Signalfire

Two years after the food crisis, when soaring prices raised the spectre of mass hunger and starvation, food inflation has made a comeback.

For Potash Corp. of Saskatchewan Inc. POT-T , the world’s biggest fertilizer maker, the price surge could not come at better time as it fights a $39-billion (U.S.) takeover bid from BHP Billiton Ltd. But in the developing world, the strain of higher food costs is beginning to show.

Last week’s riots in Mozambique, which left at least 10 dead, were the first food riots since the crisis of 2007 and 2008, when violent unrest swept through Haiti, Egypt, Western Africa and several other poor regions. The Mozambique riots followed the government’s decision to raise bread prices by 30 per cent, though rising water and electricity costs also helped to spark the uprising.

International food prices were up 5 per cent in August, the biggest one-month increase since last November, said the United Nations Food and Agriculture Organization in Rome, which has called a one-day meeting on Sept. 24 to examine the global markets for grains and rice. European wheat prices hit more than €231 ($308 Canadian) a tonne last week, which was close to the two-year high of €236 set in August, largely because drought has hammered the crop in Russia. Corn prices are at their highest level since mid-2009. Sugar and oilseed prices are also climbing.

The FAO, however, is being careful not to describe the galloping prices as a “crisis” or an “emergency,” noting that its Food Price Index, while up substantially in recent months, is still 38 per cent below its peak in June, 2008. The organization’s approach underscores how policy makers are trying not to set off the alarm, partly out of fear that the expectation of higher prices will drive hedge funds and other financial players into food futures, causing prices to rise even more, as happened in 2007-08

“The worst is behind us already,” Abdolreza Abbassian, the FAO’s senior grains economist, said in an interview Monday, noting that last week’s extension of a wheat export ban in Russia caused barely a ripple in the markets.

“This is not a food crisis. If you say food ‘crisis,’ you get a food ‘crisis’ because the speculators pile in.”

The global food markets are “overreacting,” he said, to the Russian export ban because almost none of the conditions that were in place two or three years ago exist today. World wheat stockpiles, at 175 million tonnes for the 2010-11 season, may be down somewhat from their peak but are still 40 per cent higher than in 2007-08, according to the U.S. Department of Agriculture; oil prices are about half of their 2008 peak of $147 (U.S.) a barrel; and economic growth is weak in Europe and North America, which means the demand for animal feed is barely rising.

Still, Mr. Abbassian said the recent sharp rise in food prices is not welcome and that extreme weather conditions, which seem more common, will ensure that food markets become more volatile than usual. Volatility, he notes, attracts speculators, whose trades can only increase the frequency of wild price swings. “Liquidity can come from any direction at any time,” he said.

Those swings, and the way they impact farmers’ use of fertilizer, are a key factor in the takeover drama between Potash Corp. and BHP, the world’s largest mining company. Potash Corp. dismissed BHP’s unsolicited $130-per-share bid as “grossly inadequate,” partly because it believes rising food demand and prices will translate into robust fertilizer prices.

Potash Corp. is exceedingly bullish on potash prices as food prices and demand pick up momentum. In its directors circular, amended on Friday, it said it could generate $10-billion in EBITDA – earnings before interest, taxes, depreciation and amortization – by 2015, assuming full operational capacity (which is said it cannot guarantee) and a potash price of $800 a tonne.

Analysts suggested extremely high utilization rates are a dream, given that potash supplies should increase by half by 2020, outpacing demand. UBS said utilization rates “above 82 per cent are required to shift up pricing significantly. … Utilization rates will peak at 75 per cent in 2020, but will be insufficient to catalyze a significant shift in pricing.”

The UBS price estimate for potash between 2013 and 2015 is $400 a tonne, up from this year’s estimate of $340. This suggests the recent food price surge will have to be long lasting if it is to have a dramatic effect on potash prices.

Potash rebounds

Potash is used almost exclusively for fertilizers and has no substitute. Fertilizer use is one of the most cost effective ways to boost crop yields, though many poor farmers in developing countries cannot afford it.

Last month, analysts at UBS predicted a sharp rebound in global potash consumption this year, to 27.5 million tonnes, up 42 per cent from 2009, when food prices slumped. UBS forecasts consumption of 32.4 million tonnes next year, following by several years of steady, if unspectacular, growth.

ROME — The UN’s food and agriculture body on Friday called a special meeting to address growing tensions on the food markets, as Russia prolonged a wheat export ban and food riots broke out in Mozambique.

But the Food and Agricultural Organization (FAO) said the September 24 gathering was not an emergency meeting and dismissed any comparison with the situation in 2007-2008.

During that period, food shortages and the resulting price rises sparked riots throughout the developing world.

“The fundamentals are right, they are not those before the crisis in 2007 and 2008,” an FAO official insisted.

“There are plenty of stocks and prices are below the peaks of 2008. But there is lots of turmoil.”

Abdolreza Abbassian, an economist and grain analyst at FAO said although the organisation did not fear a new crisis, “there is already some anxiety on the markets.”

Russia’s announcement “will prolong anxiety and volatility,” he added.

Prime Minister Vladimir Putin said Thursday that Russia, a major world producer, would not lift a ban on grain exports before next year’s harvest.

That extended the embargo until at least mid-2011 after a record drought destroyed a quarter of Russia’s harvest.

In Mozambique meanwhile, seven people were killed and 288 injured during riots Wednesday and Thursday over rising bread and fuel prices in and around Maputo, the capital of the country.

The price of bread has risen 17 percent, increasing pressure on struggling households in a country with a per-capita income of just 794 dollars (620 euros) a year.

BEIJING (AP) — China has ordered local leaders to cool a surge in politically sensitive food prices by raising vegetable production amid rising tensions in poor countries over surging food costs.

Mayors were told to make sure local markets have a week’s supply of vegetables, said a Cabinet announcement on Friday. It said state banks were told to lend to producers to increase output amid shortages blamed on summer flooding and drought in some areas.

“Making sure of vegetable supplies and price stability is an important task for now and in the future,” the Cabinet statement said. “Local governments should manage inflation expectations well and realize the importance and urgency of this.”

China’s food price inflation spiked to 6.8 percent in July over a year earlier, pushing overall inflation to 3.3 percent, its highest level this year, according to government figures.

Elsewhere, a jump in food prices triggered deadly riots in Mozambique this week and the poor in Asia, the Middle East and Africa are under strain after global prices jumped 6 percent in the past two months alone.

No unrest has been reported in China but food prices are politically sensitive in an economy where the poor majority spend up to half their incomes to eat.

Beijing has repeatedly emphasized the importance of ensuring adequate food supplies this year and has threatened to punish merchants who profiteer.

China also suffered a spike in food costs earlier when vegetable prices jumped 14.9 percent in April and fruit prices soared 16.4 percent.

Beijing has repeatedly said it is confident of meeting its 3 percent inflation target for 2010. But private sector analysts expect overall August inflation to rise above 3.5 percent, driven partly by food costs.

01 Sep 2010

Anxieties over the rising cost of food are bothering consumers in rich and poor countries alike, and stoking fears of social unrest in impoverished, unstable parts of the world once again.

On Wednesday, at least six people – including two children – were killed during violent demonstrations over soaring prices for basic necessities, including bread and fuel, in and around the capital of Mozambique, one of Africa’s poorest countries, sources told Reuters. The government has just increased bread prices by 30 percent.

“I can hardly feed myself. I will join the protest because I’m outraged by this high cost of living,” said Nelfa Temoteo, who lives in Maputo’s crowded Malhazine suburb.

The violence echoes the food price crisis of 2007-2008, which helped push the number of hungry people in the world above a billion, and sparked protests and riots in nearly 40 countries, including Mozambique, Egypt, Haiti and Lebanon.

In Britain too, shoppers will have noticed their supermarket bills going up again. The overall price of food and non-alcoholic drinks rose by 1 percent from June to July, the biggest single monthly rise ever recorded in government figures, the Daily Telegraph newspaper reported. And in Pakistan, where the worst floods in decades have damaged 3.6 million hectares of maize, rice, cotton and sugar cane, the U.N. Food and Agriculture Organisation (FAO) is warning the next wheat harvest is at risk as the disaster has destroyed more than 0.5 million tonnes of seed stocks ahead of the planting season, which starts this month.

“Food aid alone will not be enough. If the next wheat crop is not salvaged, the food security of millions will be at risk,” said Daniele Donati, FAO’s regional emergency operations chief.

In late August, Pakistan’s Dawn newspaper criticised the government-subsidised Utility Stores Corporation for hiking the price of certain foodstuffs like oil, ghee, pulses and gram flour by more than 20 percent, wiping out discounts it had earlier announced for the holy, fasting month of Ramadan.

The paper said the price of wheat flour is also creeping up in Asia’s third-largest wheat producer, and the higher cost of food is likely to hit the poorest hard.

“We must ask if this is just the beginning of a series of nasty shocks for the low-income consumer. Though far from perfect, the utility stores are a lifeline for those with limited means,” Dawn said in an editorial, urging the government to keep essential items at affordable levels in the shop chain, which is meant to sell staples at below-market prices.

People in crisis are also suffering in the Somali capital of Mogadishu, where food prices have reportedly shot up since Ramadan began, as Islamist rebels renewed their military campaign against the fragile government. One butcher told Associated Press he’s selling a kilo of meat for $3, up from $2 before Ramadan, and a sugar importer said supplies are dwindling in markets because traders have left or stopped importing food because of the fighting.

WHEAT THE MAIN CULPRIT

Ramadan may be a contributing factor in Muslim countries, as people stock up for holidays and special occasions. But across the world, food prices jumped sharply last month, which is likely to exacerbate local causes like floods, conflict and religious customs.

Surging wheat prices – mainly due to Russian restrictions on sales following a major drought there – drove international food prices up five percent in August, the biggest month-on-month increase since November 2009, the FAO said on Wednesday. The FAO’s Food Price Index – a basket of meat, dairy, cereals, oils, fats and sugar – has reached its highest level since September 2008, but is still 38 percent below its peak in June 2008.

The U.N. food body says the forecast for world cereal production this year has been lowered by 41 million tonnes to 2,238 million tonnes since June, but that would still be the third highest annual amount on record and above the five-year average.

Expected global rice production for 2010 has also been revised downward – mainly due to Pakistan’s floods – and now stands at 467 million tonnes, 5 million tonnes lower than June’s forecast but still 3 percent more than in 2009 and a historical record.

The FAO says the disturbances in cereal and rice markets will be tackled at a special inter-governmental group gathering it’s holding on Sept. 24.

No doubt both international and national policy makers will be keen to avoid a repeat of the crisis two years ago, and work done by researchers who analysed their responses back then should help prevent the same mistakes being made again.

Julia Compton of the Overseas Development Institute described in a blog earlier this year how bad government action can make the situation worse, citing the example of one Asian country that stoked fears of a national rice shortage, sending better-off consumers scurrying out to the shops to buy as much as they could, leaving the shelves empty.

And even though cash payments were recommended by international agencies as one of the best ways to help poor people afford expensive food, many countries found they couldn’t set up national welfare systems just like that, she wrote.

WHEN TO ACT?

Prices may not yet be spiralling as severely as in 2008, but how bad should things get before those in power start taking action?

In Pakistan, politicians know they can’t afford to upset a population mired in crisis any further, with an official indicating to Reuters last week the government would likely scrap plans to export 2 million tonnes of wheat.

Given it’s a staple food, any shortages or steep price hikes would further inflame public anger towards the government, which has faced mounting criticism over its handling of the catastrophe.

Pakistan banned wheat exports in 2007 because of shortages and high domestic prices – but some experts say such restrictions are a short-sighted response because they tighten supplies on world markets, pushing international prices even higher.

Wheat futures – financial contracts for supplies to be delivered at a later date – hit two-year highs earlier in August after Russia slapped on an export ban.

It’s too early to tell exactly what trouble today’s international price developments spell for the world’s poorest a little further down the line, but the alarm bells have started ringing.

The Financial Times reported on Monday that Egypt has seen small, localised public protests against high food price inflation.

Ministers have reassured voters there won’t be a rise in the price of the country’s subsidised loaves – sold for less than 1 US cent each – fearing social upheaval. So rather than hitting poor people’s pockets for now, the budget deficit is set to swell as the government absorbs the growing cost of wheat imports for its citizens’ daily bread.

While countries will respond differently, depending on their existing food policies and poverty levels, no one can say they haven’t been warned this time.

29 Aug

ZHENGZHOU: In a vast muddy cornfield scarred with the tracks of heavy vehicles, two young engineers pore over a construction blueprint showing a grid of 100 rectangular factory blocks.

Here on the outskirts of Zhengzhou, the provincial capital of Henan in China’s interior, Foxconn, the largest company and exporter in “the workshop of the world” has staked its future on a mammoth new industrial complex.

New powerlines are being erected and roads built to the site under the watchful eye of local farmers who daydream about the entrepreneurial opportunities that up to 200,000 new workers in the area might present.

Taiwan-based Foxconn Technology Group, which includes its flagship Hon Hai Precision Industry, makes gadgets for a constellation of global brands including Apple, Dell, Nokia and Hewlett Packard.

Most of that production comes from its plants in Shenzhen, in the Pearl River Delta area, one of the three major Chinese coastal manufacturing hubs, along with the Yangtze River area around Shanghai and Bohai Bay north of Beijing.

With this leap into Henan province, 1,600 km (1,000 miles) from Shenzhen, Foxconn is expanding aggressively inland, where wages are lower and workers more plentiful, keeping mostly higher-value, engineering, and R&D work in China’s coastal areas. It will have as many as 1.3 million workers in China by the end of 2011, up from 920,000 now, company officials say.

Foxconn is by no means alone. Intel, the world’s biggest chip maker, opened a $600 million plant this year in Chengdu and Hewlett-Packard built a laptop factory in Chongqing, both cities in the western province of Sichuan.

Cheaper labour is not the only attraction. The worker has become the consumer in China, with the government determined to raise household incomes and reduce wealth disparities. Locating factories nearer to markets makes dollars and sense.

“Most of the villagers here think it’s a good thing,” said Meng, Xiangting, 46, a farmer prying stones from a wall with a crowbar for use on his own crumbling home. “They’ve guaranteed jobs for anyone in the area between 18 to 50 years of age. I’m not interested. I’d like to open a small shop for the workers instead.”

With factories closer to home, children of farmers like Meng won’t have to make the annual trek to distant coastal regions and live desultory lives as migrant workers in factory towns.

A rash of suicides at Foxconn’s Shenzhen plant which the company said weren’t work-related but which victims’ families blamed on tough conditions, helped fuel a wave of labour unrest — and has become yet another motivation to move operations into the less volatile interior.

Foxconn’s move will touch off a mini-boom in an ancient Chinese capital perhaps best known for the 5th-century Shaolin temple that is home to its famous brand of Kung Fu.

Foxconn’s suppliers will have to relocate as well. The workers will need housing and places to shop. Some may even be able to afford cars to commute to work on the new highways being built to Foxconn’s mega-factory and its satellites.

Lydia Wang, a 28-year-old marketing manager in Shanghai, gripes that the shoes and clothing she normally buys are at least 50 percent pricier than in 2009. Wu Sengyun, a 54-year-old retiree in the coastal city of Ningbo, Zhejiang, says prices of fruit and fish are up more than 20 percent in the past year.

Willy Lin has cut back on free drumsticks in the canteen of his Jiangxi clothing factory as meat and vegetables grow dear. “The workers suffer,” he says. “Everybody is crying.”

Officially, China’s consumer price inflation topped out at 3.3 percent in July compared to a year before, a 21-month high. Officials say the spike is a one-off caused by crop damage from recent flooding. Other costs, they say, such as cars, mobile phone bills, and clothing, are falling, and pressure on prices should ease as the economy cools. At an Aug. 12 press conference, Pan Jiancheng, a deputy director in the statistics bureau, said the inflationary threat was “overhyped.”

Consumers, investors, analysts and academics interviewed by Bloomberg BusinessWeek in its Aug. 30 issue beg to differ.

“There has been a jump in prices that isn’t reflected in the numbers,” said Chinese Academy of Social Sciences economist Yu Yongding, a former adviser to China’s central bank.

Michael Pettis, a finance professor at Peking University, said he wonders how a country that grew 10.3 percent last quarter and is seeing upward pressure on wages could register a price rise of a few percentage points. Multinationals in China expect to raise wages an average of 8.4 percent this year, according to Hewitt Associates Inc., a human resources consultant.

Ordinary Chinese

Ordinary Chinese have yet to see increases in their housing, education, and medical expenses reflected in the official numbers, these analysts said.

“Inflation could well be 6 percent now for most people in China,” Peking University’s Pettis said.

If the doubters are right, then the government has an inflation problem that it either hasn’t figured out how to measure, or has chosen to ignore. Other vital Chinese statistics, like retail sales and unemployment, have also been murky. In the case of inflation, misjudging could prevent the kind of swift action needed to tame prices now, and force the government to apply harsher measures later, such as an increase in interest rates or an appreciation of the currency to curb growth. There are political risks too: Social unrest in China has been triggered when ordinary workers can’t keep up with the cost of living.

Data ‘Oddity’

Unlike most countries, China refuses to release in detail how much weighting it gives different product categories when calculating inflation, a situation that World Bank senior economist Louis Kuijs called an “oddity.” An official with the statistics bureau said there has been no major change in the basket that makes up the price index since 2005. Plans call to adjust the weighting next year to reflect housing costs more and food prices less, said the official, who declined to be identified because of agency rules.

Chinese consumers, when asked, will detail how household expenses have changed in the past decade. Medical costs are the No. 1 concern for 84 percent of China’s rural residents, according to a recent survey by the Economist Intelligence Unit. Officially, medical prices are only up 2.8 percent so far this year. That number does not include the cost of gifts to hospital doctors and administrators to ensure adequate care.

Housing and rising rental costs also eat up more of Chinese budgets. For 26-year-old Beijing resident Wang Yulu, the monthly rent of her 35-square-meter one-bedroom apartment just increased more than 20 percent, to $338.

Too Expensive

“It’s too expensive,” said Wang, who works in the Beijing office of a Hong Kong advertising company. “I’m thinking of moving.”

Getting a handle on rising prices is a particular challenge in China. Hundreds of millions of rural Chinese keep moving to cities, pushing up rents and food prices in urban coastal areas. The prices charged by millions of restaurants, coffee shops, and fitness centers go largely unrecorded as entrepreneurs evade taxes. A standard foot massage, popular in Chinese cities, has risen from around $10 in 2008 to about twice that today, said Zoe Wang, a 29-year-old strategy consultant from Shanghai.

“Unfortunately, my salary didn’t double,” she said. Official figures only record a 0.4 percent rise in recreation and education costs this year. China doesn’t separate these two categories in its figures.

Residents in far-western China face higher prices in part because of the long distances products must travel to reach them. A fast-growing population of pensioners feels price increases much more acutely than others.

Pensions Spent

Said retiree Wei Mingxiang, 54, as she shopped carefully in Beijing’s Rundeli vegetable market: “Prices have gone up too far. My entire monthly pension of $147 is spent on food.” One staple, cowpeas, recently doubled in price in two weeks to 40 cents a pound.

By periodically releasing wheat, rice, and corn from its reserves, the government has avoided the 100 percent price surge that hit global grain markets in 2007 and 2008. Beijing continues to cap prices on everything from phone bills to water, electricity, and fuel prices, and when it wants to cool growth the government orders banks to stop lending.

“The government has tended to use less mainstream instruments that economists don’t like so much,” said Kuijs of the World Bank. “And they tend to use interest rates less.”

Deposit Rates

One-year deposit rates at 2.25 percent have not been changed since November 2008, which means Chinese savers are actually losing money now that inflation has passed 3 percent. Officials fear higher rates could draw speculative investors into China.

Some analysts said that Beijing is doing a decent job of calculating prices. Arthur Kroeber, the Beijing-based managing director of economic consultancy Dragonomics, estimated that actual inflation may exceed the official figure but by not much more than one percentage point. Kroeber added that a tightening labor market and rising wages will push China into higher inflation in the coming years.

Others wondered whether the historic aversion of China’s rulers to the political risks of inflation creates pressures to keep official figures low.

Factory Jobs

Similar pressures help explain how official unemployment targets of just over 4 percent were met in 2008 and 2009, when China’s factories laid off tens of millions of workers, some economists said.

“The government has made it quite clear” what its inflation target is for 2010, Tsinghua University management professor Patrick Chovanec blogged on Aug. 12. “A whole parade of official sources have issued statements over the past few weeks predicting, with the unruffled, enigmatic certainty one normally associates with a blackjack dealer dealing a fixed deck, that inflation will come in right at 3 percent this year.”

11 Aug 2010

GENEVA: World youth unemployment is set to hit a postwar record in 2010, increasing the potential for social unrest, crime and violence, the International Labour Organisation (ILO) said on Thursday.

According to the United Nations agency, just over 13 per cent of a global workforce aged 15 to 24 will be jobless by the end of the year, slightly above levels at the end of 2009 and a huge rise since 2007. That means 81.2 million young people of working age will be without a job, an ILO report said. Between late 2007, when the economic and financial crisis began, and the end of 2009, the number of young people out of work rose by 7.8 million against an average annual increase of 191,000 over the preceding decade.

“An inability to to find employment creates a sense of uselessness and idleness among young people that can lead to increased crime, mental health problems, violence, conflicts and drug-taking,” the report said.

It forecast youth unemployment would continue to increase in 2011, despite an expected global economic recovery, but at a slower place in all regions except the Middle East and North Africa, where it would continue to accelerate.

Worst hit were developing countries, where the overwhelming majority of young people live, and where the effects of losing or failing to find a job were likely to be much more dramatic. Young people in developed economies including the United States, the 27 countries of the European Union and former communist European states outside the EU are also seeing jobs disappear, the ILO said.

Between 2008 and 2009, unemployment rates among 15- to 24-year-olds in the main developed economies rose by 4.6 per centage points to reach 17.7 per cent of the total potential youth workforce at the end of last year, the highest on record.

The ILO forecast a slower recovery for youth employment than for adults. In a comment on the report, “ILO Global Employment Trends for Youth 2010″, the agency’s director-general, Juan Somavia, suggested that governments in rich and poor countries should focus on education and trainingt to tackle the trend.

“Young people are the drivers of economic development. Foregoing this potential is an economic waste,” he said.

Aug 11, 2010

LONDON: Rising grain prices from Russia’s drought and fires will pressure populations already hit by the financial crisis and could stoke unrest — particularly in the Middle East, North Africa and parts of Europe.

Wheat prices have risen by nearly 70 percent since June after Russia suffered its worst drought in 130 years and are at their highest since 2008, when the last major food price rally sparked protests and riots in a string of emerging nations.

Analysts warn that if prices stay high then the threat of street violence will increase — at least up to a point.

“We could see some street riots but I wouldn’t expect any governments to fall,” said Jonathan Wood, global issues analyst for consultancy Control Risks.

“On one level, we have much less of a problem than in 2008 because we have better food stocks. On the other hand, because of the financial crisis many countries are not in such a good position financially to deal with it.”

Particularly in emerging markets where food makes up a higher proportion of household purchases, the price rise could filter through in inflation, rate hikes and wider deficits.

The Middle East and North Africa, particularly Egypt, are regarded as particularly vulnerable, as are emerging and southern European countries where discontent has already been fueled by harsh cuts in public spending, benefits and pay .

“Grain imports are particularly sensitive in the Middle East and North Africa — bread is such a crucial staple of the diet,” said Metsa Rahimi, analyst at security consultant Janusian. “Eastern Europe is also an obvious area of risk.”

Europe has seen less social unrest than many expected from the financial crisis — although riots in Greece in May unsettled global markets — but risks are expected to rise in the autumn as unions call strikes and spending cuts bite.

Central and Eastern Europe have pushed through tough measures to qualify for IMF and European Union aid, but analysts see patience running thin, particularly in Romania. Spain, Italy, France and the Baltic states are also being closely watched.

Political weapon?

Much will depend on how long the price increase lasts and to what extent it filters through other commodities and foodstuffs.

That could swiftly bring angry mobs on the streets particularly in relatively poor authoritarian countries where maintaining food supply is seen as key to government legitimacy, they analysts said.

Russian Prime Minister Vladimir Putin was swift to impose an export ban, with the Kremlin likely to be keen to keep its silos full especially in the event of more damage to its winter crop.

“Adequate grain supplies have long been associated with social stability in Russia,” wrote security consultancy Stratfor. ”

Stratfor believes Russia may use the crisis to pull together nearby producers Belarus, Kazakhstan and Ukraine to form a regional grain cartel.

“Moscow very publicly has used energy supplies as a political weapon, either by raising prices or cutting supplies,” it said in a note. “Grain exports fall very easily into Moscow’s box of economic tools.”

Several key importers of Russian wheat including Saudi Arabia, Turkey and Jordan have been swift to say they have enough stocks and there will be no immediate impact on ordinary people. But they are nervous.

“The risks are always greatest where there are large numbers of urban poor and where food makes up more than 60 percent of the consumer purchase index basket,” said Alastair Newton, political analyst at Nomura.

“My top pick for potential trouble would be Egypt where tensions are already high with elections coming up and concerns about succession. Egypt has a long history of food price riots — but my guess is the main impact will be on the deficit as the cost of subsidies go up.”

Food prices and subsidies have always been notoriously political in Egypt, which faces elections next year with little clarity on whether 82-year-old President Hosni Mubarak — in power for almost three decades — will stand again.

Political risk premiums

There have been occasional scuffles at Ramadan food handouts in recent weeks and grumbling over raised pre-Ramadan prices but no repeat of the widespread protests seen in 2008.

The government met those first with a security clampdown then with the promise of higher wages.

Other countries being particularly closely watched for signs of unrest include Algeria, drought-hit Syria and already unstable Yemen.

In contrast, there is seen less immediate impact on Africa, in part because of stronger other staple crops particularly maize in the continent’s south. Nigerian food price rises have also slowed because of good local crops.

Even in West Africa’s Sahel — scene of a pre-existing food crisis — aid agencies say the Russian grain crisis and global price surge has had little local impact as yet.

But rising global prices could still put pressure on some recent land deals for food production in which Middle Eastern and Asian nations have bought up tracts of land in Africa and elsewhere including Ukraine and Pakistan for food. Hungry local populations might not like seeing food being trucked abroad.

The only major change of government linked to the last food spike was the 2009 coup in Madagascar, in which popular desire to overturn a South Korean land purchase was seen as a key factor.

Insurer Zurich believes food-related unrest worries will prompt more investors to seek protection against political violence damage and expropriation. That could push up premiums and the cost of foreign direct investment in affected markets.

“We would expect to see increased demand for our political risk products as a result of this,” said Dan Riordan, Zurich president for specialty products.

2010-08-12 1
Johannesburg – Security guards allegedly went on a killing spree at a mine owned by the nephew of President Jacob Zuma and the grandson of Nelson Mandela, the Sowetan reported.

Police on Thursday recovered four bodies from a shaft at the Aurora Grootvlei Mine three days after they were shot.

“There’s now four bodies that have been retrieved from the shaft,” Warrant Officer Jannie van Aswegen said.

The mine is co-owned by President Jacob Zuma’s nephew Khulubuse and Nelson Mandela’s grandson Zondwa.

Police, he said, found out about the shooting from the Sowetan newspaper on Thursday.

According to the newspaper security guards allegedly shot at least 20 people at the Aurora Grootvlei Mine between Springs and Benoni, and left the bodies underground on Monday.

The motive for the shooting was not yet known and no arrests had been made.

Police began retrieving the bodies from the mine shaft at 10:00 on Thursday and could not yet confirm the figure reported in the Sowetan.

Meanwhile the National Union of Mineworkers said it was shocked after reading the reports.

The union linked the incident to the mine’s failure to pay its workers, leaving them “to fend for themselves”.

The mine confirmed there had been deaths, adding the killings were of illegal miners. This followed a push by the police to flush them out, it said.

- SAPA

Council workers in La Linea yesterday blocked the main road leading to Gibraltar with burning tyres, in an hour-long protest over pay.

Masked workers laid around 20 tyres across the road at the Rocamar roundabout and set them alight, creating a plume of dense black smoke and bringing all traffic to a standstill.

Firemen arrived at the scene after about 30 minutes and extinguished the fires, while Policia Nacional officers carrying batons and helmets moved in to disperse the workers.

There were no arrests, though police are checking video and documentary evidence to try and establish the identity of the workers who set out the burning barricade.

“We’ve cut off La Linea with fire,” said Jose Porras Najanjo, the provincial secretary for leading union UGT and a ringleader in the protests.

The workers are demanding that the regional government intervene and take over the La Linea council.

Yesterday’s protest marked a sharp escalation in their tactics and came despite the council paying 55% of overdue salaries for July earlier that morning.

From the Rocamar, the workers marched back under heavy police guard to the Palacio de Congresos, where the council is temporarily housed.

One lane was kept clear, which meant traffic heading into La Linea and Gibraltar was able to squeeze past.

Sr Porras told the Chronicle that the workers did not want to target the border because their row was with the mayor, not Gibraltar.

“All these workers want is to get paid,” he said.

In the Palacio, the workers marched in and held a heated meeting where they set out their plans for the coming days.

Union leaders will travel to Cádiz to meet with regional government representatives and urge them to step in and take control of La Linea’s finances.

The daily streets protests will continue in the run-up to a massive demonstration planned at 8pm on August 20.

The unions hope to drum up support among La Linea’s citizens and get as many as five thousand people out on the streets.

But the union leaders also have many critics, many of whom say that they are targeting La Linea because it is run by the Popular Party.

In PSOE-run councils such as Los Barrios, where workers have not been paid for many weeks, the unions have barely raised their heads, these critics say.

Analysis – Food squeeze next worry for emerging markets
Aug 5, 2010

LONDON (Reuters) – A food price crisis may be the next stumbling block for emerging economies, even as their bonds and stock markets rally in relief at an easing of the euro zone’s debt crisis.

Wheat prices have jumped by more than 50 percent since June and are likely to rise further due to expectations of tighter supplies, triggering concerns about a repeat of the food crisis in 2007/08 that forced interest rates higher in many economies and led to emergency controls in others.

The UN’s Food and Agriculture Organisation (FAO) cut its 2010 global wheat forecast by about 4 percent this week and said world wheat supplies may shrink next year if severe drought continues in Russia, Europe’s leading wheat producer.

Russia imposed a temporary export ban on Thursday in response to a record-breaking heatwave and the extent of the damage to crops and its economy is only beginning to become clear.

Spiralling wheat prices could translate into higher inflation and possibly higher interest rates in emerging market economies, which tend to hold a large proportion of their consumer price baskets in food.

The FAO said healthy world stock levels should prevent a repeat of the crisis of 2007/08 but past squeezes on food have led some central banks to hike aggressively in a bid to head off a second round of price rises in their economies.

Analysts and investors are already preparing for tighter monetary policy in emerging economies, even as they look to the possibility of further quantitative easing in the United States.

“It is a big deal for emerging markets, though maybe not as big a deal as it was in 2006/7/8, as food prices make up 20-50 percent of emerging CPI baskets,” said Charles Robertson, EEMEA chief economist at ING.

“Food prices never move in the U.S. as a result of changes in global harvests, because so much of the price of food is taken up by packaging, suppliers. In the EU, food prices move a little bit but in emerging markets, food price rises can add a few percentage points to the inflation rate.”

RUSSIAN RATES

Countries likely to be particularly at risk from high wheat prices include Nigeria, which has 25 percent of its CPI basket in bread and cereals, Robertson said.

Western economies typically have less than 20 percent of their CPI basket in food, compared with 30 percent on average in emerging markets, according to U.S. bank Morgan Stanley.

In Russia, higher wheat prices are contributing to speculation that the central bank will raise interest rates as early this year, after cutting 14 times since April 2009 to a record low refinancing rate of 7.75 percent.

Annual inflation in Russia is 5.5 percent.

“We see more upside risks…even a 15 percent inflation rate next summer does not seem unthinkable,” said analysts at Danske in a client note.

Some central banks have already responded.

In India, a year-long spell of double-digit inflation, largely on rising food prices, sparked massive street protests.

One of a small but growing number of economies to have started raising interest rates, India has lifted its main lending rate four times by a total of 100 basis points since March, to 5.75 percent. Analysts say there is more to come.

However, an end to the El Nino weather pattern which led to the food price spike in India may actually reduce food price inflation in India, analysts say.

CURRENCY BOOST

Higher inflation and higher interest rates tend to depress bond prices and can also affect corporate lending, eroding stock market gains.

Investors have flocked into emerging market debt this year, keeping spreads below the key 300 basis point level over U.S. Treasuries, in their search for higher yield without exposure to even riskier emerging equities. Any whiff of inflation is likely to turn those debt investors more cautious.

But currencies find an upside in higher rates, due to the relative appeal of holding deposits in higher-yielding markets.

The Ukrainian hryvnia, which has already shown some appreciation in recent months due to an improving economy, is singled out by analysts as likely to rise further.

The rouble may also be allowed to rise if Russia has to import grain, although Russian prime minister Vladimir Putin on Thursday imposed a temporary grain export ban.

“Countries that import food could be more open to allowing their currencies to appreciate in order to cope with higher food prices,” said Elisabeth Gruie, emerging market strategist at BNP Paribas. “Eastern European countries such as Poland will be sensitive to the impact on higher food prices on inflation and could react by adjusting monetary policy.”

Fuel and food prices took inflation to multi-year highs in central Europe in 2008, prompting rate rises, and there were also protests against rising food prices in many emerging market countries.

To grapple spiking food price inflation, several emerging food exporters, including Russia, Ukraine and Kazakhstan, introduced export duties in early 2008. Russia had already imposed price controls on basic foodstuffs in Oct 2007.

Wheat prices can also lead to higher prices of other food, as consumers switch to buying more rice, for example, putting upward pressure on currencies in the Middle East and Asia.

“Places like Egypt, India, Indonesia and the Philippines are pretty big importers of food,” said Philip Poole, head of macro and investment strategy at HSBC Global Asset Management.

“Consumers are moving up the food chain in emerging markets, literally, that’s putting the pressure on.”

Russia Will Tighten Security Over State’s Grain Stockpiles During Drought
By Maria Kolesnikova -

Russia is boosting security over the state’s 9.5 million metric tons of grain stockpiles as the worst drought in at least half a century erodes yields, said the government agent overseeing the reserves.

“United Grain Co. has introduced additional security measures for grain in the state intervention fund,” the agent said in an e-mailed statement today. “The role of state stockpiles in the domestic market is increasing as the situation in the Russian grain market becomes more acute because of wildfires and drought in more than 25 regions.”

Russia yesterday set a ban on grain and flour exports from Aug. 15 to Dec. 31 and published the order in the state’s newspaper of record today. Russia forecasts this year’s grain crop at between 70 million and 75 million tons, while domestic consumption stands at 75 million tons. The country has 21.5 million tons in reserves, including the state’s stockpiles.

TOKYO — The rapid rise of labour costs in China is “inevitable” and Japanese auto giant Toyota Motor has no immediate plan to review its supply chain in the country, its vice president said Tuesday.

Foreign-run factories in China have been targeted in recent labour unrest as workers gamble on overseas companies responding to their demands and government officials supporting their actions.

Production at Toyota’s assembly plant in southern China had to be suspended last month after a strike at an affiliated auto parts supplier in the country.

The unrest has sparked fears that the days of cheap Chinese labour could soon be over for foreign investors forced to offer pay rises to placate workers — and for consumers accustomed to inexpensive goods.

However, Toyota vice president Atsushi Niimi told journalists in Tokyo that he saw current events as a natural stage in China’s economic evolution.

“Japan had a period when (the government) sought to double incomes in the 1960s. At that time, strikes occurred frequently in Japan,” he said.

“It’s better for us to seek solutions by dialogue with employees, but before we are able to do this strikes occur. In a sense, it’s inevitable.

“If we change our suppliers, it would not provide a fundamental solution. What’s important is how well we communicate with employees.”

On the prospect of Toyota’s growth this financial year onward, Niimi said building more production capacity in emerging markets was key.

Despite the yen’s current strength, the company said it was not considering importing vehicles to Japan from its lower-cost plants overseas but would instead focus on making domestic plants more cost-effective.

“I believe there are still many things we can do to innovate ways of manufacturing in Japan,” he said.

“As Toyota is based in Japan,… we think it’s important to keep our competitiveness in manufacturing in Japan,” he said.

Hundreds of residents of one of the poorest municipalities in Los Angeles County shouted in protest last night as tensions rose over a report that the city’s manager earns an annual salary of almost $800,000.

An overflow crowd packed a City Council meeting in Bell, a mostly Hispanic city of 38,000 about 10 miles (16 kilometers) southeast of Los Angeles, to call for the resignation of Mayor Oscar Hernandez and other city officials. Residents left standing outside the chamber banged on the doors and shouted “fuera,” or “get out” in Spanish.

It was the first council meeting since the Los Angeles Times reported July 15 that Chief Administrative Officer Robert Rizzo earns $787,637 — with annual 12 percent raises — and that Bell pays its police chief $457,000, more than Los Angeles Police Chief Charlie Beck makes in a city of 3.8 million people. Bell council members earn almost $100,000 for part-time work.

City Attorney Edward Lee said the council members couldn’t discuss salaries in public without advance notice. The council then adjourned for a private session. About an hour later, the council members returned, and Hernandez read a statement saying the city would prepare a report on the salaries and seek public comment at the next council meeting, scheduled for Aug. 16.

Residents shouted in protest. Lee said he would have the room cleared if people continued to speak out of line. Police Chief Randy Adams said the fire department wanted to end the meeting because the crowd outside was blocking the door.

Easing Tensions

Then, in what appeared to be an effort to ease tensions, Hernandez announced that the meeting to discuss salaries would be held instead on July 26.

After the meeting, Bell resident Ali Saleh read a statement from a newly formed group called the Bell Association to Stop the Abuse. He called for an independent audit of city salaries and contracts.

On July 1 Bell took control of many of the city functions of neighboring Maywood, a city whose council members voted to contract out almost all services. Saleh also asked that Bell stop that process until the city’s salary investigations were resolved.

Bell has sold two general obligation bond issues totaling $50 million in the past six years, according to prospectuses for the bonds and information in the city’s annual financial statement for 2009. In that time, its debt has risen to $1,972 per capita in 2009 from $599 in 2004, according to its annual financial statement.

Inquiry Under Way

The city’s personal income was $24,800 per capita in 2008, according to its financial statement. That compares with an average of $32,819 nationwide, according to 2010 figures from the U.S. Bureau of Economic Analysis.

Bell’s general fund revenue declined 4.6 percent to $14.1 million for the fiscal year that ended June 30, 2009, according to the city’s financial statement. The city’s expenses rose 2.3 percent to $15.9 million in same period.

The Los Angeles County District Attorney’s Office has begun an inquiry into Bell council member pay, according to Dave Demerjian, head of the office’s Public Integrity Division. He said Bell council members were receiving $8,083 a month, mostly by serving on city-related commissions.

“We’re reviewing the council member salaries to see if they conform to state law,” Demerjian said in a telephone interview.

California law limits the salaries of council members to several hundred dollars a month, depending on the size of the city, according to Hector De La Torre, a state assemblyman from nearby South Gate, who sponsored legislation in 2005 that limits how much council members can get paid from other city-related assignments to $150 a month.

‘Obscene Pay’

De La Torre said that after his bill was passed, Bell’s City Council voted to operate under its own charter, rather than adhere to state laws on how cities should be run.

“It seems obscene to me,” De La Torre said in a telephone interview. “People making $30,000 a year are paying taxes so that their council members can make $80,000.”

Adams, Bell’s police chief, said in an interview after the council meeting that he had retired as chief of police in the much larger city of Glendale, California, when Bell officials approached him.

“I told them they would have to pay me what I was making in retirement and the $165,000 I would make as chief of police,” Adams said.

Adams said he had been brought in to end corruption in Bell’s police department.

“Some of the former members of this force are in the federal penitentiary,” he said.

‘Streets Are Cleaner’

Hernandez, the mayor, defended the salaries in an interview with the Los Angeles Times.

“Our streets are cleaner, we have lovely parks, better lighting throughout the area, our community is better,” Hernandez said, according to the newspaper. “These things just don’t happen, they happen because he had a vision and made it happen.”

Carmen Avalos, the city clerk in South Gate, said she attended the Bell council meeting to help educate people about the political process.

“This is what we are trying to avoid,” she said in an interview at the meeting. “The lack of fiduciary responsibility, the lack of transparency.”

“There are so many significant benefits in knowing how to better manage inventory and better serve customers”

NEW YORK — Wal-Mart Stores (WMT) is putting electronic identification tags on men’s clothing like jeans starting Aug. 1 as the world’s largest retailer tries to gain more control of its inventory. But the move is raising eyebrows among privacy experts.

The individual garments, which also includes underwear and socks, will have removable smart tags that can be read from a distance by Wal-Mart workers with scanners. In seconds, the worker will be able to know what sizes are missing and will also be able tell what it has on hand in the stock room. Such instant knowledge will allow store clerks to have the right sizes on hand when shoppers need them.

The tags work by reflecting a weak radio signal to identify the product. They have long spurred privacy fears as well as visions of stores being able to scan an entire shopping cart of items at one time.

Wal-Mart’s goal is to eventually expand the tags to other types of merchandise but company officials say it’s too early to give estimates on how long that will take.

“There are so many significant benefits in knowing how to better manage inventory and better serve customers,” said Lorenzo Lopez, a Wal-Mart spokesman. “This will enhance the shopping experience and help us grow our business.”

Before the rollout, Wal-Mart and other stores were using the tags, called radio frequency identification tags, only to track pallets or cases of merchandise in their warehouses. But now the tags are jumping onto individual items, a move that some privacy experts describe as frightening.

Wal-Mart, which generated annual revenue of a little more than $400 billion in its latest fiscal year and operates almost 4,000 stores, has huge influence with suppliers. That makes other merchants tend to follow its lead.

“This is a first piece of a very large and very frightening tracking system,” said Katherine Albrecht, director of a group called Consumers Against Supermarket Privacy Invasion and Numbering.

Albrecht worries that Wal-Mart and others would be able to track movements of customers who in some border states like Michigan and Washington are carrying new driver’s licenses that contain RFID tags to make it easier for them to cross borders.

Albrecht fears that retailers could scan data from such licenses and their purchases and combine that data with other personal information. She also says that even though the smart tags can be removed from clothing, they can’t be turned off and can be tracked even after you throw them in the garbage, for example.

Wal-Mart officials said they are aware of privacy concerns but insist they are taking a “thoughtful and methodical approach.”

Dan Fogelman, a Wal-Mart spokesman said that the smart label doesn’t collect customer information.

“Wal-Mart is using it strictly to manage inventory. The customer is in complete control,” he said. Fogelman added that Wal-Mart’s readers identify only inventory it has in the store.

To placate privacy concerns, Wal-Mart, which is financing some of the suppliers’ costs, is asking vendors to embed the smart tags in removable labels and not embed them in clothing.

Wal-Mart plans to educate customers with the new program through in-store videos and through signs posted in the stores that educate customers about the program.

TOKYO (Reuters) — Confronted with rising wages and a shortage of labor, a supplier of car body frames to Honda Motor Co. last month earmarked the equivalent of a half year’s profit to triple the number of robots at its three Chinese plants.

The $22 million investment by Japan-based H-One is part of a push to automate factories across China that is expected to gather pace in the wake of the recent burst of strikes and expected appreciation of the yuan.

“The automation equipment industry is growing very, very fast. Sensors, frequency converters, conveyor belts, pneumatic systems, power tools — you name it,” said Raymond Tsang, head of consultancy Bain & Co.’s Greater China industrial practice.

“We’re seeing anywhere between 20 to 30 percent growth in those sectors year over year.”

The series of high-profile strikes in recent months has affected mostly Japanese-owned auto and parts factories including Honda and Toyota Motor Co. in southern China. It has put a spotlight on growing unrest among China’s massive migrant worker population wanting a greater share of the country’s growing wealth.

Although labor remains a small portion of overall Chinese manufacturing costs, some see the worker unrest as further spurring a move to mechanization.

With China now accounting for 15.6 percent of the world’s manufactured goods — having last year surpassed Japan to become the second largest after the United States — the automation trend holds the promise of big profits for equipment suppliers such as Japan’s Fanuc Ltd., Germany’s Siemens AG, and U.S.-based Rockwell Automation.

Investors have taken notice. Shares of Fanuc, the world’s top maker of equipment that numerically controls machine tools, have jumped 16 percent over the past month as the strikes began getting wide media coverage. Sensor maker Omron Corp. has shot up 13 percent.

But analysts argue the growth potential of this trend is far from factored into share prices. The prospect for rapid automation is likely as wages rise and manufacturers look to move up the value chain and produce higher quality goods.

According to Nomura Securities, the ratio of machine tools in China that use numerical controls, a good measure of the level of automation, climbed to 27 percent in the quarter to May, up from 22 percent in 2009 and 19 percent in 2008.

This brings China to the level of Japan in the 1980s when it was in still in a phase of strong economic growth. Japan’s numerical control ratio has since risen to a world-leading 82 percent, offering a glimpse of where China may be headed as its economy develops.

Yaskawa Electric says China demand helped it log record orders overseas for its industrial robots in May, and it reckons the prospect for further growth is strong with the ratio of China plants using robots at just one-fourth the level of Japan.

“The pace of automation in Chinese factories is faster than Japan in the 1980s,” said Wenjie Ge, an analyst at Nomura Securities, which forecasts wages to double in China in five years.

“Rising labor costs would not only lead to an automation of Chinese factories but also increase personal incomes, which is spurring the spread of cars and electronics, and this is again favourable for machinery demand.”

Huge wave

The surge in wages and impending revaluation of the yuan will undoubtedly prompt some companies to move factories to countries with lower labor costs such as Vietnam.

One example is the retail industry. Nitori, which owns a chain of interior goods stores in Japan and imports about 60 percent of its products from Chinese factories, said last week it would consider shifting some production outside China.

Bain’s Tsang says not all production will go the way of automation given that wages, while rising, are still in most cases a fraction of what they are in the West. It also makes little sense to automate when a manufacturer’s business model is based on being flexible to deliver volumes based on demand.

“Further automating their factories is something that most of them are thinking about doing. But they may not do it in same way as we see in Germany or in the U.S. where production lines are 100 percent automated with robotics,” Tsang said.

But the overall momentum behind automation is strong and there is little chance that manufacturures will ditch China as a production base. Among other things, producing in China keeps a maker close to the massive and fast-growing market there.

Shin-Etsu Chemical, which had been reluctant to place a factory in China due to the difficulty of procuring a stable supply of raw materials, said today it would build a silicon plant in Jiangsu Province in response to rising demand.

The Japanese chemical firm plans to invest about $95 million, its first major investment in China, to boost its annual silicon output by about 30 percent.

Electronics parts maker TDK Corp. is also planning to add new machinery at its Chinese factories.

THK Co., which makes linear motion guides for machine tools, received orders of 274 million yuan ($40.35 million) in the quarter to March in China, a record high for a second straight quarter.

Records for robots

Fanuc, which is also a top maker of industrial robots, plans to lift its monthly output of robots to a record high by this fall to meet surging demand in China and India.

“Japanese automation-related makers such as Fanuc have been in a better position than European rivals to benefit from the trend as their products are generally cheaper,” said Mitsushige Akino of Ichiyoshi Investment Management.

“But the recent weak euro is supporting European makers such as Siemens to gain momentum. Japanese and European makers are even in their product quality, and thus the real game is going to start now.”

SHENZHEN(CHINA): Last month, while enthusiastic consumers were playing with their new Apple iPhone 4, researchers in Silicon Valley were engaged in something more serious.

They cracked open the phone’s black plastic shell and started analyzing the new model’s components, trying to unmask the identity of Apple’s main suppliers. These “teardown reports” provide a glimpse into a company’s manufacturing.

What the latest analysis shows is that the smallest part of Apple’s costs are here in Shenzhen, where assembly-line workers snap together things like microchips from Germany and Korea, American-made chips that pull in Wi-Fi or cell phone signals, a touch-screen module from Taiwan and more than 100 other components.

But what it does not reveal is that manufacturing in China is about to get far more expensive. Soaring labor costs caused by worker shortages and unrest, a strengthening Chinese currency that makes exports more expensive, and inflation and rising housing costs are all threatening to sharply increase the cost of making devices like notebook computers, digital cameras and smart phones.

Desperate factory owners are already shifting production away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions far west of here, even deep in China’s mountainous interior.

At the end of June, a manager at Foxconn Technology – one of Apple’s major contract manufacturers – said the company planned to reduce costs by moving hundreds of thousands of workers to other parts of China, including the impoverished Henan province.

While the labor involved in the final assembly of an iPhone accounts for a small part of the overall cost – about 7 percent by some estimates – analysts say most companies in Apple’s supply chain – the chip makers and battery suppliers and those making plastic moldings and printed circuit boards – depend on Chinese factories to hold down prices. And those factories now seem likely to pass along their cost increases.

“Electronics companies are trying to figure out how to deal with the higher costs,” says Jenny Lai, a technology analyst at CLSA, an investment bank based in Hong Kong. “They’re already squeezed, so squeezing more costs out of the system won’t be easy.”

Apple can cope better than most companies because it has fat profit margins of as much as 60 percent and pricing power to absorb some of those costs. But makers of personal computers, cell phones and other electronics – including Dell, Hewlett-Packard and LG – deal with much slimmer profit margins, according to several analysts. “The challenges are going to be much bigger for them,” Lai said. Most other industries, from textiles and toys to furniture, are under considerably more pressure.

One way to understand the changes taking shape in southern China is to follow the supply chain of the iPhone 4, which was designed by Apple engineers in the United States, sourced with high-tech components from around the world and assembled in China. Shipped back to the United States, the iPhone is priced at $600, though the cost to consumers is less, subsidized by AT&T in exchange for service contracts. “China makes very little money on these things,” said Jason Dedrick, a professor at Syracuse University and co-author of several studies of Apple’s supply chain. Much of the value in high-end products is captured at the beginning and end of the process, by the brand and the distributors and retailers.
According to the latest teardown report compiled by iSuppli, a market research firm in El Segundo, California, the bulk of what Apple pays for the iPhone 4’s parts goes to its chip suppliers, like Samsung, Toshiba and Broadcom, which supply crucial components, like processors and the device’s flash-memory chip.

In the iPhone 4, more than a dozen integrated circuit chips account for about two-thirds of the cost of producing a single device, according to iSuppli.

Apple, for instance, pays Samsung about $27 for flash memory and $10.75 to make its (Apple-designed) applications processor; and a German chip maker called Infineon gets $11.72 a phone for chips that send and receive phone calls and data. Most of the electronics cost much less. The gyroscope, new to the iPhone 4, was made by STMicroelectronics, based in Geneva, and added $2.60 to the cost.

The total bill of materials on a $600 iPhone – the supplies that go into final assembly – is $187.51, according to iSuppli.

The least expensive part of the process is manufacturing and assembly. And that often takes place here in southern China, where workers are paid less than a dollar an hour to solder, assemble and package products for the world’s best-known brands.

No company does more of it than Foxconn, a division of the Hon Hai Group of Taiwan, the world’s largest contract electronics manufacturer.

With 800,000 workers in China alone and contracts to supply Apple, Dell and HP, Foxconn is an electronics goliath that also sources supplies, designs parts and uses its enormous size and military-style efficiency to assemble and speed a wide range of products to market.

“They’re like Walmart stores,” Dedrick said. “They’re low-margin, high-volume. They survive by being efficient.”

The world of contract manufacturers is invisible to consumers. But it’s a $250 billion industry, with just a handful of companies like Foxconn, Flextronics and Jabil Circuit manufacturing and assembling for all the global electronics brands.

They compete fiercely on price to earn small profit margins, analysts say. And they seek to benefit from tiny operational changes.

When a company is operating on the slimmest of profit margins as contract manufacturers are, soaring labor costs pose a serious problem. Wages in China have risen by more than 50 percent since 2005, analysts say, and this year many factories, under pressure from local governments and workers who feel they have been underpaid for too long, have raised wages by an extra 20 to 30 percent.

China’s currency has also appreciated sharply against the U.S. dollar since 2005, and after a two-year pause by Beijing, economists expect the renminbi to rise about 3 to 5 percent a year for the next several years.

“It takes 3,000 procedures to assemble an HP computer,” says Isaac Wang, an iSuppli analyst based in China. “If a contract manufacturer can find a way to save 10 percent of the procedures, then it gets a real good deal.”

Contract manufacturers like Foxconn are now searching for ways to reduce costs. Foxconn is considering moving inland, where wages are 20 to 30 percent lower. The company is also spending heavily on manufacturing many of the parts, molds and metals that are used in computers and handsets, even trying to find larger and cheaper sources of raw material.

“We either outsource the components manufacturing to other suppliers, or we can research and manufacture our own components,” says Arthur Huang, a Foxconn spokesman. “We even have contracts with mines which are located near our factories.”

Many analysts are optimistic the big brands will find new innovations to improve profitability. But within the crowd, there is growing skepticism about China’s manufacturing model after years of pressing workers to toil six or seven days a week, 10 to 12 hours a day.

“We’ve concluded Hon Hai’s labor-intensive model is not sustainable,” says Wang at iSuppli Research. “Though it can keep hiring 800,000 to 1 million workers, the problem is these workers can’t keep working like screws in an inhuman system.”

This type of low-end assembly work is also no longer favored in China, analysts say, because it does not produce big returns for the companies or the country. “China doesn’t want to be the workshop of the world anymore,” says Pietra Rivoli, a professor of international business at Georgetown University and author of “The Travels of a T-Shirt in the Global Economy.”

“The value goes to where the knowledge is.”

SEOUL, July 7 (Yonhap) — The average wage level of Chinese workers is expected to more than double in five years due to labor shortage, which could put pressure on global inflation, a report said Wednesday.

“The shortage of labor force in China is continuing and the number of economically active workers has declined,” said the report by the POSRI, a research institute of steel giant POSCO. “The average wage of Chinese workers will increase by more than double within five years.”

Many economists assess that the Chinese economy has drained its once vast reserves of unemployed workers in rural areas and is facing a shortage of fresh laborers, according to the report.

The POSRI said the global economy is not likely to enjoy “low inflation and high growth” again, which implies that the expected wage hikes in China may stoke global inflation.

Recently, domestic and foreign companies in China have decided to raise salaries for employees at their factories as workers went on strikes demanding higher wages.

The spiral labor unrest is prodding companies in China to shift their production to India, Indonesia and other Southeast Asian nations, the POSRI said. For the past years, many foreign companies have rushed into China in the hopes of taking advantage of low labor costs.

“Wage hikes may accelerate moves for industrial restructuring,” it said.

Vandals attacked their stores during the G20 summit. Now, Yonge St.’s small merchants want to know, ‘Why us?’

At 4:13 on the afternoon of Sat., June 26, a burly man, clad in black, his face hidden by a kerchief, used an abandoned two-by-four — it had been part of a temporary traffic sign — to batter the window of Ken Li’s souvenir shop.

The attacker was one of dozens of rioters who swaggered north on Yonge St. after breaking away from the large G20 demonstration.

He could not have known the people who stood well behind the shattered glass of the Yonge St. stores. “This isn’t violence,” one of the black clad mob told the Star during the rampage. “This is vandalism against violent corporations. We did not hurt anybody.”

More than 40 businesses were damaged. Many of them are independently owned small stores. Their owners have come from countries including Afghanistan, China and Cuba.

They were astounded at what they saw that afternoon.

In the aftermath, the Star checked in on several small shops that were attacked on the few blocks between Dundas and College/Carlton Sts. What emerged is a portrait of uncomprehending fear — and defiance.

When the rioters arrived at First Choice Gifts at 356 Yonge St., owner Li was away from his store having a late lunch. The place was staffed by two female university students working for the summer. Yun Zhu, 22, who’s taking engineering at McMaster, had been on the job for two months. Xiao Lin, 23, who has finished her first year of chemistry at Queen’s, had been working one month. They both immigrated to Canada from China four years ago with their families.

Both were terrified but showed presence of mind. They’d heard the commotion and saw the black-clad vandals approach. “You couldn’t see them — just their eyes,” recalls Zhu. She turned off the lights while Lin locked the glass doors. “We were so scared,” continues Zhu. “Oh my God, you have no idea. They tried to get into the store. Four customers were here. Two were girls like us. Another was a couple in their 30s. They were so great. They told us, ‘Be calm, take deep breaths.’ ”

They all fled to the basement and heard the sound of breaking glass. When they emerged, they saw that a large crystal ball, which weighed about 10 kilograms and cost $299, had been taken, along with a crystal airplane from the hole in the front window.

The ball, Li explained is supposed to bring good luck, something that eluded him that day. “There were hundreds of police staying at the Delta Chelsea Hotel,” Li says of the hotel behind his store. “On that day there were no police here.”

While his store was under siege, a different tale was unfolding across the street at 361 Yonge St. where Alejandro Alonso is a co-owner of Wanda’s Belgian Waffles Café, which opened three months ago. Alonso, 25, is a former lifeguard who came to Canada two years ago from Cuba.

He, too, heard the sound of shattering glass — “bing, bing, like a movie” — down the street. But rather than run for cover, he and two employees, Egidio (Eddy) Citro, 55, and Jordan Ayoub, 27 — defied the rioters.

Wearing their white chef jackets, they stood in front of the tiny café. They kept their hands in their pockets. Alonso thought it was cowardly for the rioters to cover their faces. And he was surprised at their youth: they seemed to be 18 to 20. Many were girls.

“If you live here and this is your city, you have to take care of it,” Alonso says. “I come from a place where people have nothing and they take care of what they have.”

A girl with a camera stood beside them filming the progress of the vandals up Yonge St. One of the rioters told Alonso to move. “I said, ‘No, I will not move.’ He wanted to break the glass, so I stayed. The feeling I had was bigger than fear. I was angry. This is our store. I care. It’s not only the money; it’s the time, the effort, how many hours we work every week.”

The vandals passed by.

“If you have a reason to do something, you do it, all the way,” says Alonso. “They don’t have any reason for what they were doing.”

Business hadn’t come back by mid-week, says Robert Ayoub, who owns several Wanda’s Waffles shops. “We feel people are edgy. People are coming to Yonge St. to see the broken glass.”

Meanwhile the wreckage continued on the west side of Yonge St. The rioters shattered windows at a Swiss Chalet, where pedestrians had waved in warning to customers sitting near the front, motioning them to flee to the back. They broke a window at Money Mart, at 368 Yonge, but missed Li’s second shop, Canada Gifts, at 370 Yonge.

They were moving swiftly, and one of them was carrying a heavy crystal ball.

He was young and wiry, hooded, and heaved the ball through the south window of Barclay Jewelry Ltd. at the northeast corner of Yonge and Gerrard. It bounced back. He hurled it again. Photographers and film crews turned their cameras toward him, but a dark-haired woman in a clear rain jacket darted in front of them twirling an open umbrella, to hide his identity.

The crystal ball, meanwhile, rolled to the curb. The ball-tosser abandoned his task and as he did, angrily instead kicked the window. He brushed past umbrella girl.

Behind this splintered window stood Zohrab Kilislian, who is in his 60s. He’s had jewellery stores on Yonge for more than 30 years. He is tall and wears suspenders.

The rioters had already rammed a two-by-four through the front window; the tempered glass lay like shining rubble on the sidewalk.

Kilislian cut his hands, which had several bandages on them last week, while cleaning up the mess. A young woman who works for him was struck on the hip by the two-by-four. Another employee was so angry, he ran out the door chasing the masked man who’d thrown the lumber. He didn’t catch him.

The crystal ball now lies by the front door. It is surprisingly heavy, dented but unbroken. Another rioter apparently found it on the street and hurled it through the window. Kilislian says the police can come and get it if they’d like.

He did not board his windows in preparation for the demonstration. “I was relying on the police,” he says. “I really did not believe the police would allow this to happen. That same day, in the morning, my friends said, ‘Close up and go home.’ I said, ‘Why?’ ”

There was no jewellery in his showcases last Tuesday, three days after the riot. The windows were still being repaired. He estimates he may not be back in business until tomorrow. The display cases are cracked, as are the molded forms that hold necklaces.

He has two questions: “What do they gain from doing this? Who’s going to pay for the damage?”

His wife called when she saw the rioting on television. “She said she was shaking,” Kilislian recalls. “I said nothing, except that we were okay.”

Then he adds: “Honestly, I have never been like this. I didn’t sleep that night. I wanted to, I couldn’t. . . ”

Kilislian is the landlord at 399 Yonge, which houses two other stores besides his own. His tenant on the north side of the building is Khalil Salimi, a 36-year-old immigrant from Afghanistan. He sells leather jackets, purses and biker vests in his shop, All Leather. Salimi, the middle of nine children, is married and has two little girls, 6 and 2.

Salimi was standing by the display cases near the front of his shop when the vandals struck. They hurled a section of movable fencing through the front glass window. “I was standing where you are. I was frozen. Their faces were covered, like Halloween Day. Then we hid behind the counter. We were scared.”

Like Kilislian, he has questions. “Why would they do this? Do they want to kill us? In this country? This kind of stuff?

“You’re standing in your store and someone comes to you like this?” continues Salimi, who has also lived in India and Pakistan. “I’ve never seen that before.”

Salimi checks his phone and sees that he called police at 4:15 p.m. on Saturday. “They said they couldn’t come. They said, ‘Protect yourself.’ ”

It will cost up to $2000 to fix the windows. Is insurance likely to cover the costs? “We don’t have a police report.”

For the small shopkeepers on Yonge St., Saturday is the money day, the one they look forward to. Salimi might have sales of about $8,000 over a weekend. (His monthly rent is $9,000.)

“That Saturday, we sold zero — nothing,” he says. “All week the radio was saying, don’t come downtown.”

Last Monday at 2.30 p.m., a customer bought a leather jacket at a discounted price of $100. “This is our first sale in three days. They are still scared from downtown.”

The losses he suffered in the days before and after the G20 summit ripple far from Toronto. Every month he sends money — sometimes $500, sometimes $800 — home to his parents who live in Kandahar City and are in their mid-70s. “Always, I give them money for their food.”

He adds: “This week was very bad for me, but what can you do?”

There’s a fruit shop called Fruit Express Plus next door to Salimi’s store. It had metal gates pulled across the storefront, though the boxes of fruit were still outside. Behind the closed gates, Olga Serebrennikova, who manages the flower department, was frightened. “But nothing bad happened,” she says.

A boy in black rushed by, paused and raced back to pick up a few peaches. He passed one to a comrade. They laughed as they bit into the fruit.

4 Jul 2010

He Zongjun earns 1 mao (1p) for each of the 1000 vuvuzelas he moulds on a 12-hour night shift at the Jiying Plastic Products factory near Shanghai. His boss Wu Yijun stopped production of vuvuzelas in April but resumed last month to meet an unexpected surge in global orders for the popular droning trumpets being heard throughout the World Cup football matches in South Africa.

“I don’t watch the World Cup. I need to sleep after working a whole night,” he told the Chinese government’s Xinhua news agency.

The migrant worker from the southwestern province of Yunnan, one of China’s poorest regions, earns up to 3000 yuan (£300) a month, based on the piecework rate given by the agency. The long hours and tough conditions mean he earns up to three times the wages of many Chinese labourers.

The company sold about one million of the estimated 50 million vuvuzelas exported this year from China, which accounts for 90% of the global total, Wu said. But he said it was still struggling to recruit more staff to add to the 40 working on the new orders, despite raising the piecework rate by 25%.

Labour is too cheap in China and the rest of Asia, making it difficult to shift to a consumption-led growth model

Analysts say a highly publicised series of recent strikes among Chinese factory workers have raised expectations in a labour market where some regions are already short of skilled workers.

Nearly 2000 workers walked out in late May at the Honda Auto Parts plant in the southern city of Foshan, Guangdong province, the region at the heart of China’s manufacturing boom over the past 30 years. The two-week strike paralysed Honda car production in China and resulted in the workers getting a 25% pay rise to a standard rate of 2000 yuan (£200) per month.

In the past three months, strikes have also hit another Honda supplier in Foshan, a Hyundai plant in Beijing, a Toyota factory in Guangdong, a rubber plant in the northern city of Tianjin, and a large cotton mill in central China’s Pindingshan city. This week hundreds of staff stopped work at the Mitsumi Electric plant in Tianjin, demanding a big increase on the 1500 yuan (£150) a month they can earn for a 70-hour, six-day week.

“Strikes may happen in virtually every corner of China, particularly in the more developed parts,” said Chang-Hee Lee, an industrial relations expert with the International Labour Organisation in Beijing.

“Our research indicates that most strikes involve between a few hundred and a few thousand workers,” said Geoffrey Crothall of the Hong Kong-based China Labour Bulletin. “Anything bigger than that, it tends to be more difficult to organise everybody. Anything smaller than that, the boss is in a more advantageous position to disrupt things,” Crothall said.

The use of security guards or hired thugs to break up smaller strikes or workers’ protests is “not uncommon”, he said. “You’re more likely to see that kind of violent incident – the boss hiring thugs to break up a strike – than, certainly, workers initiating violence.”

He said the ruling Communist Party usually takes a hands-off approach to the strikes and local authorities “just keep a watch” because most strikes are seen as “purely economic” conflicts that do not challenge the government. Although the party controls all news outlets, state media ran the first reports on most of the recent strikes, a sign that the government does not see the strikes as a challenge to its authority.

China Labour Bulletin was set up to support Chinese workers by Han Dongfang, the exiled former leader of an independent trade union in China’s 1989 democracy movement.

In an interview to mark the 20th anniversary of the 1989 protests, which ended after a brutal military crackdown, Han said he saw a small sign of progress in the greater tolerance of the government towards technically illegal industrial action. Some striking workers are sacked but few are arrested by local police anymore, he said.

Lee says a new phase of industrial relations in China began with public consultations on an employment contract law introduced in 2008.

“It was a hugely controversial process because it created a lot of debate … pro-worker, pro-capital debate,” he said. “So through this process workers became aware that there was going to be a new law that would provide much better protection of their labour rights.”

The benefits of the law for protecting employment rights were especially clear to younger members of China’s pool of more than 200 million migrant workers, Lee said.

“The young migrant workers are, generally speaking, better educated than their parents’ generation so they’re more likely to know their rights,” he said. “And the second factor is that they’re different from their parents’ generation, who had a dream of going back to their home villages with a lot of money made in the city. The young-generation workers dream of a better life in the city. But the reality they face is very different from what they dream of, and that gap between the dream and the reality pushed them to take action.”

The recent strikes followed news of 13 separate suicide attempts this year at a vast Foxconn electronics plant in the southern manufacturing hub of Shenzhen, which borders Hong Kong. A total of 10 of the young Foxconn workers died, provoking a debate about how much the highly regimented conditions for the 300,000 workers at the Taiwan-owned plant, which has customers such as Apple and Dell, were to blame.

The Foxconn suicides and the strikes were “unrelated incidents but the causes were similar … low pay, long working hours, absence of channels to redress their grievances, and trade union branches that exist only in name”, said Anita Chan, a researcher on labour in China at the University of ­Technology in Sydney.

The Honda workers were “well organised, strategic and assertive”, Chan said in a commentary in the official China Daily newspaper. “The All China Federation of Trade Unions (ACFTU) has realised that the Honda strike is a different form of labour protest, not least because it goes to the heart of a problem: what is the union’s legitimate role.”

ACFTU was originally “perceived as part of the state”, like trade unions in other socialist states, but has found it difficult to “adapt to the environment of market-based employment legislation”, Lee said.

“Often union leadership at the enterprise level is under heavy influence of employers or even composed of senior managers of the enterprise.”

The striking Honda Auto Parts workers elected their own representatives and condemned the plant’s ACFTU-affiliated union officials for scuffling with some of the strikers and issuing a public apology for the strike.

“Our struggle for rights is not a struggle to protect the mere interests of 1800 workers. We are concerned with the rights and interests of the workers in the whole country,” the Honda workers said in a statement.

A letter of support for the Honda and Foxconn workers has reopened the long-standing divisions among the 78 million members of the Communist Party between its pragmatic majority and the “old Left”, loyal to its roots under Mao Zedong. Five retired officials and scholars issued an appeal drenched in Marxist rhetoric.

“For the past 30 years, China has relied on several hundred million cheap workers from rural areas to create this export-oriented ‘world factory’ and to bring about consistent, rapid growth in China’s economy,” they said.

“At the same time, workers’ basic rights have long been neglected. From the Foxconn tragedy, we hear screams coming from the lives of new-generation migrant workers, warning the entire society to rethink this development model leveraged upon the sacrifice of people’s basic dignity.”

About one-quarter of Chinese ­workers have not had a pay rise in five years, despite double-digit economic growth and consumer-price inflation, according to an ACFTU survey, while China has one the world’s largest income gaps between its tens of millions of super-rich and the rest of its 1.3 billion people.

The People’s Daily, the party’s official newspaper, carried an editorial last month saying: “The time has come to narrow the gulf between rich and poor, which is stifling consumer demand here.” Premier Wen Jiabao weighed in with a call for the country to “treat young migrant workers as they would treat their own children”.

“China has become one of the most unequal societies in terms of income distribution,” Lee said. “The government is trying to redress income distribution issues by policy intervention. At the same time, it realises that workers’ bargaining power is also crucial for rebalancing the distribution at the enterprise level.”

But predictions of a workers’ uprising or a flight of multinational manufacturers from China look premature in a nation whose leaders appear determined to do everything in their power to maintain Communist Party rule.

“The change should be welcomed,” Ben Simpfendorfer, a Hong Kong-based China economist with the Royal Bank of Scotland, said of the rising wages. “Labour is too cheap in China and the rest of Asia, making it difficult to shift to a consumption-led growth model,” Simpfendorfer said.

“I expect to see continuous improvement of working conditions and wages because China is developing so fast and also the workers are becoming increasingly capable of pushing for better wages and working conditions, either through collective action, like a strike, or through collective bargaining,” Lee said. “But I don’t think this new trend of strikes will unsettle the development of the labour market system in China. There may be a continuous number of strikes by workers in the auto sector, the electronics sector or whatever, but it is still not going to unsettle the entire labour relations system in China.”

Crothall said that although labour activism is increasing, there are no signs of attempts to set up industry-wide independent trade unions.

Any such attempt would most likely lead to the arrest of the organisers, following the example of Liu Xiaobo, a dissident writer who co-organised the Charter ‘08 for democratic reform. In December Liu was sentenced to 11 years in prison for subversion.

BEIJING // Labour rights campaigners have warned that more industrial discontent is likely in China despite a round of minimum wage increases that took effect yesterday.

The minimum pay rates in at least nine provinces and cities were increased, in some cases by as much as a third, after a series of strikes over pay at manufacturing plants.

While the wage increases had largely been planned in advance and announced this year before the latest wave of strikes, academics said yesterday they were at least partly prompted by an ongoing aim to reduce the frequency of industrial action.

Patrick Chovanec, an associate professor in the school of economics and management at Tsinghua University in Beijing, said the wage increases reflected a government policy to “reduce social unrest and maximise social harmony” by spreading the benefits of economic growth across the country and to different social classes. This had been a consistent aim under Hu Jintao, the president, he said.

Yesterday’s wage increases covered geographical areas including the central province of Henan, where the minimum wage increased by one third to 600 yuan (Dh325) a month, and the capital, Beijing, where there was a 20 per cent rise to 960 yuan a month.

China’s business capital, Shanghai, and the key manufacturing province of Guangdong, which has borne the brunt of recent strike action, have already increased minimum wages this year by about 20 per cent.

In total, more than 20 provinces are thought to have introduced or planned wage increases this year.

Recent industrial action was partly a consequence of a shortage of skilled rather than unskilled labour, Mr Chovanec said, and he cautioned that a rise in the minimum wage “may or may not have much of an impact” on skilled workers of the kind who have tended to strike in the past few weeks.

This week’s pay rises followed a period of salary stagnation for many workers after minimum wage rises were frozen more than a year ago to help companies get through the global economic slump. This stagnation in earnings has been accompanied by high inflation, meaning that increases were necessary, said Ren Xianfang, a China analyst at IHS Global Insight in Beijing.

“Inflation in China is getting to the point where it’s creating pressure for wage inflation,” she said. “Manufacturing workers need higher wages to offset the increases in the cost of living.”

Significant increases in the minimum wage in percentage terms were not enough to turn it into “a decent living”, said Geoffrey Crothall, an editor at the China Labour Bulletin, a pressure group based in Hong Kong.

Mr Crothall “expects to see” more strikes on top of those that have recently caused the car makers Toyota and Honda to stop production when employees at parts suppliers walked out. Managers felt compelled to offer large wage rises, in some cases as much as 24 per cent, to try to get staff back to work.

“The basic problem is that even after this increase, the minimum wage is still a very low wage,” Mr Crothall said. “Workers still have to do long hours to make a decent living.”

He predicted that in the coming months workers in the garment and electronics industries in particular would be “pushed even harder” to fulfil orders in the run-up to Christmas, and this could lead to walkouts.

“Often the summer disputes are triggered by high temperatures,” he said. “If the boss is too cheap to have a decent air conditioner or any air conditioner, conditions can become intolerable and workers will quickly go out on strike.”

Aside from reducing the potential for industrial unrest, the minimum wage increases are also part of the government’s aim of boosting domestic demand through giving workers a “bigger share of the pie”, Mr Chovanec said. Wages made up only 39.7 per cent of China’s GDP in 2007, down from 51.4 per cent in 1995 and considerably below the figure for western nations such as the UK, where wages make up about 53 per cent of GDP.

But wage rises are not guaranteed to improve domestic consumption, he cautioned, saying that instead people might simply save more. Concerns over costs such as for health care were a big factor behind high savings rates in China, he said. Without improved healthcare coverage and welfare benefits, there might not be increases in consumer spending.

June 18, 2010

TAIPEI, Taiwan (AP) — Compal Electronics Inc., the world’s largest contract laptop maker, said Friday that China’s labor shortage and rising wages will pose a big challenge to it amid the recovery in the computer market.

But instead of moving to lower-wage countries, Compal will increase the wages of its Chinese workers and try to improve their working environment, said company chairman Hsu Sheng-hsiung.

He said the wages will increase by a “small amount” but refused to elaborate.

Compal churned out 38 million laptops last year — 23 percent of the world total — mostly from its production base in the Chinese city of Kunshan, near Shanghai.

With computer sales expected to increase 20 percent this year, Hsu said Compal will set up several facilities in China’s interior to meet demand.

“By 2030, 80 percent of China will be urbanized,” he told a shareholders meeting. “Wages are still low in the west, but will catch up rapidly. Corporations must not relocate for the sake of wage concerns like nomads chasing new grasslands.”

With an economic recovery in full swing in China, workers have begun demanding significant wage increases and showed far less tolerance for harsh work conditions than their predecessors did only five years ago.

The problem of poor worker morale in China came into stark relief earlier this month amid a spate of suicides at the giant electronics facility of Taiwan’s Foxconn Technology Group in southern China. Stung by the suicides, the company promised to raise basic wages at the facility from 900 yuan ($130) to 2,000 yuan, beginning in October.

AMAGA, Colombia – More than 70 Colombian miners were trapped and feared dead Thursday in a coal mine explosion that could become one of the Andean country’s worst mining accidents.

At least 16 bodies were pulled from the wreckage after the midnight gas explosion at the San Fernando mine in northwestern Antioquia province. The death toll was expected to rise.

The blast occurred far from the major mining operations run by companies such as Drummond and Glencore near the Caribbean coast of the world’s No. 5 coal exporter.

Relatives sobbed and hugged each other and anxiously pressed rescue workers for news as hearses ferried bodies from the wreckage of the mine blast.

“This is a huge tragedy. Initially we have reports of 72 people trapped and now we have 16 bodies recovered,” President Alvaro Uribe said.

Luz Amanda Pulido, a national disaster official, told local radio there was little chance any miners would be pulled out alive.

A new accumulation of gas temporarily halted attempts to reach miners trapped 6,500 feet below the surface, rescue workers on the ground said.

Colombia has enjoyed a boom in energy and mining investment under Uribe, who sent troops out to drive back left rebels who once controlled large parts of the country and targeted oil pipelines as part of Latin America’s oldest insurgency.

MINING AN ELECTION ISSUE

Uribe steps down in August and his former defense minister, Juan Manuel Santos, is favored to succeed him in a run-off vote on Sunday. The country’s commodities boom is an election issue with candidates debating how to handle an influx of mining and oil dollars.

The disaster could also highlight mining safety regulations in a country where the industry ranges from large deposits operated by multinationals to hundreds of small, makeshift pits that produce coal for local markets.

Just as news of the explosion was breaking, workers at Glencore’s La Jagua’s coal mine in Cesar province went on strike over conditions after failing to reach an agreement with the company, a union said.

No details were immediately available on the owners of the San Fernando mine or its production.

Five miners died in the same mine during a flood two years ago, local media reported. Last year, a methane gas explosion in another Antioquia province coal mine killed eight workers and in 2007, 31 miners were killed in an explosion Norte de Santander in one of the country’s worst mining disasters.

The Chinese Communist party called on employers to raise salaries and improve training for workers today, as Toyota became the latest foreign firm to be hit by a wave of high-profile strikes.

The People’s Daily, the mouthpiece of the ruling party, warned that the country’s manufacturing model faced a turning point as demographic and social changes slowed the influx of low-cost labour from the countryside.

Coming a day after the premier, Wen Jiabao, made similar comments, the editorial suggests the authorities may be encouraging businesses to restructure the economy by putting less emphasis on cheap exports and more on higher-value goods and domestic consumption.

For most of the past 30 years, China’s economic growth has been fuelled by low-cost migrant labour. This has helped raise national competitiveness, attract foreign investors and keep consumer prices lower across the world. But members of a new generation of migrants are less willing to endure hardship and many have successfully gone on strike to demand better conditions.

Without mentioning strikes, the People’s Daily said China should adjust to a tighter labour market by improving skills, creating more service-sector jobs and giving workers more cash to spend. This echoed a speech a day earlier by Wen, who said a new generation of migrant workers should be given improved conditions .

“Your work is glorious and should be respected by society at large. Migrant workers should be cared for, protected and respected,” he told workers at the construction site for the No 6 subway in the capital. “The government and the public should be treating young migrant workers like their own children.”

According to labour activists, there have been numerous strikes in recent years, though few get reported in the media. Chang Kai, professor of labour relations and law at Renmin University, said the number had increased by 30% per year.

Their impact has grown as the “one-child” family planning policy starts to thin the bulge in the working-age population. This demographic change in the balance of labour supply and demand has added to improved worker organisation and greater activism at high-profile foreign firms.

Japanese firms have disproportionately been the focus of the reported strikes. The Toyoda Gosei car parts plant, in Tianjin, was shut down by a strike this week until the management promised to negotiate higher wages.

Three Honda plants in Guangdong have been affected, along with a Hyundai factory in Beijing and a Taiwanese rubber products manufacturer in Shanghai. According to Xinhua news agency, the fast food franchise KFC has conceded to a union demand for minimum monthly pay of 900 yuan (£90), up by 200 yuan.

In most cases, however, workers have organised outside the unions, which are seen as close to management and the party. This has sparked commentaries in local media urging unions to mediate more effectively between workers and employers.

Having seen how the Solidarity movement in Poland helped to overthrow a communist government that stopped representing its interests, China’s leaders do not want to alienate the labour force. So far, there is no sign of any mass, nationwide protests. This week’s statements of support for workers’ rights suggest the politburo wants to keep on the right side of the activists.

LOS ANGELES, Calif. — Police are gearing up to prevent violence in Los Angeles after Thursday night’s Game 7 of the NBA finals between the Lakers and Boston Celtics.

But at least one store owner near LA’s Staples Center says he’ll close before the game ends — just in case.

Hundreds of police officers will be deployed around the downtown arena to prevent a repeat of rioting that occurred in 2000 after the Lakers won their first championship in a dozen years, or the disturbance that erupted last year.

Fan Victor Lopez says he helped overturn a police car in 2000, but now he’s a 27-year-old father. He says these days he doesn’t want to risk jail time.

City officials are warning fans to stay away from the downtown area unless they have tickets to the game.

The Penan tribe of Borneo are facing a fight for survival. Logging, dam construction and deforestation is threatening the forest on which they depend.

Although only around 300 of the tribe of hunter-gatherers remain nomadic, even those who have settled remain dependent on the forest. Since the 1970s, the Malaysian government has been exploiting the forest of the Sarawak region, logging being a particularly devastating example.

The tribe have been trying to prevent logging on their territory since the mid to late 80s. They’ve been blockading roads to stop loggers from entering their land, with some success, but many communities have seen their forests devastated – forests they rely on for food, medicine and the materials they use to build their homes.

The first community I visited lived in an area where they had managed to keep the loggers out, though officially a company had rights to their land. I had to travel there via the logging roads and was shocked to see truck after truck carrying the timber out. I left the road, transferred to a small boat and took it up river, pushing it over the rapids until, eventually, I arrived at the settlement. It was beautiful there.

The Penan were very welcoming. They were gentle and softly spoken, and cooked me meals of wild boar that they had hunted. There was a lot of food – they pointed out an abundance of fresh boar tracks. Wild boar is what the Penan most like to eat, as well as deer and fresh fish from the river. They catch smaller animals with blow pipes: long carved-out pieces of wood through which they blow poison darts.

Another community I met had made their home at the bottom of a valley where there was old forest. While I was there, we heard bulldozers at the top of the ridge on one side of the valley. A logging company was trying to come over into their territory. The tribe told me they had gone up to the ridge to ask the loggers not to come over but were told to stop harassing the workers. The loggers said that the government had given them permission to be there and the indigenous people would be killed if they didn’t stop protesting.

People would ask for my help in every community that I visited. The tribe are very aware of the odds stacked against them – big powerful companies like Samling, who harvest the timber, and Shin Yang, who harvest palm oil, are on their land with the backing of the Sarawak government. It has also been reported that some of members of the state government are involved with the logging and palm oil companies.

In many of these cases there’s a failure among those in power to appreciate the Penan’s way of life as valid. Most of the indigenous people of Sarawak are ‘shifting cultivators’ tribal, government, who practise agriculture. This is at odds with the Penan’s nomadic hunter-gathering tradition.

I went on to visit a community whose land had been heavily logged. The contrast between them and the Penan I had been with previously was shocking. People here had very little to eat. They told me they went for months without finding a single wild boar and were a little thin. But they were determined to cling to their way of life, despite the odds. The fight for survival has come upon the Penan quickly – 15 years ago life had been relatively straightforward for them.

Some of the tribe have moved into towns, but they’re in a minority. The Penan prefer to hang on to the small patches of forest that remain. They can eke out a living in cleared areas where oil palms are yet to be planted. When companies leave these areas the forest begins to regenerate slightly, although it never totally recovers. When the palm oil companies return to plant their crops the land becomes useless to the Penan. Driving through areas of Sarawak, you can see the rows of neat little trees, stretching over miles of indigenous land.

Sadly, some of the Penan end up working for the companies who moved them off their tribal land. They have no choice: they can no longer find food in the forest so have to earn money to buy it, although the companies do not pay them well.

As well as deforestation, the Penan’s land is threatened by plans to build a series of hydroelectric dams in Sarawak. The first dam is already under construction, and the communities who live on that land have been ordered to leave. But the state of Sarawak already has the capacity to produce more electricity than it needs. The surplus electricity will be sold and exported to other parts of Malaysia.

I went to several of the communities who were being told to make way for these dams. They were worried about what to do and didn’t want to move. They would be given only a small area of land, per family, to farm in government resettlement areas. They would have to grow food in these plots, which is a far cry lifestyle they are used to. They should have the right to choose if they want to grow crops or be hunters, or a mixture of the two, which is what many of them now do.

In many other countries indigenous land rights are at least recognised on paper, but the Malaysian and Sarawak governments do not recognise the Penan’s rights. But the Penan are not giving up. They government are out of step. I think if there is enough international pressure on the Malaysian government, hopefully the Penan can see their rights recognised and their land protected.

A new study shows that deforestation in the Amazon helps spread disease by creating an optimal environment for malaria-carrying mosquitoes. The study, published in the online issue of the CDC journal Emerging Infectious Diseases, found that clearing forests in the Brazilian Amazon raised incidences of malaria by almost 50 percent.

“It appears that deforestation is one of the initial ecological factors that can trigger a malaria epidemic,” says Sarah Olson, the lead author of the new report and a postdoctoral fellow at the Nelson Institute, Center for Sustainability and the Global Environment with the University of Wisconsin-Madison.

Researchers combined information on malaria occurrences in 54 Brazilian health districts with satellite imagery of Amazon deforestation.

“The deforested landscape, with more open spaces and partially sunlit pools of water, appears to provide ideal habitat for this mosquito,” Olson says of Anopheles darlingi, the primary carrier of malaria in the Amazon. In deforested areas Anopheles darlingi displaces other less-malaria prone mosquitoes that favor forest landscapes.

“A 4 percent change in forest cover was associated with a 48 percent increase in malaria incidence in these 54 health districts,” explains Olson. “The health data used in the study is of the highest quality and spatial resolution. Unlike previous studies, our data allowed us to zoom in on areas where people are being exposed to malaria and to exclude areas where they are not being exposed.”

The study adjusted for human population, access to healthcare, and additional factors, yet still found malaria outbreaks closely aligned with deforestation.

LIMA — Thousands of Peruvian workers blocked a key highway, risking clashes with police at a US-owned smelter at the center of a bitter year-long environmental dispute.

Defying a massive police operation to prevent the blockade, workers from the facility in the central town of La Oroya placed boulders and tree trunks across sections of Highway 20, a main east-to-west artery in the Andean nation.

A similar blockade at the complex — which refines lead, zinc, gold and copper — boiled over into ugly clashes with riot police last September that left one officer dead.

“The town is totally paralyzed, 3,500 workers are taking part in the action with the support of the entire population of La Oroya,” union leader Roberto Guzman told AFP by telephone.

The Peruvian government deployed 2,000 police officers and 500 troops to stand guard over the highway.

The protest marked the start of an indefinite strike to compel the government to push back a July 15 deadline imposed on the US firm Doe Run to comply with new environmental regulations.

President Alan Garcia issued an ultimatum to the company, ordering it to resume operations by July 24 or face being shut down for good.

“We can’t be placed with our backs to the wall by a company that hasn’t followed through with the investments it agreed to make… it’s blackmail to try to get more time from the government and parliament,” Garcia told a press conference as he accused the firm of backing the protests.

“We’ve been lenient, but there’s a limit to that. We can’t make any more exceptions.”

If Doe Run isn’t up and running by the stated date, Garcia warned “it will be closed down as promised.”

Energy Minister Pedro Sanchez said a plan was underway to relocate Doe Run workers to other mining jobs across Peru if the smelter is shuttered.

Privatized and sold to Doe Run in 1997, the mine is notorious for making La Oroya the most polluted town in Peru. Sulfur dioxide from its smelters have prompted serious health concerns for the local populace of some 60,000.

It was hoped Doe Run would be able to convert it into a clean-running facility, but the company has failed to meet several deadlines to do so as has run into financial trouble.

Doe Run is accused of resorting to “blackmail” by inciting its workers to side with the company’s demand for a deadline extension.

The firm owes more than 200 million dollars in debts and back taxes and is asking for a 20-year repayment moratorium, which the government says is unacceptable.

Doe Run, an affiliate of the US group Renco, is one of the world’s leading lead producers and is based in the central US state of Missouri.

A riot at Calipatria State Prison Saturday afternoon leaves 35 inmates injured.

Mostly, it was bumps and bruises … but two were taken to pioneer memorial hospital with more serious injuries.

Lt. Shawn Mclinn with Calipatria Sate Prison described the riot as “everything, fighting, stabbing, kicking … that’s fighting.”

He said “the two inmates had injures consistent with stab wounds, possibly even sliced.”

It took two warning shots from corrections officers to break up the fight.

While the investigation moves forward, the prison is under a modified program.

Mclinn says inmates “shower and outside of that they stay in their cell.”

The program applies to all African American inmates … That’s 60 percent of the prison population. It does not include inmates of any other race.

Lt. Mclinn says its because everyone involved in the riot was African American. He added “we have to take into consideration all general population inmates could be involved.”

Prison officials are looking into whether the uprising was gang related, but have not determined this conclusion so far.

That same day, a horrifying discovery came to light. An inmates body was found.

Samuel Johnson’s was found in the same area the riot occured. Johnson was serving a 37 year sentence for second degree murder.

Prison officials believe he died of natural causes, but aren’t ruling anything out, including the riot.

Johnson’s autopsy is expected to be later this week.

A dozen out-of-control prisoners left a Nova Scotia jail with smashed windows, broken sprinklers and damaged recreation equipment.

Two sections of the Central Nova Scotia Correctional Facility remained locked down Wednesday, after a stabbing and riot at the jail the night before.

Corrections officials said an inmate was stabbed at about 9 p.m. Tuesday, prompting guards to lock down the entire jail. But some prisoners in another area refused to leave a day room and return to their cells.

Guards donned riot gear when 17 inmates — some wearing masks — started breaking sprinklers, windows and equipment, and covered security cameras.

Police were called in to provide backup but stayed outside the jail. Officers left before midnight without arresting anyone.

“Staff were able to get that under control by midnight,” said Sherri Aikenhead, spokeswoman for the Department of Justice.

David Horner, head of corrections for the department, said the inmate who was stabbed was released from hospital within hours.

Aikenhead said no correctional workers were hurt.

She said there were no fires, unlike a riot in April 2009 when 59 inmates caused extensive damage to the jail.

“We are relieved about that,” she said.

Cleanup and repairs were underway at the jail on Wednesday, as corrections staff looked for the makeshift knife that was used in the stabbing.

Opened in 2001, the jail is designed to hold 225 male and 48 female inmates in single cells. However, prisoners are often placed two to a cell because of overcrowding.