AIG to pay US$450m in bonuses despite bailout

AIG plans to pay 450 million dollars in bonuses to finance executives who led the US insurance giant to a 99.3-billion dollar loss last year, US media reported Sunday.

The payments have dismayed the US government as AIG has received 170 billion dollars in federal aid.

The bonuses are for staff at the London subsidiary AIG Financial Products, which helped trigger the collapse and then the nationalization of the former world number one insurer, The Wall Street Journal reported.

American International Group CEO Edward Liddy told Treasury Secretary Timothy Geithner bonuses could not be cancelled due to a risk of lawsuits for breaching employment contracts, The Washington Post said.

In a letter to Geithner, Liddy also indicated a refusal to pay bonuses worth tens of millions of dollars would prompt an exodus of senior employees.

"We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of the American taxpayers -- if employees believe that their compensation is subject to continued and arbitrary adjustment by the US treasury," Liddy wrote, according to the Post.

Some of the bonuses are as samll as 1,000 dollars but seven executives at AIG Financial Products were to receive more than three million dollars in bonuses, The New York Times reported.

For the fourth quarter, AIG announced a loss of 61.7 billion dollars -- the biggest ever for a US firm in one quarter -- pushing up its net loss for 2008 to 99.3 billion dollars.

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G20 bridges differences before key finance summit

Before a key summit on tackling the economic crisis, rich and emerging nations have agreed common ground on hiking IMF funds and stricter market regulation but remain split on stimulus measures.

G20 finance ministers on Saturday vowed to take "whatever action is necessary" on the world economic slowdown, after talks preparing for a London summit of world leaders on April 2.

They played down signs of division between the United States and Europe on how best to boost the global economy, insisting the road to the summit next month was smooth.

"We're prepared to take whatever action is necessary to ensure growth is restored and we're committed to do that for however long it takes," British finance minister Alistair Darling said Saturday after hosting the G20 talks.

"I believe that this does provide a very clear sense of direction."

The politicians managed to reach agreement on the need for an "urgent" and substantial funding boost for the International Monetary Fund (IMF), although a communique issued afterwards did not state a figure.

They also agreed to some tougher regulation of the financial system.

But the meeting failed to reach consensus on a new stimulus package, despite controversial calls from the US, the world's largest economy, for coordinated international pump-priming in recent days.

US President Barack Obama, who will attend the London summit in April, denied there were divisions on how to tackle the financial crisis, deriding such a notion as a "phony" story drummed up by the media.

"I don't know where this notion has emerged that somehow there are sides developing with respect to the G20," Obama told reporters after meeting Brazil's President Luiz Inacio Lula da Silva at the White House.

Agreement on IMF funding came after the United States recently suggested that its lending capacity should be trebled to 750 billion dollars (580 billion euros).

European leaders want to double the figure to 500 billion dollars.

The G20 on Saturday stated its key priority was restoring bank lending to help ease the effects of the crisis.

But Germany and France are opposed to US calls for new stimulus, instead favouring tougher regulation to tackle the crisis.

French Finance Minister Christine Lagarde said she was "delighted" that the G20 was closer on agreeing tighter regulation of markets.

The United States, eurozone, Japan and Britain are all in recession as the global economy struggles to recover from the worldwide credit crunch that erupted in late 2007.

Commercial banks are lending less cash amid fears about their exposure to the collapsed US sub-prime property market.

Also Saturday, British Prime Minister Gordon Brown, who will host the G20 summit, and German Chancellor Angela Merkel talked up the prospect of agreement on April 2.

"I'm very positive, I'm very optimistic that we will be able to... come to an agreement together with the United States, with emerging economies such as China and India," said Merkel after meeting Brown.

Brown, meanwhile, highlighted US support for changes in regulations for hedge funds and other "shadow banking" operations.

Highly speculative and lightly regulated hedge funds have been blamed for fuelling instability in financial markets.

Measures agreed at the G20 talks in Horsham, near London, included regulatory oversight of all credit agencies, blamed for being too slow to alert investors to high-risk instruments, as well as a need for "sufficient supervision and regulation of hedge funds".

US Treasury Secretary Timothy Geithner on Saturday said there was unprecedented unity among the G20 on the economy, insisting: "The world is with us" when asked about stimulus.

"We are seeing the world move together at a speed and on a scale without precedent in modern times," he said.

"We have a very broad basis consensus globally now on the need to act aggressively to restore growth."

The G20, whose members also include Canada, India, Italy, Russia and South Korea, also pledged Saturday to "fight all forms of protectionism and maintain open trade" and stressed commitment to helping developing economies.

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OPEC holds oil output until May

The OPEC oil exporters' cartel on Sunday agreed to keep current production levels unchanged until May, Iraqi oil minister Hussein al-Shahristani said.

"It's a rollover until May," al-Shahristani said after a key production meeting in the Austrian capital.

Qatar's energy minister Abdullah bin Hamad Al Attiyah added that the cartel would meet again on May 28 in Vienna to assess the market situation.

OPEC's official daily output quota currently stands at 24.84 million barrels after the cartel agreed to slash 4.2 million barrels late last year in an attempt to energise weak oil prices -- but questions remain about compliance.

The cartel has slashed its output three times since September as crude prices slumped in the face of a worldwide economic slowdown.

Algerian energy minister Chakib Khelil added Sunday that the May meeting would allow the Group of 20 (G20) richest nations time to respond to the global economic crisis at a London summit of world leaders on April 2.

"I think it was a responsible position (to hold output) and also to give the chance to the G20 to do its job on April 2. In light of the decision they will make, we'll make our decision on May 28."

He added: "All of us will have to make an extra effort to be at 100 percent" in terms of compliance with last year's output cuts. "And then (in May) we will have a chance to review compliance."

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Malaysia cuts foreign worker permits by 70%

Malaysia has slashed its work permit approvals for foreign workers by almost 70 per cent so far this year, faced with the twin threat of layoffs and recession, according to a report Sunday.

In January and February, an average of 250 permits were approved daily compared to 800 last year, following a more stringent vetting process by the authorities, a Home Ministry official told the Star newspaper.

"Those requesting for foreign labour have to prove that they have made the effort to employ locals," the ministry's senior deputy secretary-general Raja Azahar Raja Abdul Manap was quoted as saying.

"If they can prove it, then they will get the clearance," he said.

A ministry spokesman was not immediately available to confirm the report.

In January, Malaysia banned the hiring of new foreigners in the manufacturing and services sectors after a report forecast 45,000 Malaysians would lose their jobs in the next few months.

And last week, the government cancelled work visas issued to 55,000 Bangladeshi workers after unions said the situation for Malaysians was bleak enough without additional foreign manpower being brought in.

Malaysia is one of Asia's largest importers of labour and has an estimated 2.2 million foreign workers, who are the mainstay of the plantation and manufacturing sectors.

However, the government has become concerned about the ramifications of having such a large migrant workforce and periodically tries to reduce it.

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Taiwan to allow up to two casino resorts

Taiwan has taken another step forward in a move to lift a decades-old ban on casinos after it was decided no more than two gambling resorts would be licensed at the beginning, it was reported Sunday.

The ruling Kuomintang (KMT), who control the legislature, pushed through a controversial bill in Parliament in January to lift the ban on casinos despite fears it could lead to more crime and damage morality.

The bill allows offshore islands to build casinos only if they are approved by residents in referendums.

Developers who win a licence would be required to build a hotel with a minimum of 1,000 rooms according to the result arrived at Saturday during a meeting of government agencies, the Chinese-language China Times reported.

The agencies also decided that the government would not issue the third licence within 10 years of licensing the second one to "avoid competition and reduce possible social impacts," the report said.

Officials say it may take a year for government agencies to amend the existing law and complete investment requirements and screening procedures.

Hundreds of activists from religious and environmental protection groups took to the Taipei streets Sunday to demonstrate against casinos.

"President Ma Ying-jeou, who has distinguished himself as a politician of high moral standards, should have a second thought on the matter," Ho Tsung-hsun, one of the protest leaders, told AFP.

"The experience of other countries introducing casinos indicated that they would boost the domestic crime rates," he said.

British developer AMZ Holdings Plc and Taiwan's Penghu Bay Development Co., have been preparing land for casino projects in Penghu, the archipelago located in the middle of the Taiwan Strait, the Penghu county government said earlier.

Penghu hopes to attract half a million tourist visits each year, generating 100 billion Taiwan dollars' worth of revenue annually in gambling and tourism, and creating up to 50,000 jobs.

Local media has speculated that the world's casino giants would pour money into Penghu having suffered a hammering elsewhere in the global financial crisis.

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Hong Kong's air cargo traffic drops

Hong Kong's air cargo traffic dropped nearly 20 per cent year-on-year in February as overseas demand for Chinese goods continued to shrink, the airport authority said Sunday.

Hong Kong International Airport (HKIA) said it handled 198,000 tonnes of cargo in February, 19.7 per cent less than the same month last year, as the global economic downturn took its toll.

February's fall was despite this year's Chinese New Year celebrations falling earlier than in 2008, which meant that manufacturing activities in China had resumed.

HKIA also reported a 13.7 per cent fall in passenger volume to 3.4 million.

The city's air cargo volume has seen double-digit year-on-year declines in recent months as the US, Europe and other major buyers of Chinese manufactured goods cut their orders after being badly hit by the financial crisis.

"It is unlikely that this downward trend (in cargo traffic volume) will reverse in the short term when the world's major economies remain in recession," said Stanley Hui, chief executive officer of HKIA, in a statement.

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Kuwait to scrap new refinery project

Kuwait will scrap a 15-billion dollar project to build a new oil refinery after an independent watchdog said the project was not feasible, the prime minister said in comments published Sunday.

"The government is committed to the Audit Bureau report, and the council of ministers will officially halt the project at its next meeting," which takes place on Monday, Sheikh Nasser Mohammad al-Ahmad al-Sabah told Al-Watan daily.

Kuwait in May awarded contracts to build the 630,000-barrels per day refinery to four South Korean companies and a Japanese firm and later signed letters of intent with them.

The deals prompted a dispute between the government and opposition MPs who alleged the bidding process and awarding of contracts involved flawed procedures.

MPs said the contracts should have been awarded through the state-run Central Tenders Committee (CTC) to ensure transparency, and vowed they would quiz the oil minister if the contracts were signed.

The Gulf state's government in August bowed to political pressure and referred the project to the Audit Bureau for an investigation.

Though the outcome of the report was not published, local media and MPs said the Bureau concluded that the project was technically and economically not feasible and should go through the CTC.

In December, Kuwait scrapped a 7.5-billion dollar partnership with US Dow Chemical after pressure from MPs, citing high cost amid the global economic downturn.

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Macau still worth a gamble

Half-finished casinos and dropping revenues have fuelled fears that Macau's staggering growth has faltered, but analysts insist the gaming haven remains a sure long-term bet.

The former Portuguese colony has transformed itself from a sleepy backwater to a dazzling entertainment centre in the last five years, with foreign and Chinese-owned casinos sprouting up across the territory.

The city of just 550,000 now takes in more gaming revenue than Las Vegas and Atlantic City combined, thanks to the voracious gambling of Chinese visitors who have poured in from the mainland.

But worries over corruption, problem-gambling and foreign companies grabbing the spoils from China's recent economic boom led Chinese authorities to stem the flow of visitors last summer.

The tougher visa restrictions caused a sharp drop in revenue growth sparking a slew of negative stories, plummeting casino stocks and a hiatus in the city's construction boom.

But some analysts are adamant fears about Macau's demise are premature.

"Macau has been used to more than 40-percent growth -- that cannot be sustainable and a slowdown is natural," said Zeng Zhonglu, a professor in gaming economies at Macau Polytechnic Institute.

"My impression is that the economy generally is healthy."

Jonathan Galaviz, an analyst with Las Vegas-based consultancy Globalysis, said any disruption to economic growth will be temporary with Macau's short-term performance expected to fluctuate along with the Asian economy.

While gaming revenues dipped sharply over the second half of 2008, the city still raked in a total of 13.5 billion US dollars for the year, a 31 percent increase year-on-year. Revenues rose 46 percent in 2007.

Meanwhile, employment held steady in the three months to January and retail sales rose 34 percent in 2008. Gaming is a central part of the economy.

During a recent visit, there were lengthy queues at the immigration counter and the city centre jewellery and watch stores were humming with shoppers.

The tables at the Grand Lisboa, the flagship casino of local tycoon Stanley Ho, were three deep with heavy-smoking Chinese gamblers playing their favourite game of Baccarat.

But it is in the hidden world of the VIP gaming rooms where the city has suffered.

VIP revenues have played a central role in the success of Macau's economy with top casinos tussling with each other to attract high-rollers.

But many of the heaviest gamblers were Chinese government officials and the heads of state-owned companies, whose frittering away of public cash in Macau's private rooms has become a national scandal.

Unsurprisingly, official figures are not collated, but Zeng has combed through mainland media reports to establish a clearer picture.

Of the 99 cases he uncovered, he said each official or businessman lost an average of 20 million yuan (2.9 million US dollars) on the tables.

One official lost 100 million yuan in one day in 2007, while another had to be carried out of a Macau casino as he was too weak to walk after six days and nights of constant gambling.

"The central government is highly concerned that so much money is disappearing in Macau," Zeng said.

"It leads to bribes and the theft of public funds, all of which greatly damages the government's reputation."

Glenn McCartney, a tourism academic at Macau University and local businessman, said the city had to change its business focus from VIPs to a genuine mass-market entertainment, attracting visitors from across Asia.

"I am very confident about Macau. The market is not anywhere near maturity level yet," he said.

"But Macau is not Las Vegas. If I was sitting in the marketing department of a casino firm, I would be asking what changes we have to make so we can attract more people from the mainland."

US firm Las Vegas Sands in particular is hoping China will allow more visitors in.

The most aggressive foreign investor in the city, it opened the world's biggest casino, The Venetian, in 2008.

But worsening credit markets have stalled its ventures across the world, and last November it was forced to sack 11,000 workers and halt work on a huge complex of new hotels opposite the gargantuan Venetian.

Four months later, the quiet building site remains the most potent symbol both of Macau's risks for investors and its potential.

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British PM promises tougher financial watchdog

Prime Minister Gordon Brown promised on Sunday to strengthen Britain's financial watchdog, giving it more power and resources to supervise the country's financial sector.

Brown's remarks come just a day after finance ministers from the G20 group of industrialised and developing countries vowed to take "whatever action is necessary" on the world economic slowdown, after talks preparing for a key summit on fighting the crisis next month.

"The world has changed beyond recognition not just in the past 10 years, but in the past 10 months too," the premier, himself a former finance minister for a decade, wrote in the Sunday Telegraph newspaper.

"Our system for financial regulation must change with it. This means a new tougher approach, addressing the new challenges, with a reformed, tougher and better-resourced Financial Services Authority (FSA) at its core."

Brown said other measures that needed to be taken included bringing hedge funds and other investment funds under the FSA's supervision, holding board-room directors to account, greater international co-operation and a new pay and bonus structure.

He said there also needed to be better monitoring of the effect of an institution and its assets on the financial system, and stronger cross-border supervision.

"While the 1997 supervisory system was right for the circumstances we faced then, it is now clear that the detailed regulation of financial markets across the world did not keep up with the pace of change in the global economy," he wrote.

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Switzerland risks OECD tax blacklisting

Switzerland said the OECD economic grouping threatened to blacklist it as a tax haven and it risked being punished with economic sanctions, according to comments published on Saturday.

The comments by Swiss Finance Minister Hans-Rudolf Merz came a day after Switzerland and other states said they would relax their bank secrecy laws, within strict limits, amid global pressure to stamp out tax havens.

"The secretariat general of the Organisation for Economic Cooperation and Development (OECD), without informing us, drew up a proposal for a new blacklist on March 5. I have learned that Switzerland was on it," Merz was quoted as saying by the daily Le Temps.

He said the list was drawn up at the request of the Group of 20 (G20) rich and emerging countries, whose finance ministers were meeting in England on Saturday ahead of a full summit of its leaders on April 2.

The G20 has made the fight against tax havens one of its top priorities, with Germany and France pushing particularly hard.

"For the moment it's just a threat," Merz said of the blacklist proposal. "But if this threat becomes a reality during the G20 on April 2, it could entail economic sanctions for the countries targeted."

Switzerland joined Luxembourg, Austria and Monaco on Friday in saying it would relax bank secrecy laws. Merz said the decision came in response to pressure from the G20.

"We cannot run such a risk" of being blacklisted and suffering sanctions, he said.

Friday's announcements followed similar moves Thursday by Belgium, Liechtenstein and Andorra. The latter two are already on an OECD list of uncooperative tax havens.

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