Financial Times Europe - 19.09.2019

(Jacob Rumans) #1

4 ★ FINANCIAL TIMES Thursday19 September 2019


350,000peopledirectlyemployedinthe
motorsectorhadbeenlaidoffasofearly
July, SIAM estimated, with many therso
letgooverthepasttwomonths.
Even those who retained their jobs
have had huge cuts in their take-home
pay as companies scrap the overtime
that once accounted for a substantial
portionofworkers’earnings.
“They said, ‘we are not getting orders
andthereisnotenoughworksonoover-
time’,” said Gayatri Devi, 26, whose hus-
bandworksforafirmsupplyingcompo-
nentstoHonda.
As his daily shift ell from 12 hours tof
eight, the family’s monthly earnings
dropped by Rs5,000 to Rs12,000. That,
in turn, has put a squeeze on her house-
hold budget. “I never had to think about
spending on the basic items, but now I
havetothink,”shesaid.
Back at Labour Chowk, Gautam
Kumar, a 26-year-old father of three, is
deeply pessimistic. Laid off from a com-
ponents maker five months ago, he has
senthiswifeandchildrenbacktohisvil-
lage in Bihar and is surviving on money
sent to him each month by his father, a
villageschoolteacher.
“Every day, 10 or 20 people from our
circle are going home,” he said. “I am
just waiting here in the hope that I will
get some work because there is no profit
infarming.”

“The demand destruction that has
taken place over three years has
resulted in the auto sector reeling,” said
SunilKumarSinha,principaleconomist
at India Ratings. “Now even the auto
sector employees themselves are being
laid off, which will further pressure the
economy.”
Trouble in the motor sector has huge
potential ripple effects. Cars account for
an estimated7.1 per cent of India’s gross

domestic product and 49 per cent of its
manufacturingGDP,accordingtoa
study. It is also a main source of employ-
ment in an economy with a chronic job
shortage.
According to the Society of Indian
Automobile Manufacturers, car facto-
ries employ about 300,000 people,
component makers employ around 5m,
and dealerships another 3m. In total,
direct and indirect motor sector
employment — including truckers who
transport cars across the country — is
estimatedatabout37mpeople.
But as a result of slowing sales, at least

consecutive months of double-digit
sales contractions, including a 41 per
centyear-on-yeardropin ugustA.
Economists say collapsing car sales
reflect thedeep malaise fflicting thea
Indian economy after three successive
shocks —Prime Minister Narendra
Modi’s2016cashban, he2017adoptiont
ofanewvalueaddedtaxregimeandlast
year’sfinancial sector roubles whicht
were precipitated by the collapse of a
highlyratedlender.
In the wake of these disruptions, con-
sumer demand — one of the economy’s
main growth drivers over the past
decade — hasweakened onsiderably,c
especially for big-ticket items such as
cars, televisions, washing machines and
homes.
“Thiskindofconk-offinautodemand
is highly unusual in afast-growing econ-
omy,” said Saurabh Mukherjea, chief
executive and founder of Marcellus
InvestmentManagers.
“Cars are a classic aspirational sym-
bol, and the fact that this kind of aspira-
tional spending has been put on the
backburner shows how deep the dis-
tress is. It was one punch too many for
theeconomy.”
The question now is whether con-
sumer demand willrebound n the nexti
few months or remain sluggish, fuelling
abroaderslowdown.

A M Y K A Z M I N A N D J YOT S N A S I N G H
MANESAR, INDIA


At Labour Chowk, a traffic circle in
India’s motor manufacturing hub of
Manesar near New Delhi, hundreds of
jobless men are hanging around in the
sweltering heat, hoping to be picked up
for a day of paid work.


Labour Chowk is a prime spot for hiring
day labourers, typically the poorest and
least skilled workers. Now, their num-
bers are swollen with those who have
lost full-time jobs in the crisis-hitmotor
sector.
Krishna Kumar, 32,from rural Uttar
Pradesh, was laid offlast month from a
job at a components company that
makes brakes forMaruti Suzuki, the
country’s largest carmaker. Having lost
his monthly salary of Rs12,000 ($168),
heisscrapingbyoncreditfromthelocal
grocery shop and money from his par-
ents.
“I just come here every day and wait
for work,” said Mr Kumar, who has two
young children. “I will wait for one or
two months and if I don’t get a job, then
I’ll go back home. As of now, I have no
hope.”
Mr Kumar’s anxiety is shared by mil-
lions ofworkers as well as policymakers
and investors as they wait to seeif the
motor sector will bounce back after five


L E S L I E H O O K— LONDON

Leadingcountries such as Japan and
Australia will not be invited to speak at
next week’s crunch UN climate change
summit because theirsupport for coal
clashes with the demands of the organi-
sation’s secretary-general, as he sounds
the alarm on climate change.

Coal has emerged as a main issue ahead
of Monday’s meeting in New York,
where 63 countries are expected to
speak, according to a draft schedule
seenbytheFinancialTimes.
In letters and conversations with
heads of state, António Guterres, UN
secretary-general, has demanded that
countries attending the summit stop
building new coal power stations,
reduce fossil fuel subsidies and commit
to net zero emissions by 2050 —
demands that have not gone down well
inallquarters.
Dozens of leaders, including the UK’s
Boris Johnson and France’s Emmanuel
Macron, will deliver new climate
pledges in a series of three-minute
speeches,inwhathasbeenbilledasabig
showofglobalclimatecommitment.
But the summit is notable for those
that will not appear:countries building

new coal power stations such as Japan,
South Korea and South Africa will not
takethestage.
But China and India, the world’s two
biggest builders of new coal stations,
will still speak at the summit, according
tothedraftagenda.
Also excluded will be the US, which
has said it intends to withdraw from the
Paris climate agreement, as well as Bra-
zil and Saudi Arabia, which have criti-
cisedtheclimatepact.
“Only the boldest and most trans-
formative actions [will] make the
stage,” said Amina Mohammed, UN
deputy secretary-general. “We will see
onMondaywhoissteppingup.”
The specific demands from the secre-
tary-general stand in contrast to the
Paris climate agreement, which allows
countries leeway to choose their own
fuel sources and the climate targets that
theydeemrightforthemselves.
“He has stuck his neck out, in a help-
ful way,” said Chris Littlecott, associate
director at E3G, a London-based envi-
ronment group. “There is a bit of a reac-
tion of, ‘Oh why are you asking us to do
this?’ from some policymakers who
haven’t really thought about this
before.”

Unemployment


India’s workers suffer as motor industry goes into reverse


UN meeting


Leading countries kept out of


climate summit over coal use


I N T E R N AT I O N A L


L AU R E N F E D O R A N D JA M E S P O L I T I
WASHINGTON
A N D R E W E D G E C L I F F E- J O H N S O N
NEW YORK


Business confidence among top US chief
executives fell for the sixth quarter in a
row, asgeopolitical uncertainty, the US-
China trade war and slowing global eco-
nomicgrowthcontinuedtobite,accord-
ingtoasurveypublishedyesterday.
The Business Roundtable, a group of
leadingheads from nearly 200 compa-
nies,saiditseconomicoutlookindexfell
10.3 points in the third quarter to79.2.
While that was significantly above the
50-point benchmark that indicates
growth, all three components of the


index — plans for hiring, plans for capi-
tal investment and expectations for
sales—fellduringthequarter.
Joshua Bolten, roundtable president
and CEO, saidbusinesses“have their
foot poised above the brake, and they’re
tappingthebrakeperiodically”.
“Uncertainty is preventing the full
potential of the economy from being
unleashed, limiting growth and invest-
ment here in the US,” he said, adding
that “opening markets and promoting
rules-based trade remains vital to US
economicprosperity”.
“Congress and the [Trump] adminis-
trationhavetheimmediateopportunity
to come together and provide stability
and growth to our economy by enacting
theUS-Mexico-CanadaAgreement.”
White House officials and Republican
lawmakers are pushing for a quickvote
on USMCA, which was struck last year

as a replacement for the Clinton-era
Nafta deal. However, many Democrats
are sceptical of the agreement, and have
demanded changes to its provisions on
labour and environmental standards,
drugpricesandenforcement.

The stand-off has cast a shadow over
US President Donald Trump’s trade
agendaasthetradewarwithChinaesca-
lates. Mr Trumpstepped up he disputet
earlier this month with a fresh round of
15 per cent tariffs on a further $112bn of
importsfromChina.
Theeconomicimpactofthetradewar

haspromptedagroupoflobbyorganisa-
tions for US business to renew efforts to
rein in Mr Trump’s powers unilaterally
toimposetariffs.
The National Foreign Trade Council,
whose board includes a wide range of
blue-chip companies, from Facebook to
FedEx and Ford,yesterday announced
it was spearheading a new coalition to
press Congress to reassert its constitu-
tional powers on trade policy and make
it harder for the White House to move
withoutlawmakers’consent.
The new group, called the Tariff
Reform Coalition, was launched with a
letter to the top congressional leaders
with jurisdiction over trade, demanding
lawmakersacttocurbpresidentialpow-
ersontrade.
Nearly all of the chief executives sur-
veyed by theroundtable reported no
positive impact from US trade policy on

their businesses in the past 12 months.
More than half reported a “somewhat”
or “very negative” effect on sales due to
US trade actions and foreign retaliation,
while one-third reported a negative im-
pact on hiring, and one in four reported
anegativeeffectoncapitalspending.
Last month, theroundtable made
headlines when it published a new
“statementofpurpose”thatrejectedthe
longstanding notion of “shareholder
primacy” in favour of a model that cate-
gorised shareholders asone of several
stakeholders, alongside customers,
workers,suppliersandcommunities.
A separate Duke University survey of
chief financial officers also out yester-
day found that business optimism had
fallen to its lowest in three years, with
more than half of roughly 250 US CFOs
polled expectinga recession by the
November2020election.

B RYA N H A R R I S— SAO PAULO


For many Brazilian moderates
exhausted bythe constantcontroversy
surroundingJair Bolsonaro, Tabata
Amaral is a breath of fresh air. A 25-
year-old Harvard-educated lawmaker,
Ms Amaral has merged as ae rising star
of Brazilian politics and a liberal coun-
terpointtothenationalisticpresident.
Ms Amaral is also the poster child for
RenovaBR. Rather than a traditional
political party, the organisation bills
itselfasabipartisantrainingschoolaim-
ing to create a new generation of ethical
Brazilian politicians, unsullied by cor-
ruptionandthe ynicalpartysystem.c
In the years since theCar Wash raftg
scandal rocked Brazil, RenovaBR has
become one of the nation’s most potent
political forces. It is poised next year to
play asignificant role in municipal elec-
tions, widely viewed as a bellwether of
MrBolsonaro’sre-electionprospects.
Malu Gatto, a Brazilian professor of
politics at UCL, said the years-long cor-
ruption scandal amaged voters’ trustd
in political elites, parties and organisa-
tions. “In this context, new forms of
political organisations have emerged.
RenovaBRisoneofthese,”shesaid.
Much like the outspoken Mr Bol-
sonaro, RenovaBR has found its niche
by tapping into Brazilians’ disenchant-
mentwith“oldpolitics”.
In congressional elections last year,
Brazil’s traditional parties, such as the
Workers’ party and the PSDB, were
trounced. Meanwhile RenovaBR, con-
testing its first election, had 17 new law-
makers elected from parties across the
political spectrum, including Ms


Amaral. Candidates often have polished
CVs,manywithIvyLeaguedegrees.
Ahead of the municipal elections in
October next year, RenovaBR said it
received 31,000 applications for its
training programme. “That is not a triv-
ial force [of support]. It could well
become 100,000 by next year,” said
Matias Spektor, a professor of politics at
theGetúlioVargasFoundation.
But the group’s growing popularity
has put it on a collision course withtra-
ditional parties. They fear lawmakers
elected with RenovaBR’s support will be
loyal to the movement instead of the
party — a concern illustrated by Ms
Amaral. She rose to prominence this
year for her articulate defence of educa-
tion at a time when the Bolsonaro
administration was pursuing cuts. Hail-
ing from a poor family in a favela of São
Paulo, her story spoke to the aspirations
of Brazilians, her supporters say. But Ms
Amaral voted in favour of a contentious
pensionreformthatherparty,theDem-
ocratic Labour party, and many work-
ing-classBrazilians,opposed.
“Renova tries to put itself above the
parties,butitisnexttotheparties,mak-
ing parallel actions,” said Carlos Alberto
de Melo, a professor at Insper in São
Paulo. “At some point there will be an
electric shock... these movements are
neverfreeofpoliticalideology.”
For analysts, RenovaBR is ne amongo
many groups pursuing “new politics” in
Brazilafter the destruction wrought by
the Car Wash scandal. Using different
techniques, Mr Bolsonaro is doing the
same, with his constant criticism of the
horse-tradingofBrazil’s“oldpolitics”.
But as its influence grows, Renova —
meaning Renew — hascome under fire.
With funding coming from a handful of
wealthy businesspeople, criticsques-
tionifthelawmakersitnurturesarefree
to make political decisions or beholden
to their corporate masters. Instead of

renewal, they worry RenovaBR will be
businessasusualforBrazil.
“They’re putting together a new net-
work and they are paying for it them-
selves. But can they renew politics? Can
they produce actual change?” said Mr
Spektor.
CarlosLupi,DemocraticLabourparty
president, is more stark. “The legisla-
tion does not allow private financing,
[yet] they create a movement and
recruit politicians from many parties

before choosing the best ones to have
sponsored financing... Where is the
renewalinthis?”hesaidlastmonth.
Eduardo Mufarej, founder of Reno-
vaBR, rejects the ideathe movement
seeks to influence lawmakers lectede
under its umbrella.“We lost good refer-
ence points for [our] leaders over the
years. Most of us got trained to do what
we do — politicians also need to be
trained,”hesaid.
Additional reporting by Carolina Pulice

JA M E S P O L I T I— WASHINGTON

The Trump administration has moved
to expand the US government’s scru-
tiny of foreign investments to more
deals involving sensitive technology,
infrastructure, personal data and real
estate, in new rules implementing leg-
islation passed last year.

The US Treasury department’s publica-
tion of the regulations offers further
details of the new regulatory regime
that foreign buyers will be facing in
America in the coming years, as Wash-
ington frets over rising national security
threatsposedbyChinaandothergeopo-
liticalrivals.
In particular, the Trump administra-
tion is broadening the powers of the
Committee on Foreign Investment in
the US (Cfius) — an inter-agency body
chaired by the Treasury department —
to examine non-controlling invest-
ments as well as property deals that
werenotpreviouslyunderitsscope.
Among the transactions that will be
subject to additional scrutiny are real
estate transactions close to critical facil-
ities in terms of defence and infrastruc-
ture. “The United States welcomes and
encourages investment in our country
and our workforce,” said Steven
Mnuchin,theUSTreasurysecretary.
The proposed regulations “will pro-
vide clarity and certainty to investors
regarding Cfius’s enhanced authorities
to address national security risks that
arise from certain foreign investments,
and continue modernising the Cfius
process”,MrMnuchinadded.
A senior US Treasury official said the
regulations did not target any nation
specifically, and would be subject to a
30-daycommentperiod,toinformtheir
final version which is expected to take
effectnolaterthanFebruary2020.
The new rules, outlined by the Treas-
ury department on Tuesday, follow leg-
islation enacted last year by President
Donald Trump — with bipartisan sup-
port in Congress — to toughen scrutiny
on foreign investment at the same time
as it expanded export controls with
regardtosensitivetechnologies.
According to a report released last
month by the Congressional Research
Service, Mr Trump has already moved
to block some high-profile acquisitions,
including the purchase ofLattice Semi-
conductor yb Canyon Bridge Capital
Partners, a Chinese investment firm,
the purchase ofQualcomm, another
chipmaker, byBroadcom, and also
raised “concerns” about an investment
in Grindr, the social networking app, by
BeijingKunlun.
A Treasury official saidthe new juris-
diction over non-controlling invest-
ments would depend on whether the
deal would afford a foreign person “cer-
tain access, or rights, or involvement in
a US business that is itself involved in
critical technology, critical infrastruc-
ture,orsensitivepersonaldata”.
The US administration has indicated
that it may be willing to exempt invest-
ments from certain countries from
being subjected to the scrutiny on non-
controlling stakes, but would specify
thematalaterdate.

Economic outlook


US business ‘taps brake’ as uncertainty bites


Chief executive survey


finds confidence falling for


sixth consecutive quarter


‘Opening markets and


promoting rules-based
trade remains vital to US

economic prosperity’


National security


White House


extends scope


of regulatory


scrutiny on


foreign deals


Disenchantment. thical renewalE


Rising star offers


Brazil way out


of corrupt era


Tabata Amaral’s popularity


owes much to a training body


under fire from ‘old politics’


Liberal force:
Tabata Amaral,
a member of the
Democratic
Labour party, is
a poster child
for RenovaBR, a
movement that
aims to put itself
above parties
Roberto Casimiro/Alamy

‘These
movements

are never
free of

political
ideology’

Jobless carworker
Krishna Kumar: ‘I
will wait for one or
two months and if I
don’t get a job
I’ll go back home’
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