News Brief - May-June 2008

Internet 2011 alert; More oil investment; Financial reform needed; Economy; Germany signs tax convention; Pensions strength; Soundbites; Plus ça change…
Internet 2011 alert
More oil investment
Financial reform needed
Economy
Germany signs tax convention
Pensions strength
Soundbites
Plus ça change…

Internet 2011 alertInternet addresses could run out unless governments and business take action, a new OECD report says. With nearly 85% of all available Internet addresses already in use by May 2008, experts believe that, if current trends continue, addresses will run out by 2011. This could mean that new Internet users or mobile devices will not be able to access the Internet.The answer, says the report, is Internet Protocol version 6 (IPv6) which will provide an unlimited number of addresses and help drive the roll-out of broadband, Internet-connected mobile phones and sensor networks, and new Internet services. Governments and business should raise awareness of the need to start preparing now for the move from today’s Internet Protocol version 4 to IPv6 and explain to Internet Service Providers and IT professionals that the move is a commercial and social opportunity, not a financial burden.The new warning comes just a month before a major international ministerial meeting on the Future of the Internet Economy, to be held in Seoul, Korea on June 17.See www.oecdobserver.org/innovation, www.oecd.org/futureinternet and www.oecdministerialseoul2008.org/
More oil investment“Investment is one of the main challenges we are facing in the global energy sector”, said Nobuo Tanaka, executive director of the International Energy Agency (IEA) recently.Speaking to the 11th International Energy Forum (IEF) in Rome in April, Mr Tanaka pointed out that with oil prices surging over US$110 a barrel and growing concerns over the environmental repercussions of the world’s spiraling energy demand, the dialogue between energy producing and consuming countries is more meaningful than ever. “Current oil prices are too high, especially for developing countries which face other significant cost increases, and considering the threats to global economic growth at the moment”, he said.Amid various views about the reasons behind the price rally–some blame market fundamentals, others speculation and financial flows–the IEA sees a combination of different factors, but primarily, strong demand growth in the developing world coupled with constraints in bringing new oil to the market. During the past five years, spare capacity has fallen below the 3-4mb/d typical of the past decade and is likely to remain tight, IEA analysis shows. The IEA is a sister organisation of the OECD.
For more, see www.iea.org
Financial reform neededFundamental reform of the financial system and its regulation is needed to address the current financial markets crisis, said Thomas Wieser, director general at the Austrian Ministry of Finance, and chair of the OECD financial markets committee in an extra-plenary session in April. The session was called to discuss the financial turbulence with market participants. Mr Wieser advised that priority should be given to private sector initiatives to speed up the recovery of financial markets but government intervention may be needed. See also article on the subprime crisis in this edition.Meanwhile, more and better financial education is also needed today because individuals bear more and more risks without being necessarily able to cope with them, the OECD finds. This concerns not only credit, such as subprime mortgages, but also insurance and pensions. To promote a new initiative, the OECD has launched the International Gateway for Financial Education, www.financial-education.org. Reports from the Financial Markets Committee meeting are available here www.oecd.org/dataoecd/ 36/50/40451733.pdfSee also “The asset test”, by Dara Duguay, Citigroup, in OECD Observer No 255, May 2006, at www.oecdobserver.org
EconomyThe latest composite leading indicators (CLIs) continue to point to slower economic activity in the OECD area. The CLI fell by 0.5 point in March 2008 and was 3.2 points lower than in March 2007. Latest data for March 2008 indicate a weakening outlook for all the major seven economies. They also point to a potential downturn in major OECD non-member economies Brazil, China and India, but continued expansion in Russia.Annual inflation in the OECD area was 3.4% in February 2008, easing down from 3.5% in the year to January 2008. But on a monthly basis, the price level rose by 0.3% in February, compared with 0.2% in January. Consumer prices for energy increased by 13.9% year-on-year in February, compared with a rise of 13.7% in January. Consumer prices for food were up by 4.9% year-on-year in February, compared with 5.1% in January.Quarterly trade volume growth on the fourth quarter 2007 turned negative in the G7 countries, with a drop of 0.2% for exports and 1% for imports. Quarterly volume growth of the EU15 countries with third countries declined by 1.5% for exports and 1.4% for imports. On a year-on-year basis, G7 trade slowed to 3.5% for exports and 1.6% for imports. US quarter-on-quarter export growth slowed to 1% but imports fell by 1%. Japanese merchandise exports in the fourth quarter 2007 were the G7’s highest with 3.3%, as were imports with 2.3%.Unemployment in the OECD area stood at 5.5% in March 2008, the same as the previous month and 0.1 percentage point lower than a year earlier. Jobless figures in the euro area, the US and Japan were broadly stable, with some declines, including in France where it was 7.8%, 0.8 percentage point lower than a year earlier. For more detail on these and other economic stories, go to www.oecd.org/statistics
Germany signs tax convention Germany has joined 15 other countries in signing the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters, in a step that will help it combat cross-border tax evasion more effectively. The convention, covering both direct and indirect taxes, enables tax administrations to work together to enforce national tax laws by exchanging information, engaging in multilateral simultaneous tax examinations and helping each other in tax collection. It safeguards the confidentiality of the taxpayers.The convention is open for signature to Council of Europe member states and OECD member countries. The parties to the convention are: Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, the Netherlands, Norway, Poland, Sweden, the UK and the US. Canada and Ukraine have signed the convention and are still in the process of ratification. See also article on tax havens in this edition.
Pensions strengthNew guidelines to boost the financial security and performance of pensions have been agreed between the OECD countries and the International Organisation of Pension Supervisors (IOPS). The guidelines are intended to help pension regulators and supervisors improve their management of private work-related pension entities, such as pension fund management companies or pension trustees. They are part of a broader OECD effort to strengthen public confidence in the pension system. They set out minimum requirements that pension entities should meet when applying for a licence to begin operating.More than one million pension funds operate in OECD countries, managing over US$16 trillion in assets at the end of 2007. The licensing regime agreed by the OECD and the IOPS, if fully implemented, would ensure that pension entities upgrade their financial, human and operational resources to the level necessary to meet the challenges of an increasingly complex financial system, and also help to protect pension funds in periods of financial turmoil. See the full guidelines at www.oecd.org/daf/pensions
SoundbitesMarket rethink
“We can’t leave feeding people to the mercy of the market. We need a public policy, a means of intervention, and stabilisation.”
Michel Barnier, French minister for agriculture and fisheries, quoted in Financial Times, 28 April 2008“From a societal standpoint, we got carried away with finance.”
Carlos Asilis, Glovista Investments, New Jersey, in The Wall Street Journal, 28 April 2008“As long term players with little or no leverage, they (sovereign wealth funds) play a constructive and stabilising role in global financial markets.”
Henry Paulson Jr, US Treasury secretary, in International Herald Tribune, 22 March 2008Cool science
“The cooling since 1940 has been large enough and consistent enough that it will not soon be reversed.”
Science News, 1 March 1975
Plus ça change…From US$7.5-11 billion in 1962: these are the estimates of the US Department of Health, Education and Welfare for losses caused by air pollution to plant and animal life, to manufactured objects and buildings, and by reduction of visibility, in the US alone.At the same time, water supplies for the growing populations of the world's cities are increasingly threatened by various forms of man-induced pollution.“The fight against smog and water pollution”, No 6, October 1963
©OECD Observer No 267 May-June 2008


Economic data

GDP growth: +0.6% Q3 2017 year-on-year
Consumer price inflation: 2.3% Dec 2017 annual
Trade: +4.3% exp, +4.3% imp, Q3 2017
Unemployment: 5.5% Dec 2017
Last update: 12 Feb 2018

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