Business

GENEVA — Six candidates are vying to become the next head of the World Trade Organisation (WTO) — an institution which faced mammoth challenges even before the pandemic-driven global economic crisis struck.

The window to enter the race slams shut on Wednesday, in a speeded-up contest to replace the outgoing WTO Director-General Roberto Azevedo — the Brazilian career diplomat who is stepping down one year early at the end of August.

The six candidates in the running are from Egypt, Kenya, Mexico, Moldova, Nigeria and South Korea.

The new chief must revive stalled trade talks, lay the ground for the 2021 ministerial conference — one of the WTO's major events — and thaw relations with Washington.

The United States, which has threatened to leave the WTO, has blocked the organisation's dispute settlement appeal system since December, and wants China moved up from the developing economies category.

In a surprise move in mid-May, Azevedo, 62, announced that he would end his second four-year term early for personal reasons, forcing the Geneva-based WTO's 164 member states to come up with a successor in just three months instead of the usual nine.

Rather than an election, the procedure for selecting the next WTO boss relies on finding consensus, with candidates gradually being eliminated in turn.

A vote is possible as a measure of last resort, but that scenario has never occurred.

In 1999, when countries could not decide between two runners, both candidates each served a three-year term.

The next incumbent faces a tough task, with the WTO caught in the middle of rising tensions between the United States and China.

"If the process of choosing the next director general is heavily politicised, that could block things up," a diplomatic source told AFP.

If a consensus cannot be reached in time, one of the four deputy directors general will take the reins in September on a caretaker basis.

 First African WTO boss? 

The six candidates are South Korean Trade Minister Yoo Myung-hee; Kenya's former foreign minister Amina Mohamed; Mexico's former WTO deputy director general Jesus Seade Kuri; former Nigerian foreign and finance minister Ngozi Okonjo-Iweala; Egyptian former diplomat Hamid Mamdouh; and former Moldovan foreign minister Tudor Ulianovschi.

Of the directors general since the WTO was created in 1995, three were from Europe, while one each came from Oceania, Asia and South America.

There has never been a WTO leader from Africa and the continent fancies its chances this time, even though there is no regional rotation principle at the global trade body.

However, African nations have so far failed to convene around a single candidate. 

Expecting the contest to come in 2021, the African Union had given early official backing to three figures, among them Mamdouh, a veteran former senior WTO official.

Mamdouh, 67, who is also a Swiss national, was the only one to declare his candidacy.

Nigeria's decision to stand Okonjo-Iweala against him has triggered a legal dispute with the African Union.

Nonetheless, "Nigeria's candidate is gaining ground within Africa," said a diplomatic source.

Okonjo-Iweala, 66, who chairs the board of Gavi, the Vaccine Alliance, said she was receiving "tremendous support".

"I'm sure the African Union will make a decision to choose and support the candidate that merits it," she told reporters in Geneva at a virtual press conference in late June.

The former World Bank number two insisted that the WTO — which has never had a female leader — must choose is next chief based on ability.

"I hope that the WTO director general will be elected first and foremost on merit. And then, if it happens to be a woman or an African, that is also good," she said.

Kenya's sports minister Mohamed, 58, has also previously served as chair of the WTO general council and first ran for the post in 2013. She threw her hat in the ring just before nominations closed, meaning there are three women and three Africans in the contest.

Yoo, 53, is the other female candidate.

The youngest contender is 37-year-old Ulianovschi, while Seade, at 73, is the oldest. He has led posts at the World Bank and the International Monetary Fund.

SEOUL — Samsung Electronics forecast a 23-per cent rise in second-quarter operating profit on Tuesday, with strong demand for memory chips and displays overcoming the impact of the coronavirus pandemic on smartphone sales.

The smartphone and memory chip maker said in an earnings estimate that it expected operating profit to be 8.1 trillion won ($6.8 billion) for April-June, up from 6.6 trillion won in the same period last year.

The prediction was far ahead of analyst forecasts of a single-digit decline.

Lockdowns imposed around the world in the face of the coronavirus pandemic — especially in Europe and the United States — have boosted Samsung's chip business with data centres moving to stockpile DRAM chips to meet surging demand for online activities.

"The earnings surprise seems to have stemmed from Samsung's memory chip sector," said Park Jin-suk of market observer Counterpoint, pointing to "increased demand for memory chips for PCs and a continuing rise in DRAM chip prices".

Similarly TV sales, which have been on a long-term decline, were "moving upward as people spend more time at home", said James Kang, an analyst at market observer Euromonitor International Korea.

Samsung attributed the estimated operating profits rise to a one-off profit generated from its display division, without offering details.

The company predicted overall sales in the second quarter would be down by 7.3 per cent from a year earlier.

The firm is the world's largest smartphone maker, accounting for 20 per cent of global market share in the first quarter — ahead of China's Huawei with 17 per cent and Apple on 14 per cent — according to Counterpoint.

Global smartphone sales slumped more than 20 per cent year-on-year in the first quarter, their worst performance ever, according to market tracker Gartner, as the pandemic hit consumer spending and sparked widespread economic uncertainty.

Border boost 

Looking forward, analysts expect the firm's smartphone and television businesses to improve, with mobile sales growing as restrictions are lifted in some parts of the world.

Smartphone "sales in the US and Europe showed signs of improvement from late in second quarter", said Park.

"Going into the third quarter, we expect the sales figure to rise," he added, predicting smartphone sales in the "low 70 millions" for July-September.

A recent military brawl between India and China also could play in Samsung's favour, Kang said, if Indian consumers choose Samsung devices over Chinese brands amid heightened nationalistic sentiment against Beijing.

Despite the positive forecast, Samsung Electronics shares closed down 2.9 per cent on Tuesday, leaving them nearly 15 per cent off January's record high.

LG Electronics, South Korea's second largest appliance firm after Samsung, forecast second-quarter operating profits would plunge 24.4 per cent year on year to 493.1 billion won.

Its shares closed down 3.8 per cent.

Samsung Electronics is crucial to South Korea's economic health.

It is the flagship subsidiary of the giant Samsung group — by far the largest of the family-controlled conglomerates known as chaebols that dominate business in the world's 12th-largest economy.

Its overall turnover is equivalent to a fifth of the national gross domestic product.

Samsung withholds net profit and sector-by-sector business performance data until it releases its final earnings report, expected later this month.

WASHINGTON — Five more US air carriers including Delta Air Lines and United Airlines will take out loans under the CARES Act stimulus package, Treasury Secretary Steven Mnuchin said on Tuesday.

The decision means most major US air carriers have agreed to accept financing from the $2.2 trillion measure passed in late March to blunt the impact of the coronavirus pandemic.

"We welcome the news that Alaska Airlines, Delta Air Lines, JetBlue Airways, United Airlines, and Southwest Airlines have now also signed letters of intent," Mnuchin said in a statement.

The CARES Act provided for $25 billion to be lent to airlines. 

While carriers were initially hesitant to take the money for fear of draconian conditions, Treasury announced last week that American Airlines, Frontier Airlines, Hawaiian Airlines, Sky West Airlines and Spirit Airlines agreed to the government's terms.

Treasury did not specify the amount each airline was receiving, saying only that it required borrowers to provide warrants, which are financial instruments that can be converted into shares, or other forms of debt or equity.

Borrowers must also comply with conditions like maintaining employment and not paying employees above set levels, along with temporarily suspending the payment of dividends and share buybacks.

The loans are on top of another $25 billion package paid out by the government in exchange for a commitment by the airlines not to cut jobs until after September 30.

Last week, American Airlines said it had signed a letter of intent with the Treasury for a $4.75 billion loan, but company executives warned in a letter that they expected to have 20,000 more employees than necessary by the fall.

LONDON — China’s ambassador to Britain on Monday warned that London faced a risk to its international reputation if it blocked Huawei from the nation’s 5G network.

The Financial Times (FT) said the government will decide this month to phase out the Chinese technology giant’s equipment.

A UK security investigation, yet to be published, has raised “very, very serious” questions over Huawei’s limited 5G role in Britain, the financial daily added.

Culture Secretary Oliver Dowden said separately he had received the National Cyber Security Centre report and there would be a “significant” impact on Huawei’s 5G role.

But Beijing’s top envoy in London, Liu Xiaoming, described Huawei’s involvement as a “win-win” for both the company and UK-China relations.

“We have tried our best to tell the story of Huawei but we can’t control the British government decision,” he told a news conference.

However, he warned that if Huawei was rejected, it could impact Britain’s international standing and erode the trust of other existing or potential overseas investors.

He suggested it would be an example of Britain succumbing to “foreign pressure”, in a clear reference to Washington’s position on Huawei. 

British Prime Minister Boris Johnson is under intense pressure from the US, and members of his own ruling Conservative Party, to cut ties with Huawei.

US officials argue that the company could spy on Western communications or simply shut down the UK network under orders from Beijing — a charge the company denies.

Huawei’s position has been complicated further by Washington’s decision to roll out a new wave of sanctions to cripple the company’s production of the chips used in 5G.

The FT said Johnson was drawing up plans to remove the Huawei technology from Britain’s 5G network after warnings that the US sanctions could curtail the company’s access to American semiconductors and force it to use riskier supplies.

Ambassador Liu rejected claims China was a “hostile country”.

“We want to be your friend, we want to be your partner but if you want to make China a hostile country you have to bear the consequences,” he added.

BERLIN — There’s no sign of the usual lunch crowd at Berlin’s Zen Kitchen, with just a few scattered diners dotting its terrace despite the sunny weather.

Two months after Germany lifted its lockdowns, the small Asian restaurant, like so many others, is struggling to attract customers as coronavirus fears linger.

“We’ve only seen 20 to 30 per cent of our clientele back since the reopening,” said Zen’s owner Vu, whose eatery is located near Berlin’s busy Unter den Linden avenue.

Having weathered the pandemic better than many of its neighbours so far, Germany was among the first countries to reopen its economy and its progress is being closely watched across the continent.

Restaurants, bars and hotels have adapted to the new normal with face masks, physical distancing and by asking customers to share contact information so they can be alerted to any fresh outbreak.

But despite the efforts, Germany’s hospitality sector has struggled to pick up speed, highlighting the difficulties facing Europe’s top economy as it confronts the steepest recession since World War II.

Chancellor Angela Merkel’s government, which has pledged over a trillion euros in stimulus spending to cushion the coronavirus blow, is hoping for an economic rebound in the second half of 2020.

“I’m certain that we can halt the downturn in our economy after the summer break and that the German economy will start to grow again by October at the latest,” Economy Minister Peter Altmaier told the Bild am Sonntag daily.

The unemployment level is expected to keep inching up “before slowly decreasing from November”, he added.

‘Afraid to sit inside’ 

But for now the glass remains half full for many businesses.

“The situation is dramatic,” the German Hotel and Restaurant Association (DEHOGA) summarised, noting that restaurant owners expect June revenues on average to be 60 per cent lower than last year.

“Sure, customers are coming back but very, very slowly,” said Sahin Ciftci, the owner of Zeus pizzeria in Berlin’s trendy Friedrichshain district.

“People are still afraid to come and sit inside,” he sighed, surveying his empty dining room at midday.

The lack of punters combined with the extra expenses caused by the new hygiene regulations have left the sector fearing a record wave of bankruptcies.

“Without more state support, nearly 70,000 businesses will be on the brink of ruin,” according to DEHOGA.

Last month, Merkel’s government launched a scheme to help hard-hit smaller companies like restaurants cover their fixed costs, offering up to 150,000 euros ($169,000) over a three-month period.

Berlin also hopes a six-month reduction in sales tax from July will encourage Germans to hit the high street and open their wallets again.

But DEHOGA President Guido Zoellick told AFP more targeted help was needed that is “available to all restaurants”.

‘Corona cookies’ 

Some restaurateurs are banking on the return of foreign tourists to keep them afloat over the summer holidays.

Germany recently reopened its borders to most EU members as well as a slew of other countries, with more to follow depending on how the pandemic evolves.

Berlin’s five-star Adlon hotel, a stone’s throw from the iconic Brandenburg Gate, is already creaking back to life with guests thronging its lavish entrance hall.

“The recovery has started. It’s slow but it’s there,” said the hotel’s Director of Sales and Marketing Sebastian Riewe.

In Berlin’s historic Nicholas quarter, where cobbled streets are normally packed with shoppers and sightseers, cafe owner Sylke Oehler remains upbeat.

“The tourists will come back soon for sure,” she told AFP sitting outside her health food cafe Zur Alten Zicke.

Until then, the forty-something entrepreneur is working hard to drum up local custom through advertising and by switching up the menu — even creating vegan, gluten-free “corona cookies”.

“I call it healthy comfort food,” she said. “It’s won me some new customers.”

PARIS — Although crude prices have rebounded from coronavirus crisis lows, oil executives and experts are starting to ask if the industry has crossed the Rubicon of peak demand.

The plunge in the price of crude oil during the first wave of coronavirus lockdowns — futures prices briefly turned negative — was due to the drop in global demand as planes were parked on tarmacs and cars in garages.

The International Energy Agency (IEA) forecast that average daily oil demand will drop by eight million barrels per day this year, a decline of around eight per cent from last year.

While the agency expects an unprecedented rebound of 5.7 million barrels per day next year, it still forecasts overall demand will be lower than in 2019 owing to ongoing uncertainty in the airline sector.

Some are questioning whether demand will ever get back to 2019 levels.

"I don't think we know how this is going to play out. I certainly don't know," BP's new chief executive Bernard Looney said in May.

The COVID-19 pandemic was in full swing then with most planes grounded and white-collar workers giving up the commute to work from home.

"Could it be peak oil? Possibly. I would not write that off," Looney told The Financial Times.

Summited? 

The concept of peak oil has long generated speculation. 

Mostly, it has been focused on peak production, with experts forecasting that prices would reach astronomical levels as recoverable oil in the ground runs out.

But in recent months, the concept of peak demand has come into vogue, with the coronavirus landing an uppercut into fuel demand for the transportation sector followed by a knock-out punch from the transition to cleaner fuels.

Michael Bradshaw, professor at Warwick Business School, said environmental groups are already lobbying to prevent the Paris agreements becoming another casualty of the pandemic, stressing the need for a Green New Deal for the recovery.

"If they are successful, demand for oil might never return to the peak we saw prior to COVID-19," he said in comments to journalists.

The transport sector may never fully recover, Bradshaw posited.

"After the pandemic, we might have a different attitude to international air travel or physically going into work," he said.

 'Science fiction' 

Other experts say we haven't reached the tipping point yet, and might not for a while.

"Many people have said, including some CEOs of some major companies, with the lifestyle changes now to teleworking and others we may well see oil demand has peaked, and oil demand will go down," IEA Executive Director Fatih Birol said recently.

"I don't agree with that. Teleconferencing alone will not help us to reach our energy and climate goals, they can only make a small dent," Firol added while unveiling a recent IEA report.

Moez Ajmi at consulting and auditing firm E&Y dismissed as "science fiction" the idea that a definitive drop in oil demand could suddenly emerge.

He expects a slow recovery in demand even if the coronavirus leaves the global economy weakened.

That weakness would also likely slow adoption of greener fuels.

"It will take time for fossil fuels, which today still account for some 80 per cent of primary global consumption to face real competition" from rival energy sources, he said.

Meanwhile, the oil industry could face financing challenges.

Bronwen Tucker, an analyst at Oil Change International, says the industry is now under pressure from investors.

After "a pretty big wave of restrictions on coal and some restrictions on oil and gas, the risks to oil and gas investment right now feel a lot more salient", she said.

The industry is already writing down the value of assets to face up to the new market reality of lower demand and prices.

Royal Dutch Shell said this past week that it will take a $22 billion charge as it re-evaluates the value of its business in light of the coronavirus.

Last month, rival BP reduced the worth of its assets by $17.5 billion.

"This process has further to run, and we expect further large impairments to occur across the sector," said Angus Rodger of specialist energy consultancy Wood Mackenzie.

FRANKFURT AM MAIN — German Finance Minister Olaf Scholz said on Sunday he wanted to overhaul the country’s finance watchdog Bafin and give it more powers after a massive fraud scandal involving digital payments firm Wirecard.

Wirecard filed for bankruptcy late last month after admitting that 1.9 billion euros ($2.1 billion) was missing from its accounts, a case that has triggered criticism of the auditors and regulators meant to be overseeing the firm.

Scholz told the Frankfurter Allgemeine Sonntagszeitung newspaper he wanted to ditch the current two-stage procedure whereby Bafin is only called in when red flags are raised in a first vetting of accounts by a private monitoring body.

“We need far-reaching reforms,” Scholz said, adding that Bafin needed to step in earlier and have the right to launch “special audits on a large scale”.

“I want to give Bafin more control rights over financial reports, regardless of whether the company has a banking division,” he went on.

“If we decide that Bafin needs more money, more employees and more competencies, I will work to ensure that happens.” 

Bafin chief Felix Hufeld has admitted that his watchdog “had not been effective enough” at preventing the Wirecard disaster.

But auditing firm EY has also come under scrutiny for signing off on Wirecard’s accounts for years before finally warning last month of an “elaborate and sophisticated fraud” at the payments provider.

The scandal has raised questions about whether auditing firms should be rotated more frequently, Scholz said, and whether it makes sense for them to advise and monitor a company at the same time.

German shareholders’ association SdK, which has launched legal action against two EY auditors and one former employee over Wirecard, welcomed Scholz’s proposals.

Bafin needs to be “completely rebuilt”, SdK chief Daniel Bauer told the Handelsblatt financial daily.

“It’s not enough to increase the number of employees,” he warned. “They have to be the right employees who actually understand the subject matter.”

LONDON — Ineos, the chemicals giant owned by British billionaire Jim Ratcliffe, is driving through plans to build a 4x4 vehicle despite a car sector stalled by the coronavirus pandemic.

“The task of building a brand and making known to everybody what the proposition is, is quite ambitious,” said Ineos Automotive CEO Dirk Heilmann, as more detailed plans regarding the project, including on its design, were revealed.

Ineos Grenadier, described by the company as “a stripped back, utilitarian, hard-working 4x4”, will enter production in late 2021 at a new factory in Wales, creating an initial 200 jobs, a statement said on Wednesday.

“Deliveries will start first in the UK and Europe and in other global markets” thereafter, it added amid a project investment totalling £1.0 billion ($1.2 billion, 1.08 billion euros).

It comes at a time when the auto sector worldwide has seen sales and production crushed by COVID-19 lockdowns shutting factories and showrooms, although many have since reopened.

“It is a very difficult time for the automotive industry, though it is worth bearing in mind that these [car launches] are relatively enduring investments,” said Cardiff University Professor Peter Wells, an expert on the global automative industry.

“In some respects starting production now is actually using the current situation to the advantage of the business,” he told AFP. 

“It will give the business time to smooth out any production problems or any quality concerns before increasing the [assembly] line speed to full output,” Wells added.

Car enthusiast Ratcliffe identified a gap in the market for such a vehicle after the final Land Rover Defender was produced in 2016. 

Ineos has meanwhile teamed up with leading car groups, including BMW.

“Combining rugged British spirit with German engineering rigour, the Grenadier will be a truly uncompromising 4x4, built from the ground up,” Ineos said Wednesday.

It predicted that the vehicle would appeal to landowners, forestry workers, explorers and ski operators.

Wait for electric 

“In some regards the car is a rather dated concept, that is not attuned to the emergent world of low-carbon automobility,” said Wells.

“However, it is also a niche product, and in that sense builds on a noted aspect of the UK automotive industry.”

Heilmann said Ineos was not yet in a position to have a vehicle that did not run on petrol or diesel.

“It’s not the time to introduce this,” he told reporters at a briefing ahead of Wednesday’s formal update, noting there was not a battery allowing the vehicle to be driven far enough.

Ratcliffe’s move into car manufacturing follows a failed attempt by British inventor James Dyson, who last year pulled the plug on plans to build an electric car, citing an inability to make it a commercial success.

LONDON — Energy giant Royal Dutch Shell will take a vast charge of up to $22 billion (19.6 billion euros) due to chronic fallout from coronavirus and collapsing oil prices, it announced on Tuesday.

The Anglo-Dutch company said in a statement that it will face a charge of between $15 billion and $22 billion in the second quarter, after crude futures had suffered a spectacular crash on COVID-19 fallout, the Saudi-Russia price war and oversupply.

Thus, the charge will likely be larger than the $15.8 billion net profit the firm earned last year.

Tuesday's announcement comes after rival BP revealed earlier this month that it was taking a hit of between $13 billion and $17.5 billion in the same period as a result of sustained coronavirus fallout that ravaged the world's appetite for oil.

"Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient," Shell said in the statement.

It added: "In light of this, Shell is announcing today a revised long-term commodity prices and margin outlook, which is expected to result in non-cash impairments in the second-quarter results."

The move also reflected a planned reshaping of refining activities as it seeks to move towards becoming carbon neutral by 2050.

Shell also predicted that upstream crude production was expected to stand at between 2.3 and 2.4 million barrels of oil equivalent in the second quarter.

"Although this production range is higher compared with the outlook previously provided, it has had a limited impact on earnings in the current macro environment," the group cautioned.

It forecast that benchmark London North Sea Brent crude prices would stand at an average of just $35 per barrel in 2020, before recovering somewhat to reach $40 in 2021, $50 by 2022 and $60 by 2023.

Virus turmoil may continue 

In response to the killer disease, companies worldwide closed their doors and airlines grounded planes towards the end of the first quarter.

Coronavirus slammed the brakes on global economic activity and shattered oil-intensive industries.

The outbreak also sent oil prices plunging off a cliff — and even caused them briefly to turn negative.

Prices have since rebounded sharply on an easing global crude supply glut and as governments relax lockdowns and businesses slowly reopen.

Yet, some analysts warn that the market remains vulnerable to a second wave of coronavirus infections and lockdowns.

BP, which is axing around 10,000 jobs or 15 per cent of its global workforce in response to virus turmoil, decided Monday to sell its petrochemical business to privately-owned rival Ineos for $5 billion to bolster its finances.

Shell has yet to take such drastic action, but announced in March that it will cut operating costs by $3-4 billion over 12 months, and reduce its annual spending by one-fifth to $20 billion.

In April, it cut its dividend for the first time since the 1940s after sinking into loss in the first quarter of this year. The loss of $24 million compared to a profit after tax of $6 billion in the same period a year earlier.