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Lebanon’s economy minister blames Beirut blast on ‘incompetence’ and ‘stupid’ decisions

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Raoul Nehme says he has no doubt that criminal negligence within successive Lebanese governments led to the devastating explosion that killed at least 135 people in Beirut on Tuesday.

More than 4,000 people were injured and huge swaths of the Lebanese capital city were destroyed in when 2,750 tonnes of ammonium nitrate in the city’s port area exploded.

The materials had been sitting in a Beirut warehouse since they were confiscated from a cargo ship in 2014, despite repeated warnings from customs officials that it was dangerous to leave them there. The government said Wednesday it is putting an unspecified number of Beirut port officials under house arrest pending an investigation.

Even before the blast, the country had been plunged deep into an economic crisis, with massive job losses, growing debt and shortages of electricity, water, and critical supplies — all exacerbated by political corruption and unrest, fighting along the southern border, and most recently, the COVID-19 pandemic.

Nehme, a former banker, was appointed Lebanon’s economy minister in January by new Prime Minister Hassan Diab in an effort to meet protesters’ demands for a cabinet made up of people with specialized expertise, rather than partisan ties.

He spoke to As It Happens guest host Susan Bonner about how his country plans to recover from the explosion. Here is part of their conversation.

You just visited the site of this explosion. What was that like?

It was very sad because we have a number of casualties within our employees — missing people and dead people.

The site of destruction is really an apocalypse. It is something you cannot imagine. Everything is flattened in the place where the explosion happened. It sank into the sea. The silos are half felled, half of them unfortunately on some of our employees. And they are practically destroyed. I don’t think we will be able to recover any part of it, which is a big problem for Lebanon.

Warehouses burned down, destroyed entirely. Everything is destroyed. It’s absolutely terrible.

Everywhere in Beirut, we have major damage. Glass falling, doors broken, flying through the apartments.

Our ministry, which is in the city, is entirely destroyed. Nothing is left. Everything is broken. [In] my office … two windows fell on the place where I sit. Luckily, I was not there.

[Earlier today I was] in a meeting with importers and then supermarkets to discuss with them what they needed to make sure that we ensured supply. And we had to do a meeting outside of Beirut because we have no office any more in Beirut left that could be used.

And even five, six kilometres out of Beirut, a lot of glass is broken. In Beirut, stores are damaged badly and products in the stores [are] damaged badly as well.

So for the economy, it is absolutely terrible. We already had a major problem and now we have these huge losses. We cannot assess how much the losses are, but they are certainly in billions of dollars, and we just don’t have the means to resolve these issues. We have to count on international aid, heavily.

 

Destroyed buildings are visible a day after a massive explosion occurred at the port in Beirut. (Daniel Carde/Getty Images)

 

Minister, you describe this as an apocalypse. And yet the government knew that this explosive material was sitting in this port for six years in Beirut. How much responsibility does the government bear for what happened?

Personally, I think that there is a huge responsibility for the successive governments. And this is why we established that investigation committee. And we will go to the end. Whoever was responsible since 2014 until now will have to be brought to court. And really, sanctions should be very hard.

What happened is just unacceptable. And we will go to the end of this investigation. Whoever is responsible, we will go after him, whoever it is, wherever he is.

You say there will be an investigation, but critics say this goes beyond just individuals, that this shows the negligence, incompetence and corruption that runs deep in Lebanon’s political class. Would you agree with that?

Yes, we have a lot of corruption. But in this case, it’s not corruption that played a role. It is certainly incompetence. It is certainly, as well, people not understanding and assessing the risks.

It is bureaucracy and, frankly, in my opinion, stupid behaviours and decisions.

 

A woman looks out of the collapsed facade of an apartment, damaged by the explosion. ( Marwan Tahtah/Getty Images)

 

But, Minister, there were warnings that came from port officials over the years. Six formal letters to the country’s judiciary asking that this dangerous material be removed and, in fact, proposing ways to deal with it. How does this not go beyond just bureaucratic incompetence to criminal negligence?

What happened is criminal negligence. Absolutely. I fully agree with you. And it is criminal negligence from a lot of people.

But I don’t want to go beyond the investigation and say what my personal opinion is. The investigation will happen, and everyone that has a responsibility in it, everyone will have to be punished, will have to bear the consequences of what we lived through.

As for the economic consequences, that is your responsibility directly. How can you recover from this when … Lebanon was already dealing with virtual economic collapse, and now this?

Well, even before this, I was very clear, stating that without [the International Monetary Fund], we cannot get out of this problem and out of these issues.

IMF brings two things to the table. It brings financing, and [it] brings discipline. And that discipline brings in other assistance from the World Bank, from other countries, from [the International Financing Corporation] and so on.

So this is really what is important and what leads us to go to this program. But that was before. And now we have added this really cataclysm, as I told you. We just can’t handle it. We don’t have the means to handle it.

I’ll give you just one example. Where are we going to bring all the glass to replace windows? We just don’t have that. Where are we going to bring the aluminum? We don’t have that. All the doors, all the knobs, all the warehouses that were burned down.

We lived through a small Hiroshima…. It is really something that is just absolutely incredible.

So, what do you want me to say? It’s appalling. All day we have been working on emergency plans. And I have to say that we are very lucky that a lot of countries have been proposing that assistance, and [French] President [Emmanuel] Macron is coming tomorrow to Lebanon to prove once again that France is with us.

You talk about all the supplies that you will need to rebuild. Supplies will be forthcoming, as you say. But how do you convince the international community that you have the right government and the right bureaucracy and the credibility to do what needs to be done?

There is only one way to do it. Only one way and not two way. Not 19 ways. One way. We have to do the reforms that have been requested by the international community for over 20 years.

You are not a politician. You were brought in as a technocrat to help deal with the economic crisis. Do you personally believe that there is the political will to change the way Lebanon is governed?

I believe that the politicians will all have woken up to the problem enough to understand that we have now to stand united and work hand-in-hand to resolve all these problems. Because this is the solution. We have to stop bickering. Political bickering doesn’t take us anywhere. It takes us to a bigger problem.

 

Debris covers a street in Beirut after Tuesday’s massive explosion. (Marwan Tahtah/Getty Images)

 

You had hope when you took this job six months ago. How much hope do you have now, given everything that Lebanon has to face?

Look, with this new crisis, it’s getting more difficult. But I am always hopeful. My nature is to fight and never stop fighting, and to succeed.

So I am hopeful. And, always, there is light at the end of the tunnel. It is going to be difficult. It’s going to be hard. It’s going to be painful. Very painful. But we will succeed.

Written by Sheena Goodyear with files from The Associated Press. Interview produced by Jeanne Armstrong. Q&A edited for length and clarity.

Source: – CBC.ca

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Asia Today: Morrison vows ‘titanic effort’ to lift economy – 660 News

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CANBERRA, Australia — Prime Minister Scott Morrison says the Australian budget, to be delivered Oct. 6, will be a “titanic effort” to return the country to economic growth amid the coronavirus pandemic.

Morrison told reporters Sunday that the budget will the “most unprecedented investment in Australia’s future.”

Australia’s gross domestic product shrank 7% in the quarter form April to June, the largest contraction since record-keeping began in 1959. That followed a 0.3% decline in the first quarter, meaning Australia was technically in recession for the first time in 30 years.

Australia was the only major economy not to go into recession during the 2008 global financial crisis, its strength supported by strong demand, especially from China, for its natural resources — coal, natural gas and iron ore.

Even before the coronavirus, the economy was affected by massive bushfires in January that hit small businesses, which depend on tourism. Business shutdowns forced by the pandemic cost almost 1 million jobs and resulted in a major reduction in household spending despite Morrison’s government providing almost $200 billion Australian dollars ($140.5 billion) in economic stimulus.

Morrison said the upcoming budget “will be a titanic effort that we’re involved in to ensure that this country can get back on the growth path that we want to be on. That means we’re going to have to do some very heavy lifting in this budget and that comes at a significant cost.”

Treasurer Josh Frydenbeg, who will deliver the budget speech, on Thursday provided a downbeat economic outlook. Frydenberg said the economy likely will be 6% smaller by mid-2021 than forecast at the end of last year.

He said the government’s focus will be on economic recovery rather than budget repair until unemployment is “comfortably” less than 6%.

“Australia’s future population will be smaller and older than we previously assumed because of the sharp drop we are seeing in net overseas migration,” Frydenberg said. “While migration will eventually return to the levels we are accustomed to, lost migrants will not be replaced.”

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Follow AP’s pandemic coverage at http://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak

The Associated Press

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China is on a construction binge and that's good news for the global economy – Economic Times

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By Matt Phillips

The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again — and global prices of metals are reflecting that renewed appetite for growth.

China consumes roughly half of the world’s industrial metals, according to analysts. As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country. As a result, the prices of iron ore, nickel, copper, zinc and other metals used to build infrastructure have surged in recent months.

Since late March, prices of iron ore — the key ingredient in steel — have risen more than 40%. Nickel, needed for stainless steel, and zinc, used to galvanize metal, are up more than 25%. Copper, which is used in wiring for power transmission, construction and car manufacturing, and has long been seen as a barometer for the world’s industrial economy, is also up around 35%.

“China, as usual, went the investment route and is massively investing in metals-intensive infrastructure,” said Caroline Bain, a commodities market analyst with Capital Economics in London. “So there’s been a very strong pick up in China’s demand for metals.”

Last month, China’s state railway operator announced plans to double the size of its high-speed rail network over the next 15 years. In July, investment from China’s state-owned enterprises, including giants such as China National Offshore Oil Corporation and China Mobile, surged by 14% compared with the prior year, according to Standard & Poor’s analysts. (Private companies, by comparison, bolstered investment by just 3%.)

In Guangdong, the country’s most populous province, regional officials plan to spend some 700 billion yuan — about $100 billion — this year on public medical facilities, 5G networking and transportation infrastructure.

In February, the coronavirus outbreak prompted a lockdown of much of the country’s economy, the second largest in the world after that of the United States. From January to March, China’s economy contracted by 6.8%, the first decline the country has acknowledged in roughly half a century. Industrial activity stopped, causing metal prices to plunge. Copper and aluminum prices all dove roughly 20% in that period, while iron ore fell about 15%. The sudden pause in demand from such a big buyer immediately strained several countries that have built large parts of their economy around digging ore out of the ground and shipping it to China.

Australia’s exports to China — mostly iron ore and coal — tumbled roughly 20%, as the country fell into its first recession in nearly 30 years. Metal exports from Brazil, Chile and Peru also slumped, driven by cratering demand from China and declines in mining production, but also because miners were forced to halt operations as the coronavirus spread locally. The share prices of global mining giants, which get large portions of their revenue from China, cratered. In local currency terms, Vale in Brazil and the Anglo-Australian giant Rio Tinto both tumbled roughly 40% from January to March.

But the response of the authoritarian government in China — its state-led model that gives Beijing significant influence over the direction of the economy — was enormous, helping China post one of the fastest recoveries of any of the world’s largest economies in recent months.

Goldman Sachs’s estimates of Chinese budget deficits — a measure that includes both official budget deficit numbers and a variety of off-balance sheet government support that is common in China — ballooned to 20% of gross domestic product in the first half of 2020 from about 10% at the end of 2019, as the country pumped money into the economy.

Recent economic reports from China show where that government money has flowed. August data on industrial production revealed 5.6% growth over the same month last year, firmly establishing a V-shaped recovery for the sector. Industrial production in sectors tied to infrastructure, such as cement, steel and iron, all posted strong gains. Other official data on investment showed growth in utilities, road and rail construction.

Economists at the Organization for Economic Cooperation and Development expect that China’s GDP will actually grow by 1.8% this year, making it the only member of the Group of 20 nations that will not suffer a recession this year. That’s the best expected performance of any of the countries the organization tracked in its latest economic update.

“The recovery in GDP is much faster and stronger than elsewhere,” said Bain of Capital Economics.

That’s good news not only for metals markets, but could also herald better times for the global economy. Analysts have studied the prices of some metals as a leading indicator of global economic growth, even referring to copper as “Dr. Copper” because of its supposed ability to predict the direction of the economy as well as any economist with a doctorate.

“People’s perception of the economy is how weakened it is, yet all the industrial metals are telling you a very different story,” said Chris Verrone, an analyst and partner at Strategas Research in New York. “We think copper is the market trying to tell us that the economy is stronger than we expect.”

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U.S. September job report is going to show economy entering a weaker phase – MarketWatch

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American households are used to television dramas where difficult problems are resolved in one hour, or perhaps eight one-hour episodes on Netflix.

So it is with the economy, and there is a growing perception the U.S. economy has been suffering for long enough that the worst must be behind us.

Gregory Daco, chief U.S. economist at Oxford Economics, said he routinely comes across people now who think the economy is out of the woods, given that the unemployment rate has dropped to 8.4% a peak of 15%.

They don’t seem to realize that the unemployment rate is still higher than the peak unemployment rate of prior recessions, Daco said, in an interview.

The fact is that even after what has been a fairly strong first phase of recovery, the economy has only recovered to reach levels close to the worst part of the 2008-2009 financial crisis, he added.

The economy now is closer to the gnarly 2009 period than the slow but steady recovery of 2014-2016.

“I think that is often times an eye opener for clients,” he said.

Daco said the September jobs report from the U.S. Labor Department due this coming Friday will signal the economy is entering a critical phase, with less assistance from government and a number of uncertainties from the November elections, the coronavirus pandemic, and uncertain financial markets.

“There are a number of risks and we are going into the fall without much insulation,” he said.

The rough consensus among economists is for September nonfarm payroll gains to moderate to slightly under one million in September from 1.37 million gains in the prior month.

Daco is forecasting a sharper slowdown to a gain of 600,000 jobs. He sees the unemployment rate dipping to 8%, but due in part to workers giving up looking for work and dropping out of the labor force.

While 600,000 jobs would be considered strong in an ordinary environment, it is not strong enough to put a dent in the 11 million Americans who have lost jobs during the pandemic and millions more who are underemployed, he said.

“I continue to view the glass as half-empty. We’re still a long ways from where we were pre-Covid,” Daco said.

Richard Moody, chief economist at Regions Financial Corp., thinks it may be hard to gauge the strength of the September report given the technical cross-currents in the data.

September is usually the month that summer vacation resort employment declines as the season ends, and without those job losses this year, the reported gain might look stronger. In addition, there was also a decline in temporary census workers in the month that may skew the data to the downside.

The job report will be released Friday at 8:30 a.m. Eastern on October 2. There will also be critical data during the week on the manufacturing sector for September from IHS Markit and ISM on Thursday, and on consumer spending and inflation for August.

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