A U.S. decision to cut funding for a demining program in Cambodia threatens to further worsen a feud between Phnom Penh and Washington.

On Tuesday, it emerged through local media reports the U.S. had decided to discontinue annual funding in 2018, worth about $2 million, to clear explosive remnants of war in Cambodia.

Prime Minister Hun Sen reportedly responded to the surprise decision by declaring he will stump to raise the money, according to a senior Cambodian demining official.

No public explanation has been given for the cut, and both the Cambodian Mine Action Center (CMAC), the final recipient of the funding, and Norwegian People’s Aid, which administer the money, say they do not know why the funding has been discontinued.

CMAC Director General Heng Ratana said he had no warning of any cut to the funding before he received notification Monday about the decision. The money covered the salaries of about 300 staffers, many of whom were deminers.

“I don’t know what the real dispute [is]. We just present the facts and we work together; they never indicated any dispute that we have had, but suddenly they cut the aid,” he said.

“But we are very lucky that the government, the head, the prime minister, granted approval that he will maintain our operation as usual so that means it has no impact on our operation,” he said, adding that funds for the rest of this year had not been affected.

The United States had a moral obligation to deal with the legacy of its bombing of Cambodia during the Vietnam war, he added.

Ruling Cambodian People’s Party spokesman Sok Eysan told VOA he was unaware of the cut, which seemed peculiar to him.

“I think that it’s an issue which we see that it’s not normal. So, no matter what we answer, it will still be not normal,” he said.

Norwegian People’s Aid country director Aksel Steen-Nilsen said he, too, had been unaware about the reasons for the cut.

“I mean, of course, there is a lot of rhetoric between Cambodia and the U.S. right now,” he said. “But … I don’t see any specific objective related to this because it’s the end of the grant cycle, and then of course, it’s up to the donor if they have funds and interest to continue or not.”

Steen-Nilsen said cooperation had been good thus far over the three years the grant had been running and there was no indication of any special reason it would stop.

In an email, the deputy spokesman of the U.S. embassy in Phnom Penh, David Josar, said demining remained at the top of the State Department’s assistance priorities, but he did not address the specific reason for the cut.

“We will use 2018 resources to put in place a world-class removal program targeting U.S.-origin UXO [unexploded ordnance] in eastern Cambodia,” he wrote. “UXO experts have proposed that the United States devote more attention to clearing such UXO, in addition to our support for clearing the more lethal Chinese, Vietnamese, and Soviet land mines in western Cambodia.”

Next year’s funding would be opened up to competitive bidding with requests for proposals — prepared in consultation with the Cambodian government — to be released this year, he wrote without providing any further details.

For months, Cambodia has accused the U.S. of fomenting a color revolution — a conspiracy plot it has used as the grounds to jail the country’s opposition leader, Kem Sokha, and justify moves to dissolve his party.

They have seized on the continuing impacts of unexploded ordinance left over from the U.S.’s massive illegal bombing campaign during the Vietnam war — a line of attack only bolstered by news of the cut to CMAC funding.

Carl Thayer, an emeritus professor at the Australian Defense Force Academy, said the embassy reports he had read also did not seem to be specific about the reasoning for the cut.

“So we don’t really know the reason why the funding was cut so far, and it’s sheer speculation on Hun Sen’s part and political opportunism on his part to make that linkage,” he said.

Any retaliatory action by the U.S. in response to the decimation of Cambodia’s opposition party would have been made up front, he said.

“There’s an expression, ‘between conspiracy and cock-up, you always go for conspiracy, and that seems to be what the Cambodians are doing, and until I see a better explanation, I’m saying its just a bureaucratic decision probably made in Washington and passed through without much thinking,” he said.  

Josar said the U.S. had spent more than $131 million on the remediation of explosive remnants of war in Cambodia.

In recent years, the main focus of that funding has been on U.S.-dropped unexploded ordnance left in Cambodia’s east. Some experts have complained this diverts resources away from more harmful explosive remnants in the west.

 
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The restive Spanish region of Catalonia faces a potential $500 million financial hit in the fourth quarter as business-related travel dips following the attack in Barcelona and the uncertainty generated by the disputed independence referendum.

In an interview Monday with The Associated Press at the World Travel Market in London, Catalonia’s top tourism official Patrick Torrent said the region will likely see a 10-12 percent fall in tourist numbers during the fourth quarter, which would equate to around 450 million euros. The large bulk of that fall is related to a drop-off in business travel to events such as conventions.

Despite the anticipated fourth-quarter decline, the executive director at the Catalan Tourist Board, said Catalonia is set to see revenues this year outstrip those last year and that the expectation is that revenues will rise again next.

However, more insight will emerge at the turn of the year when the bulk of pre-reservations are made. His staff, he said, are “on alert” about the impact on the main booking season.

The worry among many economists is that deteriorating business environment in Catalonia, which has seen around 1,500 firms move their headquarters out of the region, could worsen further amid all the uncertainty. Credit ratings agency Moody’s has warned that the region’s financial recovery is being jeopardized

“Moody’s believes that the political instability will negatively affect the region’s economy, in particular foreign investor sentiment and the tourism sector, and add pressure to the region’s already weak finances,” it said last week.

The Catalan tourism industry, a key income generator in what is Spain’s richest region, has had a difficult few months. After the August attacks in Barcelona and a nearby town that saw 16 people killed, the region has been embroiled in a battle of wills with Spain over the disputed independence referendum in early October which prompted Madrid to impose direct rule and seek the arrest of members of the Catalan government, including its leader, Carles Puigdemont, who has fled to Brussels.

The impact of the attack in Barcelona on holiday travelers was short-lived, according to Torrent, and “less important” than other cities in Europe, such as Brussels or Paris.

“The perception of Barcelona and Catalonia as a safe destination has not suffered any impact,” he said, noting figures showing tourism numbers higher in September.

Torrent said he met up with Alvaro Nadal, the Spanish minister of energy, tourism and digital matters, on Monday for the first time since the triggering of Article 155 of the Spanish Constitution which imposed direct rule on Catalonia.

Torrent said the Spanish government has made no requirements upon him or his staff and that it is “business as usual” until an early Catalan regional election on Dec. 21.

“It’s not intervention. It’s more a kind of coordination,” he said. “It’s easy, it’s not complicated, with good relations without problems, at this moment.”

Before direct rule, Torrent would speak with Spanish tourism officials two or three times a month. Now, it’s that amount of times a week.

Torrent urged all participants in upcoming demonstrations in Catalonia before the election, including one this Saturday, to remain peaceful and law-abiding.

“It’s important to say that our streets are normal, our restaurants are working as usual, our destination is exactly the same situation,” Torrent said.
…

Two weeks ago the glitzy Ritz Carlton hotel in Riyadh was the site of an international conference promoting Saudi Arabia as an investment destination, with over 3,000 officials and business leaders attending.

Now the hotel is temporarily serving as a luxury prison where some of the kingdom’s political and business elite are being held in a widening crackdown on corruption that may change the way the economy works.

By detaining dozens of officials and tycoons, a new anti-corruption body headed by Crown Prince Mohammed bin Salman is seeking to dismantle systems of patronage and kick-backs that have distorted the economy for decades.

But it is a risky process, because the crackdown is hurting some of the kingdom’s top private businessmen — leaders of family conglomerates who have built much of the non-oil economy over the past few decades.

Many industries could suffer if investment by these families dries up in coming months, at a time when the economy has already fallen into recession because of low oil prices and austerity policies.

New breed of companies

Meanwhile, a new breed of state-backed companies is rising to compete with the old guard; many of the new enterprises are linked to the Public Investment Fund (PIF), the kingdom’s top sovereign wealth fund. But it is not clear how smoothly the transition to these firms will happen.

“The rules of the game are changing. But they’re changing indiscriminately,” said one financial analyst in the region, declining to be named because of political sensitivities. “Even people who thought they were within the rules don’t know if they will still be within those rules tomorrow. There’s just uncertainty.”

Some private businessmen in Saudi Arabia are now trying to move their money out of the country “while they still can,” the analyst said.

For many foreigners, the most shocking aspect of the purge has been the detention of billionaire Prince Alwaleed bin Talal, the flamboyant, internationally known chairman of investment firm Kingdom Holding.

But for Saudis, the names of other detainees have been equally stunning: Nasser bin Aqeel al-Tayyar, founder of the Al Tayyar Travel group; billionaire Saleh Kamel; and Bakr bin Laden, chairman of the huge Saudi Binladin construction conglomerate.

State contracts

The saga of the Binladin group underlines how the business environment is changing. Binladin and another big construction group, Saudi Oger, long enjoyed preferential access to the kingdom’s biggest projects and control over pricing as a result of their close relationships with royal patrons.

But the bottom fell out from under both companies last year, when a cash squeeze resulting from low oil prices caused the government to cancel or suspend projects and delay payments.

The firms faced multi-billion dollar debt restructurings; Binladin has laid off tens of thousands of people while Oger’s bankers say it has essentially stopped operating.

New construction company

At the same time, state oil giant Saudi Aramco is moving to set up a construction company with local and international partners to build non-oil infrastructure in Saudi Arabia — potentially taking billions of dollars of business that would previously have gone to the family conglomerates.

Aramco and PIF, the sovereign fund, have also linked up with U.S. construction firm Jacobs Engineering to form a management company for strategic projects in the kingdom.

Many in the Saudi business world are celebrating the downfall of the old patronage system and the shift toward a “cleaner” business environment.

“It’s great news for the clean ones among us — 99.99 percent are ecstatic,” said one senior executive.

But others express disquiet about the possible economic fallout of the purge. Some are concerned that banks could start calling in loans to families implicated in the probe, using loan clauses that permit this in cases of legal jeopardy; this could collapse companies’ share prices.

Business deals put in limbo?

Many new business deals may be put on hold. A businessman at a foreign technology services firm told Reuters he had been considering a venture with a Saudi partner, but decided against it this week because of the partner’s ties to the detained Bakr bin Laden.

The new anti-corruption commission has broad authority to seize assets at home and abroad. Some businessmen wonder if these powers could be used to pressure firms into participating in Prince Mohammed’s economic development projects.

“It’s the old royal fiefdoms that are not in the Al Salman branch of the royal family that are now being purged,” said a Western analyst. “It’s a further centralising of political and economic power, and a seizing of the private assets that those fiefdoms have accumulated.”

 
…

A revamping of the Federal Reserve’s leadership is widening with the announcement Monday that William Dudley, president of the New York Fed and the No. 2 official on the Fed’s key interest rate panel, will retire next year.

Just last week, President Donald Trump chose Fed board member Jerome Powell to replace Janet Yellen as Fed chair in February. The post of Fed vice chair remains vacant. So do two additional seats on the Fed’s seven-member board. And a fourth seat may open as well next year.

The unusual pace of the turnover has given Trump the rare opportunity for a president to put his personal stamp on the makeup of the Fed, which operates as an independent agency. Investors are awaiting signals of how Trump’s upcoming selections might alter the Fed’s approach to interest rates and regulations.

Trump has made it known that he favors low interest rates. He has also called for a loosening of financial regulations. The Fed has played a key role in overseeing the tighter regulations that were enacted after the 2008 financial crisis, which nearly toppled the banking system.

The uncertainty surrounding the Fed’s top policymakers has been heightened by the slow pace with which the Trump administration has moved to fill openings.

To date, the administration has placed one new person on the Fed board: Randal Quarles, a veteran of the private equity industry who is thought to favor looser regulations, was confirmed as the first vice chairman for supervision. That still left three vacancies on the Fed’s board: Just as Quarles was joining the board last month, Stanley Fischer was stepping down as Fed vice chairman.

And Yellen herself could decide to leave the board when her term as chair ends on Feb. 3, even though her separate term on the board runs until 2024.

Dudley’s announcement that he plans to retire by mid-2018 also creates an opening on the committee of board members and bank presidents who set interest rate policies. Dudley’s position is particularly crucial: As head of the New York Fed, he is a permanent voting member of the Fed committee that sets interest rates.

The committee is composed of the board members and five of the 12 regional bank presidents. Unlike the New York Fed president, the other regional bank presidents vote on a rotating basis. The New York Fed president also serves as vice chairman of the rate-setting panel.

Some economists said that while financial markets have so far registered little concern about the number of key open Fed positions, that could change quickly, especially if investors begin to worry that the central bank will accelerate interest rate hikes.

“We need to get rid of this uncertainty, and until these seats are filled, there is going to be uncertainty,” said Diane Swonk, chief economist at DS Economics.

Analysts are trying to read the two decisions Trump has made — picking Powell for the top job and Quarles for the key post for banking supervision — as signs for where he might be headed. With Powell, the president opted for continuity on rates by selecting someone who for years was the lone Republican on the board but who remained a reliable vote for the gradual approach to rate hikes Yellen favored.

And in the bank supervision post, analysts say Trump might have been signaling that he wants to reverse, or at least weaken, Yellen’s backing of the reforms instituted by the 2010 Dodd-Frank financial overhaul law. During the campaign, Trump argued that Dodd-Frank was harming the economy by constraining back lending.

Quarles has been critical of aspects of that law. To a lesser extent, so, too, has Powell, who will be the first Fed chairman in nearly 40 years to lack a degree in economics. Powell, a lawyer by training, amassed a fortune as an investment banker at the Carlyle Group.

“With his background, Powell can be expected to work well with Wall Street and the business community in general,” said Sung Won Sohn, an economics professor at California State University, Channel Islands.

A senior administration official indicated that one important attribute for the open positions will be a diversity of backgrounds.

“We believe the Fed will function best with a wide range of skill sets,” said the official, who spoke on condition of anonymity to discuss personnel decisions. This official would not give a timetable for when the administration’s next nominations for the Fed might occur.

Though Trump will choose officials to fill the openings on the board, the choice of Dudley’s replacement will fall to the board of the New York Fed. The New York Fed said a search committee had been formed to choose a successor to Dudley, who joined the New York Fed in 2007 after more than two decades at Goldman Sachs.

The announcement from the New York Fed said Dudley, 64, intended to step down in mid-2018 to ensure that his successor would be in place well before the mandatory end of Dudley’s term in January 2019.

After overseeing the New York Fed’s securities operations for two years, Dudley succeeded Timothy Geithner as its president after Geithner was tapped by President Barack Obama to become Treasury secretary in 2009.

Dudley won praise for the work he did with Geithner and Fed Chairman Ben Bernanke to contain the fallout from the 2008 financial crisis. Dudley supported Yellen’s cautious approach to raising the Fed’s benchmark rate and the plan the central bank has begun to gradually shrink its $4.5 trillion balance sheet, which is five times its size before the financial crisis.

The balance sheet contains $4.2 trillion in Treasurys and mortgage bonds that the Fed bought since 2008 to try to hold down long-term borrowing rates and help the economy recovery from the worst recession since the 1930s.

In a statement, Yellen praised Dudley for his “wise counsel and warm friendship throughout the years of the financial crisis and its aftermath.”
…

Chipmaker Broadcom made an unsolicited $103 billion bid for Qualcomm on Monday, setting the stage for a major takeover battle as it looks to dominate the fast-growing market for semiconductors used in mobile phones.

Qualcomm said it would review the proposal. The San Diego-based company is inclined to reject the bid as too low and fraught with risk that regulators may reject it or take too long to approve it, people familiar with the matter told Reuters.

A Broadcom-Qualcomm deal would create a dominant company in the market for supplying chips used in the 1.5 billion or so smartphones expected to be sold around the world this year. It would raise the stakes for Intel Corp, which has been diversifying from its stronghold in computers into smartphone technology by supplying modem chips to Apple.

Qualcomm shareholders would get $60 in cash and $10 per share in Broadcom shares in a deal, according to Broadcom’s proposal. Including debt, the transaction is worth $130 billion.

GBH Insight analyst Daniel Ives said bullish investors were hoping for $75 to $80 per share.

“Now it’s a game of high-stakes poker for both sides,” he said.

Shares of Qualcomm, whose chips allow phones to connect to wireless data networks, traded above $70 as recently as December 2016 and topped $80 in 2014.

Qualcomm’s shares were up 2 percent at $63.09 at mid-afternoon, suggesting investors were skeptical a deal would happen.

Broadcom shares fell 0.3 after hitting a record high of $281.80.

Regulatory scrutiny

Qualcomm’s largest market is the so-called modem chips that allow phones to use mobile data plans, but it also sells connectivity chips for automobiles that handle “infotainment” systems and wireless electric vehicle charging. Qualcomm provides chips to carrier networks to deliver broadband and mobile data.

Any deal struck between the two companies would face intense regulatory scrutiny. A big hurdle would be getting regulatory approval in China, on which both Qualcomm and Broadcom rely on to make money.

China is set to look at any deal closely after U.S. regulators blocked a flurry of chip deals by Chinese firms due to security concerns, thwarting the Asian country’s attempt to become self-reliant in chip manufacturing.

Broadcom could spin out Qualcomm’s licensing arm, QTL, to get regulatory approval and funding for the deal, raising as much at $25 billion from a sale, Nomura Instinet analyst Romit Shah suggested.

Broadcom had $5.25 billion in cash and cash equivalent as of July 30. Qualcomm had $35.03 billion as of Sept. 24.

Broadcom said BofA Merrill Lynch, Citi, Deutsche Bank, JP Morgan and Morgan Stanley have advised it they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction.

The company has also got a commitment letter for $5 billion in financing from private equity Silver Lake Partners, an existing Broadcom investor.

Vulnerable Qualcomm

Broadcom approached Qualcomm last year to discuss a potential combination, but did not contact Qualcomm prior to unveiling its $70 per share offer Monday, according to sources.

Qualcomm is more vulnerable to a takeover now because its shares have been held down by a patent dispute with key customer Apple, as well as concerns that it may have to raise a $38 billion bid for NXP Semiconductors NV that it made last year.

Broadcom, Qualcomm and NXP together would have control over modems, Wi-Fi, GPS and near-field communications chips, a strong position that could concern customers such as Apple and Samsung Electronics because of the bargaining power such a combined company could have to raise prices. However, a combined company would also likely have a lower cost base and the flexibility to cut prices.

Broadcom said its proposal stands irrespective of whether Qualcomm’s acquisition of NXP goes through or not.

Qualcomm’s entire 10-member board is up for re-election this spring, and Broadcom could seize on the Dec. 7 nomination deadline to put forward its own slate.

Broadcom Chief Executive Hock Tan, who turned a small, scrappy chipmaker into a $100-billion company based in Singapore and the United States, told Reuters he would not rule out a proxy fight.

“We are well advised and know what our options are, and we have not eliminated any of those options,” said Tan, who has pulled off a string of deals over the past decade. “We have a very strong desire to work with Qualcomm to reach a mutually beneficial deal.”

Tan added that if Broadcom acquires Qualcomm which in turn has acquired NXP, the combined company’s net debt could be in the range of $90 billion.

Two Qualcomm directors, Anthony Vinciquerra and Mark McLaughlin, have been aligned with activist hedge fund Jana Partners LLC, which pushed for a shakeup of the company two years ago. Jeffrey Henderson, another Qualcomm board director, was added last year as a compromise candidate.

Apple, as a key customer, could pose a risk to the deal, said Karl Ackerman, an analyst at Cowen.

Tan told Reuters that Broadcom taking over Qualcomm would improve relations with Apple: “We believe we can be very constructive in resolving these issues and resetting relationships.”

Broadcom plans to move its headquarters solely to the United States, which would allow it to avoid review by the Committee on Foreign Investment in the United States, which reviews foreign ownership of U.S. assets.

Broadcom’s offer represents a premium of 27.6 percent to Qualcomm’s closing price of $54.84 on Thursday, a day before media reports of a potential deal pushed up the company’s shares.
…

The Republican tax bill unveiled last week in the U.S. Congress could disrupt the global supply chains of large, multinational companies by slapping a 20-percent tax on cross-border transactions they routinely make between related business units.

European multinationals, some of which currently pay little U.S. tax on U.S. profits thanks to tax treaties and diversion of U.S. earnings to their home countries or other low-tax jurisdictions, could be especially hard hit if the proposed tax becomes law, according to some tax experts.

Others said the proposal could run afoul of international tax treaties, the World Trade Organization and other global standards that forbid the double taxation of profits if the new tax did not account for income taxes paid in other countries.

The proposed tax, tucked deep in the 429-page bill backed by President Donald Trump, caught corporate tax strategists by surprise and sent them scrambling to understand its dynamics and goals, as well as whether Congress is likely ever to vote on it.

Reuters contacted seven multinational companies and four industry groups. None would comment directly on the proposal, with most saying they were still studying the entire tax package.

The proposal is part of a broad tax reform bill unveiled by House of Representatives Republicans on Thursday, which promises to lower overall tax burdens and simplify the tax code.

Whether the proposed reforms ever become law is uncertain, with weeks and possibly months of debate and intense lobbying still ahead. The House package overall has drawn criticism for adding too much to the federal budget deficit and too heavily favoring the rich and big business.

However, the corporate tax part, experts said, included some ambitious proposals worthy of further discussion. They said the 20 percent excise tax is one such proposal targeting the abuses of so-called transfer-pricing where multinationals themselves set prices of goods, services and intellectual property rights that constantly move between their national business units.

Under global standards, those prices should resemble those available on the open market. However, if a foreign parent charges U.S. affiliates inflated price, it can reduce its U.S. tax bill and effectively shift profits to a lower-tax country, reducing the entire corporation’s overall tax costs.

Blunt instrument

“Clearly there’s a transfer-pricing issue and something should be done,” said Steven Rosenthal, senior fellow at the Tax Policy Center, a nonpartisan Washington think tank.

“I would view this 20-percent excise tax as a blunt instrument to address the problem. And the problem with blunt instruments is sometimes they hit what you want to hit, and sometimes they hit what you don’t want to hit,” said Rosenthal, former legislation counsel at Congress’s Joint Tax Committee.

Under the proposal, U.S. business units that import products, pay royalties or other tax-deductible, non-interest fees to foreign parents or affiliates in the course of doing business would either pay a 20-percent tax on these or agree to treat the amounts as income connected to their U.S. business and subject to U.S. taxes.

As proposed, the new tax rule would apply only to businesses with payments from U.S. units to foreign affiliates exceeding $100 million. The rule would not take effect until after 2018.

European companies that sell foreign-made products into the U.S. market through local distribution units could be among those most affected, said Michael Mundaca, co-director of the national tax department at the accounting firm Ernst & Young.

Such companies could end up paying tax on the transfers twice — first if they paid the excise tax in the United States and then at home where they are taxed now and where the new U.S. tax would not be accounted for without changes to bilateral tax treaties.

“That would be a structure that would at least initially be hit by the full force” of the excise tax, said Mundaca, a former U.S. Treasury Department assistant secretary for tax policy.

He said European officials would be registering concern. “I am sure they are making calls right now to their counterparts in the U.S. Treasury looking for some explanation… and making the point that this might be contrary to treaty obligations.”

Gavin Ekins, an economist at the Tax Foundation, a conservative think tank, predicted that most multinationals would opt to avoid the excise tax by electing to pay U.S. corporate tax on all the profits related to products sold in the United States. Those include profits on activities conducted overseas, like manufacturing or research, which are also subject to foreign income taxes.

The U.S. corporate tax rate on those profits would drop to 20 percent from 35 percent if the House bill becomes law.

The promise of additional revenue and hopes that the new tax may entice multinationals to locate more production and jobs in the United States, may well outweigh international concerns.

The entire Republican tax package is projected to add $1.5 trillion over 10 years to the $20 trillion federal debt and the planned excise tax is among sources of new revenue needed to avoid an even bigger shortfall. It is expected to bring about $155 billion over 10 years, according to a summary of the Republican proposal distributed last week.

Still, as the tax debate heats up, foreign multinationals are likely to lobby hard against it, with domestic corporations linked to foreign affiliates possibly concerned as well.

There is also uncertainty how the new rules would work in practice.

It was unclear, for example, from the bill’s language how companies should calculate income “effectively connected” to their U.S. business, Tax Foundation’s Ekins said.

“You don’t know what profit is included when you choose ‘effectively connected income’ and don’t know the formula,” he said. “Is it just for that product line? All the income that comes in from every other company or from every other source?”

The House tax committee was scheduled to begin considering amendments to the Republican tax bill on Monday.
…

Wireless carriers Sprint and T-Mobile called off a potential merger, saying the companies couldn’t come to an agreement that would benefit customers and shareholders.

The two companies have been dancing around a possible merger for years, and were again in the news in recent weeks with talks of the two companies coming together after all. But in a joint statement Saturday, Sprint and T-Mobile said they are calling off merger negotiations for the foreseeable future.

“The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, president and CEO of T-Mobile US, in a prepared statement.

T-Mobile and Sprint are the U.S.’ third- and fourth-largest wireless carriers, respectively, but they are significantly smaller than AT&T and Verizon, who effectively have a duopoly over U.S. wireless service. The two companies have said they hoped to find a way of merging to make the wireless market more competitive.

Sprint and its owner, the Japanese conglomerate SoftBank, have long been looking for a deal as the company has struggled to compete on its own. But Washington regulators have frowned on a possible merger. D.C. spiked AT&T’s offer to buy T-Mobile in 2011 and signaled in 2014 they would have been against Sprint doing the same thing. But with the new Trump administration, it was thought regulators might be more relaxed about a merger.

Sprint has a lot of debt and has posted a string of annual losses. The company has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk says, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.

T-Mobile, meanwhile, has been on a yearslong streak adding customers. After the government nixed AT&T’s attempt to buy it in 2011, T-Mobile led the way in many consumer-friendly changes, such as ditching two-year contracts and bringing back unlimited data plans. Consumers are paying less for cellphone service, thanks to T-Mobile’s influence on the industry and the resultant price wars.

“T-Mobile does not need a merger with Sprint to succeed, but Sprint might need one to survive,” Piecyk wrote in an October research note.
…

U.S. President Donald Trump urged Saudi Arabia Saturday to list its state-owned oil company on the New York Stock Exchange when the company goes public in what is expected to be the largest-ever initial public offering in which shares of a company are sold to investors.

“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!,” Trump tweeted from Hawaii, his first stop ahead of a 13-day trip to Asia.

Saudi officials have reportedly said the government intends to list 5 percent of  the company’s shares on local and global stock exchanges in 2018 but have yet to select an overseas venue. Saudi officials have estimated the IPO will be worth about $100 billion.

The NYSE has had discussions with the Saudis about the upcoming IPO as has the London Stock Exchange. Exchanges in Hong Kong, Singapore, Tokyo, Toronto and the U.S. are also soliciting portions of the public offering.

New York-based NASDAQ, which provides technology to Saudi Arabia’s exchange, has been leveraging that relationship in an attempt to win the listing.

Trump has developed a close relationship with Saudi Arabia. During his visit there last summer, he signed a $110 billion defense agreement with Saudi King Salman.

At a $2 trillion valuation Saudi officials have projected for Aramco, selling five-percent of the company’s shares would reap $100 billion.

The public offering of shares of Aramco, the world’s largest oil producer, is part of Saudi government plans to sell state assets as a recession slows Riyadh’s effort to eliminate a budget deficit caused by low oil prices.

 
…

The recent flurry of social and economic reform coming out of Saudi Arabia has left some Saudis ecstatic, others more circumspect, and a few conservatives bewildered or even angry.

Saudi Crown Prince Mohammed Bin Salman told a crowd of investors at a conference in late October that he was merely attempting to “return Saudi Arabia to the moderate Islam that once prevailed” before the Iranian Revolution in 1979. He stressed that 70 percent of Saudis are younger than 30 and vowed “not to spend another 30 years of our lives living under extremist ideas.”

The young crown prince also proposed an ambitious plan for a new economic zone on the Red Sea near Jordan and Egypt. In April, he put forward an economic road map for the kingdom, called Vision 2030. Part of the plan calls for privatizing 5 percent of the country’s flagship petroleum company Aramco, in addition to attracting foreign investment capital.

​Too much change too fast

Clarence Rodriguez, who spent 12 years as a French foreign correspondent in Riyadh and recently wrote a book called Saudi Arabia 3.0 on the aspirations of Saudi women and young people, tells VOA that she believes Saudi Arabia “is in crisis, due to the drop in the price of petroleum,” and that it has found itself under pressure to “diversify its economy, which necessitates societal reform involving women and young people, as well.”

Rodriguez points out that the late King Abdallah, who died in 2015, started the reform movement by allowing Saudi women to run for the country’s consultative “Shoura” council and to enter the work force, becoming lawyers, bankers and salespeople.

She worries, however, that some recent moves to change the status of women have angered parts of the kingdom’s mostly conservative population. Traditionalists, she says, are “not used to such quick change” and many “are afraid, because things are moving too fast for them.”

On a recent talk show on an Arabic-language news channel, a conservative Saudi caller told the show’s host that he thinks Saudi King Salman and Crown Prince Mohammed Bin Salman are “violating (Islamic) sharia law” with some of their recent reforms “and should go to jail.”

Saudi commentator Jamal Kashoggi tells VOA that he’s “not optimistic about the reforms,” but that he would “still like to be optimistic … since everyone will suffer if they fail.” Kashoggi worries that the reforms are “not engaging Saudi society, enough.” 

“We wish Mohammed Bin Salman well, and we need economic (and social) reform,” he said, “but, we also need to discuss (these issues). The change,” he said, “is being done in very narrow circles. (Ordinary) people are not feeling engaged.” 

Was Saudi society more moderate?

Hilal Khashan, who teaches political science at the American University of Beirut, is not convinced that Saudi society was more moderate before the Iranian Revolution in 1979. He thinks that parts of Saudi society have always had a conservative streak to them, pointing out that Wahabi conservatives killed many moderate Muslims, including the Shafa’i mufti of Mecca when they overran the city and the nearby resort city of Ta’ef in 1924.

A handful of prominent Saudi conservative clerics have been arrested since Mohammed Bin Salman replaced his cousin, Mohammed Bin Nayef, as crown prince, in June. 

“By weakening the clerical establishment and making clerics simple government workers,” Khashan said, “(Mohammed Bin Salman) will be able to give women more rights, as he is proposing.” Saudi women were allowed to drive, starting in September, and this week were given permission to attend sports matches with their families.

Khashan believes that economic considerations are a key factor in the decision to allow Saudi women to drive. 

“If 10 million women are given the right to drive in Saudi Arabia,” he said, “and if just a fraction of those women buy cars, take driving lessons or buy insurance, that would contribute to stimulating Saudi Arabia’s stagnant economy.” Allowing women to drive will also curtail the expensive practice of hiring foreign chauffeurs to drive women around.

Both Kashoggi and Khashan believe that the Saudi government will eventually prevail in its efforts to reform society. 

“Conservatives,” Kashoggi said, “have already lashed out. They’ve been lashing out since 2003. Al-Qaida, or ISIS, or the radical Wahabis … these are the extremists in Saudi Arabia … and they don’t want change. They have resisted, and will continue to resist. … The only thing stopping them is (government) security.”

Clashes with clerics

Khashan points out that in clashes with conservative clerics back in the 1960s, after King Faisal opened a school for girls in Riyadh, and when the king opened the first TV station in Riyadh in 1965, the government prevailed. 

“Whenever the state clashes with the (conservative) clerical establishment, the state emerges victorious,” he said, “and there’s no reason to believe that things will not be the same, this time.”

Jordanian analyst Shehab Makahleh is less certain about who will come out on top, however. 

“There is a kind of opposition among royal family members who are not happy (about the reforms),” he said, “and they have had a number of meetings to clarify where the country is heading in the coming five to 10 years.”

Makahleh believes that King Salman may soon abdicate in favor of Mohammed Bin Salman “in order to gain more support from the international community” for his ambitious reform program and to promote a more secular model of society.
…

A solid rebound for the job market in October as the U.S. economy added 261,000 jobs. Job gains were strong across the board, and the unemployment rate fell to 4.1 percent, its lowest level in 17 years. But, as Mil Arcega reports, American workers are not seeing any real growth in their wages.
…

Venezuelan President Nicolas Maduro has announced that the country and state oil company PDVSA will restructure its burgeoning foreign debt, even as he vowed to make a payment of more than $1 billion that came due on Thursday.

The announcement did not put Venezuela or PDVSA into default, but suggests that Maduro’s cash-strapped government may be preparing to do so as heavy debt payments aggravate the country’s crippling economic crisis.

Why is Venezuela so heavily indebted?

Even though the OPEC nation was flush with cash during a decade-long oil boom, Venezuela’s ruling Socialist Party borrowed heavily during the era of late president Hugo Chavez to finance generous social programs that made him popular. The country also dismantled mechanisms meant to ensure Venezuela saved money when oil prices were high, leaving it without sufficient hard currency reserves to import basic goods such as food and medicine after prices crashed in 2014. Hunger and preventable diseases are as a result taking a growing toll on the population of 30 million.

Why can’t Venezuela refinance its debt?

The most common refinancing mechanisms are effectively blocked by U.S. sanctions levied this year, in response to accusations that Maduro was undermining democracy, which prevent U.S. banks from acquiring newly issued Venezuelan debt.

Venezuela and PDVSA cannot carry out “swap” transactions in which they exchange maturing bonds for ones that come due further down the road because financial institutions with U.S. headquarters would not be able to acquire the new debt. Investors also say bondholders would have no interest in renegotiating payment timelines without a cohesive plan to reform the country’s dysfunctional socialist economic model. Maduro has repeatedly balked at carrying out such reforms.

Who are the major holders of Venezuela and PDVSA bonds?

These securities are popular among funds that invest in emerging market bonds. Their high yields – which are close to 10 times higher than those of neighboring Colombia – help increase the overall profitability of the portfolios.

Institutional investors with big holdings include T. Rowe Price Associates Inc., Ashmore Investment Management Ltd., and BlackRock Investment Management Ltd. Goldman Sachs Group Inc came under heavy fire this year for purchasing $2.8 billion in PDVSA bonds at a steep discount, which opposition critics dubbed “hunger bonds.”

What would be the consequences for Venezuela of default?

Creditors could seek to seize assets Venezuela owns in other countries, including refineries such as those operated by PDVSA’s U.S. refining and marketing subsidiary Citgo. A default could also make it more complicated for Venezuela to import products from foreign companies.  Providers of goods such as food and medicine may reduce sales to Venezuela on concern that they will not get paid, or that they could find themselves ensnared in creditor lawsuits.

What is the role of Russia and China in financing

Venezuela?

Venezuela has borrowed heavily from both nations via oil-for-loan agreements in which it pays back in deliveries of crude and fuel. Investors believe support from Moscow and Beijing has been instrumental in allowing Venezuela to keep up with bond payments so far. Russia recently said it was willing to restructure a $3 billion loan.  But both China and Russia have shown impatience with Venezuela’s continued refusal to reform its Byzantine socialist economic regulations that are widely cited as the principal obstacle to growth.

Could multi-lateral institutions such as the International Monetary Fund and the World Bank get involved in the country’s debt restructuring?

Maybe, but substantial obstacles loom. There has been no formal contact between Venezuela and the IMF and World Bank although it does have a representative on each of their boards. Before the fund could get involved again, Maduro’s government would have to agree to an economic and financial assessment – something it has for years refused to do on the grounds that it violates sovereignty. Its current willingness to submit to such a review is unclear.

How would a default affect daily life in Venezuela?

Default would likely further pummel the country’s already bruised bolivar currency, which has depreciated 99 percent on the black market since Maduro took office. Reluctance to do business with Venezuela could make it harder to import goods.
…

California Gov. Jerry Brown and lawmakers asked the U.S. government Friday for $7.4 billion to help rebuild after a cluster of fires tore through the heart of wine country, killing more than 40 people and leaving thousands without housing.

In a letter to the White House, Brown joined California’s U.S. senators and 39 members of its congressional delegation to urge President Donald Trump and Congress to quickly adopt a disaster-related appropriations measure to support the state’s recovery.

Brown said the funding would go toward cleanup and programs to support housing, transportation, agriculture, environmental protection and other services for those affected by the fires.

A series of blazes that started in Northern California the night of Oct. 8 killed at least 43 people and destroyed about 8,900 homes and other buildings. At the peak, thousands of firefighters battled 21 blazes that burned simultaneously.

Officials have not yet assessed all the damage and effects of the fires, but the governor’s office and the affected counties determined that $7.4 billion in federal funding is needed to help California recover, the letter says.

The wildfires significantly damaged farmland, rangeland and watersheds, and more than a third of the funding requested, $3.1 billion, would go toward helping agricultural industries bounce back, including affected wineries, California officials said.

“The full economic impact to the agricultural, tourism, hospitality, and wine industries is still not known,” the letter says. “Nine California wineries were destroyed and 21 were damaged in the nation’s most prominent winemaking region.”

Congress last month approved $576.5 million in aid for wildfires earlier this summer in California and the U.S. West. It also has approved billions in relief funding to help states affected by hurricanes and other weather-related disasters this year.

Trump pledged aid for California fire victims on Oct. 10, saying he had told Brown that “the federal government will stand with the people of California.”

Brown said he has asked the California Department of Finance to expedite doling out $41.5 million to support the immediate needs of victims not eligible for federal aid.

During the wildfires last month, Brown declared a state of emergency for the Northern California counties of Solano, Napa, Sonoma, Yuba, Butte, Lake, Mendocino and Nevada as well as Orange County in the south.
…

Economic growth in sub-Saharan Africa is expected to rebound this year from 20-year lows in 2016, according to the International Monetary Fund’s biannual report. The Washington-based organization warns that, despite the modest recovery, public debt is continuing to rise and could soon become unsustainable in some African countries. Henry Ridgwell has more.
…

President Donald Trump is making his mark on the US Federal Reserve, naming former investment manager and central bank governor Jerome Powell to replace Janet Yellen, whose term expires in February. If confirmed by the Senate, the next chairman of the Federal Reserve will oversee U.S. monetary policy and maintain the stability of the world’s largest economy. Mil Arcega has more from the nation’s capital.
…

Venezuela on Thursday announced plans to restructure its burgeoning foreign debt, a move that may lead to a default by the cash-strapped OPEC nation whose collapsing socialist economy has left its population struggling to find food and medicine.

President Nicolas Maduro vowed to make a $1.1 billion payment on a bond maturing Thursday, but also created a commission to study “restructuring of all future payments” in order to meet the needs of citizens.

Venezuela has few avenues to do that though because of sanctions by the United States that bar American banks from participating in or even negotiating such deals.

Thus, Maduro’s most readily available recourse to ease payments is unilaterally halting them.

“I am naming a special presidential commission led by Vice President Tareck El Aissami to begin refinancing and restructuring all of Venezuela’s external debt and (begin) the fight against the financial persecution of our country,” Maduro said in a televised speech.

Billions in bonds

Venezuela and state-owned companies have $49 billion in bonds governed by New York Law and promissory notes, according to New York-based Torino Capital.

The government and state oil company PDVSA owe about $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.

The next hard payment deadline for PDVSA is an $81 million bond payment that was due Oct 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.

That would likely make countries less willing to do business with Venezuela, aggravating shortages of food and medicine and creating further problems for its oil industry, which is hobbled by under-investment.

Wall Street for years pumped billions of dollars into Venezuela by way of bond purchases, passing off the revolutionary rhetoric of the ruling Socialist Party as bluster that belied an iron-clad willingness to pay its debts.

Maduro surprised many by maintaining debt service after the 2014 crash in oil prices, diverting hard currency away from imports of food and medicine toward Wall Street investors.

PDVSA carried out a debt renegotiation in 2016.

But that option was taken off the table after U.S. President Donald Trump levied sanctions blocking the purchase of new debt issued by Venezuela and government-owned entities.

Investors puzzled

Investors seemed puzzled by Maduro’s statements Thursday, which neither clearly declared default nor laid out a path to easing payment burden.

“At no moment did he say they wouldn’t pay, so it’s not a default,” said Alejandro Grisanti of Caracas-based consultancy Ecoanalitica. “But in this environment, Maduro has no way to restructure or refinance as he said today.”

And the mere presence of El Aissami on the new debt commission makes it a non-starter for U.S. financial institution. He was blacklisted this year by U.S. Treasury Department on accusations he is involved in drug trafficking.

The increased pressure of the sanctions has made banks more nervous about working with PDVSA, according to financial industry sources, leading to delays in simple operations.

PDVSA struggled for days to deliver funds for a bond payment due last week amid confusion over which banks were charged with transferring the money.

​Toll on Venezuelans

Critics say Maduro’s decision to put debt above imports has taken a huge toll on the population.

Child malnutrition has reached the scale of a humanitarian crisis in four Venezuelan states, according to a May 2017 report by Caritas Internationalis, a Rome-based nongovernmental organization with links to the Catholic Church. Medicine shortages have also left children dying of preventable diseases.

Officials say ideological adversaries are exaggerating problems for political effect.

But the situation is a stark contrast to the oil boom years of late socialist leader Hugo Chavez, who spent generously on social welfare programs while borrowing profusely to keep spending at full tilt.

Venezuela’s debt is the highest yielding of emerging market bonds measured by JPMorgan’s EMBI Global Diversified Index , paying investors an average of 31 percentage points more than comparable U.S. Treasury notes.

That is nearly double the spread on bonds issued by Mozambique, which is already in default, and more than six times the spread on bonds from war-torn Ukraine.
…

A $100 billion semiconductor company based in Singapore will legally relocate its home address to the United States, President Donald Trump announced Thursday.

Broadcom Limited, which manufactures communications chips around the world, said it would relocate its legal address to Delaware once shareholders approve the move, bringing $20 billion in annual revenue back to the U.S. The move will allow Broadcom to avoid a cumbersome federal review process.

The Oval Office announcement was tied to the release of congressional Republicans’ tax reform proposal, which would drastically reduce corporate rates and makes it easier for companies to deduct foreign taxes.

The company credits the GOP plan with making it easier to do business in the U.S. “America is once again the best place to lead a business with a global footprint,” Broadcom CEO Hock Tan said.

However, Broadcom’s move to the U.S. will take place regardless of whether the Republican plan passes, the company said.

Scrutiny regarding merger deal

A year ago, the company entered a $5.5 billion agreement to merge with U.S. network provider Brocade Communications Systems, but that has been delayed while it’s scrutinized by the Committee on Foreign Investment in the United States. The high-level government committee, familiarly known as CFIUS, investigates proposed acquisitions of U.S. companies by foreign buyers on national security and intellectual property grounds.

By becoming a U.S.-based company, Broadcom can avoid the CFIUS process. Broadcom’s corporate headquarters will remain in San Jose, California.

The company makes semiconductor chips used for a variety of products, from cable set-top boxes to smartphones and other wireless devices.

It’s rooted in one of the largest-ever tech industry acquisitions, when Singapore-based Avago Technologies Ltd. bought Broadcom Corp. for $37 billion last year. The deal made Broadcom Ltd. the parent company of both Broadcom Corp. and Avago Technologies. By joining forces, the rival chipmakers hoped to make a bigger dent in the rapidly growing market for wireless devices.

Nearly 20 percent of its revenue in the most recent fiscal quarter came from sales to Apple and the contractors that manufacture Apple products, such as the Foxconn Technology Group.

About half of its revenue comes from China-based distributors and manufacturers, though the end products are used around the world.

Singapore tax breaks

The Singapore Economic Development Board has awarded the company with tax breaks for having a major presence there, but the company warned in a recent regulatory filing that one of those benefits terminates in 2021, four years earlier than expected.

About 39 percent of Broadcom’s employees are in Asia.

Broadcom has 7,500 U.S. employees across 24 states, the company said. It has manufacturing facilities in Colorado and Pennsylvania and engineering offices in California and traces its origins to blue chip American companies like Bell Laboratories, Lucent, and Hewlett-Packard.

“The proposed tax reform package would level the global playing field and allow us to compete worldwide from here in the United States,” Tan said in a statement. “Our move would domicile our $20 billion annual revenue in the United States. From our base here, each year we will invest $3 billion in research and engineering and $6 billion in manufacturing, resulting in more high-paying tech jobs.”
…

Google is partnering with AutoNation, the country’s largest auto dealership chain, in its push to build a self-driving car.

AutoNation said Thursday that its dealerships will provide maintenance and repairs for Waymo’s self-driving fleet of Chrysler Pacifica vehicles. The agreement will include additional models when Waymo brings them on line.

Terms of the multi-year deal were not disclosed.

Google has been partnering with a number of car-centric companies like Avis, the ridesharing company Lyft, and Fiat Chrysler.

AutoNation Inc., based in Fort Lauderdale, Florida, runs about 360 dealerships in the U.S.
…

Vietnam is hoping leaders of the remaining 11 member countries of a Pacific Rim trade pact, the Trans-Pacific Partnership, may be able to discuss during next week’s regional summit a revised deal following the U.S.’s withdrawal.

Deputy Foreign Minister Bui Thanh Son said he hoped talks held in Japan this week will have narrowed differences enough to allow trade ministers and leaders to endorse an amended TPP agreement during the Asia Economic Cooperation forum, whose annual regional summit will be held in Danang, Vietnam, next week.

“Vietnam will actively contribute together with other TPP member countries to achieve the most positive results that meet the interests of TPP members,” Son said. He told reporters he hoped there would be ministerial and summit meetings on it next week.

In Tokyo, Japanese officials also said they were hoping for a “framework” agreement on pursuing the TPP by the time of the APEC summit, despite having lost the U.S., the world’s biggest economy, as its anchor.

U.S. President Donald Trump withdrew the U.S. from the dozen-member trade agreement just days after taking office earlier this year, saying he preferred country-to-country trade deals, a departure from his predecessor Barack Obama in which TPP was the key to his “pivot” to Asia policies.

The TPP is meant to dismantle tariffs and other trade barriers while protecting labor, environment and intellectual property standards.

Son said the remaining 11 member countries in the TPP are still working toward an agreement with balanced interests to all members and it’s open for the United States and other countries to join in the future.

The TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

 
…

Facebook reported better-than-expected quarterly profit and revenue on Wednesday as it pushed further into video advertising, showing no sign of financial damage from the controversy over how Russia used the social network in an attempt to sway voters in the 2016 U.S. election.

The company’s shares, which hit a record earlier in the day, initially rose in after-hours trading, but later fell into negative territory. They have gained almost 60 percent this year.

Chief Executive Mark Zuckerberg condemned Russia’s attempts to influence last year’s election through Facebook posts designed to sow division, and repeated his pledge to ramp up spending significantly to increase the social network’s security, something he said on Wednesday would affect profits.

“What they did is wrong, and we are not going to stand for it,” Zuckerberg said of the Russians, on a conference call with analysts.

Facebook is at the center of a political storm in the United States for the ways it handles paid political ads and allows the spread of false news stories. U.S. lawmakers have threatened tougher regulation and fired questions at Facebook General Counsel Colin Stretch in hearings this week.

Facebook, in a series of disclosures over two months, has said that people in Russia bought at least 3,000 U.S. political ads and published another 80,000 Facebook posts that were seen by as many as 126 million Americans over two years. Russia denies any meddling.

Facebook’s total advertising revenue rose 49 percent in the third quarter to $10.14 billion, about 88 percent of which came from mobile ads.

Analysts on average had expected total ad revenue of $9.71 billion, according to data and analytics firm FactSet.

Facebook in the third quarter gave advertisers for the first time the ability to run ads in standalone videos, outside the Facebook News Feed, and the company is seeing good early results, Chief Operating Officer Sheryl Sandberg told analysts on a conference call.

“Video is exploding, and mobile video advertising is a big opportunity,” Sandberg said.

More than 70 percent of ad breaks up to 15 seconds long were viewed to completion, most with the sound on, she said.

The 49 percent increase in total ad sales in the latest quarter compares with a 47 percent rise in the prior quarter and a 51 percent jump in the first quarter.

Facebook has been warning for more than a year about reaching a limit in “ad load”, or the number of ads the company can feature in users’ pages before crowding their News Feed.

Advertisers seem unfazed, though, spending heavily as the social network continues to attract users.

The nearly 50 percent jump in ad revenue “is phenomenal, especially when for the past few quarters they’ve been trying to bring that expectation way, way down. Yet it keeps going up,” Tigress Financial Partners analyst Ivan Feinseth said.

Of the Russia scandal enveloping Facebook publicly, Feinseth said: “In the bigger picture, I don’t think it’s a really big factor.”

The company’s performance was strong in comparison with smaller social media firms Snap Inc and Twitter, Wedbush analyst Michael Pachter said.

“Facebook grew revenues by $3.3 billion year-over-year for the quarter. This is more than Twitter and Snapchat generate combined for the full year,” he said.

Facebook said about 2.07 billion people were using its service monthly as of Sept. 30, up 16 percent from a year earlier.

Analysts on average had expected 2.06 billion monthly active users, according to FactSet.

Net income rose to $4.71 billion, or $1.59 per share, from $2.63 billion, or 90 cents per share.

Analysts on an average were expecting the company to earn $1.28, according to Thomson Reuters I/B/E/S.

Total revenue increased 47.3 percent to $10.33 billion beating analysts estimate of $9.84 billion, according to Thomson Reuters I/B/E/S.

Various U.S. investigations into how Russia may have tried to sway American voters in the months before and after last year’s elections are hanging over Facebook and its competitors.

There is also proposed U.S. legislation that would extend rules governing political ads on television, radio and satellite to also cover digital advertising.

“We expect more scrutiny about Facebook’s ad system ahead,” analyst Debra Aho Williamson of research firm eMarketer said in a note. “We’re also monitoring for any signs that this investigation will have a material impact on ad revenue.”
…

President Trump appears to be a step closer to naming Jerome Powell as the new head of the U.S. central bank.

Late Wednesday, The Wall Street Journal, citing unnamed sources, reported that White House officials have notified Powell that he will replace Federal Reserve Chair Janet Yellen when her term expires early next year.

Trump is expected to announce his choice to head the bank on Thursday.

Powell is already one of the Federal Reserve’s governors.  Analysts say he is a Republican centrist who appears inclined to continue the Fed’s strategy of gradually raising interest rates.  The Journal story cautions that Trump, who has praised Yellen recently,  might still change his mind.

Powell would be a middle-ground pick for Trump, who is also considering current Fed Chair Janet Yellen as well as Stanford University economist John Taylor and former Fed Governor Kevin Warsh.

While Powell is expected to continue Yellen’s cautious approach to raising interest rates, economists say he might relax some of the financial rules designed to prevent another financial crisis like the one that caused chaos in the markets during the 2007-2008 recession.  Trump has complained that those rules hurt banks and economic growth.  

Yellen, who was selected as Fed chair by President Barack Obama, has been an outspoken advocate for the stricter financial regulations that took effect in 2010.

Many conservative members of Congress had been pushing Trump to select Taylor, rather than Powell, for Fed chairman. Taylor, one of the country’s leading academics in the area of Fed policy, would likely embrace a more “hawkish” approach — more inclined to raise rates to fight inflation than to keep rates low to support the job market.

Taylor is the author of a widely cited policy rule that provides a mathematical formula for guiding rate decisions. By one version of that rule, rates would be at least double what they are now.
…

President Donald Trump on Wednesday signed the repeal of a banking rule that would have allowed consumers to join together to sue their bank or credit card company to resolve financial disputes.

The president signed the measure at the White House in private. Journalists were not present to witness the signing.

The Republican-led Senate narrowly voted to repeal the Consumer Financial Protection Bureau’s regulation, which the banking industry had been seeking to roll back.

The Trump administration and Republicans have pushed to undo regulations they say harm the free market and lead to frivolous lawsuits.

Democrats contend the rule would have given consumers more leverage to stop companies from financial wrongdoing. CFPB Director Richard Cordray, an appointee of former President Barack Obama, has called the move a “giant setback” for consumers.

The repeal means bank customers will still be subject to what are known as mandatory arbitration clauses. These clauses are buried in the fine print of nearly every checking account, credit card, payday loan, auto loan or other financial services contract and require customers to use arbitration to resolve any dispute with their bank. They effectively waive the customer’s right to sue.

The overturning of the rule marks a notable victory for Wall Street. After the financial crisis, Congress and the Obama administration installed tough new regulations on how banks operated and fined them tens of billions of dollars for the damage they caused to the housing market.

But since Trump’s victory last year, banking lobbyists have worked hard to get some of the rules repealed or replaced altogether.
…

Members of the U.S. International Trade Commission on Tuesday made three different recommendations for restricting solar cell and panel imports on Tuesday, giving President Donald Trump a range of choices to address injury to domestic producers.

The recommendations range from an immediate 35 percent tariff on all imported panels to a four-year quota system that allows the import of up to 8.9 gigawatts of solar cells and modules in the first year. The president’s ultimate decision could have a major impact on the price of U.S. power generated by the sun.

Both supporters and critics of import curbs on solar products were disappointed by the proposals, which were unveiled at a public meeting in Washington.

Trade remedies were requested in a petition earlier this year by two small U.S. manufacturers that said they were unable to compete with cheap panels made overseas, mainly in Asia. The companies, Suniva Inc and the U.S. arm of Germany’s SolarWorld AG, said Tuesday’s recommendations did not go far enough to protect domestic producers.

“The ITC’s remedy simply will not fix the problem the ITC itself identified,” Suniva said in a statement. The company, which is majority owned by Hong Kong-based Shunfeng International Clean Energy, filed the rare Section 201 petition nine days after seeking Chapter 11 bankruptcy protection in April. It had sought a minimum price on panels of 74 cents a watt, nearly double their current cost.

One analyst said the stiffest remedy recommended, a 35 percent tariff on solar panels, would add about 10 percent to the cost of a utility-scale project but would have a negligible impact on the price of residential systems because panels themselves make up a small portion of their overall cost.

“It’s not nearly the doomsday impact we were potentially expecting,” said Camron Barati, a solar analyst with market research firm IHS Markit Technology.

But the top U.S. solar trade group, the Solar Energy Industries Association, said in a statement on Tuesday that any tariffs would be “intensely harmful” to the industry. The group has lobbied heavily against import restrictions on the grounds that they would undermine a 70 percent drop in the cost of solar since 2010 that has made the technology competitive with fossil fuels.

Recommendations

The ITC will deliver its report to Trump by Nov. 13. He will have broad leeway to come up with his own alternative or do nothing at all. Since only two members agreed on the same restrictions, there was no majority recommendation from the four-member commission.

“There is still plenty to be worried about,” said MJ Shiao, who follows the U.S. solar market for GTM Research.

Trump has vowed to protect U.S. manufacturers from low-priced imports, and U.S. Commerce Secretary Wilbur Ross has talked about tariff-rate quotas as a flexible way to protect some industries, allowing imports in as needed, but only up to a certain level before high tariffs kick in.

Commissioners David Johanson and Irving Williamson urged the president to impose an immediate 30 percent tariff on completed solar modules, to be lowered in subsequent years, and a tariff-rate quota on solar cells. Imports of cells in excess of one gigawatt would be subject to a 30 percent tariff that would decline after the first year.

ITC Chair Rhonda Schmidtlein recommended an immediate 35 percent four-year tariff on imported solar modules, with a four-year tariff rate quota on solar cells. This would impose a 30 percent tariff on imports exceeding 0.5 gigawatts and 10 percent on imports below that level. These tariffs would decline over a four-year period.

In the most lenient recommendation, Commissioner Meredith Broadbent said the president should impose a four-year quota system that allows for imports of up to 8.9 gigawatts of solar cells and modules in the first year.
…

Property damage claims from a series of deadly October wildfires now exceed $3.3 billion, California Insurance Commissioner Dave Jones said Tuesday.

The figure represented claims for homes and businesses insured by 15 companies and was more than triple the previous estimate of $1 billion. Jones said the number would continue to rise as more claims were reported.

The amount of claims now reported means that the fires caused more damage than California’s 1991 Oakland Hills fire, which was previously the state’s costliest, with $2.7 billion in damage in 2015 dollars, according to the Property Casualty Insurers Association of America.

Forty-three people were killed in the October blazes that tore through Northern California, including the state’s renowned winemaking regions in Napa and Sonoma counties. They destroyed at least 8,900 buildings as more than 100,000 people were forced to evacuate. It was the deadliest series of fires in California history.

Several dozen buildings were also damaged or destroyed in fires in Southern California’s Orange County.

“Behind each and every one of these claims … are ordinary people, Californians who lost their homes, lost their vehicles, in some cases whose family members lost their lives,” said Jones, a Democrat who is running for attorney general.

Jones said there were just over 10,000 claims for partial home losses, more than 4,700 total losses and about 700 for business property. There were 3,200 claims for damaged or destroyed personal vehicles, 91 for commercial vehicles, 153 for farm equipment and 111 for watercraft.

The figures do not reflect uninsured losses, including public infrastructure and the property of people who were uninsured or underinsured.

Arson suspect’s warning

Meanwhile, a man facing arson charges for a wildfire that destroyed two homes south of the San Francisco Bay Area had an ominous message for a prosecutor during a court hearing Tuesday: “You’re next.”

Marlon Coy, 54, uttered the words while glaring at Santa Cruz County District Attorney Jeffrey Rosell while he explained four of the felony charges Coy is facing, the Santa Cruz Sentinel reported.

Coy pleaded not guilty to charges of arson of a nondwelling, arson causing bodily injury and being a felon in possession of a firearm, the newspaper reported.

Witnesses saw Coy start the fire on October 16 near a property in Santa Cruz County connected to someone with whom he had a dispute, sheriff’s officials said.

Coy was arrested in possession of jewelry and a bicycle taken from a home that had been burglarized while under evacuation, according to sheriff’s officials.
…

Imagine you could swipe your phone over a piece of fish in the supermarket and instantly see secure records of its entire path through the supply chain, from the technique used by the fisherman who caught it in Indonesia to when it was shipped and how it was processed at a factory in your home country —  all at the tap of a smartphone.

Trial projects such as that one are testing the potential of Blockchain technology to bring transparency to all sorts of notoriously inefficient or shadowy industries in Southeast Asia.

Blockchain, the technology that powers bitcoin, is an essentially unchangeable form of bookkeeping. It creates cryptographically chained signatures between blocks of information that are authenticated by users over a peer-to-peer distributed ledger — a public record that can be applied to any type of bookkeeping, not just cryptocurrencies.

“It removes the requirement for a centralized authority, and in a lot of the products that it’s being launched in, this centralized authority tends to be the government,” said Alisa DiCaprio, head of research at R3 — an enterprise banking software firm that uses distributed ledger technology.

In a region where the most important records — identity and ownership for instance — are often subjected to little or no external oversight, blockchain offers enormous potential benefits.

Erin Murphy, Founder and Principal of Inle Advisory Group, a Myanmar and emerging business advisory firm, said major Asian business hubs are looking to blockchain to clean up and simplify transactions.

“Ideally, we would want to see adoption of blockchain at an official level all across the region,” she said in an email. “But perhaps not surprisingly, the governments that are leading blockchain adoption are those that are already low-corruption.”

One of those governments, she said, is Singapore, which is working with major banks on a blockchain-based system to streamline and qualitatively improve their customer (KYC) processes.

In other countries, it is being used for completely different purposes. In the Philippines, a remittance market worth billions of dollars per month has been invaded by firms offering cheaper services built on blockchain, which people can access without a bank account..

“Any steps that get taken at first may not be viewed through an anti-corruption lens and may inadvertently tackle that issue; it will likely be viewed through a development lens to kickstart poverty alleviation and bringing sectors up to international standards that attract foreign investment,” Murphy said.

More than money

There are many trials with clear utility in Southeast Asia underway, including systems for land titling under development in Sweden and Japan.

In June, the United Nations unveiled a blockchain-based system built in partnership with Microsoft and Accenture that gives stateless refugees a permanent identity based on biometric data.

It’s also being explored for secure voting systems.

The blockchain-based app developed to track the supply chain of fish from Indonesia — Provenance — is now the basis of many other trials, including a project to create a similar system for the garment industry.

Online you can view the results of a pilot released in May this year that follows a piece of clothing — an Alpaca Mirror Jumper from London-based designer Martine Jarlgaard, from a farm in Dulverton, Britain, through every step of production into London with location, content and timestamps.

It is a long way, though, from realizing that something can be done to actually making it happen, DiCaprio of R3 said.

“The technical capability to do this exists in most developing countries,” she said. “You have engineers who can code on the blockchain. But the understanding of how to actually implement this from a business point of view is very poor.”

DiCaprio estimates it will take about five years before we actually see large-scale functioning applications and believes the most impactful will occur at the macro economic level.

“So for example one area that it’s moving very quickly is trade finance,” she said. “And trade finance, you’re generally talking about fairly large companies, generally in Asia mostly exporting or importing from or to the US or EU,.”

Faster, cheaper and more transparent transactions combined with reductions in the risks of lending and borrowing would flow to down to the village level, she added.

Subversion vs centralization

Blockchain proponents are divided by some sharply divergent values. Some see blockchain — whose slogan is “be your own bank,” as technology that can fundamentally upend a global financial system they believe is intractably corrupt.

“There is a serious opportunity for us here to remove money out of government,” said a Southeast Asia based bitcoin trader who would only give his alias FlippingABitCoin, fearing he could expose himself to physical theft.

Billions of people currently excluded from the formal banking system will be able to access global cryptocurrencies with no middle man using nothing more than a phone, he said.

“It will level out the playing field of power,” he said.

Another group of enthusiasts are encouraging the absorption of this technology by states, as demonstrated by Canada, Singapore, China and Germany, all of which are either exploring or conducting trials of their own central bank digital currencies using blockchain.

“In the long run, we believe if there is any threat at all to governments, it is that other governments will lead the way in adopting blockchain technologies in producing low-corruption, high-transparency, highly-secure digitized economic infrastructures that will attract business, investment and stakeholder confidence,” wrote Michael Hsieh, a non-resident affiliate at the Center for International Security and Cooperation at Stanford University, in an email.

“The societies who lead in the great fintech [financial technology] innovation race of the 21st century will siphon all the capital and productivity from those that lag,” he wrote.
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Opening a new trade route to Afghanistan that bypasses Pakistan, India has dispatched its first consignment of wheat to the war torn country via the Iranian port of Chabahar.

The strategic sea route is a significant step in bolstering trade with Kabul that has been hampered because rival Pakistan does not allow India to transport goods to Afghanistan through its territory.

After the shipment was seen off by Indian Foreign Minister Sushma Swaraj and her Afghan counterpart Salahuddin Rabbani via a joint video conference Sunday, the Indian government called it a “landmark moment.”

In the coming months, six more consignments of wheat totaling 1.1. million tons will be sent from India’s western port of Kandla to Chabahar. From the Iranian port it will be taken by road to Kabul.

The shipment comes days after U.S. Secretary of State Rex Tillerson, on a visit to New Delhi, allayed concerns that the Trump administration’s tough stand on Iran could pose a fresh stumbling block to India’s plans to develop the strategic Iranian port as a regional transit hub.

Easier connectivity to Afghanistan is key for India to step up its economic engagement with Kabul, which Washington has called for as part of its new policy to stabilize the war torn country.

And Chabahar port, in which India is investing $500 million to build new terminals, cargo berths and connecting road and rail lines, is the centerpiece of the strategy to improve linkages not just with Afghanistan, but also to resource-rich Central Asian republics.

“This is the first time that we are getting into Afghanistan through a route different than what traditional routes have been,” said South Asia expert Sukh Deo Muni at New Delhi’s Institute of Defense Studies and Analyses.

Indian leaders expressed optimism about the project, which is still a work in progress. Minister Swaraj called it the starting point of a journey that would spur the unhindered flow of commerce and trade throughout the region. Prime Minister Narendra Modi tweeted the launch of the trade route, “marks a new chapter in regional cooperation & connectivity.”

The sea route via the Iranian port is the second step taken by India to increase connectivity with Kabul. In June it opened an air freight corridor to provide greater access for Afghan goods to the Indian market.

The Chabahar port is seen as India’s answer to the Gwadar port in Pakistan being developed by China.

The project was conceived almost 15 years ago, but the plans were stalled for years due to U.S. led international sanctions on Iran. Their easing prompted India to sign a trilateral pact with Iran and Afghanistan last year to develop the port.

U.S. Secretary of State Tillerson indicated in New Delhi last week that fresh sanctions on Iran by the Trump administration would not pose a stumbling block to those plans.

“It is not our objective to harm the Iranian people, nor is it our objective to interfere with legitimate business activities that are going on with other businesses, whether they be from Europe, India or agreements that are in place that promote economic development and activity to the benefit of our friends and allies as well. We think there is no contradiction within that policy,” he told reporters in India.

Those words have been welcomed in New Delhi said analyst Muni. “I think there is a far more reassuring feeling in India vis-a-vis the Trump administration than what the initial thought was,” he said.

The shortest and most cost effective land routes between India and Afghanistan lie through Pakistan. However, due to longstanding rivalries between the two countries, India is not allowed to send any exports through Pakistani territory and Afghanistan is only allowed to send a limited amount of perishable goods through Pakistani territory to India.

 
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President Donald Trump’s plan for overhauling the U.S. tax system faced growing opposition from interest groups on Sunday, as Republicans prepare to unveil sweeping legislation that could eliminate some of the most popular tax breaks to help pay for lower taxes.

Republicans who control the U.S. House of Representatives will not reveal their bill until Wednesday. But the National Association of Home Builders, a powerful housing industry trade group, is already vowing to defeat it over a change for home mortgage deductions, while Republican leaders try to head off opposition to possible changes to individual retirement savings and state and local tax payments.

Trump and Republicans have vowed to enact tax reform this year for the first time since 1986. But the plan to deliver up to $6 trillion in tax cuts for businesses and individuals faces challenges even from rank-and-file House Republicans.

House and Senate Republicans are on a fast-track to pass separate tax bills before the Nov. 23 U.S. Thanksgiving holiday, iron out differences in December, send a final version to Trump’s desk before January and ultimately hand the president his first major legislative victory. Analysts say there is a good chance the tax overhaul will be delayed until next year.

The NAHB, which boasts 130,000 member firms employing 9 million workers, says the bill would harm U.S. home prices by marginalizing the value of mortgage interest deductions as an incentive for buying homes. The trade group wants legislation to offer a $5,500 tax credit but says it was rebuffed by House Republican leaders.

“We’re opposed to the tax bill without the tax credit in there, and we’ll be working very aggressively to see it defeated,” NAHB chief executive Jerry Howard told Reuters.

Republicans warned that the Trump tax plan is entering a new and difficult phase as lobbyists ramp up pressure on lawmakers to spare their pet tax breaks.

“When groups start rallying against things and they succeed, everything starts unraveling,” Senator Bob Corker, a leading Republican fiscal hawk, told CBS’ Face the Nation.

Anxiety in high-tax states

One of the biggest challenges involves a proposal to eliminate the federal deduction for state and local taxes (SALT), which analysts say would hit upper middle-class families in high income tax states such as New York, New Jersey and California. The states are home to enough House Republicans to stymie legislation.

The top House Republican on tax policy gave ground over the weekend, saying he would allow a deduction for some local taxes to remain.

“We are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” House Ways and Means Committee Chairman Kevin Brady said in a statement.

But the gesture appeared to do little to turn the tide of opposition to SALT’s elimination.

“I’m not going to sign onto anything until the full package is fully analyzed by economists,” Representative Peter King of New York told the Fox News program Sunday Morning Futures. “The fact that we’re getting it at the eleventh hour raises real issues with me,” he added.

A lobby coalition representing state and local governments, realtors and public unions rejected Brady’s statement outright, saying the move would “unfairly penalize taxpayers in states that rely significantly on income taxes.”

House Republicans have also faced opposition from Trump and others after proposing to sharply curtail tax-free contributions to 401(k) programs and move retirement savings to a style of account that allows tax-free withdrawals, rather than the tax-exempt contributions that are popular with 401(k) investors.

House Republicans now say they could permit higher 401(k) contribution limits but continue to talk about tax-free withdrawals. “We will expand the amount that you can invest. But we’ll also give you an option to actually not be taxed later in life,” House Republican leader Kevin McCarthy told Fox News.

The current cap on annual 401(k) tax-free contributions is $18,000.

Corker said congressional tax committees seem to be falling short of their goal to eliminate $4 trillion in tax breaks to prevent the Trump plan from adding to the federal deficit.

“They’re having great difficulty just getting to $3.6 trillion,” said the Tennessee Republican, who has vowed to vote against tax reform if it increases a federal debt load that stands at more than $20 trillion.

Ohio’s Republican governor, John Kasich, told Fox News Sunday that spending on entitlement programs such as Medicare, Medicaid and Social Security should also be reviewed as part of the effort to pay for tax cuts.

“It may be separate from the tax bill, but it needs to happen,” Kasich said.
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Xavier Gabriel can take some credit if the tiny Catalan mountain town of Sort is one of the most famous in Spain.

He runs a lottery shop called La Bruja de Oro, or The Golden Witch, in a town whose name, aptly, means “Luck” in Catalan. Its fortune in having sold many prize-winning tickets has made it a household name and a successful online business.

But the crisis surrounding Catalonia’s push for independence has changed life for 60-year-old Gabriel. He joined more than 1,500 companies in moving their official headquarters out of the wealthy region in recent weeks. Their main fear: that they would no longer be covered by Spanish and European Union laws if Catalonia manages to break away, dragging their businesses into unknown territory.

“The time had come to make a decision,” said Gabriel, who employs 16 people and describes himself as a proud Catalan.

​Hedging their bets

Like Gabriel’s, the vast majority of companies that moved their headquarters didn’t transfer workers or assets, such as bank holdings or production equipment. So far, it’s mainly a form of legal insurance. But as the political crisis escalates, the risk is that companies are deferring investments and hiring. There is evidence that tourists are holding off booking, perhaps frightened by images in the media of police crackdowns, street demonstrations and strikes.

And the situation risks getting worse before it improves: the central government’s decision Friday to take control of the region could spiral out of control if there is popular resistance, whether by citizens or local authorities like the Catalan police force.

“There is absolutely no doubt that the crisis is having a very damaging effect on the economy,” said Javier Diaz Gimenez, an economics professor at Spain’s prestigious IESE Business School.

Financial markets in Spain have so far fallen only modestly, reflecting investors’ apparent belief that the tensions will eventually be resolved. The Spanish government has called a regional election in Catalonia for Dec. 21 and could later consider revisions to the constitution that might placate some of the independence supporters.

But that could take some time, Diaz Gimenez says, given how confrontational both sides have been.

Banks leave

The list of businesses moving headquarters includes Catalonia’s top two banks, Caixabank and Sabadell, which are among Spain’s top five lenders. Then there is the Codorniu cava sparkling wine maker for which Catalonia is famous. Another well-known cava maker, Freixenet, is also planning to follow if the independence drive continues. Publishing giant Planeta, the world’s leading Spanish-language publisher and second biggest publisher in France, has also moved its official address out of Catalonia.

Caixabank says it suffered a moderate but temporary run on deposits because of the crisis, but said it has since recovered and was adamant the move was permanent.

Shares for Caixabank, Sabadell and some other companies have been volatile, falling after the Oct. 1 vote for independence and jumping sharply when they announced their decision to move headquarters.

Tip of the iceberg

Lottery shop owner Gabriel says ticket sales this month are up nearly 300 percent over last year, a rise he attributed to popular support for his decision to move his business.

Diaz Gimenez said the decisions to move headquarters, while not immediately affecting jobs, were “just the tip of the iceberg.”

“Plans to relocate firms or invest elsewhere are going to accelerate and some of it is going to go to, say, Poland, and it’s never going to come back,” he said.

“People that were thinking about investing in Spain and Barcelona are starting to think again,” he said. “It’s not just Catalonia. It’s the mismanagement by Spain, which is proving that it’s not a serious country because it cannot solve this thing.”

Spanish economy humming

The turmoil, ironically, comes just as Spain has been enjoying some of the fastest economic growth in Europe.

Its economy, the fourth-largest in the 19-country eurozone, grew by a hefty quarterly rate of 0.9 percent in the second quarter. The government has maintained its forecast for growth in 2017 at 3.1 percent, but revised its estimate for 2018 from 2.6 percent to 2.3 percent because of the political crisis. Moody’s credit rating agency has warned that a continued political impasse and, ultimately, independence for Catalonia would severely hurt the country’s credit rating.

Billions at stake

Tourism seems to be taking the biggest hit so far.

Experts say spending in the sector in Catalonia in the first two weeks of October — that is, following the independence referendum — was down 15 percent from a year earlier.

Tourism represents about 11 percent of Spain’s 1.1-trillion euro ($1.3 trillion) gross domestic product, with Catalonia and its capital, Barcelona, providing a fifth of that, being the most popular destinations for visitors.

Exceltur, a nonprofit group formed by the 25 leading Spanish tourist groups, expects growth in tourism this year to ease from an estimated 4.1 percent to 3.1 percent.

Reservations in Barcelona alone are down 20 percent compared with last year, it said. If the trend continues in the final three months of the year, it could lead to losses of up to 1.2 billion euros ($1.41 billion) in the sector, which in turn could affect jobs.

Analysts fear that the independence movement’s stated aim of continuing to create as much social and economic chaos for Spain as possible could exacerbate the situation. The Catalan National Assembly group has been openly talking about a boycott against Spain’s top companies and major strike activity.

“Spain, its tourism, everything is very dependent on image,” Diaz Gimenez said. “And this is just killing it.”
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At the 2015 Paris summit, world leaders pledged to take steps to avoid catastrophic climate change. This November in Bonn, Germany, U.N. negotiators will be back, working out the details of how to cut emissions of planet-warming gases. It is the first conference since President Donald Trump said the United States would withdraw from the agreement. That leaves questions about the direction of U.S. greenhouse gas emissions. As VOA’s Steve Baragona reports, the answer is not straightforward.
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Artisans in Mali are hoping that Bogolan, a traditional cotton fabric, will continue to fascinate Western fashion designers and provide jobs at home. VOA’s Teffera Girma Teffera and Bagassi Koura visited a small neighborhood in central Bamako where artisans are hard at work. Salem Solomon narrates.
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Stores watching Amazon take a larger share of clothing sales are trying to solve one of the most vexing issues for online shoppers: finding items that fit properly.

The retailers are unleashing tools that use artificial intelligence to replicate the help a salesperson at a store might offer, calculate a shopper’s most likely body shape, or use 3-D models for a virtual fitting room experience. Amazon, which some analysts say will surpass Macy’s this year as the largest U.S. clothing seller, is offering some customers an Alexa-powered device that doubles as a selfie-stick machine and a stylist.

Retailers want to reduce the rate of online returns, which can be up to 40 percent, and thus make customers happier — and more likely to be repeat shoppers. And the more interaction shoppers have with a brand, the more the technology will learn about shoppers’ preferences, said Vicky Zadeh, chief executive of Rakuten Fits Me, a tech company that works with QVC and clothing startup brands.

“It’s all about confidence,” she said. “If they have the confidence to buy, they will come back to the retailer time and time again.”

The push is coming from big names like Levi’s and The Gap and startups like Rhone and Taylrd.

Levi’s new Virtual Stylist texts back and forth with online customers to offer recommendations, based on their preferences. Marc Rosen, Levi’s president of global e-commerce, said early tests show the chatbot is driving more browsers to become buyers.

Reliance on body shape

Rakuten Fits Me, which works with QVC and other companies, fine-tuned its fitting technology this summer and said its retail partners now offer garments that should fit shoppers’ body shapes when the customer first does the initial search. Shoppers provide three measurements — height, weight and age — and then it calculates a person’s most likely body shape, not size, to determine the fit for any garment and offer more accurate recommendations.

And Gap Inc. has an augmented reality app in collaboration with Google and startup Avametric that allows shoppers to virtually try on clothes. Shoppers enter information like height and weight and then the app puts a 3-D model in front of them. However, the tool only works on Google Tango smartphones.

Sebastian DiGrande, executive vice president and strategy and chief customer officer at Gap, said the augmented reality app had produced good feedback, but the company is still determining whether shoppers really want a virtual 3-D model.

Clothing brand Tommy Hilfiger similarly has built its mobile app around the camera and image recognition. It has an augmented reality feature enabling shoppers to see what the clothes look like on a virtual runway model — but not their own body type.

And men’s online clothier Bonobos, now owned by Wal-Mart, launched an app that offers customers a virtual closet to see items they bought and saved. The app is converting browsers to buyers at a faster rate, said Andy Dunn, founder of Bonobos.

Companies are smart to offer new tools, but many are too “gimmicky,” said Sapna Shah, principal at Red Giraffe Advisors, which makes early-stage investments in fashion tech.

“If it’s not Amazon, will brand-specific apps be the way for people to shop in the future?” she said. “How many apps are people going to have on their phone?”

And all the companies need to win over customers who prefer to touch and see things in person.

“It’s great that they’re busting their tail with all these apps, but I am skeptical,” said Doug Garnett of Portland, Oregon. Garnett said he buys some clothes online when he knows and understands the brands, but otherwise, “I really need to see them on my body before I act, and really prefer that to be in a store.”

Personalized offers

As Amazon dives further into fashion, it could use its base of data to spur trends and personalize offers for its customers. Its Echo Look features a built-in camera that photographs and records shoppers trying on clothes and offers recommendations on outfits. It works with its Style Check app, using machine learning and advice from experts. The potential: Learn shoppers’ styles and recommend outfits to buy. Amazon reportedly is exploring the idea of quickly fulfilling online orders for custom-fit clothing.

The company also reportedly acquired Body Labs, which creates true-to-life 3-D body models.

“We’re always listening to our customers, learning and innovating on their behalf and bringing them products we think they will love,” said Amazon spokeswoman Molly Wade. She wouldn’t comment on the prospect of custom-fit or the reports about Body Labs.

Steve Barr, the U.S. retail and consumer sector leader at consultants PwC, said that Amazon was trying for a curated experience based on massive data analytics. But he said he thought such an approach had limitations.

“No matter how great Amazon is with artificial intelligence and predictive behaviors,” Barr said, “they can’t put a red tab on a pair of a jeans or a swoosh on a pair of shoes.”
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