Australia signals approval of China-based AIIB; Japan divided

(GNN) - Australia said on Friday there was a lot of merit in the China-led Asian Infrastructure Investment Bank (AIIB) while Japan's finance minister signalled cautious approval of the institution that the United States has warned against.

However, other top officials in Tokyo were more sceptical, reflecting a split in the government of Prime Minister Shinzo Abe over

whether joining an institution launched by Japan's main rival would help or hinder its interests.

The Sydney Morning Herald newspaper reported that Canberra could formally decide to sign up to the AIIB when the full cabinet meets on Monday.

Japan, Australia and the South Korea, all major U.S. allies, are the notable regional absentees from the AIIB. The United States, worried about China's growing diplomatic clout, has questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.

But the opposition to the AIIB began crumbling after Britain said earlier this month that it would join the institution, maintaining it was in its national interest. France, Germany and Italy swiftly followed suit.

Australia now appears close to joining, although no formal decision has been made, and Beijing said Japan and South Korea were also considering the possibility.

China's Finance Minister Lou Jiwei said the bank would be set up by the end of the year and would complement rather than compete with other institutions, including the World Bank and the Asian Development Bank (ADB), the Manila-based multilateral institution dominated by Japan and the United States.

"All parties will by the middle of this year complete talks and sign the charter for the AIIB, and by year-end will make the charter effective and officially establish the AIIB," Lou said in an interview with state media, adding that Beijing was "maintaining communication" with the United States and Japan.

Asked about Australia, South Korea and Japan joining the bank, China's Foreign Ministry said it was "open" to it.

"They have all already expressed that they are contemplating the issue at hand," ministry spokesman Hong Lei told a daily briefing. "We are open to them making the relevant decision."

Japanese Finance Minister Taro Aso said Tokyo could consider joining the China-led bank if it could guarantee a credible mechanism for providing loans.

"We have been asking to ensure debt sustainability taking into account its impact on environment and society," he told reporters after a cabinet meeting.

"We could (consider to participate) if these issues are guaranteed. There could be a chance that we would go inside and discuss. But so far we have not heard any responses."

Other officials were more leery, reflecting Tokyo's concern over China-led lending practices, its relations with major ally Washington and the AIIB's potential rivalry with the ADB.

"We have a cautious position about participation," said top government spokesman Yoshihide Suga.

But a source familiar with Japan's policy-making said Tokyo should get involved to help ensure best practices and to avoid being left out. "Now it has become awkward as Europe joins but the U.S. and Japan stay out," the source said.

According to one senior official in the ruling coalition, the result of the differences is that Japan's participation "is not going to happen under the Abe administration".

OUR NEIGHBOURHOOD

Australian Treasurer Joe Hockey said no final decision had been made on Australia's involvement but the matter had been under careful consideration.

"More than 30 countries have already signed up. This is going to operate in our region, in our neighbourhood," he told a radio station in Brisbane.

"There is a lot of merit in it, but we want to make sure there are proper governance procedures. That there's transparency, that no one country is able to control the entity."

The Sydney Morning Herald said Canberra could invest as much as A$3 billion ($2.3 billion) in the bank and that the National Security Committee has cleared the way for the investment.

South Korean government officials denied a newspaper report that Seoul had decided to join in exchange for a five percent stake in the AIIB and the position of deputy chief.

The finance ministry said in a statement South Korea will make a decision on whether to join the bank "through close consultation with major countries and after considering various factors such as economic advantages and disadvantages".

Hockey said joining the AIIB would not affect Australia's close relationship with the United States and also referred to the gains that Australian companies could reap.

"The United States understands that this is a bank that's going to be operating in our region. It's going to be using contractors in our region. We want Australian contractors involved, we want work for Australians out of this bank," he said.

"And because it's operating in our region, in our neighbourhood, it is important that Australia fully understand and look at participating in this Bank."

($1 = 1.3067 Australian dollars)

(Reuters)(Additional reporting by Leika Kihara, Yuko Yoshikawa and Kaori Kaneko in TOKYO and Megha Rajagopalan and Michael Martina in BEIJING, Editing by Raju Gopalakrishnan)

Japan split on joining AIIB bank, caught between US, China

(GNN) - Japan is split over joining a China-led development bank, concerned about missing out on the rapidly coalescing global movement for the institution while also worried about alienating ally United States and helping bolster rival China, officials said.

Finance Minister Taro Aso signaled for the first time on Friday that Tokyo could be part of the Asian Infrastructure Investment Bank (AIIB) if it can guarantee a credible mechanism for providing loans.

But other top officials took a more skeptical stance, reflecting a split in the government of Prime Minister Shinzo Abe over whether the AIIB would help or hinder Japan's interests.

"We have a cautious position about participation," said top government spokesman Yoshihide Suga.

Around 30 countries, including Britain and Germany, have decided to participate in Beijing's flagship economic outreach project, but Washington, Japan's main ally, has urged countries to think twice before joining, citing worries about governance and environmental safeguards.

"Views are split within the Japanese government on whether to join the AIIB," said a person with close knowledge of Japan's financial policy-making.

The result of the standoff within the government, said a senior official in the ruling coalition, is that Japan's participation "is not going to happen under the Abe administration."

Japan is hesitant to join out of concern over China-led lending practices, over its relations with Washington and over the AIIB's potential rivalry with the Asian Development Bank (ADB), the Manila-based multilateral institution dominated by Japan and the United States, officials said.

By custom, the ADB is headed by a former senior official from the Bank of Japan or the country's finance ministry.

But the source familiar with Japan's policy-making said Tokyo should get involved to help ensure best practices and to avoid being left out. "Now it has become awkward as Europe joins but the U.S. and Japan stay out."

Finance Minister Aso told a news conference that the AIIB needs to have its board of directors screen and approve individual cases in deciding provision of loans.

"We have been asking to ensure debt sustainability, taking into account its impact on environment and society," he said after a cabinet meeting.

"We could (consider joining) if these issues are guaranteed. We'll give it careful consideration from diplomatic and economics viewpoints."

If the bank can address debt sustainability, environmental and societal concerns, "there could be a chance that we would go inside and discuss," he said. "But so far we have not heard any responses."

Suga, the chief cabinet secretary, interpreted Aso's comments to mean that "unless such issues are resolved, participation would be impossible."

(Reuters)(Additional reporting by Yuko Yoshikawa and Kaori Kaneko; Editing by William Mallard and Raju Gopalakrishnan)

China, Japan agree to keep momentum alive for better ties

(GNN) - China and Japan held their first security talks in four years on Thursday and agreed to keep alive and foster a nascent recovery in bilateral ties plagued by the legacy of Japan's wartime aggression and a territorial dispute.

The world's second- and third-largest economies, however, failed to set a timetable for the implementation of a scheme designed to ensure real-time communication between their armed forces.

Sino-Japanese relations have chilled over what China views as Japan's reluctance to properly atone for its wartime past as well as a dispute over a group of tiny East China Sea islets.

Patrol ships and fighter jets from both countries have shadowed each other regularly near the uninhabited islands that are controlled by Japan but also claimed by China, prompting fears that an accidental collision could spark conflict.

Japanese Prime Minister Shinzo Abe's moves to ease the constraints of Japan's pacifist constitution on its military have unnerved China. Japan says China's defence policy lacks transparency.

Abe held formal talks with Chinese President Xi Jinping last November. In the meeting, hailed by Xi as the first step toward improved ties, the two agreed to work for the implementation of a bilateral crisis management mechanism.

"Both sides agreed that the tide is beginning to turn for the better regarding relations between Japan and China following the summit meeting," a Japanese Foreign Ministry official told a media briefing after the one-day meeting.

"They also agreed that it is important to keep on taking positive steps in various areas and at various levels to firmly establish this trend."

In a sign of a thaw in Sino-Japanese ties, foreign ministers of Japan, China and South Korea are set to meet on Saturday in Seoul for the first time in nearly three years.

Xi and Abe, in their talks last year, agreed to aim for implementation of a plan for hot lines between defence officials as well as communication between vessels and aircraft to convey each other's intentions and avoid clashes.

Although both sides at the Thursday meeting agreed to work to implement the scheme at an early date, no agreement was reached on a concrete schedule toward that goal, the official said.

(Reuters)(Reporting by Kiyoshi Takenaka; Editing by Robert Birsel)

Japanese woman abducted by North Korea died of drug overdose: report

GNN - Megumi Yokota, a Japanese national abducted by North Korean agents decades ago as a schoolgirl, died from an overdose of medication in 1994 and was buried in a pit with other corpses, a South Korean newspaper said on Friday.

Yokota, who has been an iconic symbol of Japanese nationals abducted by the North and Tokyo's efforts to ascertain their fate, died of an overdose of sedatives and sleeping pills in a psychiatric ward, South Korea's Dong-a Ilbo newspaper said.

Japanese Prime Minister Shinzo Abe's administration eased some sanctions on North Korea in July in return for Pyongyang's reopening of a probe into the fate of Japanese citizens abducted in the 1970s and 1980s.

Dong-a Ilbo said the finding was included in a report by Japanese officials who had interviewed North Korean witnesses who were on the staff of the hospital where Yokota died, and Abe's administration had been briefed about the fresh details.

Abe, whose government is under fire for fund-related scandals in his cabinet, has made resolving the abductee issue a priority. Last week, he said the North had told Japan it intended to deepen its probe into their fate.

Pyongyang admitted in 2002 to kidnapping 13 Japanese citizens to help train spies, and five abductees and their families later returned to Japan.

Japan wants to know about the fate of the remaining eight, who Pyongyang has said have died, and others that Tokyo believes were also kidnapped.

Yokota was snatched off a beach in northern Japan on her way home from school in 1977 at the age of 13. Pyongyang has said she had committed suicide after suffering from mental diseases.

Japan has never accepted North Korea's explanation of Yokota's death, after bones North Korea said were hers were shown by DNA testing to be those of a man.

The Dong-a Ilbo newspaper said two North Koreans who were on the staff of the hospital gave testimony that Yokota was given sedatives and sleeping pills that exceeded safe doses.

"At the time of the patient's death, there were blue marks all over her body," one of them was quoted as saying. That was an indication that poison or excessive medication was taken or injected, the person was quoted as saying.

Her body was dumped in a pit to be buried without a coffin, the report said.

While in the North, she married a South Korean abductee named Kim Young-nam in 1986, and they had a daughter. Yokota died in 1994, said Kim, who was one of more than 500 South Korean civilians thought to have been abducted by the North and who was briefly reunited with his South Korean family in 2006.

At the rare family reunion event held by the two Koreas, he said Yokota had suffered from depression and schizophrenia and repeatedly attempted suicide.

(GNN,AIP,Reuters,ga)(Reporting by Ju-min Park; Editing by Jack Kim and Clarence Fernandez)

As U.S. kicks off crude exports, Iran casts a shadow in Asia

#GNN - The United States faces an awkward rival in its first attempts in 40 years to export crude oil - Iran.

Iran, whose economy has been throttled by Western sanctions that have halved its crude shipments, is now selling higher quality and cheaper oil to China that leaves little room for the U.S. crude to enter the world's top energy consumer.

While buyers in Japan and South Korea have been willing to trial a U.S. grade of the super-light crude known as condensate, China has already locked in annual contracts with Tehran and is not expected to take any U.S. oil in the short-term.

With U.S. producers looking to open a trade route to sell surplus condensate from the U.S. shale boom, worries about quality and legal issues have added to doubts about how much of the oil the rest of Asia can take.

"China gets condensate from Iran, which is much cheaper than that from the U.S.," said a Singapore-based trader with a European trading company. "They might get involved at a later stage but they will not be at the forefront."

Condensate won export approval from U.S. officials in June as long as it has been minimally processed, softening a decades-old ban on selling U.S. crude abroad.

The light oil can be cracked in a processing plant called a splitter to make petroleum products and petrochemicals, or blended with heavier crude for use in refineries.

South Korea and Japan have purchased the first condensate from the United States. Mitsui & Co bought a cargo from Enterprise Product Partners for loading this month and has onsold it to South Korean refiner GS Caltex [GSCAL.UL], sources said.

Refiner Cosmo Oil Co has also bought a cargo of U.S. condensate that will load in late August for arrival at the Yokkaichi refinery in Japan in October, a source said.

Japan and South Korea, which together account for just over half of Asia's 1.1 million-barrels-per-day (bpd) in condensate splitter capacity, are seen as more open to trying the United States as an alternative supplier.

Enterprise has also signed a short-term contract with another Japanese trader, Mitsubishi Corp, with a first loading likely in September.

IRAN COMPETITION
Asian buyers have been waiting to see if the U.S. oil is suitable and if exporters can price it competitively given it has to be shipped a further distance than competing grades from the leading regular suppliers Qatar and Australia.

"They are testing the waters so we're not expecting huge volumes this year," said Richard Gorry, managing director of energy consultancy JBC Asia.

Showing the competition U.S. exports face, Iran exports about 55 percent of its roughly 250,000 bpd of South Pars condensate output to two Chinese buyers at deep discounts under annual contracts.

Since U.S. and European Union sanctions were eased late last year in exchange for Iran curbing nuclear activities, Tehran's exports have risen about 30 percent to 1.25 million to 1.3 million bpd, much of this as South Pars shipments to China.

Some of the Iranian condensate could be sold as low as $5 a barrel below Dubai quotes or about $8 a barrel cheaper than Qatari grades.

U.S. condensate would likely have to be priced lower than the similar Qatari grades to attract buyers, traders said.

Qatar is the biggest supplier of condensate to Asia at about 450,000 bpd, followed by Iran. Australia and East Timor together produce nearly 170,000 bpd, with most of the output heading to Asian markets, according to trade sources.

Higher shipping costs compared with the short distance from the Middle East will deter India from buying U.S. condensate, according to sources at Indian refiners.

LEGAL, QUALITY CONCERNS
Another issue is uncertainty over the future of U.S. regulations on condensate exports.

Two U.S. senators have questioned the U.S. Commerce Department's approval, saying exports may violate a ban in place since the Arab oil embargo of the 1970s. Refined products, such as gasoline and diesel, are not restricted.

"What happens if some ruling appears and penalizes the buyers?" asked a trader at a North Asian refiner. "Also, there's not much economics in it so why take the risk?"

Asian users are also concerned that U.S. condensates may vary widely in quality as they will be come from fields scattered across shale formations such as the Eagle Ford in southern Texas, from which Enterprise pulls its oil.

The U.S. oil is expected to be more commonly used as a blend stock by refiners, limiting the amount available for 350,000 bpd of new splitter capacity coming online in Asia this quarter.

(GNN,Reuters,AIP)(Reporting by Florence Tan, Jacob Gronholt-Pedersen and Keith Wallis in SINGAPORE, Meeyoung Cho in SEOUL, Osamu Tsukimori and James Topham in TOKYO, Chen Aizhu in BEIJING, Rania El-Gamal in DUBAI, and Nidhi Verma in NEW DELHI; Editing by Manash Goswami, Richard Pullin and Tom Hogue)

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Mango exports: Pounce while India is still out, says expert

The ban on Indian mangoes by the EU has heightened the concerns of Pakistani mango exporters who might suffer a similar fate, if they fail to comply with the EU regulation standards. PHOTO: FILE

KARACHI: The recent ban on Indian mangoes being exported to the European Union (EU) countries offers a unique opportunity to Pakistan who can pounce and expand their business, Harvest Trading Director and horticulture expert Ahmad Jawad said in a statement.

The EU banned Indian alphonso mangoes and four vegetables from May to December 2015 on grounds that their mangoes were contaminated with non-European fruit flies.

“It is the right time for Pakistani exporters to push their product into high-value European markets so that mango lovers don’t feel a shortfall, especially for the EU where Pakistan has been awarded GSP Plus status,” Jawad said.

With an annual production capacity of around 1.6 million tons, India is the world’s largest mango exporter, selling up to 70,000 tons to overseas markets, according to The Economic Times.

The banning of Indian mangoes by the EU has opened up an opportunity for the Pakistani exporters. It may, however, be a wakeup call at the same time for the latter as both the countries use same technology: Hot Water Treatment (HWT).

“The government and its allied departments should impose strict monitoring of mangoes this year so that we may grab the markets in EU and the United Kingdom,” Jawad said, while talking to a group of journalists in Islamabad – the significance of the EU markets can be judged from the fact that the UK alone imports £6 million worth of mangoes from India, according to The Economic Times.

The controversial ban on Indian mangoes by the EU has heightened the concerns of Pakistani mango exporters who might suffer a similar fate, if they fail to comply with the EU regulation standards.

“The permission may be granted to only those exporters who are prepared to comply with the protocols set by the EU,” the statement quoted Jawad as saying.

The Pakistani mango export industry is promoting the use of HWT and looking after Global Gap Mango farms that have been doing good agriculture practices so that fruit flies and other pests may be destroyed before the shipments are dispatched, the statement read.

In HWT, mangoes go through a thorough cleaning system where they are treated in hot water at temperatures of around 48°C (118.4°F) for approximately an hour. They are then dried, packed and cold treated.

Pakistan’s HWT facility has also been approved by Australia, South Korea, Mauritius, Lebanon, and the facility is open to all in the fresh produce exporting trade.

However, Jawad informed that the country will have to wait to learn if the HWT facility satisfies authorities in the UK and EU.

The statement further said that the impact of the ban of Indian mangoes has turned into a controversy not only in India but also in the EU.

Many importers, retailers, growers and politicians have branded the prohibition as a punitive and over-reactionary measure and started active lobbying against it. They have even filed an e-petition to the concerned authorities for the reversal, the statement said.

Published in GNN & Tribune & Our Correspondent, May 6th, 2014.