Business

NEW DELHI — Switzerland is the world’s most innovative country for a second consecutive year, while Asian giant India made the biggest strides among major economies, a global indicator showed on Wednesday.

The annual Global Innovation Index — compiled by World Intellectual Property Organisation (WIPO), Cornell University and INSEAD — ranks 129 world economies on 80 parameters including research, technology and creativity.

Switzerland was closely followed by Sweden and the United States.

India, where the announcement was made, was ranked 52nd but has leaped up the rankings in recent years, WIPO Assistant Director General Naresh Prasad said.

The report came as the International Monetary Fund downgraded global growth and warned of a “precarious” 2020 amid trade tensions, continued uncertainty and rising prospects for a no-deal Brexit.

The report’s authors said spending on innovation was still growing and appeared resilient despite the slowdown.

But they also warned of signs of waning public support for research and development in high-income economies usually responsible for pushing the innovation envelope, and increased protectionism.

“In particular, protectionism that impacts technology-intensive sectors and knowledge flows poses risks to global innovation networks and innovation diffusion,” the report said.

“If left uncontained, these new obstacles to international trade, investment, and workforce mobility will lead to a slowdown of growth in innovation productivity and diffusion across the globe.”

DUBAI — The International Monetary Fund (IMF) on Tuesday slashed its economic growth forecast for the Middle East and North Africa to the worst level in more than a decade over Iran sanctions and regional unrest.

In its World Economic Outlook update, the global lender projected economic growth for the Middle East, North Africa, Afghanistan and Pakistan this year would be 1 per cent, its worst since the IMF put them in one group in 2009.

The downgrade, the fifth in a year, is a half percentage point lower than its April projection.

The reduction is in large part due to a change in the IMF's forecast for Iran's growth "owing to the crippling effect of tighter US sanctions", the lender said. 

"Civil strife across other economies, including Syria and Yemen, add to the difficult outlook for the region."

The price of oil, the main driver for revenues in the region, will also impact growth, the IMF added.

In 2018, the region saw 1.6 per cent growth, down from 2.1 per cent in the previous year.

The IMF in April projected Iran's economy will shrink by a steep 6 per cent this year, its worst performance since it contracted by 7.7 per cent in 2012.

The new report provided no updated figures on the Iranian economy, the second largest in the region behind Saudi Arabia, but other reports predicted a deeper recession in the Islamic republic.

One report jointly prepared by the London-based Institute of Chartered Accountants in England and Wales and Oxford Economics, released early this week, said Iran's economy is expected to shrink by 7 per cent this year.

The report also predicted regional growth to be just 0.6 per cent due to Iran sanctions and instability in the region.

US sanctions on Iranian oil exports were renewed in May and aim to halt Tehran's overseas crude sales, which provide key revenues to the Islamic republic.

The IMF also attributed the lower growth projections to rising US-Iran tensions centred on recent incidents in the Gulf and unrest in several Arab nations.

"Civil strife in many countries raises the risks of horrific humanitarian costs, migration strains in neighbouring countries, and, together with geopolitical tensions, higher volatility in commodity markets," the IMF said.

The IMF raised its forecasts for Saudi economic growth this year by 0.1 percentage points, to 1.9 per cent, and to 3 per cent in 2020.

It attributed the boost to the development of the kingdom's non-oil-related sectors.

The world's largest oil exporter has substantially cut power and fuel subsidies as well as imposed fees on expatriates and a 5-per cent value added tax as part of a reform programme to decrease dependence on oil. 

WASHINGTON — US credit monitoring agency Equifax agreed to pay up to $700 million in a settlement stemming from a data breach that affected nearly 150 million customers, regulators said on Monday.

The biggest-ever penalty in a data breach case was announced by the Federal Trade Commission (FTC) and state regulators after revelations that hackers had stolen the personal details, including names, dates of birth and social security numbers, of millions of people.

“Companies that profit from personal information have an extra responsibility to protect and secure that data,” FTC Chairman Joe Simons said in a statement announcing the settlement.

“Equifax failed to take basic steps that may have prevented the breach that affected approximately 147 million consumers,” he added.

The settlement, subject to court approval, calls for at least $300 million of the penalty to go to affected consumers, and to provide extra credit monitoring beyond what the company has already offered. Additional money will be added to this consumer fund based on the number of claims filed, officials said.

“As part of our settlement, Equifax will provide every American who had their highly sensitive information accessed with the tools they need to battle identity theft in the future,” said New York state Attorney General Letitia James, one of the state regulators in the case.

“Equifax put profits over privacy and greed over people, and must be held accountable to the millions of people they put at risk.”

Some $175 million will be paid to states joining the litigation and $100 million in civil penalties to the federal government.

While Equifax does not deal directly with consumers, it handles sensitive information on them to help lenders determine borrowers’ creditworthiness in the United States and some other countries including Britain. It is one of three large credit-reporting agencies in the United States.

The FTC said that Equifax learned of a vulnerability in its network in March 2017 but failed to patch its network or notify consumers until later in the year.

Origin remains unclear 

While not the largest breach — attacks on Yahoo leaked data on as many as one billion accounts — the Equifax incident could be the most damaging because of the nature of data collected: bank and social security numbers and personal information of value to hackers and others.

It remains unclear who was behind the Equifax hack, but some experts said it appeared to be the work of a state-sponsored actor.

Equifax chief executive Mark Begor said in a statement: “This comprehensive settlement is a positive step for US consumers and Equifax as we move forward from the 2017 cybersecurity incident and focus on our transformation investments in technology and security as a leading data, analytics, and technology company.”

NEW YORK — With its free coffee, couches and glass partitions, shared workspace startup WeWork has shaken up both office culture and commercial real estate.

Brushing aside questions about its business model, the New York outfit shows no signs of slowing down and is now preparing for its Wall Street debut to raise fresh capital.

As recently as this month WeWork was seeking to tap credit markets for $4 billion to expand its footprint in the market for co-working, according to The Wall Street Journal.

When the French startup CybelAngel wanted to open a New York office, WeWork was an obvious choice.

With only basic furniture, their current space overlooks Manhattan's tony 5th Avenue, with a corner office next to a small conference room.

"It's not cheaper" than a traditional office rental, said Jocelyne Attal, CybelAngel's head of operations in New York.

"But we don't have to make a three-year commitment."

She added: "There's security, a reception desk, the building codes are met, there's housekeeping. We don't have to take care of anything."

The free Monday breakfasts and Thursday drinks do not hurt, either.

When the company first appeared on the scene in 2010, the co-working concept was only starting to gain traction thanks to new technologies allowing professionals to work remotely.

The global financial crisis helped business, as it drove financial and creative professionals to launch their own startups.

"WeWork was the first to really gravitate towards all the demand from first time entrepreneurs and small business," said Alex Cohen, vice president at the Compass real estate firm in New York.

At WeWork spaces, all office supplies and utilities are provided, right down to Internet connections and printers. And the decor, a blend of bright colours and industrial themes, appeals to millennials.

But the company also has attracted interest from major companies like Microsoft, HSBC and Facebook. 

Companies with more than 500 employees now represent 40 per cent of WeWork's clientele.

Officially renamed the We Company in January, the firm now manages 485 locations in 28 countries — often entire floors split into separate offices, common spaces and individual work spaces that WeWork furnishes and sublets.

Losses or Investments? 

"Per square foot, it is much more expensive than a typical workplace," said Cohen of Compass.

But for a small business, the benefits per person add up.

"You are sitting in a room with four or five other people, and included in the desk space is the ability to use conference rooms, to enjoy the lounge, the pantry."

But not everyone welcomes the company's rise.

"There's been a certain amount of reluctance among owners about renting space, in light of the fact that WeWork's tenants are relatively short term," he said.

In a recession, the tenants will tend to clear out.

Real estate market players recall the misadventures of a company called Regus — now an office space and co-working giant known as IWG — which nearly went bust following the tech crash of 2001.

Questions linger about whether WeWork's business model is sustainable.

The latest estimates value the company at $47 billion although it continues to burn cash: $1.9 billion in losses last year with revenues of $1.8 billion.

IWG's revenues were almost twice as much last year, and it is also profitable and has $4 billion market capitalisation.

Meanwhile, WeWork has ventured into new areas like residential apartments and education, and tells investors they should see its quarterly losses as investments.

"We really want to emphasise the difference between losing money and investing money," Chief Financial Officer Artie Minson told CNBC.

"At the end of this quarter, we have these cash flow-generating assets."

Certain moves by co-founder Adam Neumann, such as personally investing in real estate before renting it back to WeWork, have also caused some to grit their teeth.

Nevertheless, Cohen says co-working has driven demand for commercial real estate in major urban markets over the last five years.

"Many landlords, despite a certain amount of reluctance, or reluctance among their lenders, have had to accept WeWork as a good opportunity for them," he said.

SAN FRANCISCO — Microsoft on Thursday posted quarterly earnings that trounced expectations, citing growth in partnerships with companies on technology and cloud computing services.

The US technology titan, shifting in recent years to business services from consumer tech, reported its net income rose 49 per cent to $13.2 billion on revenue that was up 12 per cent to $33.7 billion.

Microsoft’s profit in the fiscal fourth quarter that ended June 30 was helped by at $2.6 billion tax benefit, according to the company.

The results showed the “strongest commercial quarter ever”, for Microsoft, said chief financial officer Amy Hood.

Chief Executive Satya Nadella said the results closed out a record fiscal year for the tech giant, which has the largest market value of any company at more than $1 trillion.

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Nadella.

“Every day, we work alongside our customers to help them build their own digital capability...This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

Net income for the fiscal year more than doubled to $39.2 billion on revenue that was up 14 per cent to $125.8 billion, according to the earnings report.

Microsoft shares rose 1.4 per cent to $138.35 in after-market trading that followed release of the earnings figures.

“Microsoft is firing on all cylinders now, growing big in growing markets and even managing growth in mature markets like PCs (personal computers),” said technology analyst Patrick Moorhead of Moor Insights and Strategy.

The Redmond-based company is “cementing its spot” as a provider of software, infrastructure and platforms hosted as services in the internet cloud, according to Moorhead.

Microsoft reported growth across all it businesses except Xbox gaming unit where revenue declined 10 per cent.

A reason is likely that the latest generation Xbox console that debuted nearly six years ago is getting “long in the tooth”, with a successor on the horizon, Moorhead said.

Microsoft in June gave the world a first glimpse of a powerful next-generation Xbox that it aims to release late next year.

Xbox head Phil Spencer pulled back the curtain on “Project Scarlett”, a successor to the Xbox One that will give game makers “the power they need to bring their creative visions to life”.

The new Xbox was promised to be released in time for the Christmas holiday shopping season in 2020.

Xbox battles in the console gaming arena with Sony, which is working on a new generation PlayStation.

The commitment to consoles by longtime contenders in the market comes with the rise of video games hosted as subscription services streamed Netflix-style from data centres in the Internet cloud, which plays to Microsoft’s cloud and Xbox strengths.

Revenue from productivity and business processes division that includes business and consumer cloud services as well as career-focused social network LinkedIn was up 14 per cent to $11 billion, according to the earnings report.

Money taken in at LinkedIn jumped 25 per cent with the service seeing record levels of engagement, Microsoft said.

The company also saw revenue rise from server products; Windows operating software; online search advertising, and its Surface table computers.

Surface revenue growth was “surprising” considering the overall personal computer market was flat, according to Moorhead.

“This quarter was an absolute ‘blow out quarter’ across the board with no blemishes and in our opinion speaks to an inflection point in deal flow as more enterprises pick Redmond for the cloud,” Wedbush analyst Daniel Ives said in a note to investors, referring to Microsoft’s headquarters in Washington State.

“While the stock has been very strong and a trillion dollar market cap is now reached, we believe the cloud party is just getting started in Redmond.”

CHANTILLY, France — Ministers from G-7 top economies on Thursday reached consensus on steps towards an accord on taxing digital giants, an issue that has divided the United States and its allies Britain and France.

French Finance Minister Bruno Le Maire, who hosted the two-day meeting in Chantilly outside Paris, hailed the consensus as unprecedented, although US Treasury Secretary Steven Mnuchin insisted there was more work to be done.

The French parliament this month passed a law that would tax digital giants for income amassed inside a country even if their headquarters are elsewhere, a move the United States complained discriminated against US firms like Google, Apple, Facebook and Amazon.

Britain has announced plans for a similar tax and the G-7 meeting in the tranquil French town — usually famed for its horses rather than horsetrading — was dominated by tough talks to find some common ground.

Le Maire said finance ministers and central bankers had reached an agreement "to tax activities without physical presence, in particular digital activities".

"This is the first time that G-7 members agree in principle on this," he told reporters.

 'Minimum tax' 

France issued a statement saying the G-7 had agreed a two-pronged solution — confirming the principle of companies being able to accrue revenues outside their legal base but also on a minimum tax to be agreed internationally for their activities.

Ministers "fully supported a two-pillar solution to be adopted by 2020", the statement said.

"Ministers agreed that a minimum level of effective taxation... would contribute to ensuring that companies pay their fair share of tax," it said.

A French official, who asked not to be named, said the tax rate would have to be agreed in the future.

German Finance Minister Olaf Scholz said he was happy with the "progress" achieved and in particular with the reference to the minimum tax level in the final statement.

Further talks would now be needed in the wider context of the G-20 group of top economies for an international agreement which would be overseen by the Organisation for Economic Cooperation and Development (OECD).

Scholz expressed hope that a full international consensus could be reached next year under the OECD.

 'Step forward' 

The French parliament's move infuriated President Donald Trump and the US had announced an unprecedented probe against France which could trigger the imposition of tariffs.

Mnuchin struck a slightly more cautious tone than his French counterpart Le Maire while making clear he was well satisfied with the talks.

"We made some significant progress at this meeting, there is more work to be done," Mnuchin told reporters, adding that ministers had made a "big step in the right direction".

He said the United States has "significant concerns" with the French law and planned British legislation and was pleased that both Paris and London would dump the domestic laws if an international agreement was forged.

"Everyone here wants to reach an acceptable international solution," said Mnuchin. "Creating certainty for global multinationals is very important," he added.

 'Warning on Libra' 

The G-7 ministers had far less trouble agreeing a position on new cryptocurrencies such as Facebook's Libra, saying such new and untested digital money risked destabilising the international monetary system and were not ready to be implemented.

"They agreed that projects such as Libra may affect monetary sovereignty and the functioning of the international monetary system," the French statement said.

The other key issue at the meeting was finding a replacement for Christine Lagarde, who has led the International Monetary Fund since 2011 but has resigned to become head of the European Central Bank.

CHANTILLY, France — France on Wednesday expressed defiance in a row with the United States over taxing tech giants that threatens to dominate a G-7 meeting, saying an international accord was the only way to solve the dispute.

French Finance Minister Bruno Le Maire was set to meet Treasury Secretary Steven Mnuchin on the sidelines of the meeting of finance ministers from the world’s seven most developed economies in Chantilly outside Paris. But there was no early sign of any compromise.

The French parliament earlier this month passed a new law that will tax digital giants on revenue accrued inside the country, even if their European headquarters are elsewhere, in a move that will affect US groups Google, Apple, Facebook and Amazon.

The move infuriated the United States which announced an unprecedented probe against France which could trigger the imposition of tariffs.

“It is going to be difficult, I know. The American position has hardened recently,” said Le Maire ahead of his meeting with Mnuchin, which was pushed back due to the US official’s delayed flight.

Le Maire said he would make clear that the French parliament had agreed the tax and this could only be withdrawn if there was an international agreement.

‘Won’t back down’ 

In comments to France Inter radio, Le Maire said France would not back down with its plans to impose a 3 per cent tax on revenue that tech firms earn from French sales, despite the threat of US retaliation.

“The possibility of US sanctions against France exists,” Le Maire said. “There is a legal instrument for that and clearly there is the political will.”

Even before the final vote by French lawmakers, the US announced it was opening a so-called Section 301 investigation into the measure.

A Section 301 investigation was used by the Trump administration to justify tariffs on China. 

But Le Maire said: “France will not back down on the introduction of its national tax. It was decided upon, it was voted upon, it will be applied from 2019.”

The minister had late Tuesday expressed confidence that the G-7 could find a consensus for an international accord which would be overseen by the Organisation for Economic Cooperation and Development (OECD).

“This would be the best way to solve this problem,” said Le Maire.

France became the first major economy to pass such tax legislation last week when parliament gave its final approval.

Britain unveiled legislation last week and Spain said on Wednesday it would move forward once a new government is in place.

But smaller EU states such as Ireland and Luxemburg — low-tax countries which host the European headquarters of digital giants — have prevented a consensus in the EU.

While the measure does not specifically target US internet giants, the French commonly call it the GAFA tax, an acronym for Google, Amazon, Facebook and Apple.

Work has been under way for several years on a reform of the international tax system to ensure that multinationals are not able to escape paying taxes in countries where they do large amounts of their business.

Libra not liked 

Several other thorny issues await G-7 ministers when they begin their meeting against a mixed global economic picture.

Plans by Facebook to launch a virtual currency called Libra have stoked concerns among regulators in numerous countries about regulation and market oversight of cryptocurrencies.

“We’ll reiterate our intention not to allow a private company to acquire the elements of monetary sovereignty,” a French official told AFP last week on condition of anonymity. 

Le Maire has publicly voiced his concerns about Libra, a virtual currency to be backed with a basket of real-world currencies that Facebook says will facilitate online financial transactions.

“The conditions are not yet in place today for Libra to be introduced,” Le Maire said Wednesday before meeting Mnuchin, adding that a regulatory framework was needed.

The ministers are also expected to discuss who will take over at the International Monetary Fund (IMF) after Frenchwoman Christine Lagarde was named to head the European Central Bank. The IMF post has traditionally been held by a European.

WASHINGTON — IKEA said it will close its only US factory at the end of the year, cutting 300 jobs, as it will be more cost effective to make the products in Europe and import them.

The global big-box furniture store, known for its Swedish meatballs and sometimes incomprehensible assembly instructions, said raw material costs were too high compared to plants in Europe meaning prices at the plant in the southern Virginia town of Danville were “significantly higher”.

“We made every effort to improve and maintain the competitiveness of this plant, but unfortunately the right cost conditions are not in place to continue production in Danville, VA for the long-term,” Bert Eades, the company’s site manager, said in a statement last week.

The factory, which opened in 2008 to produce wood shelves and storage units for the US and Canadian markets, will close in December. 

“We will do everything we can in the coming months to support our co-workers through this change as they look for new jobs and training opportunities,” Eades said.

IKEA, which has production units at 24 sites in nine countries, with about 20,000 workers, said it will work with labor representatives and US agencies to provide job search assistance.

LONDON — World stock markets were slightly firmer on Monday, mostly posting modest gains after initial doubts on news that China's economy grew at its weakest pace in nearly three decades as US President Donald Trump's trade war hit home.

Wall Street opened little changed to weaker after its record-breaking run, with the market still counting on the US central bank to cut interest rates sooner rather than later despite recent strong jobs data.

Investors were also waiting to see earnings from JPMorgan Chase and the other banks, as well as other major companies such as Netflix, United Continental and Johnson & Johnson.

In Europe, London's benchmark FTSE 100 index closed 0.34 per cent higher and Frankfurt's DAX 30 put on 0.52 per cent while the Paris CAC 40 edged up 0.10 per cent.

"It was a day without much movement. The markets are really just waiting for a stronger lead on the macroeconomic data front," Yann Azuelos of Mirabaud France told AFP.

Asian equities initially stumbled but then staged a recovery as traders digested Chinese second-quarter gross domestic product (GDP) numbers.

China's economy expanded 6.2 per cent in the second quarter, the slowest headline reading since the early 1990s, official data showed. The outcome was in line with forecasts and within the government's target range.

"There's no doubt in anyone's mind that the trade war is a major contributing factor here," noted Oanda analyst Craig Erlam.
"The Chinese data, while confirming slowdown fears, seems to be lifting basic resource stocks," Erlam said.

"A decent rebound in industrial production is naturally driving this, easily exceeding expectations, and along with retail sales and investment figures, arguably indicates that worst fears are not being realised."

The GDP number, nevertheless, highlights the negative impact the US tariffs stand-off is having on China, as leaders also try to recalibrate its growth model from exports and state investment to one driven by consumer spending.

Observers pointed out that the weakness raised the chances of further monetary easing measures from the central People's Bank of China, with investors also tracking the progress of the latest trade talks between Washington and Beijing.

Fed rate cut 

Amid concerns about the possible impact, some expect the US Federal Reserve (Fed) will cut borrowing costs at the end of the month, though there is speculation about how far it will go.

While bank boss Jerome Powell's congressional testimony last week flagged a reduction, data indicating inflation remains reasonably healthy has kept investors guessing.

"The Fed is under pressure to cut the interest rate this year," noted ThinkMarkets analyst Naeem Aslam.

BEIJING — China’s Fosun Group is considering nearly a billion dollar rescue of embattled British tour operator Thomas Cook, the Hong Kong-listed conglomerate confirmed on Friday.

The Chinese company said in a stock market announcement that there are “ongoing advanced discussions” about a capital injection which would see a debt-for-equity swap at the British travel agency, which has struggled with its debt pile.

The deal would equate to a £750 million ($940 million) rescue of the London-based firm.

Fosun Group is already a minority investor in Thomas Cook — with a stake of around 18 per cent — and owns French luxury holiday resort group Club Med which it bought for more than $1 billion in 2015.

The plan, which is still subject to the approval of shareholders and regulators, would involve Fosun’s tourism group taking a controlling stake in Thomas Cook’s tour operating business and a minority share in its airline arm.

The British firm in May revealed that first-half losses widened on a major write-down, caused in part by Brexit uncertainty that has delayed summer holiday bookings.

In a note to the London stock exchange ahead of the market opening Friday, Thomas Cook said the “new money that would provide sufficient liquidity to trade over the Winter 2019/20 season and the financial flexibility to invest in the business for the future”.

The group had total debt of about 1.9 billion pounds as of March 31, according to data compiled by Bloomberg, and its shares have tumbled 87 per cent over the past 12 months.

“Fosun is hoping that Thomas Cooks’ brand name and global reach will expand its business among wealthy Chinese tourists,” Andrew Collier, managing director at Orient Capital Research, told Bloomberg News. 

“Bondholders are expecting this synergy to work, otherwise they wouldn’t convert debt to equity.”

Shares in Thomas Cook dived almost 40 per cent in early London trade Friday, having risen 20 per cent earlier in the week on rumours of a Fosun bid. 

“Thomas Cook’s largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm. Shareholders face significant dilution — basically it’s wipe out time, said Neil Wilson, chief market analyst at Markets.com.

The Shanghai-based Fosun Group conglomerate has been on a buying spree in recent years, and taking control of Thomas Cook would significantly expand its business in Europe.

As well as tourism it has interests in property, finance, pharmaceuticals, steel, and entertainment.

It is one of China’s so-called “grey rhino” companies — along with Wanda, HNA and Anbang — that have come under growing scrutiny in the last few years from mainland authorities wanting to crack down on debt-fuelled foreign acquisitions.