In late trading, the benchmark 30-year government bond was 15/32 lower at 105 3/16 , yielding 7.193 per cent. At the short end of the market, the two-year note was off 3/32 to yield 4.150 per cent.

The Federal Reserve entered the open market to arrange three-day matched sales when Fed funds were trading at 2 15/16 per cent, below their perceived target of 3 per cent.

Spain, EC United Kingdom, EC Australia Japan, Asia United States of America P6211 Security Brokers and Dealers CMMT Comment & Analysis COSTS Equity prices P6211 The Financial Times London Page 25 720
International Capital Markets: Mexican bank to launch warrants linked to notes Publication 930209FT Processed by FT 930209 By TRACY CORRIGAN

NAFINSA, the Mexican government-owned development bank, is preparing to launch an unusual Eurobond issue with warrants into Grupo Televisa, the Mexican media giant.

The Dollars 100m issue of five-year bonds, arranged by Bankers Trust, is accompanied by an issue of three-year warrants, which can be exercised into Televisa American depository shares in the third year.

The deal offers investors the first long-dated warrants on an individual stock in the Mexican market.

The issue is expected to carry a six per cent coupon, and has been largely pre-placed with emerging market funds and traditional warrant buyers. The deal is expected to be launched officially today.

The warrants, which can be traded separately, are likely to be priced at a premium of 20 per cent to the current stock price.

The commercial paper and medium-term note ratings of Kingfisher, the UK retailer, have been put under review for a possible downgrade by Standard & Poor's, the US rating agency, as a result of the company's planned links with Darty, the French group. S&P said it will be meeting Kingfisher's management soon.

Nacional Financiera Kingfisher Mexico United Kingdom, EC P6111 Federal and Federally-Sponsored Credit Agencies P6719 Holding Companies, NEC P5311 Department Stores P5722 Household Appliance Stores P5231 Paint, Glass, and Wallpaper Stores P5912 Drug Stores and Proprietary Stores P6552 Subdividers and Developers, Ex Cemeteries FIN Share issues FIN Company Finance P6111 P6719 P5311 P5722 P5231 P5912 P6552 The Financial Times London Page 25 260
International Capital Markets: Amsterdam SE issues takeover barriers warning Publication 930209FT Processed by FT 930209 By DAVID BROWN AMSTERDAM

THE AMSTERDAM Stock Exchange yesterday issued a warning to 20 listed companies that they must comply with modified rules, agreed last year, which limit the total allowable number of barriers to hostile takeover.

The bourse posted notices to a number of companies, including Hoogovens, the steelmaker, and Nutricia, the biochemicals concern, warning that they must limit their anti-takeover barriers to a total of two. The limitation, agreed last year, was aimed at opening up what remains one of the most tightly-defended systems of corporate ownership in Europe, but many companies have yet to comply.

The stock exchange has given laggards until February 15 to comply with the regulations or face possible but unspecified sanctions.

The warning came as the exchange unveiled a plan aimed at shoring-up its competitive position against London's electronic SEAQ exchange, which has siphoned-off a substantial share of business in recent years.

A newly-announced two-tier trading system involves a split of the market into separate institutional and retail segments.

Trading in the 30-odd leading international issues will be conducted on a computer-based wholesale system on which offered 'buy' and 'sell' prices are displayed; institutions and brokers will moreover be given access to an additional system upon which they will be able to deal directly with each other.

Remnants of the present trading system will be preserved for the retail side of the market; intermediary dealers, known in Holland as hoekmen, set prices and match buy and sell orders from their smaller and less powerful clients.

The plan follows two years of study by a panel set up specifically to formulate ways of defending Amsterdam's long-term existence as a financial centre. Its recommendations are similar to measures adopted recently by the New York Stock Exchange.

Full details, together with new proposals to revise the bourse's cost structure and fees, will be placed before the bourse membership for approval next month.

Amsterdam Stock Exchange Netherlands, EC P6231 Security and Commodity Exchanges COMP Company News TECH Services GOVT Regulations P6231 The Financial Times London Page 25 355
International Bonds: Republic of Finland reopens Ecu Eurobond sector Publication 930209FT Processed by FT 930209 By ANTONIA SHARPE

THE Republic of Finland reopened the neglected Ecu-denominated sector yesterday with a Ecu500m five-year Eurobond, the first sovereign issue since last June when the Danish rejection of the Maastricht treaty put the international Ecu market out of favour with investors.

The last sovereign borrower in Ecu Eurobonds was the Kingdom of Spain, which raised Ecu250m via a two-year note last May. In July, the European Investment Bank brought a 10-year Ecu200m Eurobond. Since then, the sector has been virtually moribund, apart from some small issues of Ecu80m or less.

The French Treasury's successful auction of Ecu710m worth of 10-year notes in late January had raised hopes that the Ecu market would soon recover. Syndicate managers said that a resurgence of investor interest in Ecu-denominated instruments had also encouraged borrowers to look again at this area.

Yesterday's offering from Finland was priced at 99.40 to yield 8.15 per cent, in the middle of the indicated range of 8.13 to 8.18 per cent. An official at the lead manager Morgan Stanley International said that about two-thirds of the issue had been placed by yesterday afternoon and the syndicate was unlikely to be broken until today, to allow time to place the remaining stock in the Far East overnight.

Yesterday's offering was Finland's second in the international market so far this year. In late January, it reopened its Dollars 2bn global bond offering launched last November, adding a further Dollars 1bn of five-year bonds. Finland has a borrowing programme of close to FM60bn in 1993, which will be split between the international and domestic markets.

Finland's foray into the Ecu market reinforced rumours that the French Treasury was looking to raise up to Ecu2bn in five-year notes. Other issuers said to be showing interest in Ecu were Belgium, the European Investment Bank and the European Community. Dealers reported that prices in the Ecu secondary market eased in the afternoon, in anticipation of a sharp increase in supply.

Finland kicked off this week's round of sovereign borrowing, which is expected to be quite heavy. Scandinavian issuers were said to be interested in the dollar sector, and among non-sovereign borrowers, the Asian Development Bank was reportedly looking at raising dollars in the 10-year area.

In the early afternoon, the Republic of Ireland launched a Dollars 500m Eurobond due 2003, priced at 99.46 to yield 6.95 per cent. An official at the co-lead manager, Daiwa Europe, said the issue was Ireland's first Eurobond this year, and its first in the Eurodollar sector since February 1990.

He reported good sales into Germany, the Benelux countries and the UK, and said that a majority of the issue had been placed by late afternoon. The remainder is expected to be placed in the Far East. After the syndicate broke, the deal traded at 99.43 bid, representing a widening of two basis points in the yield spread since the launch to 57 basis points over comparable US Treasuries.

Elsewhere, France Telecom raised FFr2.5bn through a 10-year Eurobond, priced at 98.70 to yield 8.07 per cent. Syndicate managers reported good demand, as investors were encouraged by the improved outlook for the French franc since the cut in German rates. The issue traded at 98.40 to yield 8.11 per cent, reflecting the weaker tone in French government bonds.

European Economic Community (EC) Finland, West Europe P6211 Security Brokers and Dealers COSTS Equity prices CMMT Comment & Analysis P6211 The Financial Times London Page 25 589
International Company News: BIL plans public offering Publication 930209FT Processed by FT 930209 By AP-DJ WELLINGTON

BRIERLEY Investments, (BIL) the New Zealand-based hotels and investments concern, is planning an initial public offering of a company that comprises around 10 per cent of its New Zealand investments, AP-DJ reports from Wellington. The offer will not be made until at least the second half of 1993.

The subsidiaries to be included in the new company, will comprise Brierley's small holdings in New Zealand.

Brierley Investments New Zealand P672 Investment Offices COMP Company News FIN Share issues P672 The Financial Times London Page 24 101
International Company News: Coles Myer in investment move Publication 930209FT Processed by FT 930209 By BRUCE JACQUES SYDNEY

THE strategic battle between Australia's biggest retailer, Coles Myer, and the country's largest wholesale grocery supplier, Davids Holdings, has flared up again, writes Bruce Jacques in Sydney.

Coles Myer yesterday announced it had paid ADollars 18.2m (USDollars 12.3m) for a 14.9 per cent interest in Queensland-based QIW Retailers.

Davids has a takeover offer in force for QIW, but the offer has been bogged down by legal action alleging breaches of the Trade Practices Act.

Last year, Davids unsuccessfully sought an injunction to prevent Coles Myer from buying QIW shares.

Coles Myer Davids Holdings Australia P5141 Groceries, General Line P5181 Beer and Ale P5182 Wine and Distilled Beverages P5142 Packaged Frozen Foods P6719 Holding Companies, NEC P6799 Investors, NEC COMP Company News COMP Shareholding P5141 P5181 P5182 P5142 P6719 P6799 The Financial Times London Page 24 153
International Company News: Buoyant News Corp improves to ADollars 453m Publication 930209FT Processed by FT 930209 By AP-DJ SYDNEY

NEWS CORP, Mr Rupert Murdoch's Australia-based international media company, has announced a 27 per cent increase in after-tax operating profit to ADollars 452.8m (USDollars 305.9m) in the fiscal first-half to end-December, compared with ADollars 355.3m in the same period a year ago, AP-DJ reports from Sydney. Earnings per share fell to ADollars 1.09 compared with ADollars 1.10.

News Corp said 'gains in operating profit were reported by almost all of the company's businesses.' It said Fox Broadcasting and Fox Television Stations in the US reported 'significant gains' compared with a year earlier.

'In addition, inserts, magazines and newspapers worldwide all posted particularly strong results in weak advertising environments. These gains were partially offset by lower earnings from Twentieth Century Fox Film and HarperCollins.'

News Corp said the dividend would be increased 20 per cent to 1.5 cents.

Profit before accounting for abnormal or unusual items rose 94 per cent to ADollars 490.1m from ADollars 252.2m. Sales rose 1 per cent to ADollars 5.33bn against ADollars 5.27bn.

News Corp Australia P2711 Newspapers P2721 Periodicals P2731 Book Publishing P6719 Holding Companies, NEC P2754 Commercial Printing, Gravure P2796 Platemaking Services FIN Annual report P2711 P2721 P2731 P6719 P2754 P2796 The Financial Times London Page 24 221
International Company News: Manila to reduce PAL stake Publication 930209FT Processed by FT 930209 By REUTER MANILA

THE Philippine government plans to auction part of its stake in Philippine Airlines (PAL) to try to resolve an ownership battle and raise money for economic programmes, Reuter reports from Manila.

Philippine National Bank (PNB) has been directed to sell a 20 per cent stake held by state institutions in PR Holdings, a consortium that owns the majority of PAL. The move is seen as helping to resolve the stalemate between PAL chairman Mr Antonio Cojuangco and his allies, and Mr Lucio Tan, who heads a beer and tobacco empire. Each side owns about 40 per cent of PR Holdings, with government institutions holding the balance.

Together with PNB, the Development Bank of the Philippines and a military pension fund own 20 per cent of the consortium that bought 67 per cent of PAL when it was privatised last year. The remaining 33 per cent is held by the government.

Philippine Airlines Philippine National Bank PR Holdings Philippines, Asia P451 Air Transportation, Scheduled P91 Executive, Legislative and General Government COMP Disposals COMP Company News P451 P91 The Financial Times London Page 24 199
International Company News in Brief Publication 930209FT Processed by FT 930209 By REUTER and AP-DJ CAIRO, TOKYO, HONG KONG

THE sale of hotels and companies planned under Egypt's most serious move towards privatisation is likely to raise at least Dollars 150m, according to a consultant, Reuter reports from Cairo.

Egypt has recently named four five-star hotels, other tourist facilities and some consumer product companies for what would be its biggest sale yet of state-owned assets.

'The companies for sale are worth not less than Dollars 150m,' Mr Ahmed Shawki, a consultant involved in the deals, said.

Economists expect most companies to be auctioned off rather than publicly floated on Cairo's stock market.

The for-sale list includes the Shepherd and Sheraton hotels in Cairo, the Hilton hotel in Luxor, the Oberoi in Aswan, luxury Nile pleasure boats and tourist village projects. No date has yet been fixed for the sales.

*****

AOYAMA TRADING, the Japanese discount clothing retailer with chain stores in mainly suburban areas, plans to launch seven retail outlets in Taiwan, Hong Kong and China this year, AP-DJ reports from Tokyo.

It will establish a wholly-owned subsidiary to set up four retail stores in Taiwan and hopes eventually to increase the number of outlets to about 60. The company's plan also calls for one retail store in Hong Kong, one in Shanghai and another in Shenzhen.

*****

WHARF Communications, part of the Wharf (Holdings) group, is to take a stake in a Sino-Hong Kong joint venture to set up a cable television station in Chengdu, capital of China's Sichuan province, Reuter reports from Hong Kong.

Wharf will take 40 per cent of the consortium with the remaining 60 per cent split equally between Wharf chairman, Mr Peter Woo, and MKI Corp. The consortium will then buy 50 per cent of Sichuan Allday TV Development, which will initially invest Yn33m (Dollars 5.5m) in the project. The remaining 50 per cent will be held by China-owned Sichuan Province Cable TV Enterprise Development.

Aoyama Trading Wharf Communications Sichuan Allday TV Development Egypt, Africa Taiwan, Asia China, Asia P7011 Hotels and Motels P9611 Administration of General Economic Programs P56 Apparel and Accessory Stores P4841 Cable and Other Pay Television Services COMP Disposals COMP Company News RES Facilities COMP Shareholding P7011 P9611 P56 P4841 The Financial Times London Page 24 386
International Company News: Setback for ABSA as executive departs Publication 930209FT Processed by FT 930209 By PHILIP GAWITH JOHANNESBURG

AMALGAMATED Banks of South Africa (ABSA), South Africa's largest bank, yesterday suffered a severe setback with the announcement that the services of one of its most senior executives, Mr Bob Aldworth, had been 'terminated with immediate effect'.

A terse announcement from ABSA said 'this action is the result of investigations into certain irregularities within the ABSA group'. Mr Aldworth has also been stripped of his ABSA group directorships.

Industry analysts were unable last night to explain Mr Aldworth's fate. He had only recently been appointed the executive director, marketing, for the corporate banking division, making him one of the four most senior executives in the group.

The loss is a double blow to ABSA as his banking skills were not only rare in a group where many senior executives have a building society background, but he had the important task of increasing ABSA's share of the corporate market which badly lags its overall market share.

Following the recent retirement of another senior ABSA executive, Mr Piet Liebenberg, Mr Aldworth's departure will fuel speculation as to whether ABSA now has the managerial acumen to complete the ambitious rationalisation programme set in train following a series of mergers in 1991 and 1992.

This is not the first occasion that Mr Aldworth has been forced to step down from a senior executive position. In 1982, when managing director of the then Barclays Bank operation in South Africa (now First National Bank), Mr Aldworth resigned following allegations about his private life.

ABSA's last published results - for the six months ended September 1992 - showed a 14 per cent advance in net profits to R293.8m (Dollars 94.2m).

Amalgamated Banks of South Africa South Africa, Africa P602 Commercial Banks COMP Company News PEOP Personnel News Aldworth, B Executive Director Amalgamated Banks of South Africa P602 The Financial Times London Page 24 326
International Company News: Coles Myer investment fuels battle with Davids Publication 930209FT Processed by FT 930209 By BRUCE JACQUES SYDNEY

THE strategic battle between Australia's biggest retailer, Coles Myer, and the country's largest wholesale grocery supplier, Davids Holdings, has flared up in public again.

Coles Myer yesterday announced it had paid ADollars 18.2m (USDollars 12.3m) for a 14.9 per cent interest in Queensland-based QIW Retailers.

Davids has a takeover offer in force for QIW, but the offer has been bogged down by legal action alleging breaches of the Trade Practices Act.

Last year, Davids unsuccessfully sought an injunction to prevent Coles Myer from buying QIW shares.

Mr Peter Bartels, chief executive officer of Coles Myer, said last night that the QIW purchase was a strategic investment that would allow Coles to expand into the wholesale grocery market.

'The independent wholesale grocery market has become increasingly important and it has been obvious for some time that there would be major rationalisation in that segment,' he said.

Coles would seek appropriate representation on the QIW board but had 'no present intention' of purchasing further shares, Mr Bartels added.

Coles Myer Davids Holdings Australia P5141 Groceries, General Line P5181 Beer and Ale P5182 Wine and Distilled Beverages P5142 Packaged Frozen Foods P6719 Holding Companies, NEC P6799 Investors, NEC COMP Company News COMP Shareholding P5141 P5181 P5182 P5142 P6719 P6799 The Financial Times London Page 24 232
International Company News: Profits ahead 17% at Pacific Magazines Publication 930209FT Processed by FT 930209 By BRUCE JACQUES

PACIFIC Magazines & Printing, the magazine associate of the Australian-based media group News Corporation, reported a 17 per cent increase in profit to ADollars 31.4m (USDollars 21.2m) for the six months ended December.

Sales rose 11 per cent rise, to ADollars 334m.

The company, which was floated in October 1991, paid two dividends totalling 20.4 cents for the half-year.

Mr Ken Cowley, chairman, said the result was helped by a ADollars 76m reduction in debt to ADollars 225m.

This allowed the group's interest expense to fall from ADollars 14.2m to ADollars 9.2m. Tax provision rose from ADollars 11.0m to ADollars 13.6m.

Mr Cowley said the result comprised modest trading profit increases in both the commercial printing and magazine divisions.

He said the magazine division was being reorganised in order to allow further staff reductions.

Hongkong Bank of Australia, part of the Hongkong and Shanghai banking group, has reported its first annual profit in four years.

The bank made an after-tax profit of ADollars 8.06m in 1992, compared with a loss of ADollars 37.8m the year before.

In spite of the turnround, the bank had to make provisions.

Pacific Magazines and Printing Hongkong Bank of Australia Australia P602 Commercial Banks P27 Printing and Publishing COMP Company News FIN Interim results FIN Annual report P602 P27 The Financial Times London Page 24 238
International Company News: Sharp falls at Dutch paper groups Publication 930209FT Processed by FT 930209 By DAVID BROWN AMSTERDAM

THE NETHERLANDS' top three paper and packaging groups - KNP, Buhrmann-Tetterode and VRG - yesterday released figures indicating a steep fall in profits for 1992.

The three companies, which last year announced plans to merge into the second biggest paper group in Europe, after Stora of Sweden, warned of a continued deterioration in market conditions during the first half of the current year.

KNP, the biggest of the three, said its profit before extraordinary items fell to Fl 79.4m (Dollars 42.6m) in 1992, down Fl 280m, on turnover of Fl 4.7bn. Including extraordinary gains and losses, the comparable figures are Fl 295m for 1991, against Fl 56.7m.

Buhrmann-Tetterode saw a slight rise in turnover from Fl 5.58bn to Fl 6.3bn, but earnings halved from Fl 193m to Fl 85m. Net profits, including extraordinary results, fell from Fl 103m to Fl 50m.

At VRG, profits tumbled from Fl 53m to Fl 21.5m, in spite of a sales advance of 13 per cent to Fl 3.5bn. Detailed figures are to be released by all three companies in early April.

'These are not good results,' conceded a KNP spokesman, 'but if you look at the condition of the market and the losses being turned in by our competitors, especially in Sweden, we are glad to have made a profit.'

Difficult market conditions will persist in the first half. 'Despite current adverse recessionary influences,' however, the merged company expects it 'can not only maintain, but also improve its competitive position.' Nevertheless, rationalising the operations of all three groups will 'initially involve costs,' the statement added.

Under the terms of the planned merger, Buhrmann shareholders are being offered one share in the new company, to be named KNP BT, for every share they own. VRG shareholders will receive 0.8 shares for each existing share.

The combined group hopes to be better placed to compete in the increasingly consolidated European marketplace. The merger terms are to be put to shareholders for approval at a series of meetings scheduled later this month. The merger offer expires on March 5.

Buhrmann Tetterode VRG Groep Koninklijke Nederlandse Papierfabrieken Netherlands, EC P2621 Paper Mills P2631 Paperboard Mills P26 Paper and Allied Products P265 Paperboard Containers and Boxes P2653 Corrugated and Solid Fiber Boxes P3555 Printing Trades Machinery P508 Machinery, Equipment, and Supplies COMP Company News FIN Company Finance P2621 P2631 P26 P265 P2653 P3555 P508 The Financial Times London Page 24 420
International Company News: Castor trustee considers legal action Publication 930209FT Processed by FT 930209 By BERNARD SIMON TORONTO

THE bankruptcy trustee of Castor Holdings, the Montreal-based property finance group backed largely by European investors, is considering further legal action against Mr Wolfgang Stolzenberg, the German-Canadian financier, and others involved in Castor's collapse.

An official of Richter and Associates, the trustee, said yesterday that investigations were continuing into the 'massive discrepancy' between Castor's assets and its liabilities. A decision on further action is expected in the next month or so.

Richter began proceedings last December to recover CDollars 24m (USDollars 18.8m) which Mr Stolzenberg allegedly appropriated from Castor for his personal gain.

Richter won a court order to seize Mr Stolzenberg's personal assets in Canada, including a house and three penthouses in Montreal and two luxury cars. The trustee has also sued Castor's other directors, alleging they approved a dividend payout when the company was insolvent.

Castor, which specialised in high-risk second and third mortgages and construction loans, went into bankruptcy last July. Although the value of its assets was set at CDollars 1.9bn in 1991, creditors are likely to lose at least CDollars 1bn.

Mr Stolzenberg has filed a motion seeking to overturn last December's court order on the grounds that the trustee failed to reveal all the facts of the case. Mr Neil Stein, a Montreal lawyer who represents Castor, added yesterday that 'most of the facts are denied'.

Mr Stein said Castor's other directors would also contest the trustee's claims.

Mr Stolzenberg last December sold a controlling interest in Imry Merchant Developers, the UK property group, as part of a restructuring of Imry's debt by Barclays Bank. Castor's creditors have sought to establish a link between the Montreal company and Imry.

Mr Stein said the only link was the use of a Castor offshore subsidiary in an earlier Imry refinancing 'for technical, tax treaty reasons'.

The funds channelled through the subsidiary were guaranteed by a term deposit for the same amount. Mr Stein said that 'not one cent of Castor's money' was used.

Castor Holdings Canada P65 Real Estate GOVT Legal issues COMP Company News PEOP Personnel News P65 The Financial Times London Page 23 367
International Company News: Safeway to cut staff as full-year profits decline Publication 930209FT Processed by FT 930209 By KAREN ZAGOR NEW YORK

SAFEWAY, the California-based supermarket group, yesterday unveiled plans to cut its corporate administrative staff, contributing to a charge against fourth-quarter earnings of Dollars 13.8m, or 12 cents a share.

The charge will also cover the cost of consolidating Safeway's distribution centre in Sacramento into a new centre in Tracy, California. Safeway, which employs about 1,000 people in corporate administration, did not say how many might lose their jobs.

The company's overall earnings for 1992 were depressed by tough competition in the US food retail industry.

In the 1992 fourth quarter, Safeway earned Dollars 22.2m, or 19 cents a share, against a net loss of Dollars 47.7m, or 48 cents, a year earlier.

Sales rose to Dollars 4.85bn from Dollars 4.66bn.

For the whole of 1992, Safeway earned Dollars 43.5m, or 37 cents compared with profits of Dollars 54.9m, or 48 cents in 1991. Sales totalled Dollars 15.15bn against Dollars 15.12bn in 1991.

Stripping out one-time items, Safeway said its underlying annual earnings rose to Dollars 98.4m, or 83 cents, from Dollars 79m, or 69 cents.

Safeway Stores United States of America P5411 Grocery Stores GOVT Legal issues PEOP Personnel News COMP Company News P5411 The Financial Times London Page 23