For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

WEDNESDAY, MARCH 15, 2017 ~ VOL. XLI NO. 136 WSJ.com ASIA EDITION
As of 12 p.m. ET DJIA 20815.27 g 0.32% NIKKEI 19609.50 g 0.12% STOXX 600 373.54 g 0.29% BRENT 50.75 g 1.17% GOLD 1205.30 À 0.24% EURO 1.0644 g 0.08% DLR ¥114.57 g 0.27%

What’s U.S. Weighs Steps on China Firms

News Trump administration
considering tougher
tary of State Rex Tillerson
travels to Northeast Asia this
week to try to unify Japan,
organizations in helping North
Korea both import and export
military equipment.
number of Chinese firms in re-
cent months.
Last week, the U.S. Com-
Ross said while announcing the
sanctions on ZTE last week.
China’s embassy in Wash-
stance on companies South Korea and China behind Reports and legal docu- merce Department fined a Chi- ington didn’t respond to re-
Business & Finance a policy to constrain Pyong- ments released recently by the nese telecommunications com- quests for comment on North
aiding North Korea yang’s nuclear and ballistic- United Nations, U.S. govern- pany, ZTE Corp., $1.2 billion Korea. Beijing in recent months
missile programs. ment and private intelligence for breaking U.S. sanctions by said it was banning coal im-
oshiba’s CEO said the BY JAY SOLOMON Mr. Tillerson is walking a firms detail Pyongyang’s ex- selling equipment to North ports from the North to com-
T company is considering a
bankruptcy filing for West- WASHINGTON—The Trump
delicate diplomatic path in his
first trip to Asia as Washing-
tensive use of Chinese firms
and North Korean front com-
Korea and Iran, a charge it ac-
knowledged.
ply with new U.N. sanctions.
U.S. officials said Mr. Tiller-
inghouse Electric to stop the administration is considering ton’s top diplomat. U.S. offi- panies inside China to both But Trump administration son would be discussing North
bleeding at its U.S. nu- increasing financial penalties cials said they want China’s sell conventional arms to officials have signaled there Korea at all his stops in Asia,
clear affiliate after losses on Chinese companies in re- support in punishing North countries in Africa and South- will be more financial pressure including the issue of “second-
topping $6 billion. B1 sponse to growing evidence of Korean leader Kim Jong Un for east Asia, and to import equip- placed on Beijing if it doesn’t ary” sanctions against non-
their support for North Korea’s staging a string of weapons ment for its military programs. cut off North Korea, a step North Korean companies that
 Major central banks look
weapons programs, according tests in recent months. But To deter China, the admin- that risks Chinese retaliation. have been aiding Pyongyang.
set to indicate an improv-
to U.S. and Asian officials. this approach risks being un- istrations of Donald Trump “We are putting the world “All of the existing tools
ing global economy is turn-
The administration’s delib- dercut by the continuing role and Barack Obama have fined on notice: The games are over,” that we have to try to bring
ing the tide on a long era of
erations come as U.S. Secre- of Chinese firms, traders and and imposed sanctions on a Commerce Secretary Wilbur Please see KOREA page A2
ultralow interest rates and
bond-buying programs. A1
 Valeant shares tumbled
to their lowest level since Displaced by Quake, Nepalese Face Pressure to Return Home Private
2009 after Ackman sold
his stake in the struggling
drug company. B2
 Investors are souring on
EU Firms
the pound as the U.K. pre-
pares to leave the EU, send-
ing the currency back toward
Can Ban
three-decade lows. B12
 Volkswagen forecast
Head Scarf
higher sales and earnings de-
spite continued costs from BY EMRE PEKER
the company’s emissions-
cheating scandal. B3 BRUSSELS—The European
Union’s top court ruled that pri-
 The private-equity firms
vate employers can ban the Mus-
that own Neiman Marcus are
lim head scarf, saying in its first
in discussions to sell the
decision on the continentwide
struggling retail chain to
controversy that curbs on reli-
Hudson’s Bay. B1
gious symbols in the workplace
 Facebook said user data don’t constitute discrimination.
can’t be used for surveillance, Tuesday’s ruling by the 15-
cracking down on a method judge panel of the European
allegedly used by police. B4 Court of Justice comes as Eu-
rope is roiled by disagreement
 The EPA plans to re-
over how to address the influx
open a review of fuel-
of mostly Muslim migrants
NAVESH CHITRAKAR/REUTERS

economy targets for auto

from the Middle East and North
makers set by the Obama
Africa and what represents an
administration. B3
acceptable level of religious ex-
 At least four North Korean pression at work and in public.
banks under U.S. Treasury The issues are at the center
sanctions remain on the of Wednesday’s elections in the
Swift money-transfer mes- Netherlands, where the Free-
saging network. B2 EARTHQUAKE’S AFTERMATH: Nepali civic officials used bulldozers to tear down a relief camp in the capital for victims of the 2015 dom Party of Geert Wilders, a
earthquake, in a bid to force people to return to their villages. Above, people scavenged for their possessions on Tuesday. far-right, anti-Islam lawmaker,
World-Wide is posing a stiff challenge to
Prime Minister Mark Rutte.
 A Republican plan to re- They are also reverberating
Buffeted in Britain
Central Banks Signal
place the ACA would leave 24 in France, where polls indicate
million more people unin- that anti-Islam right-wing pol-
sured in 2026 compared with Sterling fell after U.K. itician Marine Le Pen will win
current law but would reduce lawmakers removed the final the first round of voting in

Shift in Monetary Mood

the deficit, the CBO said. A6 hurdle to Prime Minister April’s presidential elections.
Theresa May triggering talks In their decision, the judges
 The White House back- on leaving the EU. A4, B12 of the Luxembourg-based
pedaled on Trump’s claim court said a private company’s
that his phone line was or- BY HARRIET TORRY “There is no longer that once a year in 2015 and 2016. prohibition on wearing a head
dered tapped by Obama. A5 How many dollars £1 buys
AND PAUL HANNON sense of urgency in taking fur- Central banks in the U.K. scarf didn’t constitute “direct
$1.50 ther actions,” European Cen- and Japan—which were ag- discrimination based on reli-
 Trump has given the CIA June 23:
secret new authority to con- Brexit vote Major central banks meet- tral Bank President Mario gressively easing policy as re- gion or belief.”
duct drone strikes against 1.40 ing this week look set to indi- Draghi said last week, after cently as last summer—are ex- It follows years in which
suspected terrorists. A4 cate an improving global econ- the bank left its current poli- pected to leave borrowing populist movements have
1.30 omy is turning the tide on a cies in place and indicated costs unchanged at their ramped up attacks on Islam,
 The president is tenta- long era of ultralow interest that the ECB probably won’t meetings Thursday and could portraying the religion as in-
tively set to meet with Xi 1.20 rates and bond-buying pro- need to enact fresh stimulus give more optimistic economic compatible with European val-
in coming weeks, amid grams. to support the economy. “That forecasts given low unemploy- ues. Their anti-immigrant
tensions between the U.S. Tuesday*
1.10 The Federal Reserve is urgency that was prompted by ment and rising inflation rates rhetoric has resonated with
and China. A3 $1.21
poised to raise rates and oth- the risks of deflation isn’t in both countries. many voters, forcing centrist
▼0.6%
 U.K. lawmakers removed ers are on hold, marking a there,” Mr. Draghi said. Monetary policy makers in political parties that for de-
1.00
the final hurdle to Prime turnaround from a year ago, Center stage is the Fed, Norway, Indonesia and Turkey cades championed EU diver-
2016 ’17 when the U.S. central bank which is all but certain to lift also are expected to keep rates sity to also embrace tough
Minister May’s plan to start
talks on leaving the EU. A4 *As of 11 a.m. in New York was holding steady and others its benchmark short-term steady when they meet this stances on divisive matters.
Source: Tullett Prebon were cutting rates or expand- rate Wednesday and signal week. “The ruling is surely an in-
 The EU’s top court THE WALL STREET JOURNAL. ing their bond-buying stimulus that more increases are likely A pickup in inflation and gredient for cohesion and so-
ruled that private employ- efforts amid deflation fears in the months ahead, picking signs of stronger global growth cial peace throughout Europe
ers can ban the Muslim and weak growth. up the pace after moving just Please see RATES page A2 Please see SCARF page A4
head scarf. A1
 Prosecutors pressed
preliminary charges against
Fillon for using public
U.S. Soldiers Must Battle On— INSIDE GRAFT THRIVES
funds to finance phony jobs
for his family. A3
Without Burger King
 Chinese retail sales
clocked the slowest in-
i i

Army nixes ‘luxuries’ for Poland

i
IN MEXICAN
crease in 11 years. A3
mission; ‘be ready for potatoes’ STATES
MEI-CHUN JAU/WSJ

Journal Report
Kenya weathered the BY JULIAN E. BARNES In Iraq and Afghanistan,
commodities bust fairly soldiers stationed at big U.S.
well. Nigeria was hit VILSECK, Germany—For bases got used to gorging on
A vanished governor and near-empty coffers
worse. An interview with years, wherever the U.S. Army American fast food and shop-
Kenya’s central-bank chief
and the head of Nigeria’s
went, Burger King was sure to ping at military strip malls.
follow. “We went a little too far
NEIMAN BY JOSÉ DE CÓRDOBA
AND JUAN MONTES
federal and state auditors
said $2.5 billion spent by
sovereign-wealth fund. When the Army rolls into on some of the luxuries,” MARCUS his administration was un-
Investing in Africa, B3-B8 Poland next month to take po- says the regiment’s Command
sitions near the Russian bor- Sgt. Maj. Kevin Muhlenbeck,
WEIGHS SALE XALAPA, Mexico—One
day last October, the gover-
accounted for.
Mr. Duarte, who before
der, however, the creature a veteran of both conflicts. nor of Veracruz state was vanishing denied wrongdo-
CONTENTS Markets.................... B12 comforts will stay “We set a climate BUSINESS & FINANCE, B1 scheduled to appear on a ing in a series of media in-
Business News...... B3 Opinion.............. A10-11
China’s World......... A2 Property Report.. B11
behind. No Whop- that soldiers morning news program. He terviews, has become the
Crossword.............. A12 Technology............... B4 pers. No foot-long weren’t in a com- never showed up. public face of corruption in
Heard on Street... B12 U.S. News............. A5-6 Subway sand- bat zone anymore. Instead, Javier Duarte Mexico and an embarrass-
Journal Report. B6-8 Weather................... A12 wiches. No Pizza They weren’t in the disappeared, the same day ment to the ruling Institu-
Life & Arts......... A9,12 World News....... A2-4
Hut pies or caramel right mind-set to authorities asked a judge tional Revolutionary Party.
A3/CONTRASTO/REDUX

China: RMB28.00; Hong Kong: HK$23.00;

Indonesia: Rp25,000 (incl PPN);
lattes at the Army’s fight tonight.” for a warrant to arrest Its hopes for retaining
Japan: Yen620 (incl JCT); Korea: Won4,000; version of Star- Whopper On the menu for him. Many in Mexico think power in elections next
Malaysia: RM7.50; Singapore: S$5.00 (incl GST)
bucks, Green Beans. Poland: austerity. he was tipped off. year are hampered by the
KDN PP 9315/10/2012 (031275); MCI (P)
NO. 066/01/2017; SK. MENPEN R.I. NO: 01/ “You are never going to see “The standard of living is Mr. Duarte has since alleged financial malfea-
SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998
Burger King,” Lt. Gen. Ben Spartan—Spartan, plus Wi-Fi,” been charged with racke- sance not just of Mr. Duarte
Hodges, the top Army com- Gen. Hodges told the soldiers, teering and using illegally but of half a dozen other
mander in Europe, warned sol- to some chuckling. The Army obtained funds. Investiga- former state governors.
diers of the 2nd Cavalry Regi- says the internet is necessary
ment at a recent rehearsal for soldiers to keep up with
‘TRAIN tors believe he used front
men and a web of phantom
On Sunday, the acting
governor who filled in af-
drill. “Be ready for potatoes paperwork, to Skype family SPOTTING’: companies to divert public ter Mr. Duarte’s disappear-

s Copyright 2017 Dow Jones &

three meals a day for six members and to watch Netflix.
months. The Irish have figured Some soldiers plan to get
20 YEARS ON funds and acquire real es-
tate in Mexico, Houston
ance was detained and ac-
cused of helping him flee.
Company. All Rights Reserved
out how to make it interesting. their fill before they leave and Miami. With Veracruz The former acting gover-
I am sure you can, too.” Please see ARMY page A8 LIFE & ARTS, A9 state’s affairs in disarray, Please see MEXICO page A8
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, March 15, 2017
America Finally Looks Vulnerable to Beijing
CHINA’S WORLD
ANDREW BROWNE
SHANGHAI—When Chi-
nese leaders gaze out toward
the Pacific, their panorama
is obstructed by a string of
military airfields, naval an-
chorages, radar emplace-
ments and listening posts
sentineled by U.S. forces and
their allies.
Breaking through what
they regard as a hostile
chain of con-
tainment is a
national pri-
ority.
To do so
Beijing must
weaken the
U.S. alliance network. Can
Washington hold the line?
That’s the larger question
hanging over the all-out
struggle that Beijing is wag-
ing to prevent the installa-
tion of a U.S. antimissile bat-
tery in South Korea, meant
to protect against a North
Korean nuclear attack, which
took a dramatic turn last
week with the removal from
office of South Korean Presi-
dent Park Geun-hye.
Pyongyang may well turn
into Donald Trump’s first in-
ternational crisis. Its nuclear
menace, along with missile
defense, will be high on the
agenda when he holds his
KOREA
Continued from Page One
pressure on North Korea are
on the table, and we’ll be look-
ing to try to see what the
most effective combination is,”
said a senior U.S. official
briefed on the Asia trip.
Republican senators wrote
Treasury Secretary Steven
Mnuchin last month and called
for an investigation into the
Bank of China and other Chi-
nese firms for their alleged
roles in helping North Korea.
A report released this
month by the U.N.’s Panel of
Experts documented North Ko-
rea’s extensive use of China to
evade international financial
sanctions and sell weapons.
In a case that particularly
alarmed the Trump adminis-
tration, a North Korean busi-
nessman attempted to use
Pyongyang’s embassy in Bei-
jing to export a lithium metal
that is used to miniaturize nu-
clear warheads, according to
the U.N. report.
The U.N. also said North Ko-
rea’s military acquired compo-
nents for its missile program
using Chinese firms. Debris
collected from a February 2016
North Korean rocket launch in-
cluded ball bearings and pres-
sure transmitters. Those mate-
rials were sold to North Korea
by a Chinese firm, which had
originally sourced the compo-
nents from Europe.
“This company was unable
to provide the identity of the
purchaser and indicated that
the pressure transmitters had
been sold in an electronics
RATES
Continued from Page One
are the key developments of
the past half-year, economists
say. A deep rout in commodity
prices since mid-2014 has sta-
bilized in recent months, while
U.S. consumer sentiment and
stock markets have rallied
since President Donald Trump’s
election on hopes of tax cuts,
less regulation and more gov-
ernment spending in the years
ahead.
The annual rate of inflation
in the Organization for Eco-
nomic Cooperation and Devel-
opment’s 35 members rose to
2.3% in January from 1.8% in
December, its highest point
since April 2012, largely on a
jump in energy prices. Exclud-
ing food and energy, annual
inflation rose only marginally
to 1.9% from 1.8% in December,
the OECD said.
“It does feel like the global
economy that felt weak last
year is doing a little better,
growth has picked up in
places, therefore monetary
policy doesn’t have to be so
focused on downside risks,”
first meeting with his Chi-
nese counterpart, Xi Jinping,
tentatively set for April in
Mr. Trump’s private club in
Florida, Mar-a-Lago, accord-
ing to Chinese officials.
Barack Obama infuriated
Beijing with his military-fla-
vored “pivot” to Asia. To the
Chinese leadership it was yet
more Cold War-style games-
manship, and to test U.S. re-
solve they pushed back with
bullying tactics against U.S.
friends and allies, for in-
stance sending a giant oil-
drilling rig into waters off
Vietnam protected by a flo-
tilla of paramilitary vessels.
As presidential candidate,
Mr. Trump trashed U.S. allies
in Asia as freeloaders and
suggested that both South
Korea and Japan should ac-
quire their own nuclear de-
terrent. After the election,
Defense Secretary Jim Mat-
tis rushed to Northeast Asia
to offer reassurances. Secre-
tary of State Rex Tillerson
will follow him this week.
B
ut America’s alliance
network—the legacy of
a sprawling postwar
empire—looks increasingly
vulnerable.
China fears the antimis-
sile system’s radar will
snoop on its own missiles. If
by lashing out with eco-
nomic sanctions against its
neighbor it manages to de-
lay, or derail, the deploy-
ment, it would weaken a
critical link in a chain of U.S.
security alliances that
stretches from the Korean
Peninsula through the Japa-
China. led by President Xi Jinping, shown at the National People’s Congress in Beijing on March 7, faces increased U.S. pressure.
market,” the U.N. report said.
In September 2016, the U.S.
Treasury Department sanc-
tioned a Chinese business-
woman and Communist Party
member, Ma Xiaohong, along
with her company and three
associates, for aiding North
Korean firms involved in
Pyongyang’s nuclear and bal-
listic missile programs.
The U.S. and China froze
the assets of these entities.
The U.S. Justice Department
said Donald Kohn, a member
of the Bank of England’s Fi-
nancial Policy Committee and
former Fed vice chairman.
Stronger inflation and low
unemployment in the U.S., U.K.
and Japan mean “there’s noth-
ing to distract these major
central banks from setting
monetary policy as they would
have precrisis now,” said
Adam Posen, president of the
Peterson Institute for Interna-
tional Economics and a former
Bank of England policy maker.
This contrasts with the
early months of last year,
when several major central
banks were cutting interest
rates to ward off deflation and
the Fed was holding off on
rate increases because of
slumping U.S. growth and fi-
nancial market turbulence.
In January 2016, the Bank
of Japan pushed interest rates
below zero. In March last
year, the ECB cut rates and
expanded its asset purchases
to boost the eurozone’s flag-
ging economy. In August, the
Bank of England cut rates and
revived bond buying in the
wake of the U.K.’s June deci-
sion to quit the European
Union.
WORLD NEWS
Components for a U.S. antimissile system that has drawn China’s criticism arrived in Seoul recently.
nese islands and the Philip- holdups, the U.S. has rushed
pine archipelago all the way the first components of the
to Australia. battery to South Korea.
The downfall of President
T
Park in a corruption and in- he sense of urgency
fluence-peddling scandal, points to wider con-
and the prospect that her cerns about the future
likely successor will be more of the U.S.-South Korea alli-
conciliatory toward Pyong- ance at a time when the pos-
yang, plays to Beijing’s ad- sibility of a direct confronta-
vantage. tion with North Korea looms
Moon Jae-in’s “sunshine” larger.
approach to the North is at For more than seven de-
odds with a hardening in cades, U.S. armed forces
Washington. He has also have presided over a benign
questioned the antimissile hegemony in Asia. After de-
system, although it is un- feating Japanese fascism,
clear whether he would they stayed on to help build
stand in its way as president prosperity from the rubble
amid mounting public out- of war and fend off Commu-
rage over a recent flurry of nism. Douglas MacArthur,
North Korean missile tests. the “blue-eyed Shogun,” got
Not taking chances on Japan back on its feet.
identified another 23 firms owned by Ms. Ma and Dan-
that it said were tied to Ms. dong Hongxiang, as well as
Ma and her holding company, five ships. Sayari said there
Dandong Hongxiang Industrial are numerous other Chinese
Development Co. business networks collaborat-
Since then, private U.S. in- ing with Pyongyang.
telligence firms have identi- “Ma is just one node in one
fied much broader networks network supporting one
involving Chinese companies [North Korean] institution,”
aiding North Korea. said Jessica Knight, director of
Sayari Analytics, a Wash- analysis at Sayari. “There are
ington-based financial intelli- dozens more examples of
gence company, said it found these Chinese facilitators,
27 other companies majority- some with even more cross-
They have raised the rate
twice since then, most re-
cently in December to a range
between 0.50% and 0.75%, on
optimism about the U.S. eco-
nomic outlook. They are likely
to lift it Wednesday to a range
between 0.75% and 1% and
pencil in more increases this
year.
ECB economists last week
raised their growth forecasts
for the eurozone over the
coming years, while the Bank
of England increased its U.K.
ALEX KRAUS/BLOOMBERG NEWS
growth forecasts last month.
Among central banks in de-
veloped economies, the Bank
of England is the leading can-
didate to follow the Fed in
raising its policy interest rate
this year. BOE policy makers
are expected to leave their
Mario Draghi bank rate unchanged Thurs-
day, but have made it clear
Now, almost no developed they are prepared to move in
economy is considering fur- either direction, and would
ther easing, and many emerg- raise rates if inflation over-
ing-market central banks are
on hold as well.
shoots their 2% target by too
much or for too long as a re-
Fed officials cut their
benchmark federal-funds rate
sult of the pound’s deprecia-
tion following the U.K.’s Brexit
to near zero during the finan- vote.
cial crisis and held it there for Other central banks in Eu-
seven years, through the deep rope appear more likely to
recession and fitful recovery. stand pat for a while amid
THE WALL STREET JOURNAL.
tively, China is trying to dic-
tate the security options of a
sovereign nation whose
safety—and that of some
28,500 U.S. troops it hosts—
is imperiled by North Ko-
rea’s rapid mastery of mis-
sile and nuclear technology.
I
n his book “Powerplay:
The Origin of the Ameri-
can Alliance System in
Asia,” the Georgetown Uni-
versity scholar Victor Cha
US AIR FORCE/PLANET PIX/ZUMA PRESS
calls the early U.S. alliance
network an “informal and
accidental empire.” Informal
because the U.S. pulled the
strings of power in member
countries from behind the
scenes; accidental because in
the immediate aftermath of
World War II, President Tru-
man had no intention of
building such an extensive
network.
Nowadays, the U.S. Pacific Truman was focused on
Command from Hawaii, tra- the Soviet threat in Europe.
ditionally led by a four-star Japan dominated his Asian
Navy admiral, looks after a calculus. Only after North
territory that embraces al- Korean troops poured across
most half of humanity. the 38th parallel in 1950 did
China is convinced all this Truman decide that South
firepower is there to keep it Korea, as well as Taiwan,
down, but it can’t yet match were worth defending. He
the strength. Rather, it seeks would “stop those sons of
to undermine U.S. credibility bitches” in Korea, and pre-
and prestige by intimidating vent dominoes falling to
its Asian partners. Communism elsewhere.
Already, the Philippines— Today, Mr. Trump’s chal-
one of the region’s weakest lenge—a supreme test of
countries, which threw out statesmanship—will be to
U.S. military bases in the turn back an existential nu-
1980s—is bending to Bei- clear threat from Pyongyang,
jing’s will. while somehow holding to-
But the stakes are far gether a fading imperium
higher in South Korea, an in- that Mr. Xi is anxious to con-
dustrialized economy with a sign to the dustbin of his-
war-ready military. Effec- tory.
government’s role in this sup-
port for North Korea.
Some in Washington said
Beijing might not be directly
involved in this trade. But at
the same time, they said suc-
cessive Chinese governments
haven’t shown the political
will to crack down on the pro-
liferation.
As a result, the Trump ad-
ministration is considering
pursuing strategies similar to
ones the Obama and George
W. Bush administrations used
to financially isolate Iran with
North Korea.
This would include sending
Treasury Department officials
to China to directly warn local
firms about the risks of doing
business with North Korea.
There is also a belief that
sanctioning another Chinese
network engaged with Pyong-
yang, similar to Ma Xiao-
DING LIN/XINHUA/ZUMA PRESS
hong’s, could have a ripple ef-
fect across Asia.
“It’s not a foregone conclu-
sion that China’s leaders will
shelter North Korea,” said An-
thony Ruggiero, a former
Treasury and State Depart-
ment official who focused on
North Korea at the Foundation
for Defense of Democracies, a
border business than Dandong Washington think tank.
Hongxiang.” Still, these officials said us-
Ms. Ma hasn’t responded to ing the international financial
multiple requests for com- system to punish Beijing
ment, while representatives of comes with enormous risks.
her firm have declined to com- And it could accelerate efforts
ment. Diplomats at the North by the Chinese government to
Korean mission at the United establish a financial system
Nations didn’t respond to re- not anchored in U.S. dollars.
quests for comment.
Current and former U.S. of- THE WALL STREET JOURNAL.
ficials said the Trump and Dow Jones Publishing Company (Asia)
Obama administrations have 25/F, Central Plaza, 18 Harbour Road,
Hong Kong
been uncertain of the Chinese Tel: 852 2573 7121 Fax 852 2834 5291
Andrew Dowell, Asia Editor
Troy McCullough, Senior News Editor, Asia
considerable political uncer- David Holland, News Editor, Asia
Darren Everson, International Editions Editor
tainty.
This week’s central bank Hugo Restall, Editorial Page Editor
meetings come alongside a Mark Rogers, Advertising Sales
general election in the Nether- Jacky Lo, Circulation Sales
Jacquelyn Drozdoff, Communications
lands, which will gauge voters’ Simon Wan, Technology
support for the euroskeptic Jonathan Wright,
Party for Freedom, or PVV, led Managing Director Asia & Publisher
by Geert Wilders. Advertising through Dow Jones Advertising
Later this spring, France Sales: Hong Kong: 852-2831 2504; Singapore:
will vote in a presidential elec- 65-6415 4300; Tokyo: 81-3 6269-2701;
Frankfurt: 49 69 29725390; London: 44 207
tion that has called the future 842 9600; Paris: 33 1 40 17 17 01; New York:
of the euro into question, 1-212 659 2176.
Or email: Mark.Rogers@wsj.com
since National Front candidate
Marine Le Pen has pledged to Printers: Hong Kong: Euron Limited, 2/F., Block 1,
Tai Ping Industrial Centre, 57 Ting Kok Road, Tai
pull France out of the common Po, Hong Kong; Indonesia: PT Gramedia Printing
Group, Jalan Palmerah Selatan 22-28, Jakarta
currency if she wins. 10270; Japan: The Mainichi Newspapers Co., Ltd.,
The French election will be 1-1-1 Hitotsubashi, Chiyoda-ku, Tokyo, 100-8051;
Korea: JoongAng Ilbo. 100 Seosomun-ro, Jung-gu,
“key to whatever happens in Seoul, 100-814. Publisher/ Printer: Song, Pil-Ho;
the eurozone,” said Frederic Malaysia:Dasar Cetak (M) Sdn Bhd, Lot 2, Jalan
Sepana 15/3, Off Persiaran Selangor, Seksyen 15,
Mishkin, economics professor 40200 Shah Alam, Selangor. (ROC No: 048885)6;
Singapore: Singapore Press Holdings Limited, 82
at Columbia Business School Genting Lane Media Centre Singapore 349567
and a former Fed governor.
Trademarks appearing herein are used under
“The biggest risk factor license from Dow Jones & Co.
right now is the geopolitical ©2015 Dow Jones & Company. All rights reserved.
USPS 337-350; ISSN 0377-9920
one,” he said.
NEED ASSISTANCE WITH
YOUR SUBSCRIPTION?
CORRECTIONS  By web: http://wsj-asia.com
By email: service@wsj-asia.com
AMPLIFICATIONS By phone: Hong Kong: 800 901 216; Australia:
0011 8000 322 8482; China: 400 991 1174;
India: 000 800 440 1938; Indonesia: +62 21
2970 2702; Japan: 0120 779 868; Korea: 0030
Readers can alert The Wall Street 844 0063; Malaysia: 1800 804 612; New
Journal to any errors in news Zealand: 0800 442 434; Philippines: 1800 1441
articles by emailing 0033; Singapore: 1800 823 2042; Taiwan:
wsjcontact@wsj.com. 00801 444 141; Thailand: 001800 441 8323
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Strong China Data Contain a Warning
Growth in China’s
retail sales slows,
pointing to worrying
slide in consumption
BY MARK MAGNIER
BEIJING—With data in
hand on a solid start to 2017
for the Chinese economy,
economists pointed to slowing
consumption as a warning
light that demand isn’t yet
strong enough to pick up the
slack as the boost from stimu-
lus policies wanes.
Data released Tuesday
showed improvement in indus-
trial production, investment
and property data for January
and February, as effects from
strong infrastructure spending
and monetary easing carry
over from last year. Figures
for the first two months are
usually combined to factor in
the Lunar New Year holiday,
whose slightly shifting dates
from year to year skew com-
parisons.
However, retail sales
clocked the slowest increase in
Terror Plots Stir Border Debate in Malaysia Trump, Xi
BY BEN OTTO
KUALA LUMPUR—Malay-
sia’s open-border policy has
long helped lend it notoriety as
a way station for conspirators
to plot terror attacks abroad.
Now, many people worry
that two major terror-linked
plots on Malaysia’s own soil
show that the Muslim-major-
ity nation is increasingly be-
coming a host to other peo-
ple’s deadly conflicts.
The plots were the Febru-
ary killing of North Korean
dictator Kim Jong Un’s half
brother with VX nerve agent,
which police blame on a North
Korean-led hit team, and an
alleged Islamic State-linked at-
tempt to attack Saudi King
Salman’s visiting delegation
last week with a car bomb.
They followed Islamic State’s
first successful attack in Ma-
laysia last year and dozens of
FRANCE
Preliminary Charges
Filed Against Fillon
French prosecutors pressed pre-
liminary charges against conserva-
tive presidential candidate François
Fillon for using public funds to fi-
nance phony jobs for his family, a
judicial official said, dealing a new
blow to his election campaign
The prosecutors allege Mr. Fil-
lon, the onetime favorite to become
A worker tests lights at a factory in Suining. Data showed a rise in China’s industrial production.
11 years, with a 9.5% rise in
the two-month period, accord-
ing to the National Bureau of
Statistics, compared with a
10.9% increase in December.
The retail-sales report “sug-
Open-Door Policy
Malaysia is among the world's least travel-restricted nations.
Selected countries by number of countries’ passports accepted
visa-free, with visa-on-arrival or with electronic travel authorization
13 most-open nations*
Malaysia
France
Thailand
U.S.
Russia
North Korea
Afghanistan, Somalia, Turkmenistan
*Cambodia, Comoros, Guinea-Bissau, Madagascar, Mauritania, Micronesia, Mozambique,
Samoa, Seychelles, East Timor, Togo, Tuvalu, Uganda
Sources: Arton Capital Passport Index; staff reports
terror-related arrests in 2016.
“In the past, terrorists did
not target Malaysia, but today
the threat has changed,” said
Rohan Gunaratna, a professor
president, misappropriated public
funds by paying his family without
requiring them to do work. Prose-
cutors also allege the candidate
misappropriated corporate assets
by lining up a separate publishing
job for his wife, and violated disclo-
sure rules for lawmakers.
Mr. Fillon’s lawyer and officials
for his campaign didn’t respond to
requests to comment. Mr. Fillon
has denied wrongdoing.
Filing preliminary charges is a
significant step in French law. An
AN ICON JUST GOT LARGER
WORLD NEWS
gests that final demand is not
as strong as people expect,”
said BBVA Research economist
Xia Le. That, combined with
expectations that momentum
from the stimulus and a still-
198
164
91
74
43
40
2 (Malaysia and Singapore)
0 slightly this year but left its
THE WALL STREET JOURNAL.
of security studies at Nanyang
Technical University in Singa-
pore. “Malaysia has become a
really important target.”
Khalid Abu Bakar, Malaysia’s
WORLD WATCH
investigation into the allegations
will continue, and magistrates then
will decide whether to file formal
charges and order him to trial, or to
drop the preliminary charges alto-
gether.
When investigators launched an
initial probe in January, Mr. Fillon
said he would pull out of the elec-
tion if he faced preliminary charges.
In recent weeks, he vowed to re-
main in the race despite receiving
notification about such plans.
—William Horobin
Wednesday, March 15, 2017 | A3
2016, data from the statistics
bureau showed Tuesday, as tax
cuts for car buyers aimed at
stimulating the economy en-
couraged consumers to move
forward their purchases, econ-
omists said. The tax cuts have
since been partially rolled
back; auto sales fell 1% year
over year in the first two
months of 2017, data showed.
Amid China’s economic
slowdown, many consumers
remain apprehensive.
Hu Pingjun, a 59-year-old
retiree from a state-owned
textile mill who was shopping
for vegetables in Beijing, said
CHINATOPIX/ASSOCIATED PRESS
she has no plans to buy major
appliances or other large
items given that the family is
working to pay down a mort-
gage and car loan. “We always
try to save for the future by,
for example, purchasing fewer
clothes,” Ms. Hu said. “Overall,
our spending outlook is not
very bright.”
vibrant property market will Consumption will need to
fade in coming months, is pick up for China to meet its
prompting predictions that target of 6.5% growth this
growth could weaken in the year, economists say.
second half of the year. Value-added industrial out-
Car sales surged 10.1% in put grew by a faster-than-ex-
chief of police, told The Wall
Street Journal that authorities
that could rival Singapore’s
and Thailand’s. Tourism is now
have raised the alert level since
the two plots in February but
that “people are free to move
Malaysia’s second-largest for-
eign-exchange earner.
Malaysia is among the most
and do their routine.” welcoming nations, extending
The Foreign Ministry web- visa-free or visa-on-arrival ac-
site says “Malaysia condemns cess to 164 countries and ter-
all acts, methods and practices ritories, according to Canada’s
of terrorism and transnational Arton Capital. By comparison,
crimes.” After Australia and the U.S. does so for 43 coun-
Britain issued travel warnings tries and France, 91.
for Malaysia last year, Malaysia When many Western na-
asked the countries to lower tions curbed travel from some
their threat levels. Britain has Middle Eastern states after the
retained its warning, while Sept. 11, 2001, terrorist attacks
Australia softened its language in the U.S., Malaysia eased
travel rules.
“level of advice” the same. Last year, Malaysia’s Na-
These and other events have tional Security Council, a state
sparked debate within Malay- body, proposed restoring visa
sia’s government over its open- requirements for several Middle
door policy. The country has East nations, citing the need for
maintained relaxed borders for greater controls following an Is-
decades to help it forge a busi- lamic State-linked attack. Prime
ness and travel hub between Minister Najib Razak’s cabinet
East Asia and the Middle East quickly rejected the idea.
TAIWAN sonal information, release of se-
crets and communications secu-
Ex-President Indicted rity and surveillance, office
Over Secrets Leak spokesman Chang Chieh-chin said.
The indictment of Mr. Ma, who
Prosecutors indicted China- has denied the charges, comes
friendly ex-President Ma Ying-jeou more than a year after his Na-
over the leak of classified informa- tionalist Party was defeated by
tion on suspected influence ped- the pro-independence Democratic
dling by an opposition lawmaker. Progressive Party, which has
The Taipei District Public Pros- sought to maintain mainland ties
ecutor’s Office found after a six- while asserting the self-governing
month probe that Mr. Ma broke island’s own place internationally.
laws on the protection of per- —Associated Press
THE NAVITIMER 46 mm
pected 6.3% in the first two
months of 2017 from a year
earlier, compared with 6.0%
growth in December. Invest-
ments in factories, buildings
and other fixed assets in ur-
ban areas rose by a better-
than-expected 8.9% year over
year in the January-February
period, compared with a rise
of 8.1% in 2016.
There had been concerns
that investment had been
dominated by the state and
led by stimulus spending.
Sheng Laiyun, a spokesman
with the statistics bureau, said
private investment in prop-
erty, factories and other capi-
tal goods tied to Beijing’s pub-
lic-private infrastructure
projects is noticeably better.
Economists say China is
walking a fine line as it tries
to stimulate the economy
enough to prevent a sharp
drop in output while attempt-
ing to address rising debt and
widespread industrial overca-
pacity built up after years of
stimulus policies and high lev-
els of investment.
—Pei Li and Liyan Qi
contributed to this article.
Plan to
Meet Soon
WASHINGTON—U.S. Presi-
dent Donald Trump is tenta-
tively set to meet in coming
weeks with his Chinese coun-
terpart, Xi Jinping, officials
from both nations said.
By Lingling Wei,
Jeremy Page
and Felicia Schwartz
Two Chinese officials said
the leaders are expected to meet
in April at Mr. Trump’s private
club in Florida, Mar-a-Lago.
White House spokesman Sean
Spicer on Monday wouldn’t con-
firm a date or location but said
“planning is ongoing” for a visit
to help defuse tensions over
North Korea and the deploy-
ment by the U.S. of a missile-de-
fense system in South Korea.
The U.S. and China have
been moving to smooth rela-
tions since Mr. Trump reaf-
firmed U.S. commitment to the
“One China” policy in a phone
call last month. Chinese lead-
ers were alarmed when he
suggested in January that he
would review the longstanding
policy, under which the U.S.
agrees not to have formal dip-
lomatic relations with Taiwan.
Relations have stabilized
since the February call between
Messrs. Trump and Xi, but Bei-
jing remains wary about his
plans in other areas, especially
trade and the South China Sea.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, March 15, 2017
Parliament Clears Path for Brexit
Lawmakers in upper
house drop final
objections and pass
government measure
BY JENNY GROSS
AND LAURENCE NORMAN
LONDON—British lawmak-
ers have removed the final
hurdle to Prime Minister The-
resa May’s plan to start talks
on the U.K. leaving the Euro-
pean Union, a milestone mo-
ment that sets the stage for
unwinding 40 years of close,
complex cross-Channel ties.
Mrs. May is expected to
move this month to formally
trigger what will likely be two
years of negotiations. The two
sides publicly remain far apart
on central issues, raising the
risk of a messy denouement
detrimental to both sides.
Parliament’s unelected
House of Lords, which had
sought to guarantee more say
for British lawmakers over the
eventual shape of the deal,
dropped its objections late
Monday and passed the Brexit
measure. They voted 274 to
135 not to pursue an amend-
ment that would guarantee EU
citizens living in the U.K. the
U.K Firms Preparing for Life After EU
BY JASON DOUGLAS
AND ROBERT WALL
LONDON—No one knows
how Britain’s departure from
the European Union will affect
business here, but many com-
panies already are making stra-
tegic moves to better prepare
for their post-Brexit futures.
British Prime Minister The-
resa May won votes Monday
from Parliament that brought
her a step closer to starting
two years of separation talks
before the end of March. For
businesses, those negotiations
will determine what tariff and
customs regime will replace
the U.K.’s free-trade relation-
ship with the rest of the EU
along with rules on the flow of
non-British EU citizens to
work and travel across the
English Channel.
A more immediate concern
has been the sharply lower
pound since the June 23 Brexit
referendum. The weaker cur-
rency makes British-made
goods more competitive over-
seas, and export demand grew
for the ninth successive month
in February, according to a
SCARF
Continued from Page One
and notably in France,” said
François Fillon, the conserva-
tive French presidential candi-
date who lost his lead in the
polls amid a corruption probe.
Last summer, France was
gripped by controversies as
dozens of towns pushed to ban
the full-body swimsuit known
as burkini worn by Muslim
women. A top French court
Trump Has Authorized CIA to Launch Drone Strikes
BY GORDON LUBOLD
AND SHANE HARRIS
WASHINGTON—President
Donald Trump has given the
Central Intelligence Agency se-
cret new authority to conduct
drone strikes against sus-
pected terrorists, U.S. officials
said, changing the Obama ad-
ministration’s policy of limit-
ing the spy agency’s paramili-
tary role and reopening a turf
war between the agency and
the Pentagon.
The new authority, which
hadn’t been previously dis-
closed, represents a significant
departure from a cooperative
approach that had become
standard practice by the end of
former President Barack
Obama’s tenure: The CIA used
drones and other intelligence
resources to locate suspected
terrorists and then the military
conducted the actual strike.
The U.S. drone strike that killed
Taliban leader Mullah Mansour
in May 2016 in Pakistan was
the best example of that hybrid
approach, U.S. officials said.
The Obama administration
put the military in charge of
pulling the trigger to promote
transparency and accountabil-
ity. The CIA, which operates
The House of Lords approved the Brexit bill on Monday, authorizing
Prime Minister Theresa May to launch divorce talks with the EU.
right to remain after Brexit
and by a vote of 274 to 118 to
back down on demands for
greater parliamentary over-
sight on the final terms of the
vote.
“Parliament has today
backed the government in its
determination to get on with
the job of leaving the EU and
negotiating a positive new
partnership with its remaining
member states,” said David
Davis, the cabinet minister
Riding It Out
A weakened pound is supporting
British exports...
New export orders
60
Expanding
55
50
45
Contracting
40
2016
Sources: IHS Markit (new export orders); U.K. Office for National Statistics
(input prices); Bank of England (investment intentions)
survey from IHS Markit Ltd.
But it also has driven up the
cost of imported goods, sup-
plies and ingredients for many
companies.
G’s Fresh Ltd. supplies Brit-
ain’s biggest supermarkets
with fresh fruit and vegeta-
bles, often imported from
Spain. It is tweaking its supply
suspended the orders.
In the Netherlands, Mr.
Wilders has seen his popular-
ity peak as he called for shut-
ting mosques and banning the
Quran. Mr. Rutte eventually
hardened his stance to counter
Mr. Wilders’s rise, telling im-
migrants to either adapt to the
Netherlands or go home.
Tuesday’s court decision
risks being a harbinger of
broader discrimination, rights
activists said.
Firms may bar religious,
political or philosophical sym-
under covert authorities,
wasn’t required to disclose the
number of suspected terrorists
or civilian bystanders it killed
in drone strikes. The Penta-
gon, however, must publicly
report most airstrikes.
Mr. Trump has indicated he
wants to accelerate the fight
U.S. Air Force MQ-1B Predator drones prepared to launch in the Persian Gulf region last year.
HK JP KO ML
WORLD NEWS
overseeing Brexit, after the
votes. “We are now on the
threshold of the most impor-
tant negotiation for our coun-
try in a generation.”
The Brexit talks will play
out during a period of funda-
mental change on both sides
as voters in the West chal-
lenge establishment politi-
cians. The EU is contending
with rising nationalism and
skepticism about its aims
ahead of elections in the Neth-
...but it is also pushing up
firms' costs..
Change from a year earlier in
U.K. manufacturers' input prices investment intentions
30%
20
10
0 would retool a factory in
–10
’17 2016
chain in response to the
roughly 15% rise in the cost of
its produce from a year ago. It
is packing trucks coming from
Europe more tightly and ship-
ping produce directly from
Spain to retail depots, bypass-
ing distribution centers
Apart from the currency
move, a longer-term concern
bols in the workplace if such
guidelines are in place and
they may fire an employee for
noncompliance if the rules are
applied to all religious and po-
litical beliefs, the judges ruled.
“Today’s disappointing rul-
ings by the European Court of
Justice give greater leeway to
employers to discriminate,”
said John Dalhuisen of Amnesty
International. “At a time when
identity and appearance has be-
come a political battleground,
people need more protection
against prejudice, not less.”
against Islamic State and other
militant groups. The CIA first
used its new authority in late
February in a strike on a senior
al Qaeda leader in Syria, Abu
al-Khayr al-Masri, U.S. officials
said. The strike in northern
Syria on Mr. Masri, a son-in-
law of the late al Qaeda leader
SI IN UK FR MN PR THE WALL STREET JOURNAL.
erlands on Wednesday and the talks—which she has
France and Germany in com- vowed to do this month—it
ing months. The negotiations may be mid-May or even late
with London could strain ties June before formal negotia-
among the EU’s remaining tions kick off as the bloc fin-
members as they adjust to life ishes its preparations.
without one of the bloc’s larg- Some British tactics—in-
est and richest economies. cluding hints the U.K. would
Mrs. May also faces politi- turn itself into a tax haven if it
cal pressure at home. The
head of Scotland’s govern-
ment, Nicola Sturgeon, chose
doesn’t get a good deal—have
gone down badly on the conti-
nent.
Monday to call for a second
referendum on Scotland’s in-
dependence from the U.K. once
When Mrs. May’s govern-
ment published a 76-page
Brexit white paper earlier this
Brexit terms are known, rais-
ing the specter that the U.K.
year, it omitted any mention
of the €55 billion to €60 bil-
PA/ZUMA PRESS
could break up even as it dis- lion (up to $64 billion) in pay-
entangles itself from the EU.
Scots, who make up about
8% of the U.K.’s population,
ments the EU says Britain
owes it to cover budget com-
mitments already made,
voted against independence in among other things.
September 2014, 55% to 45%. That caused consternation
But in last year’s Brexit poll- among some Brussels officials,
ing, they favored remaining in who want Britain to agree to a
the EU by a greater margin of financial settlement as a pre-
62% to 38%. requisite to further talks on
The British prime minister their post-Brexit relationship.
has made it clear she wants a “The British must respect
clean break, pulling out of the commitments they were in-
EU’s common market and re- volved in making,” said Euro-
asserting British control over pean Commission President
immigration. Jean-Claude Juncker. Brexit
Still, Mrs. May has said she “won’t be at a discount or at
wants to maintain good rela- zero cost,” he added.
tions and reach the best trade —Jason Douglas
agreement she can with the and Valentina Pop
bloc. Even after she triggers contributed to this article.
or custom costs for the South-
ampton, England, maker of
...meanwhile, companies' appetite pipes, valves and other indus-
for investment is recovering from trial components.
the shock of June's Brexit vote. “To be paralyzed until
Bank of England's measure of Brexit happens doesn’t make
any sense,” she said.
Surveys by the Bank of Eng-
1.2
land’s network of regional
agents show companies’ in-
1.0 Services
Manufacturing vestment and hiring plans re-
0.8 main solid, having recovered
from an initial wobble follow-
0.6 ing the Brexit referendum.
Earlier this year, Michigan-
0.4 based Whirlpool Corp. said it
0.2 Yates, England, to focus on
producing dryers just for U.K.
0
customers. Whirlpool now ex-
’17 2016 ’17 ports about a third of the
plant’s output to the rest of
THE WALL STREET JOURNAL. Europe. Instead, it will use a
Poland facility to make dryers
for many executives is for continental Europe, it said
whether Brexit will result in in a filing in January.
higher border costs. A few are The move was widely seen
taking action early to protect as a Brexit defense because it
themselves. cut the number of dryers be-
Jan Ward, chief executive of ing shipped across the English
Corrotherm International Ltd., Channel. A company spokes-
sped up plans to open a new woman said, however, that
factory near Carcassone, the shift was part of a broader
France, to avoid any new tariff regional restructuring.
FREDERICK SADONES/PACIFIC PRESS/LIGHTROCKET/GETTY IMAGES
Women in headscarves talk to a bather in Antwerp, Belgium.
Osama bin Laden, had been re- While U.S. officials said Mr.
ported, but it wasn’t previously Trump’s action specifically ap-
known the CIA had carried it plied to the CIA’s ability to op-
out under the new authority. erate in Syria, it means the
U.S. officials are still assessing agency eventually could be-
results of the strike. come empowered under Mr.
Spokesmen for the Penta- Trump to once again conduct
gon and the CIA declined to covert strikes in other places
comment. where the U.S. is targeting
militants in Yemen, Libya, So-
malia and elsewhere.
Syria may not be the only
place where the CIA is now
authorized to conduct drone
strikes. Earlier this month, a
U.S. drone reportedly targeted
two men in a village in Paki-
stan near the border with Af-
ghanistan. The Defense De-
partment didn’t acknowledge
conducting the operation, as it
typically would.
Whether the CIA’s new au-
thority might expand remains
unclear. The CIA, the Pentagon
and the White House are nego-
tiating a longer-term approach
to conducting counterterror-
ism operations and determin-
JOHN MOORE/GETTY IMAGES
ing who has the authority to
do what, U.S. officials said.
Mr. Trump provided the au-
thority to the CIA not long af-
ter meeting with intelligence
officials at the agency head-
quarters on Jan. 21, the day
after he was inaugurated, the
PRU/AGENCE FRANCE-PRESSE/GETTY IMAGES
Charlotte Hogg resigned Monday.
Official
At BOE
Quits Over
Conflict
BY JASON DOUGLAS
LONDON—A senior Bank of
England official resigned after a
panel of lawmakers said her
failure to disclose a potential
conflict of interest meant she
shouldn’t do her job, an unprec-
edented turn of events showing
how the spotlight is on the cen-
tral bank and its expanded role
in the British economy.
Charlotte Hogg, who was
appointed chief operating offi-
cer at the BOE in 2013 before
being named deputy governor
for markets and banking in
February, quit Monday, the
BOE said Tuesday.
Her resignation came after
Parliament’s powerful treasury
committee said Ms. Hogg’s
failure to disclose that her
brother worked in a senior
role at U.K. lender Barclays
PLC during almost four years
at the bank represented “a se-
rious error of judgment.”
The panel added that the
episode raises wider concerns
about the governance of the
322-year-old central bank,
which faces multiple policy
challenges as the U.K. prepares
to leave the European Union.
This is the first time that
criticism from the committee
has led a senior official to re-
sign. The latest deputy gover-
nor to resign was Rupert Pen-
nant-Rea, who quit in 1995
over an affair with a journalist.
“The committee considers
that her professional compe-
tence falls short of the very
high standards required to ful-
fill the additional responsibili-
ties of deputy governor for
markets and banking,” the panel
said in a report into her ap-
pointment as deputy governor.
In a letter to BOE Governor
Mark Carney published by the
central bank, Ms. Hogg apolo-
gized for her error and stressed
she hadn’t shared confidential
information “or misused it in
any way” during her years at
the bank. “We, as public ser-
vants, should not merely meet
but exceed the standards we ex-
pect of others,” she said in ex-
plaining her resignation, which
her letter revealed was first of-
fered last week, but initially re-
jected by Mr. Carney and the
bank’s senior management.
Ms. Hogg’s resignation
leaves vacant spots on two of
the BOE’s committees: its
Monetary Policy Committee,
which sets interest rates, and
its Financial Policy Committee,
which monitors risks to the sta-
bility of the financial system.
U.S. officials said. Mr. Trump’s
nominee for director of the
CIA, Mike Pompeo, had yet to
be confirmed.
A White House spokesman
declined to comment.
Mr. Trump’s new policy is
sure to reignite the debate over
targeted killing. Human-rights
groups believe the Defense De-
partment, with its culture and
legal requirement to be more
publicly transparent and ac-
countable, is where drone op-
erations should be rooted.
“There are a lot of problems
with the drone program and
the targeted killing program,
but the CIA should be out of
the business of ordering lethal
strikes,” said Christopher An-
ders, deputy director of the
Washington office of the
American Civil Liberties Union.
Both agencies take steps to
determine the validity of tar-
gets before striking. When it
comes to vetting targets, the
CIA uses a higher, or “near
certainty,” standard, while the
Defense Department relies on
“reasonable certainty” in war
zones, though it adheres to
the higher standard when op-
erating elsewhere.
—Carol E. Lee
contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Tillerson to Make First Asia Trip
Secretary of state will
hold talks in region
anxious about North
Korea’s intentions
President Donald Trump’s
top diplomat will visit Japan
on Wednesday followed by
stops in South Korea and
China, a vital trip for an ad-
ministration that has sent
mixed signals to a region fac-
ing new risks.
By Felicia Schwartz
in Washington, Jeremy
Page in Beijing
and Jonathan Cheng
in Seoul
On the eve of Secretary of
State Rex Tillerson’s first offi-
cial trip to Asia, the adminis-
tration signaled a shift away
from President Barack
Obama’s “rebalancing” policy
of focusing more resources on
CARLOS JASSO/REUTERS
allies and partners in Asia,
and toward Mr. Trump’s trade-
mark “America first” approach
to economic interests and di-
plomacy.
“What we’re looking to do
is approach our economic en-
gagement with Asia in a way
that not only promotes
growth, but also promotes the
interests of the United States,
of United States workers, of
United States citizens and of
United States companies,” Su-
san A. Thornton, acting assis-
tant secretary of State for the
Bureau of East Asian and Pa-
cific Affairs, said at a news
briefing on Monday. “We’re
looking for a way of…leveling
the playing field.”
The trip follows a rocky
start to the administration’s
relations with Asia. Within
days of his inauguration, Mr.
Trump withdrew the U.S. from
the Trans-Pacific Partnership,
a 12-nation trade agreement
backed by Japan and other
American allies. Tweets and
remarks by Mr. Trump rankled
many Asian officials and cre-
ated uncertainty about the
U.S. role in the region. He has
retracted some of those state-
ments and last month sent an-
other top official, Defense Sec-
retary Jim Mattis, to deliver a
message of continuity and
New York Says Exxon Withheld Information
BY CHRISTOPHER M. MATTHEWS
AND ERIN AILWORTH
The New York attorney gen-
eral accused Exxon Mobil
Corp. of withholding docu-
ments from his office as it in-
vestigates whether the energy
company misrepresented its
understanding of climate
change to investors and the
public.
Lawyers for Attorney Gen-
eral Eric Schneiderman’s office
said in court documents on
Monday that Exxon hadn’t dis-
closed that Rex Tillerson, the
former chairman and chief ex-
Obama-Era Border Official in Center of Trump’s Storm
BY LAURA MECKLER
WASHINGTON—When for-
mer President Barack Obama
wanted to scale back deporta-
tions of illegal immigrants, it
was Tom Homan who got offi-
cers to ease up. Now, as Presi-
dent Donald Trump wants to
ramp up deportations, the task
again falls to Mr. Homan, this
time to enforce tougher new
rules.
Mr. Homan is acting direc-
tor of Immigration and Cus-
toms Enforcement, an agency
under scrutiny as it works to
implement Mr. Trump’s con-
troversial deportation policies.
“The pendulum swings left
and right all the time,” Mr. Ho-
man said in an interview. “So,
yeah, it’s a change in what we
do, but once I get the policies,
the law, I say: ‘OK, here’s your
mission, here’s what you need
to execute,’ and we execute it.”
Critics said ICE officers are
pouncing on people at
churches, arresting those with
no criminal records, breaking
up families and sowing fear
throughout immigrant commu-
nities. Backers of Mr. Trump’s
policy said the administration
is simply allowing officers to
enforce the law as it was in-
tended, rather than only tar-
geting a narrow band, mostly
Rex Tillerson will stop in Japan, South Korea and China, which are among countries that have received mixed signals from the U.S.
support for U.S. allies.
In Japan and South Korea,
initial fears about relations
with the U.S. under Mr. Trump
have eased somewhat. Japa-
nese officials view a summit
between Prime Minister
Shinzo Abe and Mr. Trump in
February as successful. South
Korean officials were calmed
by the first delivery last week
of gear to build a U.S.-made
missile-defense system against
North Korea.
Still, anxiety remains about
Mr. Trump’s plans, particularly
in Beijing given his campaign
pledges to slap 45% trade tar-
iffs on Chinese products and
his public criticism of China’s
construction of seven artificial
islands in the disputed South
China Sea. China was also dis-
mayed by the initial South Ko-
rean deployment of the mis-
sile-defense system—the
Terminal High-Altitude Area
Defense, or Thaad—fearing it
will also be used to track Chi-
nese nuclear missiles.
Mr. Tillerson’s visit comes
ecutive, used an alias email
address to discuss risk-man-
agement issues related to cli-
mate change. Mr. Tillerson,
now U.S. secretary of state,
used the pseudonym “Wayne
Tracker” from at least 2008 to
2015, according to the attor-
ney general.
“Despite the company’s in-
cidental production of approx-
imately 60 documents bearing
the ‘Wayne Tracker’ email ad-
dress, neither Exxon nor its
counsel have ever disclosed
that this separate email ac-
count was a vehicle for Mr.
Tillerson’s relevant communi-
serious criminals as Mr.
Obama directed.
In the center of the storm
sits Mr. Homan, 55 years old,
who grew up idolizing his fa-
ther, a small-town policeman
and village judge, and always
saw officers as the good guys.
“They are law enforcement
officers that are enforcing the
law that Congress enacted,” he
said of his personnel. “If peo-
ple do not like the immigration
laws of this country there’s a
place to go. Talk to your sena-
tor, talk to your congressman.”
A 33-year veteran of federal
immigration enforcement, Mr.
Homan, a big, burly man who
speaks in the blunt language of
street-patrol officers, has
earned the respect of some
people on both sides of an an-
gry debate.
“He’s a really good man,
above all,” said John Amaya,
who was ICE deputy chief of
staff during Mr. Obama’s ad-
ministration when it ratcheted
back enforcement. “Once he’s
clear on the direction [of a
policy], he will salute and exe-
cute.”
Mr. Homan’s hometown,
West Carthage, N.Y., is about
30 miles south of the Canadian
border, and he remembers be-
ing fascinated by the border
patrol agents. In 1984, he
U.S. NEWS
shortly after North Korea sent
four missiles in the direction
of U.S. military bases in Japan,
which Pyongyang said was a
response to military drills in-
volving the U.S. and South Ko-
rea, an annual exercise that
Seoul and Washington de-
scribe as defensive in nature.
In a statement Tuesday,
North Korea’s official media
warned that its army would
“launch merciless ultrapreci-
sion strikes” if the U.S. and
South Korean forces infringed
on the country’s sovereignty
or dignity “even a bit.”
Mr. Tillerson will discuss
Washington’s approach to
North Korea with U.S. allies in
South Korea and Japan, a se-
nior American official said.
A Japanese official said To-
kyo welcomed further pres-
sure on Pyongyang from the
U.S. as a way of bringing
North Korean leader Kim Jong
Un to the negotiating table. A
bit of saber-rattling has been
helpful in the past and might
be more credible coming from
cations at Exxon,” Senior En-
forcement Counsel John
Oleske said in a letter to New
York Supreme Court Justice
Barry Ostrager.
Exxon said in a statement it
had provided more than 2.5
million pages of documents in
response to a subpoena from
Mr. Schneiderman’s office, and
said it would respond to the
claims in court. The company
acknowledged that the
Wayne.Tracker@exxonmo-
bil.com address is part of the
company’s email system.
“[It] was put in place for se-
cure and expedited communica-
joined the Border Patrol, and
rose through the ranks.
In Mr. Obama’s administra-
tion, he ran ICE’s “enforce-
ment and removal opera-
tions” division, responsible for
deportations. In January, Mr.
Trump appointed him acting
director of the entire agency.
During Mr. Obama’s admin-
istration, he agreed with the
general philosophy of target-
ing criminals versus using
Tom Homan, acting director of Immigration and Customs Enforcement, resents criticism of his
officers for what he says is simply following the law.
the new U.S. president, this of-
ficial said. However, ultimately
Tokyo wants the North Korea
problem solved peacefully. An-
alysts have said Japan is con-
cerned it could get sucked into
a regional conflict by a U.S.
military strike on North Korea.
The U.S., Japanese and
South Korean militaries have
conducted four joint drills
since last year, including one
Tuesday, as the three coun-
tries seek to enhance their
ability to respond to a North
Korean missile attack. Prime
Minister Abe said in parlia-
ment on Monday, “We would
like to further raise the level
of cooperation” with the U.S.
military.
Thaad’s deployment was
made more complex last week
after a court removed South
Korean President Park Geun-
hye following her impeach-
ment last year. Some of the
top contenders to succeed Ms.
Park have called for a rethink-
ing of deployment.
Mr. Tillerson will meet on
tions between select senior
company officials and the for-
mer chairman for a broad range
of business-related topics,” the
company said. But reports “in-
dicating that emails to or from
this address were exclusively
climate-related are false.”
A spokesman for Mr.
Schneiderman’s office declined
to comment. A State Depart-
ment spokeswoman declined
to comment.
Mr. Oleske said in the letter
that despite promising to
“move heaven and earth” to
comply with a subpoena,
Exxon had withheld docu-
scarce agency resources to ap-
prehend ordinary illegal immi-
grants. But he and others who
worked with him said he
wanted more latitude for ar-
rests and didn’t shy from mak-
ing his case internally.
As new enforcement guide-
lines were crafted in 2014, Mr.
Homan pushed to include peo-
ple with old court orders di-
recting them to leave the
country, an argument he
Wednesday, March 15, 2017 | A5
Wiretap
Claims
Toned
Down
BY TED MANN
White House press secre-
tary Sean Spicer has backped-
aled on President Donald
Trump’s claims that his phone
line was ordered tapped by
then-President Barack Obama,
an allegation Mr. Trump re-
cently made on Twitter with-
out providing any evidence.
In a question-and-answer
session Monday with reporters
during his regular briefing, Mr.
Spicer suggested Mr. Trump
had been speaking broadly
when he posted his accusations
against Mr. Obama on March 4.
“He doesn’t really think
that President Obama went up
and tapped his phone person-
ally,” Mr. Spicer said. “But I
think there’s no question that
the Obama administration—
that there were actions about
surveillance and other activi-
ties that occurred in the 2016
election. That is a widely re-
ported activity that occurred
Friday with South Korea’s act- back then. The president used
ing minister, Prime Minister the word ‘wiretapped’ in
Hwang Kyo-ahn, and the coun- quotes to mean, broadly, sur-
try’s foreign minister, Yun veillance and other activities.”
Byung-se, who have both Mr. Spicer continued, “It is
urged a swift deployment of interesting how many news
the missile system, despite a outlets reported that this activ-
widespread belief that Beijing ity was taking place during the
is retaliating against South 2016 election cycle and are now
Korean businesses to show its wondering where the proof is.”
displeasure. A spokesman for Mr.
“It’s an utterly reasonable Obama has denied the allega-
step to take” to deploy Thaad, tion of wiretapping.
said Ms. Thornton, who will
join Mr. Tillerson on the trip.
U.S. officials sought to play
down tensions with China re-
Spokesman’s remarks
lated to Thaad’s deployment, were the first to suggest
calling it purely defensive.
“We’ll continue to discuss this
Trump hadn’t meant
with China,” the senior U.S. of- his allegation as literal.
ficial said. “They’re clearly not
convinced yet.”
In China, the priority is to
prepare for an April meeting Mr. Spicer and other aides
that Chinese officials privately to Mr. Trump have pointed in
say will occur at Mr. Trump’s the past to reports that gov-
private club at Mar-a-Lago, ernment agencies were looking
Fla. into possible connections be-
—Chieko Tsuneoka in Tokyo tween people in Mr. Trump’s
contributed to this article. orbit and officials in Russia.
But Mr. Spicer’s remarks
Monday were the first by the
press secretary suggesting the
president hadn’t meant his al-
legation as necessarily literal—
and therefore wasn’t maintain-
ments related to senior man- ing that he, and his phone
agement, including from 34 lines at Trump Tower in New
email accounts assigned to top York, were targeted directly by
executives, board members the Obama administration.
and their assistants. Top members of the House
The New York attorney gen- intelligence panel had asked
eral and the U.S. Securities the Justice Department to pro-
and Exchange Commission are vide information about any
also investigating how Exxon wiretaps by Monday. Late
values its assets in a world of Monday, a department spokes-
increasing climate-change reg- woman said the agency had
ulations. The Irving, Texas- called the committee to ask for
based company has played more time. The agency said it
down questions about its mod- wanted “to review the request
est asset write-downs, saying in compliance with the govern-
it is extremely conservative in ing legal authorities and to de-
booking the value of new termine what if any responsive
fields and wells. documents may exist.”
lost. But he won an argument and the officers who would re-
for firmer rules defining who move them, people involved in
was a “recent arrival,” which the discussions said.
made more people subject to Mr. Homan said he doesn’t
deportation. recall that comment but said:
During one Obama-era shift “When you go arrest a crimi-
in policy, Mr. Homan spoke nal alien, that’s black and
emotionally about not wanting white. When you go after a
to take children from their family group, that’s a harder
homes or their parents, ac- decision to make.”
cording to two people who Under Mr. Trump’s adminis-
were present. He worried tration, his officers have
about the toll on both children greater power to decide who is
deported. Critics said they are
becoming a rogue force intent
on mass deportation.
They pointed to arrests in
Virginia of men leaving a cold-
weather shelter at a church;
the deportation of an other-
wise law-abiding father who
lost legal status because of a
paperwork error; and the ar-
rest of a young woman whose
participation the Deferred Ac-
SHAWN THEW/EUROPEAN PRESSPHOTO AGENCY
tion for Childhood Arrivals
program expired.
Mr. Homan said ICE contin-
ues to prioritize arrests of
people with criminal convic-
tions and to run targeted en-
forcement operations.
He said that nobody would
think twice if an American
were arrested after failing to
follow a judge’s order, al-
though the stakes are much
higher for an illegal immigrant
in such cases.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, March 15, 2017
G-20 Leaders Seek Clarity on U.S. Policies
U.S. Treasury secretary
plans to promote ‘open
and fair’ trade during
meeting in Germany
BY IAN TALLEY
WASHINGTON—U.S. Trea-
sury Secretary Steven Mnuchin,
debuting on the global stage be-
fore the world’s finance chiefs
in Germany this week, is hoping
to tamp down worries that the
Trump administration is on the
verge of sparking a trade war.
President Donald Trump’s
“America First” agenda—along
with administration threats to
level unilateral currency sanc-
tions, vows to rewrite interna-
tional trade deals, and jabs at
the World Trade Organization—
has spooked China, Germany
and other Group of 20 econo-
mies.
G-20 officials warn the
White House risks triggering
tit-for-tat trade retaliations that
could hit global growth just as
the economy appears to be
turning a corner. Many are also
concerned the administration
could upend the post-World
War II rules-based-order long
championed by the U.S. as vital
for averting international con-
flict.
Those countries, seeing com-
peting power centers in Mr.
Trump’s administration and
worried about where Washing-
ton may lead the world, are
seeking clarity from Mr.
Trump’s economic point-man.
A senior U.S. Treasury offi-
cial, in a briefing before the
G-20 meeting, said Mr. Mnuchin
plans to promote “open and
fair” trade. “That means a trad-
ing system that has a level play-
ing field for our firms and our
workers globally,” the official
said. But the official stopped
short of committing to past
Trump’s Trade Nominee Faces Lawmakers
BY WILLIAM MAULDIN
AND NATALIE ANDREWS
WASHINGTON—President
Donald Trump’s pick for U.S.
trade representative was sched-
uled Tuesday to face lawmakers
eager to press him on how he
plans to carry out the adminis-
tration’s “America first” trade
policy without generating a ma-
jor backlash from the country’s
trading partners.
The nominee, Robert Light-
hizer, is expected to be con-
firmed by the Senate eventually
and will likely get the support
of Democrats who agree with
the new president’s views that
deals such as the North Ameri-
can Free Trade Agreement ha-
ven't worked to the benefit of
Republican Plan Cuts Number of Insured, Deficit
BY STEPHANIE ARMOUR
AND KRISTINA PETERSON
The number of Americans
without health insurance would
grow by 24 million under a
House Republican proposal to
topple most of the Affordable
Care Act, according to a non-
partisan report that is likely to
complicate GOP lawmakers’ ef-
forts to unite around the plan.
The report, released Monday
by the Congressional Budget Of-
fice, rattled some centrist Re-
publicans in the Senate who
have said they won’t support
legislation that leaves a large
number of people without cover-
age. House Republicans hoping
to push the legislation through
both chambers by early April al-
ready face a revolt from conser-
vative GOP lawmakers who as-
sert that the proposal doesn’t do
enough to roll back the ACA.
The CBO also found the leg-
islation would reduce the fed-
eral deficit by $337 billion over
the next decade and would
lead insurance premiums to in-
crease at first, then shrink.
The increase in the number
of Americans without cover-
age appears to contradict ear-
lier statements by President
Donald Trump, who has said
everybody would be covered
under a new plan.
By next year, an additional
14 million people would be un-
insured, compared with condi-
tions if the Affordable Care
Act were allowed to stand, ac-
cording to the CBO report. In
2026, that figure would reach
24 million, bringing the total
number of uninsured Ameri-
cans to 52 million.
U.S. Treasury Secretary Steven Mnuchin is hoping to dispel concerns at the G-20 meeting that the U.S. might spark a trade war.
G-20 vows to “reject protec-
tionism.”
“The rest of the world is go-
ing to be looking to the new
secretary of the Treasury to ex-
plain U.S. positions on a whole
range of issues, from exchange-
rate matters, trade, financial
regulation and commitment to
international financial institu-
tions,” said Nathan Sheets, who
served as the top financial dip-
lomat in former President Ba-
rack Obama’s administration.
“It’s a very high-stakes proposi-
tion for him.”
About two months into Mr.
Trump’s term, governments are
still struggling to discern feisty
campaign rhetoric from presi-
dential policy. Mr. Trump, a Re-
publican, and his team have
U.S. workers.
But members of both parties
were expected to question him
closely about the administra-
tion’s evolving trade policies.
Republican lawmakers have in-
creasingly expressed concerns
about Mr. Trump’s trade
agenda, saying they worry that
U.S. businesses or farmers
could be hurt by retaliation
from China or other trading
partners if the administration
adopts an overly protective ap-
proach.
Many Democrats are pleased
with a shift toward policies that
favor U.S. manufacturing work-
ers rather than broad efforts to
liberalize trade, but were look-
ing to draw him out on specific
plans.
Inside the GOP Health Plan
The Republican health-care bill would increase the number of Americans without health insurance and
reduce the federal deficit by more than $300 billion by 2026, according to the Congressional Budget Office.
Percentage of U.S. residents under 65 without health insurance
20%
Actual
15
Pre-
Affordable
Care Act
10
5 -100
2010
Sources: U.S. Census Bureau (actual uninsured rate); Congressional Budget Office (projected rate, deficit)
Republicans disputed some
of the report’s findings. Tom
Price, secretary of Health and
Human Services, and Mick
Mulvaney, director of the
White House Office of Man-
agement and Budget, told re-
porters they “strenuously”
disagreed with the CBO.
“It’s just not believable,”
said Dr. Price, a former ortho-
pedic surgeon. He added that
the CBO didn’t examine steps
his agency would take through
administrative action, nor did
it take into account other leg-
islation that would drive down
insurance costs.
But Sen. Lindsey Graham
(R., S.C.) said Republicans
shouldn’t reject the CBO report
because they don’t like every
element of it. “Let’s say the
CBO is half right—that should
U.S. NEWS
threatened to slap China and
Mexico with high tariffs, called
Beijing and Germany currency
manipulators, and challenged
the authority of the World
Trade Organization.
The administration is also
considering new duties on im-
ports from countries found to
be devaluing their currencies
and tightening international in-
vestment oversight, particularly
from China.
Unilateral action by Wash-
ington that counters interna-
tional trade law could provoke
reprisal, many G-20 officials
warn. That could give other
countries an excuse to flout the
cooperative arrangements es-
tablished over the decades
through the WTO, the Interna-
“Mr. Lighthizer has talked a
good, strong game on combat-
ing China’s abuse of their trade
obligations, and I hope he’s
committed to putting those
words into action,” said Sen.
Chuck Schumer of New York,
the Democratic leader.
Members of the Senate Fi-
nance Committee, where Mr.
Lighthizer was slated to appear
Tuesday for his first confirma-
tion hearing, also want to know
how his views sort with other
members of Mr. Trump’s trade
team, where divisions have
emerged between longtime
backers of free trade and skep-
tics of U.S. policy.
White House National Trade
Council chief Peter Navarro has
sought to warn trading partners
Projected
House GOP plan
Affordable Care Act
2015 2020 2025
be cause for concern,” Mr. Gra-
ham told reporters. “The pru-
dent thing for the party to do
is to look at the CBO report
and see if we can address
some of the concerns raised.”
The nonpartisan estimate
sets the stage for the next
round of intraparty negotia-
tions on Capitol Hill. If cen-
trist Republicans balk at the
rise in uninsured people, they
may press GOP leaders to take
steps to cut that number.
Democrats and other critics
said the CBO score confirmed
predictions that the GOP bill
would take insurance away
from millions of people.
“In the year 2017, Republi-
cans want to throw 24 million
people off health insurance,
raise premiums for older people
and at the same time provide
tional Monetary Fund and other
multilateral institutions.
“We want to stick to the
open and rules-based interna-
tional trade order,” said Peter
Wittig, Germany’s ambassador
to the U.S. “If you erect trade
barriers, and enter into a spiral
of retaliation…in the end, it will
be a lose-lose game for all of
us.”
The IMF, the G-20’s eco-
nomic adviser, has raised the
red flag on protectionism, cau-
tioning global growth is at
stake. Temporary trade barriers
such as antidumping and coun-
tervailing duties have surged
over the past several years, and
now cover nearly 2.5% of goods,
up from 2% in 2014. Many
countries also complain of non-
of the urgency of reducing trade
imbalances with the U.S., while
Commerce Secretary Wilbur
Ross has backed a pragmatic
approach to renegotiating
Nafta. Some other officials have
expressed support for U.S. deals
that Mr. Trump has denigrated.
In his first days in office, Mr.
Trump pulled the U.S. out of
the 12-nation Pacific trade
agreement that his Democratic
predecessor, Barack Obama, ne-
gotiated, saying the U.S. could
cut a better deal to protect
American industry and its
workers.
Mr. Lighthizer, 69 years old,
is well-versed in trade law. He
long represented U.S. compa-
nies petitioning the govern-
ment to apply tariffs on over-
Annual net change to the deficit
under House GOP health-care plan
$50 billion
25
0 for the 31 states that expanded
-25
-50
-75
’17 ’18 ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26
THE WALL STREET JOURNAL.
$285 billion in tax breaks for
the top 2%,” Sen. Bernie Sand-
ers (I., Vt.) told reporters Mon-
day. “I think that legislation is
disgusting, it is immoral and it
should not see the light of day.”
The Republican push to re-
peal and replace the ACA is
forging ahead. The House bud-
get committee is scheduled to
begin voting on the GOP bill
Thursday—one day later than
planned because of snowstorms
complicating lawmakers’ travel.
Republicans leaders are on a
tight timetable in aiming to get
the legislation through both
chambers by early April, using
a budget process in the Senate
that requires only a simple ma-
jority to pass the legislation.
The CBO’s estimate that the
House GOP bill would squeeze
$880 billion from federal Med-
THE WALL STREET JOURNAL.
In calls that the secretary has
held with G-20 counterparts, he
has adopted what is essentially
the G-20 mantra to bolster
“stronger and more inclusive
growth.”
Mr. Trump’s administration
dismisses trade-war fears, say-
ing it is seeking to discipline
trade partners it believes have
abused the international rules-
based order at the expense of
U.S. industries and the Ameri-
can economy. Its sanction
threats wouldn’t be necessary,
administration officials said, if
the IMF, the WTO and G-20 had
ensured member countries lived
up to their agreements.
That argument may gain
traction at the G-20 if Mr.
Mnuchin is able to persuade his
OLIVIER DOULIERY/BLOOMBERG NEWS
counterparts the administra-
tion’s “America First” isn’t
about protectionism, but rather
encouraging other countries to
lower their own barriers to
trade.
Chinese officials appear to
be trying capitalize on fears
about Mr. Trump’s agenda
within the G-20.
Western governments have
challenged China’s bid to be
tariff barriers on the rise, such recognized as a market econ-
as regulations that restrict ac- omy given the tight control the
cess to markets. government still maintains over
White House trade czar Pe- the country. However, Chinese
ter Navarro has been the most leadership sees an opportunity
outspoken on Mr. Trump’s to reposition itself on the global
team. Mr. Mnuchin, a former stage if Washington loses its in-
Goldman Sachs Group partner ternational influence.
and Hollywood financier, ap- “If there is a sense that the
pears to be presenting a more U.S. is pulling back from inter-
moderate side of the adminis- national leadership, that creates
tration, a sign of tension within a vacuum and a void in the sys-
the administration about how tem that isn’t going to stay
tough a line to push interna- there for long,” Mr. Sheets said.
tionally. Premier Li Keqiang of China
Mr. Mnuchin has already said in a speech this month that
softened the president’s com- Beijing would “firmly uphold
ments on the dollar. He has af- the authority of the multilateral
firmed the IMF’s key role in architecture and see that it
steering the global economy works effectively” and “oppose
and backed the G-20 as a venue protectionism in its different
that can advance U.S. interests. forms.”
seas competitors blamed for
dumping steel or other prod-
ucts on the U.S. market at un-
fair prices or benefiting from
foreign-government subsidies.
A former partner at the law
firm Skadden, Arps, Slate,
Meagher & Flom LLP, he has
also served as deputy U.S. trade
representative under former
President Ronald Reagan, a
post that gave him experience
SKADDEN
negotiating deals that blocked
excessive imports into the U.S.
The gathering was set to be Robert Lighthizer
something of a homecoming for
Mr. Lighthizer, who served as a for trade representative—a cab-
senior aide to the committee inet-level post that has statu-
under former Sen. Bob Dole (R., tory powers over U.S. trade pol-
Kan.). Even lawmakers skepti- icy—is someone who has
cal of Mr. Trump’s agenda said worked closely with Congress
they are pleased that his pick before.
U.S. WATCH
EDUCATION
icaid spending over 10 years is
likely to be brought up in the Student-Loan Defaults
coming debate, not only by Rise by 1.1 Million
Democrats, but also by Senate
Republicans uneasy over the More than 3,000 people a day
proposed changes to the fed- defaulted on their federal student
eral-state safety-net program. loans in 2016, new government
The fate of Medicaid’s ex- data show, underscoring persis-
pansion under the ACA is tent problems in the way the
likely to remain a major stick- government and families finance
ing point. The House proposal higher education in the U.S.
would freeze funding in 2020 The number of Americans who
fell at least nine months behind on
the program. a payment on federal student loans
Monday’s report highlights increased by 1.1 million in 2016, ac-
the trade-offs Republicans are cording to Education Department
making: They hope the blow data released this week. As of Dec.
they suffer from the estimates 31, roughly 8 million people owing
of millions more without in- $137 billion were in default. The
surance will be offset by government considers a borrower
moves to undo the ACA’s in default after 270 days of no pay-
least-popular elements, includ- ment, though in some government
ing its mandates and taxes. reports defaults aren’t recorded un-
“When you don’t force peo- til 360 days of no payment.
ple to buy a product they don’t —Josh Mitchell
want, then more people will
choose not to buy that prod- INTERNAL REVENUE SERVICE
uct,” Sen. John Cornyn of
Texas, the second-ranking Sen- White Nationalist
ate Republican, told reporters. Group Loses Exemption
The CBO report says 14 mil-
lion more people would be The U.S. government revoked
without insurance in 2018 un- the tax-exempt status of a
der the proposal because it re- group run by prominent white
peals a requirement that most nationalist Richard Spencer for
Americans pay a penalty for its failure to file tax returns.
not having insurance. It pegs IRS records show Mr. Spen-
the rise to 24 million more peo- cer’s National Policy Institute au-
ple without coverage in 2026 to tomatically lost its tax-exempt
lower coverage under Medicaid. status as a 501(c)(3) nonprofit
The legislation would re- after failing to file tax returns
duce the federal deficit by for three consecutive years. Mr.
$337 billion by 2026, the CBO Spencer didn’t respond to mes-
found, largely by lowering sages seeking comment. But he
spending for Medicaid and told the Los Angeles Times,
ending the ACA’s tax credits. which first reported the story,
In its calculations, the CBO that he would appeal the revo-
used an estimate that the bill cation.
would be enacted by May 2017. —Associated Press
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | A7

GERALD F. SEIB EXECUTIVE WASHINGTON EDITOR

The Face of Real News

Gerald Seib’s illustrious career covering politics has taken him around the
world and put him face-to-face with some of the biggest players on the
global stage—but it has also put him in situations of real danger. In 1987,
he was kidnapped and imprisoned for four days on suspicion of espionage
by Iranian officials while covering the Iran–Iraq War.

Real journalists and real news from America’s most trusted newspaper.

Watch the film illustrating this story at WSJ.com/Gerald

#TheFaceOfRealNews

Source: Pew Research Center, Political Polarization & Media Habits, 2014
© 2017 Dow Jones & Company, Inc. All rights reserved. 6DJ5222
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, March 15, 2017
MEXICO
Continued from Page One
nor, Flavino Rios, said in a
radio interview he had been
accused of lending a helicop-
ter to Mr. Duarte, adding, “I
will demonstrate that I am
innocent.”
The mystery of Mr. Du-
arte’s disappearance has riv-
eted Mexicans’ attention
even with the strong news
focus this year on issues that
could affect their lives and
economy: the trade and bor-
der policies of U.S. President
Donald Trump. Long after
those controversies have re-
ceded, many in Mexico say,
their country will still need
to get a handle on its deep-
seated corruption problem if
it is to become a fully mod-
ern country. Prince-like state
governors often answerable
to no one pose a continuing
threat to Mexico’s economic
health and struggle to estab-
lish universal rule of law, po-
litical analysts say.
For centuries Mexico was
controlled by strong leaders,
from Aztec emperors to
Spanish viceroys. For much
of the 20th century, powerful
presidents from a single
party served six-year terms
and yielded to handpicked
successors.
That system ended in the
late 1990s, partly because of
its reputation for corruption,
with the rise of competitive
elections. Along with the new
democracy came a push to
decentralize power. Once-fee-
ble state governments gained
both authority and a torrent
of cash. Federal transfers of
tax money to the 32 state
governments soared more
than 20-fold from 1996 to
$88 billion last year.
What the states didn’t get
were strong enough institu-
tions to make sure all of the
money was properly spent.
Forty-one of Mexico’s gover-
nors had to deal with corrup-
tion scandals of one sort or
another from 2000 to 2013,
counting formal charges as
well as accusations from au-
dit offices and investigative
journalism, according to a
study by the Mexican Com-
petitiveness Institute. “They
are worse than potentates,”
said José Antonio Crespo, a
political scientist at Mexico’s
CIDE university.
In Tamaulipas on the U.S.
border, two former governors
are under U.S. indictment on
money-laundering charges,
the whereabouts of one of
them unknown; they have
said they are innocent. In-
dicted on similar charges is a
former interim governor of
Coahuila state, who pro-
fessed innocence before he,
too, disappeared.
A former governor of So-
nora is awaiting trial in Mex-
ico on embezzlement
charges, which he has de-
nied. An ex-governor of
Quintana Roo, where Cancún
is, has been imprisoned both
in the U.S. and in Mexico,
where he currently is serving
time on drug and money-
laundering charges.
Two other governors who
left office recently are under
federal investigation, accord-
ing to people in the attorney
general’s office; the ex-gover-
nors say they have done
nothing wrong. All seven of
these former governors ex-
cept the one from Sonora be-
long to Mexico’s ruling party,
known as the PRI.
“The decentralization of
corruption is a big downside
ARMY
Continued from Page One
their German base for Poland.
“I am probably going to hit
the American Burger King on
post at least twice this week,”
says Sgt. Zackary Cowher, 27
years old. “And then I am go-
ing to get out to one of the
German Pizza Huts.”
Last year, the North Atlan-
tic Treaty Organization ap-
proved a deterrent force in Po-
land and the Baltic States to
counter Russia’s military
buildup. After a road march
through the Czech Republic
and Western Poland, the U.S.
Army’s contribution to the
NATO force will arrive at its
new position early next
month.
For much of the long wars
in Afghanistan and Iraq, the
Army fought out of forward
operating bases. The military
called them FOBs, and soldiers
who rarely left those bases
were called Fobbits, especially
Javier Duarte, former governor of the Mexican state of Veracruz, disappeared in October, leaving the state’s coffers almost empty;
Mayors, angry that state money had stopped flowing to their towns, occupied the offices of an acting governor for weeks, below.
of democratization,” said De-
nise Dresser, a Mexican po-
litical analyst. “Governors
use the opacity of state
spending to funnel money
into their pockets and to pay
for elections.”
Nowhere did the mix of
executive power, scant ac-
countability and rivers of
cash allegedly get more out
of hand than in Veracruz,
the long, narrow state hug-
ging the Gulf of Mexico. Af-
ter Mr. Duarte disappeared
in October, the state’s cof-
fers were found to be almost
empty.
Dozens of mayors, angry
that state money had
stopped flowing to their
towns, occupied the office of
the interim governor for
weeks. Unpaid teachers, doc-
tors and bureaucrats rallied
regularly in the mountaintop
capital of Xalapa, snarling its
traffic.
Federal auditors are look-
ing into state contracts for
police uniforms, patrol cars,
hospitals, schools and many
other matters. Federal tax of-
ficials are investigating 33
companies, which they be-
lieve to be fake, that the offi-
cials said received $168 mil-
lion from branches of the
Duarte administration with-
out providing the products
or services contracted.
Ranches, fine wines
Investigators believe front
men in Mr. Duarte’s inner
circle masked his acquisition
of real estate with state
money and used 112 bank ac-
counts to erase the traces of
state money, according to an
official in the attorney gen-
eral’s office.
They say Mr. Duarte
bought, through fronts, a
222-acre ranch carved out of
pine-forested mountains in
Mexico’s ritziest weekend-
getaway resort town, Valle
de Bravo, complete with sta-
bles for 20 horses, a helipad
and a log-cabin-style man-
sion that was honored by the
Architectural League of New
York.
Another ranch that inves-
tigators believe Mr. Duarte
acquired through a front was
handed over to the state af-
ter authorities reached an
agreement with the front
man who bought it for the
ex-governor, according to au-
thorities. This one, in a lush
U.S. soldiers lined up to order from a Burger King at Camp
Liberty in Baghdad, Iraq, in 2005.
by Marines who often lived in
more rugged conditions.
In 2010, when Gen. Stanley
McChrystal was the top com-
mander in Afghanistan, he or-
dered the closing
of Burger King at bases in that
country to put the military
more on a war footing.
The ban lasted about a year.
After Gen. McChrystal was
forced to resign after his staff
was quoted anonymously
IN DEPTH
jungle setting surrounded by man of 43 who once told a
waterfalls, had a museum- radio interviewer he was an
quality collection of modern admirer of the late Spanish
paintings and a cellar full of dictator Francisco Franco,
expensive French wines, ac- both for Mr. Franco’s
cording to authorities. “strength and energy” and
The federal attorney gen- because, like himself, Mr.
eral’s office has so far verified Franco had a high-pitched
four properties as having been voice.
acquired by Mr. Duarte Mr. Duarte rose to power
through associates, and the in- in Veracruz after a career as
vestigation is continuing, ac- a bureaucrat in federal and
cording to an official in the of- state government, part of it
fice. Investigators have under former Gov. Fidel Her-
tentatively traced 140 U.S. rera. As his personal aide,
properties, many of them in Mr. Duarte used to carry the
Houston and Florida, to Mr. governor’s briefcase to meet-
Duarte and his associates, a ings. He later became Mr.
former investigator said.
A lawyer who is cooperat-
ing with investigators has
told them he purchased two
The ex-governor fled;
$3 million apartments in the his interim successor
Pacific resort of Ixtapa and
waterfront acreage on the
is accused of helping
Yucatán Peninsula on Mr. Du- him with a helicopter.
arte’s behalf, according to in-
vestigators. They added that
the lawyer said state funds
had been used to buy jew- Herrera’s secretary of fi-
elry, luxury watches and a nance and then gained the
$200,000 ring for the gover- PRI’s nod to run for Veracruz
nor’s wife. governor, winning the office
“Under Duarte, corruption in 2010.
rose to unimaginable levels,” He would have faced little
said Alberto Olvera, a sociol- practical resistance if he
ogist at the University of Ve- wished to tap the spigot of
racruz. federal funds, said Mr. Olvera
Mr. Duarte, in his public of the University of Veracruz.
denials of wrongdoing before In that state as in many oth-
he vanished, said he owned ers, the governor controls
just two houses, and wasn’t electoral authorities and the
the owner of the ranches and legislature, which in turn ap-
various other properties in- points top judges. Governors
vestigators cite. A lawyer also control the budgets of
who is believed to represent state electoral agencies, po-
Mr. Duarte hasn’t been tentially giving them ways to
speaking to the press and hamper political challenges.
couldn’t be reached to com- Mexican state officials and
ment. lawmakers often lean on au-
Mr. Duarte is a roly-poly ditors to ignore irregularities
Sgt. Maj. Muhlenbeck. Meals
will be taken at a Polish mess
hall. Too many amenities, he
says, risk creating divisions
between those on the front
lines and those in bigger
CHRIS TOMLINSON/ASSOCIATED PRESS
bases.
“You see how it starts erod-
ing the fiber of teamwork,” he
says. “Soldiers at outposts
start thinking those guys have
all that stuff and we don’t. You
actually start seeing a level of
animosity between traditional
combat arms soldiers and sol-
diers who have more of the
sustainment duty.”
Further complicating the
culinary dynamic, U.S. troops
speaking derisively about the will be working alongside Brit-
Obama administration, his re- ish, Croatian and Romanian
placement, Gen. David Petra- forces and under the supervi-
eus, decided an Army moves sion of a Polish brigade.
on its stomach. He brought Gen. Hodges wants to inte-
back Burger King. grate the Americans with their
The U.S. military can send allies to create a seamless
expeditionary fast-food restau- fighting force—the most im-
rants nearly anywhere in the portant reason, he thinks, to
world. keep Burger King out. “We are
In Poland, the military will not going to have an American
send toiletries and snacks, but ghetto inside a Polish garri-
no Whoppers, says Command son,” he says. “That defeats
THE WALL STREET JOURNAL.
other two also are under in-
vestigation, according to
prosecutors. They have de-
nied wrongdoing. The PRI
lost control of all three of
the young governors’ states
in elections last year.
Mr. Peña Nieto, for his
part, had the lowest public-
approval rating of any mod-
ern Mexican president, about
12%, in a poll by the newspa-
per Reforma published in
January. Mr. Peña Nieto
hasn’t been accused of any
wrongdoing. It is his admin-
istration that is investigating
Mr. Duarte.
During the 2012 election
campaign, opposition parties
accused Mr. Duarte in Vera-
cruz of helping finance Mr.
Peña Nieto’s race with di-
verted state money. One of
MARCO UGARTE/ASSOCIATED PRESS
Mr. Duarte’s closest aides
was stopped at the airport in
Mr. Peña Nieto’s home state
carrying suitcases holding $2
million in cash. The aide,
briefly detained, said it was
meant to pay for entertain-
ment at future state festi-
vals.
Mr. Peña Nieto’s campaign
denied the money was meant
for it, and more recently, a
spokesman for the president
said all such notions were
just politically motivated at-
tacks.
Mr. Rios, the former act-
ing Veracruz governor ac-
cused of helping Mr. Duarte
flee, was detained for alleged
influence peddling and abuse
of authority, according to a
communique from the state
attorney’s office.
Since Mr. Duarte’s disap-
pearance, tantalizing clues to
TKEL UNIVERSAL /ZUMA PRESS
his whereabouts have ap-
peared. In November, author-
ities in Chiapas state border-
ing Guatemala arrested a
man carrying doctored pass-
ports for Mr. Duarte—pic-
tured wearing a big handle-
bar mustache—and his wife,
who is also missing. The man
in public contracts, several was interrogated: investiga-
state auditors said. One audi- tors haven’t disclosed what
tor described how, shortly he said.
after taking office, he found An official at the federal
a black Chevrolet Suburban attorney general’s office has
on his driveway and a card said police were particularly
saying it was a gift from a looking for Mr. Duarte in
high-ranking state official. Central America. There’s a
This auditor said he also had $765,000 reward for informa-
often been offered envelopes tion leading to his arrest.
of cash from builders and This year, Mr. Duarte or
lawmakers to conceal con- someone with access to his
tract irregularities, which he Facebook account has been
said he refused. posting messages, often com-
“We’re exposed to strong memorating events of his ad-
political pressures, no doubt ministration, such as a suc-
about it,” said Veracruz’s au- cessful state bond offering.
ditor for the past four years,
Lorenzo Portilla, speaking in
general terms. “The gover- ‘Transparency unit’
nors exercise significant in- In Veracruz, meanwhile,
fluence over us.” Mr. Portilla scrutiny of the 33 suspected
said he didn’t succumb to fake companies continues.
such pressures. Two bear addresses in
The Mexican Competitive- Xalapa, the state capital. One
ness Institute estimates that is a building where the PRI
corruption costs the coun- has an office at which citi-
try’s economy 5% of gross zens can ask for party infor-
domestic product. The World mation. The office is known
Bank’s International Finance as the “transparency unit.”
Corp. puts the figure at 9% of The address given for the
GDP. other company is a run-down
The disappearance of Mr. building owned by the
Duarte is a political headache mother of a PRI official. It
for the PRI. This is the party houses a hole-in-the-wall
that dominated government bakery.
through much of the 20th The tiny bakery’s operator,
century. Its reputation for Emma Lopez, was surprised
corruption played a large to learn that a company sup-
part in its historic presiden- posedly based at her address
tial-election defeat in 2000. had received more than $1
Twelve years later, the million in Veracruz public
PRI’s successful candidate for contracts.
president, Enrique Peña Ni- “I’m afraid criminals will
eto, promised voters the think I am rich and will come
party could be trusted to to kidnap me and I won´t be
rule once again. As examples able to pay the ransom,” said
of what he called the New Ms. Lopez, wiping her brow.
PRI, he pointed to three “Duarte did his dirty tricks,
young governors. and now we are paying the
One was Mr. Duarte. The bill.”
the whole purpose of being
with our allies.”
The Wi-Fi exception to the
Spartan ethic, he says, is a
Soldiers can look forward
to one other exception to the
Spartan barracks conditions in
Poland.
bow to the modern world. Sol- In Iraq and Afghanistan, the
diers need access to the inter- military’s “General Order
net to complete training, Number 1” has banned alcohol
check their pay, complete vari- at U.S. military bases
ous Army requirements—and there. European forces gener-
to play games on their lap- ally don’t follow that rule. The
tops. French army in Afghanistan
Still, Russia has some of the had wine in their field rations.
most adept hackers on the The Polish army in Iraq would
planet. Military officials say put on feasts with alcoholic
they expect Moscow to try to beverages available for visit-
break into any vaguely mili- ing general officers.
tary network, even if it is used Given the mix of soldiers in
just for streaming movies. the NATO deployment, enforc-
They are warning troops to be ing an alcohol ban would be a
very careful how they use Wi- failing enterprise, American
Fi. officers say.
“It gets back to vigilance,” “It will be impossible in
says Col. William Holt, who this environment, and I be-
helps oversee cybersecurity lieve not necessary, to have a
for the U.S. Army Europe. general order number one
“This is not just about the mil- banning alcohol,” Gen. Hodges
itary networks, but the Wi-Fi told the 2nd Cavalry Regi-
sites as well. There are risks. ment. “I am sure we will have
We are in a contested environ- one or two knuckleheads that
ment, so we have to make sure will do something stupid, but
we act properly and protect first sergeants know how to
ourselves. “ deal with this.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
‘Trainspotting,’ 21 Years Later
Danny Boyle, director of the 1996 hit movie about addicts in Edinburgh, reconvenes the cast for a sequel
BY CARYN JAMES
THE YOUNG MEN who raced
around Edinburgh in director
Danny Boyle’s “Trainspotting”
have hit middle age. “T2 Train-
spotting,” which opens March 17, is
a sequel, set in the present, to the
indie film that became a hit 21
years ago. The 1996 movie’s kinetic
camera work and editing ener-
gized the story about oddly likable
heroin addicts. The film also
raised the profiles of Mr. Boyle
and its then little-known stars.
The same actors return for the
follow-up. But now Renton (Ewan
McGregor) is 46. He comes home
after two decades in Amsterdam,
having suffered a cardiac incident.
Sick Boy now goes by Simon
(Jonny Lee Miller) but remains a
platinum-haired, low-level drug
dealer. Begbie (Robert Carlyle), es-
caped from prison, is still hot-
headed. Spud (Ewen Bremner) is a
helpless addict.
Mr. Boyle aimed for commercial
success with the big-budget drama
“The Beach” (2000). It bombed.
But he had an unexpected hit and
won an Oscar for “Slumdog Mil-
lionaire” (2008), an independent
film that struggled to find a dis-
tributor. Mr. Boyle’s career also in-
cludes “127 Hours” (2010) and
“Steve Jobs” (2015) as well as the
opening ceremony of the London
Olympics in 2012.
“T2” has opened in other coun-
tries to positive reviews and
earned more than $30 million so
far world-wide on a production
budget roughly half that amount.
Edited from an interview.
You had a different version of a se-
quel written 10 years ago, which
didn’t work. Why did this one?
We have this 20-year time thing.
When we did the first film, it was
about hedonism, the recklessness
of that age when you can take the
ultimate risks. To update that to a
time when you cannot do that any-
more—though you may be desper-
ate to do that as men are often, to
relive those glory days when the
bravado was effortless—felt like a
very pure way to make a film.
Simon tells Renton, as an accusation:
“Nostalgia, that’s why you’re here.
You’re a tourist in your own youth.”
How does nostalgia figure into the
film?
It was a wonderful chemical run-
PLAYLIST: FLOYD CARDOZ
MUSIC FOR
ANOTHER LIFE
Floyd Cardoz, 56, owns New York’s
Paowalla restaurant and India’s
Bombay Canteen in Mumbai. He is
the author of the cookbook “Flavor-
walla” (Artisan). He spoke with
Marc Myers.
I’m a chef today because of Bob
Seger’s “AGAINST THE
WIND.” In mid-1980, I
was studying bio-
chemistry in
Bombay when I
realized I
wasn’t really
passionate
about re-
search. My
parents had
always thrown
lavish parties,
and I loved food.
I decided I wanted
to study to be a chef
and go into the hospital-
ity industry.
When I told my mother, she was
both surprised and supportive. She
told my father, and I know he
wasn’t exactly happy. Nor was my
grandmother, who wondered why I
wanted to become “a cook.” My
closest friends understood, but all
of my other friends who were head-
ing to the U.S. to study medicine
and engineering abandoned me.
Preparing food for others was
considered below everyone’s expec-
tations for me. Still uncertain about
my new career decision, I received
a package from my cousin, Marise,
who was studying in London. She
BOB SEGER performing in 1983.
Wednesday, March 15, 2017 | A9
LIFE&ARTS
MOVIES
FROM TOP: TRISTAR PICTURES; ALBERTO CRISTOFARI/A3/CONTRASTO/REDUX
Danny Boyle, below, director of the 1996 hit ‘Trainspotting,’ brought back cast members including Ewan McGregor, above left, as Renton and Jonny Lee Miller as
Simon for the sequel, in which the characters they play are middle-aged.
ning through the production, be- but I absolutely made this film for use of Ecstasy, which is ironic be-
cause some of the actors had not myself. It’s very personal in a way cause it’s about heroin, which
seen each other for 20 years. More that surprised me. I was shocked numbs people. The excitement of
important, there’s always some- when I looked at the film after the first film was more as though
thing key about a film. Here it was three or four weeks of editing and people were on Ecstasy. It’s a very
the editing because you have this there are all these children run- vibrant film, very dynamic.
other film to draw on. That was a ning around. Obviously, I knew Whether there’s any counterpart
wonderful playground to work in, there are children in it. I cast to that at the moment—I don’t
to see how much to use of the them, I directed them. But when think there is. There’s not much
other film, how much to have a we looked at the film, it was clear drug use in the film other than
meta level where they’re almost that it was about manhood and ag- Begbie takes a lot of Viagra, so
aware as characters that they were ing and masculinity and how dis- much that he would explode if he
in another film. appointing we are as fathers. We was a real person.
never really talked about that
There are brief flashbacks to “Train- when we made the film. And the Does the energetic style of the new
spotting” throughout. Are they meant film is littered with children who film take you back to an earlier
to fill in the story for people who are disappointed in their fathers. phase of your career?
don’t know the original? You can’t help but feel there is a
I have no idea how this works for The first film was considered timely kind of house style you inherit
you if you haven’t seen the first ease the passage of people into the in its depiction of widespread drug from yourself, but part of the
one. Obviously part of your re- film. We used them much more use. Is the sequel culturally resonant equation of this film is that the
sponsibility as a director should be subjectively. today? characters are not able to recreate
to answer that question. But I You just stumble into these things. the past. In the first film, freeze
can’t because it’s so saturated into Then who were you making the film They’re not planned to be rele- frames were just a style. Here we
me, the first film. We didn’t use for? vant. The other film coincided used them because we wanted to
flashbacks as you could have done, I never say this because it’s not a with a huge explosion of pop cul- stop time like a photograph and
in a more conventional sense, to sentiment I particularly admire, ture in Britain, Britpop and the start it again.
sent me a mixtape of current U.K.
hits. It included “Against the
Wind.”
I had watched Westerns as a kid,
so I loved the snap of the drums
that opens the song—followed by
the galloping acoustic guitar and
piano intro. Then Bob Seger’s
coarse voice comes in, and it
sounded rugged and in-
dependent.
But the 1980
song’s lyric really
got to me:
“Against the
wind / We were
runnin’ against
the wind / We
were young and
strong, we were
runnin’ / Against
the wind.”
The words cap-
tured how I felt. I was
alone, going against the
wind in India but determined to
succeed. The song became a tip-
ping point and convinced me to fol-
low my heart and push on, no mat-
ter what.
Sadly, my father never lived to
see my success. My mom did, and
she’s very proud of me. Recently, I
was driving home to New Jersey
from my Manhattan restaurant
when “Against the Wind” came on a
Sirius XM station. I turned it up
and sang along. I have to. Always.
At the end, I smiled and thought,
ASSOCIATED PRESS
“I’d do things exactly the same.” I
also thought I should drive a little
slower.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Wednesday, March 15, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Deep States
CBO’s Prophecies, Demystified And Demagogues
T
he white smoke rose Monday afternoon more market-friendly Center for Health and Econ-
from the U.S. Congressional Budget Of- omy scored the House GOP’s “Better Way” health In September 1980 the are not acts of sedition. Neither Dilbert
Turkish military nor his creator is a member of the Re-
fice as the fiscal forecasters published plan, which this bill closely resembles. The center
mounted a coup, ar- sistance. But, to borrow a phrase, this
their cost-and-coverage esti- model was designed by the Uni- rested half a million is no ordinary time.
mates of the GOP health-care The U.S. budget gnomes versity of Minnesota’s Stephen people, sentenced more This is paranoid time.
reform bill. Awaiting such pre-
dictions—and then investing
tend to underestimate Parente, the leading expert in
modeling premium support-
than 500 of them to
death, and executed 50.
Specifically, we are again in territory
best identified by Richard Hofstadter in
them with supposed clairvoy- market incentives, style health reforms. GLOBAL
The military left power “The Paranoid Style in American Poli-
VIEW
ance—are Beltway rituals. The
coverage numbers weren’t
especially in health care. theThe center estimated that
individual market would
By Bret
two years later, having
imposed a constitution
tics.” It may be one of the more over-
worked essays in academic history, but
Stephens
great for Republicans, but they grow by about a million on net that further entrenched see for yourself whether Hofstadter’s
shouldn’t allow an outfit that in 2018 compared to current its prerogatives. description of the “modern right-wing”
historically underestimates the benefits of mar- law and by 13 million in 2026. Tax credits and de- For decades, the generals’ veto applies today:
power in Ankara formed the legal spine “America has been largely taken
ket forces to drive policy. regulation may well be more powerful than man-
of what Turks call derin devlet, or deep away from them and their kind, though
The good news is that the CBO estimates that dates in practice. state—the self-appointed defenders of they are determined to try to repossess
the American Health Care Act would cut the bud- The center did find that per capita Medicaid the national interest, nobody above it and to prevent the final destructive
get deficit by $337 billion over 10 years as the block grants would cause about four million fewer them, nothing beneath them. As a de- act of subversion. The old American
bill replaces ObamaCare’s subsidies with tax insured individuals in total by 2026, which is more scriptor for Turkish reality this had a virtues have already been eaten away
credits, rationalizes its Medicaid expansion and modest than the CBO. Over time, according to the lot going for it, except for this: There by cosmopolitans and intellectuals; the
repeals its tax increases. The bill would cut taxes CBO, coverage losses would rise to 21 million in was nothing deep about the deep state. old competitive capitalism has been
by nearly $900 billion while cutting spending by 2020 and then to 24 million in 2026 as states rolled Everyone knew who called the shots.
$1.2 trillion. back ObamaCare’s Medicaid expansion. Everyone understood the nature of the
The bad news is that the CBO thinks 14 million But there are more than a few reasons to regime. Undemocratic it might have Sean Hannity reminds
been. Shadowy it was not.
people on net would be uninsured in 2018 rela- doubt the CBO’s fortune-telling, especially in us that the paranoid
What once went in Turkey—and still
tive to the ObamaCare status quo. How many health care. Precisely because its models give
people may “lose coverage” is the debate pro- too much weight to government coercion and
goes in Egypt and Pakistan—has now style in politics is alive
come to America, or so we’re told.
gressives want to have, as if that’s the only rele- too little to free markets, its projections have of- “Deep-state Obama holdovers embedded and well today.
vant question in U.S. health care. ten missed the mark. like barnacles in the federal bureaucracy
The CBO attributes “most” of this initial cover- In February 2013, the CBO predicted that are hellbent on destroying President
age plunge to “repealing the penalties associated ObamaCare enrollment in the individual market Trump,” Sean Hannity opined last week. gradually undermined by socialistic and
with the individual mandate.” If people aren’t would be 13 million in 2015, 24 million in 2016 “It’s time for the Trump administration communistic schemers; the old national
subject to government coercion to buy insurance and 26 million in 2017. The actual enrollment for to purge these saboteurs.” security and independence have been
or else pay a fine, some “would choose not to have those years were, respectively, 11 million, 12 mil- Mr. Hannity has suggested that the destroyed by treasonous plots, having
insurance because they chose to be covered by in- lion and 10 million. As recently as March 2016, CIA has conducted “false flag” cyber- as their most powerful agents not
attacks against American targets while merely outsiders and foreigners as of
surance under current law only to avoid paying the CBO was projecting an enrollment boom of
pretending the attacks emanate from old but major statesman who are at the
the penalties, and some people would forgo insur- 15 million for this year. Russia. The Daily Mail claims Barack very centers of American power.”
ance in response to higher premiums.” The CBO also failed to predict how many peo- Obama intends to convert his new home This was written in 1963.
What this finding says about the value Ameri- ple would game ObamaCare’s insurance rules and into “the nerve center of the mounting Hofstadter took it as a given that the
cans attach to ObamaCare-compliant health in- mandates, signing up for coverage just before insurgency against his successor.” A Bre- purveyor of paranoid conspiracy theo-
surance is damning. If the CBO is right, some 14 they need expensive procedures like knee re- itbart author warns: “The Deep State ries is himself a believer in them; that
million people would rather spend their money placements, then dropping coverage. On paper never sleeps. It’s always doing some- Joe McCarthy was, himself, McCarthy-
on something else, despite the subsidies. they shouldn’t behave that way, but the real world thing. Something, that is, to undermine ite. But is that true of Mr. Trump, Mr.
But the CBO also has too much faith in the man- works differently than the CBO’s models. the Trump administration.” Bannon or aides such as Sean Spicer,
date as an effective policy tool. In ObamaCare prac- The CBO was also badly wrong about the The idea of a deep state isn’t new to who on Monday rolled back the presi-
tice, the mandate isn’t pulling “free riders” into the 2003 Medicare prescription-drug benefit, which U.S. politics. Nor is it particularly right- dent’s accusation that Mr. Obama had
wing: The left has its own lunatic theo- personally ordered the wiretapping of
insurance markets. The IRS reports that in 2015 unlike ObamaCare used incentives, markets and
ries when it comes to the workings of Trump Tower?
some 12.7 million taxpayers claimed one or more private competition to control public costs. The the CIA, NSA or NSC, which explains The paranoid style can be evidence
exemptions from the mandate, such as “hardship,” drug benefit cost about 40% less over its first de- why Mr. Hannity and Julian Assange are of irrationalism bordering on mental ill-
while merely 6.5 million paid the fine. cade than the CBO projected. now fellow travelers. ness. It can also be a form of a cunning
The GOP wager is that the stability of the indi- Democrats in 2009-10 wasted months gaming But as the Turkish example reminds instrumentalism to destroy your politi-
vidual insurance market would improve with bet- the CBO scoring process to hide the enormous true us, whatever else exists in Washington, cal opponents by stoking hysterical
ter incentives and if people want to participate. costs of ObamaCare with budget gimmicks, which it isn’t a deep state. When Mr. Trump fears in your supporters. Turkish Presi-
Deregulation would free up insurers to offer more is a spectacle the GOP ought to avoid. Opponents demanded the resignations of 46 U.S. dent Recep Tayyip Erdogan is a master
options at many price points that meet different in Congress weren’t any more convinced than the attorneys, they all left, except for Man- of the latter method. What about Mr.
needs. Instead of brute force, Republicans think public, and the delays crowded out other priorities. hattan’s Preet Bharara, who asked for a Trump?
firing and got it. The CIA is run by a We may never know the answer.
more people would join the market if it offers al- If Republicans try to juke the coverage estimates,
Trump appointee, and the only generals What we know is that after eight weeks
ternatives worth the cost. they’ll be making the same mistake. in charge of federal departments are of the Trump administration we have
The CBO’s budget gnomes don’t share these The smarter approach is to take the CBO as the ones the president nominated to talk from the most popular conservative
assumptions and they don’t get built into their merely one opinion about the future and point their positions. The GOP establishment media about the need for “purges” to
models. CBO models are not a writ carved in to others that are equally credible, and explain has rolled over for the new president. cleanse what Mr. Bannon calls “the ad-
stone by a finger of light, but merely an educated why. Above all, the GOP shouldn’t let budget As for the “corporatist, globalist media” ministrative state.”
economic guess about how consumers and busi- scorekeepers dictate political judgments. They that Steve Bannon rails against, it also Conservatives used to understand
nesses will behave differently in response to new should thank the CBO for its opinions, have con- includes Fox News. the ideological provenance of words
health-care policies. fidence that their ideas will work, and march Ordinarily it should go without say- and the consequences that flow from
Thus this cost estimate should be part of the ahead to fulfill their campaign promise to repeal ing that Washington is not Ankara, treating political differences as mortal
larger debate, not taken as gospel. Last year the and replace the failing Affordable Care Act. that the CIA and FBI are staffed by pa- threats to the state. Too bad too many
triots, that a flurry of invidious leaks intelligent conservatives gave up worry-
is not tantamount to tanks in the ing about the use of language sometime

The Trump-Xi Summit streets, that complex institutional net-

works are not conspiracies in govern-
last year. They will come to regret what
they’ve allowed, perhaps only when

C
hinese Premier Xi Jinping will meet
sometime this April with President
Donald Trump in Florida, according to
indications Monday from officials of both
countries. In a increasingly troubled world,
this is good news.
U.S. Secretary of State Rex Tillerson will
travel to Beijing later this week to discuss
plans for Mr. Xi’s meeting with the American
President, which will take place at Mr. Trump’s
ment, and that the predictable reflexes they, too, become its victims.
leader, Kim Jong Un, seems bent on arming of bureaucracies to defend their turf Write bstephens@wsj.com.
missiles with nuclear weapons that could hit
South Korea, Japan and the U.S. mainland.
What does Mr. Xi plan to do about it?
There are also rising tensions over China’s
expansion into the South China Sea, questions
The Price of Indonesia’s
about the future of Asian trading relationships
after the Trump Administration pulled out of Economic Nationalism
the Trans-Pacific Partnership, campaign alle- By Matthew Busch tration—and extend the security of its
gations by Mr. Trump of Chinese currency ma-

Florida estate. Call it the Mar-a-Lago summit.
Maybe Mr. Xi should stay the weekend.
There is a lot to talk about. There is the urgent
question of what to do about nuclear-armed
North Korea, whose increasingly volatile
What the Dutch Want
nipulation, and China’s continuing theft of U.S.
intellectual property.
The Trump method is to get people’s atten-
tion. He has China’s. The goal at Mar-a-Lago
should be to find a new modus vivendi.
I
ndonesia’s largest mining investor
may soon be pulling out of the
country. Faced with a new regula-
tion requiring majority divestment of
its local subsidiary, U.S. mining com-
pany Freeport McMoran has signaled
its intent to pursue international arbi-
tration should negotiations remain at
an impasse past June. If filed, such a
investments beyond the end of its orig-
inal contract in 2021. But it has refused
to concede on the 51% divestment, and
on this point Jakarta, too, seems un-
willing to budge.
The standoff reflects a growing as-
sertiveness toward Freeport among In-
donesia’s elites. Many bitterly recall
how the mining company’s contract in
the early 1990s also mandated a divest-

W
claim would be among the largest in ment of up to 51%, only for the com-
ednesday’s election in the Nether- focused on Brussels for now. history and have a chilling effect on pany to escape the clause at the last
lands is about more than Geert Mr. Wilders and his party enjoy only about other investors doing business in minute through a favorable change in
Wilders. The speculation about 20% support and shrinking. This is a substantial Southeast Asia’s largest economy. legislation by the Suharto government.
whether Mr. Wilders, an anti- number of voters, but it is far At issue is Freeport’s operations at
immigration firebrand, will Wednesday’s election from the majorities or near- Grasberg, the world’s largest gold mine.
win a plurality in Parliament is about more than majorities that delivered Jakarta wants higher royalties, land re- Jakarta’s efforts to retake
has obscured a deeper change Brexit, the election of Donald linquishments, more materials procured
in Dutch politics. the ‘rise of populism.’ Trump or that say they support from local suppliers, the construction of control of the country’s
For all the talk about a pop- Marine Le Pen in France. a $2 billion smelter and, crucially, a 51% natural resources is going
divestment of the Arizona-based com-
ulist revolt, the larger reality is As for Mr. Rutte, his for-
pany’s stake in its local subsidiary. to be costly for taxpayers.
the stability of Dutch politics. The economy has tunes have improved in the polls as he has co- It’s all part of Indonesia’s larger ef-
weathered recent recessions better than most, opted some of Mr. Wilders’s attitudes toward fort to exercise greater control over its
with a growth rate now at 2.5% year on year in immigrant assimilation—such as his warning natural resources. In the oil-and-gas Senior officials now seem eager to
the fourth quarter and unemployment consis- that immigrants should “behave normally or sector, President Joko Widodo over- take up the fight with Freeport again
tently low by European standards. leave.” He won points over the weekend for ruled plans previously approved for an for the 51% stake, despite protests that
The latest polls suggest Prime Minister Mark blocking Turkish officials from participating in offshore LNG project, deciding instead the divestment would affect Indonesia’s
Rutte’s People’s Party for Freedom and Democ- rallies in Dutch cities in favor of Turkish strong- that the project should be built in a re- investment climate, that Grasberg al-
racy will remain the largest party in Parliament, man Recep Tayyip Erdogan. mote and underdeveloped part of east- ready contributes $16 billion to state
though with fewer seats. Investors appear to be The other story of this election is the near- ern Indonesia to create a “multiplier ef- revenues, or that the minerals at the
relaxed about the potential outcomes, although collapse of the Labor Party, which isn’t hitting fect” for local communities. Never mind mine might as well have been, in the
that Mr. Widodo’s then energy minister words of an early explorer, “on the
a large proportion of voters remain undecided, 15% in most polls. Its base has rebelled against
opposed the move and pointed to an moon” had it not been for Freeport’s
and this is an era of political surprises. leaders who participated in Mr. Rutte’s welfare- independent costing that found this technical innovation and appetite for
Mr. Wilders and his Party for Freedom es- reform agenda as part of his coalition govern- would be 30% more expensive than the risk. In fact, Indonesia’s energy minis-
pouse views on immigration and Islam that are ment. Voters instead are turning to far-left par- offshore project. ter has explained that the divestment
calculated to inflame the country’s complacent ties such as the Greens and Socialists or urban- In the minerals sector, officials im- requirement was inserted at the spe-
center—such as threats to ban mosques or the focused parties such as D66. posed bans on the export of nickel and cific guidance of Mr. Widodo.
Quran. But his underlying theme that the Neth- That makes the Netherlands the latest exam- bauxite to force miners to build indus- Given Freeport’s willingness to con-
erlands should have a deeper sense of national ple of a phenomenon that’s bigger than the “rise trial facilities locally. The ban was later cede on almost all of Jakarta’s demands
identity into which it expects immigrants to as- of populism.” Voters are demanding greater reversed after it was discovered that if only it could preserve its rights to
similate resonates broadly. choices and more fight from politicians. If main- local and state-owned miners were also Grasberg, Jakarta could have simply
being hurt by the policy. kept negotiating higher payments from
Mr. Wilders isn’t outside the mainstream on stream parties feel harried by the likes of Mr.
Meanwhile, over the course of five the company. That would have been the
other issues in the campaign, such as social Wilders, they might reflect that they’ve taken years of negotiations Freeport has ac- smart play, if protecting citizens’ inter-
spending. His support for an expansive welfare too long to recognize that Europe’s consensus- ceded to most of Jakarta’s ever-shifting ests was the point.
state is in line with orthodox center-leftists, as driven elitism has alienated a growing number demands in a series of interim agree-
Leon de Winter writes nearby. Mr. Wilders also of citizens. Those voters welcome the debates ments. In return, the company has Mr. Busch is a research fellow in the
has moderated his euroskeptic views in this that the Geert Wilderses stir up even if they sought to preserve its protections—in- East Asia program at the Lowy Insti-
campaign, apparently judging that voters aren’t don’t embrace their agendas in the ballot box. cluding recourse to international arbi- tute for International Policy.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
More Bank Capital Could Kill the U.S. Economy
By Tim Congdon
And Steve H. Hanke
I
n the decade since the finan-
cial panic of 2008, U.S. politi-
cians and bureaucrats joined
in a remorseless and deter-
mined effort to tighten regu-
lation in America. Banks have been
required to hold more capital
against their risky assets, in the be-
lief that this would make them—and
the U.S. economy—safer. Neel Kash-
kari, president of the Federal Re-
serve Bank of Minneapolis, wants
more. He argues that the financial
system won’t be truly safe unless
capital requirements are doubled—
to 23.5% for the biggest banks.
Regulators sparked the
Great Recession with a
credit crunch. Now they
want to do it again.
We think this bandwagon has
taken a wrong turn. In the 1950s and
’60s, the U.S. achieved benign macro-
economic outcomes with much lower
capital requirements than today. In
1987, when Alan Greenspan became
Fed chairman, the equity capital in
the banking system was 6% of total
assets. Yet he presided over the Great
Moderation for almost 20 years.
When Maestro Greenspan stood
down in early 2006, the capital-to-
asset ratio had risen to its highest
level since 1939, and yet the 2008
panic came anyway.
The Dutch Find Welfare and Immigration Make an Uneasy Mix
By Leon de Winter
T
o hear the international media
tell it, my country has
changed from one of the most
tolerant, affluent and easygoing na-
tions on the planet into a zoo of xe-
nophobes and racists—all because a
politician with unusual hair has been
saying politically incorrect things.
The Netherlands votes Wednes-
day in elections for the Tweede
Kamer, Parliament’s lower house.
Twenty-eight parties are competing
for 150 seats. Any of the established
parties could find a niche within
America’s Democratic Party; they all
are basically social democrats.
That includes the conservatives
and the so-called extreme right-wing
Freedom Party, led by Geert Wilders,
the man with the unusual hair. Mr.
Wilders is harshly critical of Islam
and the country’s immigration poli-
cies, but his social agenda is as left-
wing as the Socialist Party’s.
The Netherlands has changed, but
it has been a decades-long process.
In the 1960s and ’70s, the Dutch in-
vited guest laborers from Morocco
and Turkey to work temporarily in
the wildly expanding economy. The
boom ended, but the workers stayed,
creating an underclass of low-skilled
Muslim immigrants.
On ‘Right to Try,’ the FDA Should Proceed With Caution
By Henry I. Miller
T
he U.S. Food and Drug Admin-
istration is America’s most
ubiquitous regulatory agency,
overseeing everything from syringes
and CT scanners to drugs, vaccines
and most foods. These products ac-
count for more than $1 trillion annu-
ally, or about a quarter of U.S. con-
sumer spending. This slow,
dysfunctional agency needs drastic
reform of its requirements, proce-
dures and attitudes.
One reform Scott Gottlieb, Presi-
dent Trump’s nominee to lead the
agency, will likely embrace is “right to
try”—that is, giving terminally ill pa-
tients access to unapproved medi-
cines. He could remove the FDA from
judgments about “compassionate use”
of unapproved drugs. There is already
a trend in this direction: Thirty-three
states have passed laws aimed at pro-
PUBLISHED SINCE 1889 BY DOW JONES & COMPANY
Rupert Murdoch
Executive Chairman, News Corp
Gerard Baker
Editor in Chief
Matthew J. Murray
Deputy Editor in Chief
DEPUTY MANAGING EDITORS:
Michael W. Miller, Senior Deputy;
Thorold Barker, Europe; Paul Beckett,
Washington; Andrew Dowell, Asia;
Christine Glancey, Operations;
Jennifer J. Hicks, Digital; Neal Lipschutz,
Standards; Alex Martin, News; Ann Podd,
Initiatives; Andrew Regal, Video; Matthew Rose,
Enterprise; Stephen Wisnefski, Professional News
Paul A. Gigot, Editor of the Editorial Page;
Daniel Henninger, Deputy Editor, Editorial Page
WALL STREET JOURNAL MANAGEMENT:
Suzi Watford, Marketing and Circulation;
Joseph B. Vincent, Operations;
Larry L. Hoffman, Production
EDITORIAL AND CORPORATE HEADQUARTERS:
1211 Avenue of the Americas, New York, N.Y., 10036
Telephone 1-800-DOWJONES
Capital isn’t the problem. Instead,
the blame for the 2008 crisis and the
Great Recession rests largely with
regulators. This may seem paradoxi-
cal to observers who take it for
granted that a profession as highly
paid as banking must be full of
crooks and knaves. No doubt in the
run-up to the crisis some bankers
were foolish and greedy, and some
outright fraud took place. But no
macroeconomics textbook asserts a
relationship between fraud in invest-
ment banking and a downturn in ag-
gregate demand.
Here’s what really went wrong in
the fall of 2008, after the bankruptcy
of Lehman Brothers (which was not a
commercial bank). Regulators were
in such a panic that they hastily in-
creased banks’ capital requirements
to 7% from 4%, without thinking
through the long-term ramifications.
In his memoirs, crisis-era Treasury
Secretary Hank Paulson wrote: “Vir-
tually everyone agrees we have had
inadequate regulation of banks and
capital markets.”
Maybe, but “virtually everyone”
in officialdom overlooked the obvi-
ous. There are two ways for banks to
raise their capital-to-asset ratios: by
increasing capital or decreasing as-
sets. Which is most likely during a
crisis? Issuing new equity or bonds
would be difficult under crisis condi-
tions, so banks will instead shed
risky assets. In late 2008 and early
2009 that meant a drop in lending
to the private sector and a credit
squeeze. As businesses repaid loans,
new ones were not issued in their
place and the quantity of money in
the economy fell. That hit demand,
Photos of the original laborers
show young men in suits and dress
shirts—completely Westernized, it
seems. Now retired, they often dress
as if they had moved back to rural
Morocco or Turkey. Their children
and grandchildren drop out of
school and commit crimes at much
higher rates than the original Dutch
population. Many become more reli-
gious than their grandparents; some
even move to the Islamic State ca-
liphate in Syria.
Non-Western immigrants and
their descendants also depend on
welfare to a much greater extent
than the native Dutch. They are half
of all welfare recipients but only 11%
of the total population. Among re-
cent Somali refugees granted asy-
lum, 80% are on welfare.
Holland is truly a welfare state,
and the Dutch are proud of it. More
than half their total earnings are col-
lected by the state, the goal being to
redistribute wealth and equalize
chances for everyone. It works amaz-
ingly well, producing highways, rail-
roads, dikes and bridges, world-class
schools and health care, and a cradle-
to-grave social-security system. Most
political discussions in today’s cam-
paign are about the pressing question
of how to preserve and expand the
welfare state without going broke.
viding easier access to experimental
treatments that are still in the earliest
stages of human testing.
The right to try unapproved drugs
has the potential to be compassionate
and sound public policy—but there
are dangers. The concept must be im-
plemented in a way that takes into
consideration the realities of drug
testing.
According to the libertarian Gold-
water Institute, right-to-try legisla-
tion would allow “terminally ill
Americans to try medicines that have
passed Phase I of the FDA approval
process and remain in clinical trials
but are not yet on pharmacy shelves.”
It would also expand usage of “poten-
tially life-saving treatments years be-
fore patients would normally be able
to access them.”
But here’s the rub: About three-
quarters of drugs that pass Phase I
will never be accessible. They ulti-
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
DOW JONES MANAGEMENT:
Mark Musgrave, Chief People Officer;
Edward Roussel, Innovation & Communications;
Anna Sedgley, Chief Operating Officer & CFO;
Katie Vanneck-Smith, President
OPERATING EXECUTIVES:
Ramin Beheshti, Product & Technology;
Jason P. Conti, General Counsel;
Frank Filippo, Print Products & Services;
Steve Grycuk, Customer Service;
Kristin Heitmann, Transformation;
Nancy McNeill, Advertising & Corporate Sales;
Jonathan Wright, International
DJ Media Group:
Almar Latour, Publisher; Kenneth Breen,
Commercial; Edwin A. Finn, Jr., Barron’s;
Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
spending and jobs, just as it had in
the Great Depression.
The banks hadn’t wanted this.
They became aware of the abrupt
demands for extra capital only after
a meeting of international policy
makers in Washington on Oct. 10,
2008. Then-Fed Chairman Ben Ber-
nanke wrote in his memoir that
most such meetings are “a terrible
bore because much of the work is
done in advance by the staff.” But on
this occasion, the participants “tore
up the agenda” and agreed to “a
statement of principles that was
written from scratch, based on some
Fed proposals.” That statement
called for boosting capital require-
ments—a vicious shock for banks at
a moment of extreme vulnerability.
The Dutch are disciplined, hard-
working, well-educated, and at the
same time open-minded, tolerant
and antiauthoritarian—all of this be-
cause of our Calvinist heritage. We
are also the most secular people in
the world. Lots of Dutch say they
believe only in “something.” We
even have a name for this post-
religious religion: “Somethingism.”
Did my countrymen really
turn into xenophobes and
racists? No, they are as
open-minded as ever.
This type of open and yet highly
regulated society can function only if
it is carried by a disciplined and well-
educated citizenry with a reasonable
degree of cultural homogeneity. But
because of political correctness and
cultural relativism, Dutch elites
agreed to absorb low-educated, even
illiterate, mostly Muslim migrants
from collectivistic rural areas. Signif-
icant numbers of them refuse to em-
brace the radical, secular tolerance of
their new home.
That is what the fuss is about. To
put it in abstract terms: Can a wel-
mately won’t be approved, because
of either safety concerns or lack of
efficacy. Most legislative proposals,
including the one recently intro-
duced by Sen. Ron Johnson (R.,
Wis.), would enable patients to re-
quest the drugs after only the most
meager safety testing.
Phase I testing, often the first time
a new drug has been administered to
humans, provides extremely limited
information. These trials are per-
formed on between 20 and 100 pa-
tients and last only a short time.
They’re usually administered to paid,
healthy volunteers, who may not pro-
vide a good representation of how
the drug will affect terminal patients.
Such trials essentially exist to deter-
mine what doses of the drug are tol-
erated without causing gross safety
problems such as seizures, organ fail-
ure or death.
The determination of efficacy
starts in Phase II, when the drug is
administered to volunteers who suf-
fer from the disease or symptom for
which the drug is intended. If the re-
sults of Phase II are promising, the
drug moves into still larger Phase III
trials—the most extensive and expen-
sive part of drug development.
A physician at a large health in-
surer, who spoke to me on the condi-
Notable & Quotable
From “Post-Preet, Can America
Survive?,” James Freeman’s Best of
the Web on WSJ.com, March 13:
Even during the Reagan years
conservatives shook their heads
watching zealous reformers come to
Washington only to begin seeking
bigger offices and bigger budgets for
their agencies, rather than trying to
shut them down. . . .
Wednesday, March 15, 2017 | A11
DAVID KLEIN
What was the fallout? In the five
years preceding October 2008, bank
lending to the private sector had
soared by more than 75%, according
to Fed data, to $7.4 trillion from $4.2
trillion. In the five years after, bank
lending stagnated, increasing by less
than 10%.
The stock of loans actually went
down during the first two years of
this period, the only time such a thing
has happened on a significant scale
since the 1930s. The reversal was
most extreme for industrial and com-
mercial loans, which plunged from
$1.6 trillion at the end of October
2008 to $1.2 trillion two years later.
The blame for this credit crunch falls
on the Fed, acting in concert with the
Bank for International Settlements.
fare state become an immigration
state? You know the answer: A wel-
fare state with open borders will one
day run out of money. But what
moral justification is there for limit-
ing migration in a globalized and
unjust world? That’s a tough ques-
tion for the politically correct mind.
(Interestingly, the American Demo-
crats’ main project is the reverse:
turning an immigration state into a
welfare state.)
But the tensions in Dutch society
aren’t only about money. We’ve had
two political assassinations in the
past 15 years. In May 2002, two
weeks before a national election,
Pim Fortuyn—the leading candidate
for prime minister, a gay professor
who had published a book called
“Against the Islamization of Our
Culture”—was killed by an animal-
rights activist who said he wanted
to protect “vulnerable groups.” The
killer, who served 12 years in
prison, is now free and on welfare.
The other victim was Theo van
Gogh, a provocateur, filmmaker and
critic of Islam who was decapitated
on an Amsterdam street by a radi-
cal Muslim.
These two intellectuals personi-
fied the open Dutch welfare state.
They were loudmouthed and care-
free children of the antiauthoritar-
tion of anonymity, recently raised
concerns about right to try. He won-
ders “where liability will ultimately
lie when and if something goes
wrong.” Even trickier: “Who is the
deep pocket if and when the treat-
ment fails and the patient’s family is
looking for someone to blame?” He
More access to unapproved
drugs could be good policy,
but there are risks even
to terminal patients.
warns that the right to try could be-
come an “unfunded mandate” and
raises questions about who will pay
for the drugs and how their prices
will be determined. Medical insur-
ance as we know it was never de-
signed or intended to cover unproven
treatments of last resort.
There is also the cost of false hopes
and eventual disappointment that will
accrue to most patients and their
loved ones. I know how damaging this
can be, physically and emotionally.
When I was a medical student at the
University of California, San Diego, we
would often treat patients who’d vis-
Mr. Trump spent last year demon-
strating how few people and how lit-
tle money are required to mount a
winning presidential campaign. Will
he now prove how many federal em-
ployees aren’t needed to run a gov-
ernment? Late this afternoon the
President is expected to sign an ex-
ecutive order on reorganizing the ex-
ecutive branch. Do we dare to hope
for a downsizing?
That brings us to Mr. Kashkari’s
proposal to further double capital
requirements. What might happen if
the Trump administration enacted
his plan? Bank stocks would take an-
other dive. They would find it im-
possible to raise new capital
through equity or bond issues, so
they would be forced to shed assets.
As in 2009 and 2010, banks would
refuse applications for new loans.
They might go so far as to wriggle
out of contracts for existing loans
and ask for early repayment.
Unless the Fed would buy up as-
sets far in excess of the previous
three “quantitative easing” exercises,
the quantity of money in the econ-
omy would fall and the traumatic
economic conditions of the Great De-
pression and the Great Recession
would return.
The Fed’s drive to raise bank capi-
tal is part of an international pro-
gram orchestrated by the Bank for
International Settlements in Basel,
Switzerland. A fair question is
whether the bureaucrats in Basel
know more about restoring a suc-
cessful American financial sector
than do bankers in New York and of-
ficials in Washington. With some jus-
tice, Jamie Dimon, chief executive of
J.P. Morgan Chase, has described the
Basel rules as “anti-American.” They
are also a major threat to free-
market capitalism.
Mr. Congdon is founder and chair-
man of the Institute of International
Monetary Research at England’s Uni-
versity of Buckingham. Mr. Hanke is
a professor of applied economics at
Johns Hopkins University.
ian 1960s, unapologetic and humor-
ous critical minds who happily
provoked the sensitivities of the
bourgeois establishment and as
happily insulted religion in gen-
eral—in particular Catholicism, be-
fore they turned against Islam.
They represented an extreme of the
wide horizon of Dutch tolerance.
Their peaceful and pacified coun-
trymen are still recovering from the
shock of their murders.
Did the Dutch really turn into
xenophobes and racists? No, they
are as open-minded as ever. But
they have started to demand what
most of their politicians (except
people like Fortuyn and Mr.
Wilders) until recently didn’t dare
mention because it was politically
incorrect: that immigrants practice
tolerance, work and study hard,
and teach their children to be
proud and contributing members of
this society. That is the least you
can ask when the fruits of your la-
bor are taxed at 50%.
This is the Netherlands in 2017.
Still an impressive country, if you
ask me, whatever the result of
Wednesday’s election.
Mr. de Winter is a novelist and
political commentator for De
Telegraaf.
ited Mexican “miracle cure” clinics
that use unproven treatments to
fleece desperate terminal patients.
It is also important not to forget
that a dying patient’s situation can
become worse. Adverse reactions can
make his last days or weeks far more
miserable if the drug causes a stroke,
anaphylactic shock or neuralgia,
among other symptoms.
The right to try involves a difficult
balance of competing interests, in-
cluding individuals’ right to make
choices based on their own judgments
about risk and benefit. Society also
has a role in preventing desperation-
driven coercion of patients and their
exposure to unacceptable risks.
Current right-to-try proposals
need more thought and refinement.
There ought to be some actual evi-
dence about efficacy beyond specula-
tion derived from computer simula-
tions, cell culture or animal experi-
ments. An appropriate minimum
threshold might be at least one Phase
II trial that results in a “reasonable
expectation of effectiveness.” The
manufacturer of the medicine should
also have to provide a statement to
patients that conveys the uncertainty
of a positive response and the known
and possible side effects—something
similar to the informed-consent in-
formation that a patient in a clinical
trial receives.
Right to try is a worthy goal, but
well-meaning interventions can be-
come worse than the disease. As one
of my medical-school professors once
admonished us, there is a difference
between a patient’s living longer and
interventions that make him so mis-
erable that it only seems longer.
Dr. Miller, a physician and molecu-
lar biologist, was the founding director
of the FDA’s Office of Biotechnology
and is a research fellow at Stanford
University’s Hoover Institution.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Wednesday, March 15, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

YOUR HEALTH | Sumathi Reddy

Does Recess Need Coaching?

Schools are experimenting with new ways to get children to be more physical, including structured recess with activity zones
SCHOOLS ACROSS the country
are revamping recess.
Some have it two or three times
a day in shorter increments. Oth-
ers bring in recess coaches to fa-
cilitate games. Many now have ac-
tivity zones—all to encourage
more physical fitness.
The shift is a turnaround after
many schools in the U.S. cut back
or eliminated recess due to space
constraints and demands for more
class time.
The Centers for Disease Con-
trol and Prevention and SHAPE
America, a Virginia-based non-
profit, came out in January with
their first joint guide of 19 recess
strategies. “We’re really interested
in increasing daily physical activ-
ity,” said Shannon Michael, a CDC
health scientist involved in devel-
oping the recommendations.
The CDC and SHAPE America
recommendations include strate-
gies such as holding a daily recess
before lunch and never punishing
students by not allowing them to
participate in recess.
They also recommend having a
weather plan, designating outdoor
and indoor areas for recess, mak-

GETTY IMAGES/ISTOCKPHOTO
ing markings on playgrounds, pro-
viding equipment, and having
physical activity zones and
planned activities.
“Sometimes kids may be out for
recess but they’re not being ac-
tive,” said Michelle Carter, senior
program manager of SHAPE Amer- Health professionals say school recess should never be taken away. It improves children’s fitness, concentration and attentiveness in the classroom.
ica. “So if you have zones with dif-
ferent activities and such, it en- play, which is as important devel- finds children rolling down hills, that come with recess, such as beth Cushing, president of the
courages more participation.” opmentally for children. looking at ant beds and climbing bullying, said Rebecca London, an group which contributed to the
Students are given choices of ac- Debbie Rhea, an associate dean trees. assistant professor of sociology at CDC recess strategies.
tivity zones. and professor of kinesiology at The program is now in 16 University of California, Santa Initially Angela Moore, principal
The guidelines follow on several Texas Christian University in Fort schools in Oklahoma and Texas. Cruz, who studies schools that use at Thomasville Primary School in
studies, which have found that re- Worth, is against structured re- Her research, which compares the Playworks, an Oakland-based non- North Carolina, was wary about
cess not only improves physical cess. schools to demographically profit which helps schools orga- creating activity zones during re-
activity among students, but also Her LiiNK program, a research matched control schools in the nize recess with the help of recess cess. Now, she’s noticed write-ups
improves concentration and atten- project she began in 2013 is based same school districts, has found coaches. Students learn common for students fighting during recess
tion in the classroom. It can even on a Finnish model giving students that students’ off-task behavior in rules so they don’t have to spend are down.
improve emotional and social de- four, 15-minutes of totally unstruc- the classroom declined from 50% time quibbling over rules, she The playground now has five
velopment in children. tured play outside every day. before the program was in place to said. colored zones and classes rotate;
Other recess experts say the There aren’t even kickballs or soc- 24 to 28% by the end of the school Playworks has trained staff or options include blacktop games
zones aren’t constructive—they cer balls around. The participating year. had recess coaches in more than like four square or basketball,
make recess more like physical ed- schools also get character develop- Organized recess can prevent 3,000 schools across the country playground equipment, or dance
ucation class and less like free ment lessons every week. She some of the disciplinary problems over the past 20 years, said Eliza- parties and aerobics.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15 1 2 3 4 5 6 7 8 9 10 11 59 D.C. player
12 25 Asset for dance
-10 marathon
13 14 15 16
60 Most nail-biting
-5 competitors
0 61 Equivalent of the
17 18 19 hexadecimal A 27 Olympic weapon
5
Beijing
10 20 21 62 Sibling’s address 32 Urbanite’s
Seoul
Toky
Tokyo 15 63 Genesis getaway
22 23 24 25 33 Santa ___
20 construction
New
wDDelhi
h Shanghai
25 26 27 28 29 64 Subj. of early 34 Nikon offering
Riyadh
y dh
h Taipei
Ta p 30
lk t
Kolkata Amendments 35 Fixes, as a
Karachi
h 35 30 31 32 33 34
Hong Kong Down flawed
Hanoi
Bangkok
Ban k k Manila 35 36 1 Browser option soundtrack
Warm
37 38 39 40 41 42 43 2 Nook, e.g. 36 Home of the
Cold minor league
Kuala
la LLumpur
p 3 Macedonia,
Stationary 44 45 46 47 Owlz
Montenegro
Singapore
g p 37 Elusive resident
48 49 50 51 52 and others
Showers of the Pacific
JJakarta
k 4 Brand that
53 54 55 Northwest
Rain sponsored the
56 57 “Ripley’s Believe 38 Traveling
T-storms It or Not!” radio 39 Not amply
58 59 60 show supplied with
Snow
61 62 63 64 5 Euro 41 Heatedly
Sydney
yd eyy Flurries predecessor 42 Revulsion
b
Melbourne 6 New Orleans
Ice JUST A PASSIVE FANCY | goes back to it in
43 Interior
decorator’s
Global Forecasts Today Tomorrow Today Tomorrow By Steven E. Atwood Nov. contrasting
City Hi Lo W Hi Lo W City Hi Lo W Hi Lo W
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; Geneva 17 4 pc 17 5 s Ottawa -7 -14 sn -6 -17 s Across 22 City on the 44 How most TV 7 Like a spot by details
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Hanoi 22 19 c 24 19 r Paris 14 5 pc 17 6 s 1 Yank’s foe IJsselmeer shows are now the fire 45 Everglades
Havana 23 14 s 22 15 s Philadelphia -2 -7 sf 3 -7 s 23 Associate who’s presented 8 Sheltering place denizens
Today Tomorrow Hong Kong 21 18 c 22 19 pc Phoenix 33 17 s 33 18 s 4 Gp. including the
City Hi Lo W Hi Lo W Honolulu 29 21 pc 29 21 pc Pittsburgh -3 -7 sf 2 -9 pc Eagles and been ejected 45 End for ethyl or 9 Baldwin, for one 47 Neglects to
Amsterdam 12 5 pc 15 6 pc Houston 21 12 pc 23 17 c Port-au-Prince 32 21 pc 32 21 pc Falcons from a club? methyl 10 Navy enlistee mention
Anchorage -7 -15 pc -7 -16 c Istanbul 11 6 c 10 5 c Portland, Ore. 14 4 r 13 3 pc 26 Simpleton’s lack 46 Chain where you 11 Irish lass
Athens 15 8 pc 16 7 pc Jakarta 32 23 t 31 24 t Rio de Janeiro 29 22 pc 32 24 t 7 Undetermined, 49 Dodge models
Atlanta 7 -3 s 12 2 s Johannesburg 25 13 pc 27 13 pc Riyadh 26 16 s 28 16 t on a sched. 28 Messy place can get a Chili 12 They’re not yet of 1995 to 2005
Baghdad 26 13 s 20 8 pc Kansas City 5 -1 pc 17 11 c Rome 18 5 s 17 5 s 29 Well, to Watteau Cheese Coney residents 50 Mongolian word
Baltimore -1 -8 sf 4 -9 s Las Vegas 31 16 s 30 17 pc Salt Lake City 24 10 s 20 8 c
10 H.S. class and Tots
30 There are 8,760 14 Originates for “ocean”
Bangkok 35 27 pc 35 27 sh Lima 30 22 pc 30 23 pc San Diego 23 15 pc 22 15 pc 13 They get chalked 48 Hamburger made
Beijing 16 0 pc 18 2 pc London 16 7 pc 15 5 c San Francisco 19 12 c 19 9 c up in a typical yr. 19 Unpretentious 51 Clear sky
Berlin 11 2 pc 13 5 pc Los Angeles 28 13 pc 26 15 pc San Juan 29 22 pc 30 23 s 31 City on the Arno from venison?
15 “Alley ___” way to live 55 Policy expert
Bogota 18 10 sh 18 9 r Madrid 20 4 s 20 4 s Santiago 31 12 s 31 14 s 52 Like the Fr.
Boise 20 8 c 15 5 c Manila 33 24 pc 32 24 pc Santo Domingo 30 20 pc 30 21 pc 33 George Burns’s 24 Mgr.’s helper 57 Police HQ
16 Wooed in-laws “fromage”
Boston 2 -7 sf 1 -7 s Melbourne 31 21 c 25 14 r Sao Paulo 27 19 pc 29 21 s
Brussels 13 5 pc 16 7 s Mexico City 21 8 pc 20 10 pc Seattle 12 5 r 11 4 pc successfully 53 Hold back
35 Dollar bills that Previous Puzzle’s Solution
Buenos Aires 23 12 sh 22 9 pc Miami 22 11 s 22 13 s Seoul 11 -1 s 12 -1 s 17 Bowler everyone 54 Guilt symptom
Cairo 21 12 s 21 12 pc Milan 19 7 pc 19 7 s Shanghai 13 7 s 13 7 c have been torn N E S S F O R E S T J O T
loves to touch? up? 56 Where the
A Q U A A V E N U E A N A
Calgary 10 -3 pc 3 -7 sf Minneapolis 0 -8 pc 5 0 pc Singapore 32 25 pc 31 25 pc P U N I N T E N D E D N E T
Caracas 30 23 pc 30 24 pc Monterrey 27 16 pc 28 14 pc Stockholm 10 0 s 8 4 pc 18 It might make a 37 Make an rubber meets the T I L D E N E U F W E L T
Sydney 26 22 t 26 21 t I N A S E C P O P I D O L
Charlotte 6 -7 pc 11 -5 s Montreal -4 -12 sn -5 -14 pc lot appearance track? M E M O A B S R E M O V E
Chicago -1 -10 s 4 0 s Moscow 6 2 c 6 1 sn Taipei 18 16 c 20 17 sh E S P G N AWS E P E E
Dallas 20 13 pc 24 17 c Mumbai 33 18 pc 32 19 pc Tehran 17 7 s 18 8 pc 20 Earn hand over 40 Land east of the 57 Worn-out firearm P O I S O N I V Y
Denver 24 7 pc 23 5 c Nashville 5 -6 s 11 4 pc Tel Aviv 18 12 pc 18 11 pc fist Persian Gulf that’s no longer S P I T E R O D E H O R
Detroit 0 -8 pc 5 -6 s New Delhi 29 14 pc 30 14 pc Tokyo 8 5 r 12 6 s S H I N T O EWE R U N E
21 Like sugar in 41 Asteroid with a usable? P A C K I C E S H AM E S
Dubai 30 24 pc 32 23 c New Orleans 15 8 s 19 12 s Toronto -5 -9 sf 0 -8 s A R K S C L O D A D O R E
Dublin 15 8 pc 11 3 c New York City -2 -6 sf 1 -5 s Vancouver 10 4 pc 9 4 sh your coffee moon 58 Ears: Prefix S P A P UM P I N G I R O N
Edinburgh 12 7 c 12 2 c Omaha 4 -1 c 17 4 c Washington, D.C. 0 -6 sf 4 -5 s M I X O R S I N O S MU T
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 15 3 pc 16 4 s Orlando 17 3 s 18 6 s Zurich 16 3 pc 15 2 s S E E E S T E E M H E S S

Look Behind the Numbers

Join Miriam Gottfried for an in-depth look at the stories driving global business.
Get incisive analysis of the companies, sectors and securities making news with
WSJ’s Heard on the Street podcast.

P DCASTS Listen now at WSJ.com/listenHeardOnTheStreet

WSJ Podcasts are also available on iTunes, Amazon Echo, Spotify, iHeartRadio, Google Play Music and Stitcher

© 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ4877
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Yen vs. Dollar 114.5690 g 0.27%
Toshiba Weighs Drastic Action
U.S. bankruptcy filing
for Westinghouse unit
is under study; chip
business on the block
BY TAKASHI MOCHIZUKI
TOKYO—Toshiba Corp.’s
chief executive said Tues-
day the company is consider-
ing a bankruptcy filing for
Westinghouse Electric Co. to
stop the bleeding at its U.S.
nuclear affiliate after losses
topping $6 billion.
Japan’s finance minister
had previously urged Toshiba
to make a decision about a
possible chapter 11 filing in the
U.S. by the end of March. This
was Toshiba’s first public con-
firmation that it is studying
the idea.
Be Careful:
Volatility Is
Hiding, Not
Hibernating
One of the basic rules of
markets is being violated.
Investors usually hate un-
certainty, but since the U.S.
election, days of rising un-
certainty have often been
accompanied by higher
stock prices.
The idea that riskier mar-
kets are worth more makes
little sense, but the explana-
tion may tell us something
about the split between the
views of pro-
fessional
traders and
retail inves-
tors. As cash
floods in
from private
STREETWISE investors it
JAMES has pushed
MACKINTOSH up the mar-
ket overall,
but has also
led professionals to worry a
little more about the risks—
both of a meltdown and, con-
ceivably, a “melt-up,” when
the market soars 10% or more
in short order. The prospect
of either big losses or big
gains prompts buying of op-
tions, pushing up their cost,
proxied by implied volatility.
The puzzle shows up
most clearly in the link be-
tween the VIX gauge of im-
plied volatility and the S&P
500, although something
similar has been going on
with European shares and
the VStoxx, the European
VIX equivalent.
Days when the VIX or VS-
toxx goes up have normally in
the past been days when the
stock market falls, as higher
expected volatility shows
more risk is anticipated, jus-
tifying lower prices.
That link has partially bro-
ken down, with stock prices
often rising when implied
volatility rises, particularly
last month. The 30-day cor-
relation between the VIX and
the S&P 500, a formal mea-
sure of how much they move
together, is the highest since
2006, even as the absolute
level of the VIX is very low
compared with history.
Last month underlined
the strange nature of the
rally. Money pouring in
from private investors
helped push up the Dow
Jones Industrial Average to
12 record highs in a row,
even as other measures sug-
gested growing caution. The
wild optimism visible at the
index level wasn’t repeated
under the surface, where
defensive shares outper-
formed (ignoring the oil
sector, sometimes classed as
defensive and sometimes cy-
clical). Unlike a normal
rally, smaller-company
stocks underperformed too.
When traders are more
cautious they tend to buy
more put options to protect
themselves against falling
share prices, which pushes
up implied volatility.
Please see STREET page B2
TECHNOLOGY: FACEBOOK BANS USE OF USER DATA FOR SURVEILLANCE B4
Hang Seng 23827.95 g 0.01%
The statement by Toshiba
Chief Executive Satoshi Tsu-
nakawa came after further
signs of deterioration at the
Japanese conglomerate, which
has suffered through account-
ing scandals and management
turmoil in the past two years.
The company said it would
again miss a deadline for filing
results for its most recent
quarter, which were initially
due on Feb. 14. The new target
is April 11. And the Tokyo
Stock Exchange said it would
place Toshiba shares under
special supervision, a height-
ened warning to investors that
the shares could be delisted.
Toshiba said last month
that it planned to record a
write-down of ¥712.5 billion
($6.2 billion) on its U.S. nu-
clear unit owing to cost over-
runs at nuclear-power-plant
CEO Peter Hancock, left, agreed to resign after directors feared the insurer was headed for a fight with investor Carl Icahn, right.
Icahn Was Key to Shake-Up at AIG
BY JOANN S. LUBLIN
AND LESLIE SCISM
The person at the center of
last week’s surprise change
atop insurance giant American
International Group Inc.
wasn’t Peter Hancock. It was
activist investor Carl Icahn.
The 58-year-old Mr. Han-
cock agreed to resign as chief
executive after several direc-
tors met with him Wednesday
evening in his AIG office in
downtown Manhattan, accord-
ing to people familiar with the
matter. Some directors at the
time were worried about the
CEO’s ability to continue im-
proving the company’s results,
while several also feared a po-
tential fight with Mr. Icahn.
The huddle followed a pri-
vate session of the company’s
independent directors in
which they had discussed Mr.
Hancock’s successes and
shortcomings, adding new de-
tail to last week’s sudden
shake-up at AIG.
That “executive session” oc-
curred after a two-day board
meeting, during which Mr.
Neiman Marcus Gets Shopped
BY SUZANNE KAPNER
The private-equity firms
that own Neiman Marcus
Group Ltd. are in discussions
to sell the struggling retail
chain to Hudson’s Bay Co., ac-
cording to people familiar with
the matter.
Neiman on Tuesday said it
had hired financial advisers to
explore strategic alternatives,
including a potential sale of
the 100-year-old upscale chain
or debt restructuring. It didn’t
say whether it is in talks with
any potential buyers. The re-
tailer, which has spent a dozen
years under private-equity
ownership, has nearly $5 bil-
lion in debt and is struggling
with weak sales.
Hudson’s Bay is seeking a
transaction that would give it
control of the business without
having to assume the com-
pany’s debt, the people said.
THE WALL STREET JOURNAL.
Gold 1205.30 À 0.24%
Japan’s Toshiba is reeling from losses at its U.S. nuclear affiliate.
projects in Georgia and South
Carolina undertaken by West-
inghouse.
Mr. Tsunakawa said he is
looking at ways to “wall off”
any risk of further losses at
the unit and hopes eventually
Hancock and his team high-
lighted accomplishments in
trying to bring AIG’s results in
line with the best of its peers.
Mr. Hancock has agreed to stay
on until a successor is found.
Last month, AIG posted one
of its worst quarterly results
since the financial crisis, with
major setbacks in the global
insurance firm’s turnaround
plan. The AIG directors feared
disruption if they didn’t
quickly address concerns from
Mr. Icahn and some directors
about the CEO’s ability to com-
plete the turnaround, people
familiar with the matter said.
So they pushed for Mr.
Hancock to step aside, the
people said.
A decision “to stand by [Mr.
Hancock] would carry the
threat if not the reality of a
battle with Carl,” said a person
familiar with the matter.
Despite the coming change
atop AIG, the board remains
committed to the current turn-
around plan developed by Mr.
Hancock and won’t consider
“breaking up the company,” AIG
Chairman Douglas Steenland
Hudson’s Bay could purchase
Neiman assets using a struc-
ture that wouldn’t trigger a
change in control, leaving the
debt on Neiman’s books, one of
the people explained.
Neiman is owned by pri-
vate-equity firm Ares Man-
agement LP and the Canada
Pension Plan Investment
Board, which bought the busi-
ness in 2013 from another
group of private-equity back-
ers for $6 billion including
debt. In January, the investors
pulled plans for an initial pub-
lic offering, citing difficult
market conditions.
Hudson’s Bay is an acquisi-
tion-hungry owner of mar-
quee names in retail includ-
ing Lord & Taylor and Saks
Fifth Avenue. Earlier this
year, the Canadian company
approached much larger rival
Macy’s Inc. about a potential
takeover, The Wall Street
WTI crude 47.59 g 1.67%
to remove Westinghouse from
Toshiba’s group balance sheet.
Asked by an analyst at a media
event whether the options in-
cluded a chapter 11 filing by
Westinghouse for protection
from creditors, Mr. Tsunakawa
Bumpy Ride
AIG's share-price performance
$70
65
60
55
50
45
’15 ’16
Source: FactSet
THE WALL STREET JOURNAL.
said in taped comments to em-
ployees Monday night. He said
AIG previously rejected such a
breakup plan, which Mr. Icahn
proposed in 2015.
In his taped comments
Monday night, Mr. Steenland
also said directors have begun
their search for AIG’s next
chief executive and likely will
pick an outsider. “We are
highly focused on the search to
bring in the right person to
Journal reported.
During the discussions with
Macy’s, representatives from
Ares approached Hudson’s Bay
about a deal for Neiman, the
people said. Hudson’s Bay has
now shifted its focus to Nei-
man, they said.
Hudson’s Bay Chairman
Richard Baker, who has a re-
cord of crafting unusual deals,
has long eyed Neiman, say
people familiar with his think-
ing. Neiman Marcus operates
about 40 namesake stores in
the U.S. as well as two Berg-
dorf Goodman stores on Fifth
Avenue in New York City and
42 Last Call discount stores.
Having two high-end U.S.
department store chains under
one roof would create a domi-
nant force in luxury retailing
at a time when the power has
shifted from retailers to
brands. It would also create an
opportunity to cut costs by
10-Year JGB yield 0.090%
HITOSHI YAMADA/ZUMA PRESS
’17
Wednesday, March 15, 2017 | B1
10-Year Treasury yield 2.595%
Big Tech
said, “Various measures, in-
cluding what you mentioned,
Reshapes
are possible.”
Mr. Tsunakawa reiterated
that Toshiba is seeking a buyer
for its computer memory-chip
The Auto
business to fill the hole on its
balance sheet created by the Industry
losses at Westinghouse. How-
ever, he hinted that any poten-
tial foreign buyer, particularly BY CHESTER DAWSON
one from China, would get ex-
tra scrutiny. “The memory- Intel Corp. sent a fresh
chip technology has an aspect shock wave through the auto-
of national security,” he said. motive supply chain, becom-
Mitsushige Akino, chief ing the latest tech company
fund manager at Ichiyoshi to gobble up a specialized
Asset Management, said car-components supplier. The
Toshiba needs to sell the chip Silicon Valley company’s $15
business at a high price and billion acquisition of Mobil-
put a lid on Westinghouse eye NV could unsettle estab-
losses to survive. lished auto makers, but it
—Kosaku Narioka and may be the type of big bet
Megumi Fujikawa needed to populate roads
contributed to this article. with self-driving vehicles.
Mobileye—an Israeli com-
pany specializing in camera-
based software—was attrac-
tive to Intel because of its
head start in high-tech auto-
motive applications, including
advanced cruise control and
braking systems designed to
avoid crashes even if the
driver is unaware.
Companies that can better
connect or automate vehicles
are commanding large premi-
ums not seen in the broader
ROBERT GALBRAITH/REUTERS, BRENDAN MCDERMID/REUTERS
car business.
“It shows there’s an in-
creasing belief that autono-
mous vehicles and assisted
driving through the levels is
real and needs to be industri-
alized,” said Mark Wakefield,
co-leader of the automotive
practice at consulting firm
AlixPartners.
Companies with deep pock-
ets and broad business port-
folios are pouring into the
auto industry as a result.
For decades, auto makers
treated suppliers as subordi-
nate partners, and dollars
that flow from purchasing de-
cisions have kept parts mak-
ers afloat.
Tech company investments
may weaken auto maker influ-
ence over the supply chain
lead the company at this im- amid a race to reinvent auto-
portant time,’’ he added. mobiles as smarter and safer.
Mr. Icahn, who disclosed a The deal follows similar ac-
stake in AIG in fall 2015, had quisitions in recent months
called for Mr. Hancock’s firing such as Samsung Electronic
before reaching an agreement Co.’s $8 billion purchase of au-
in early 2016 for a board seat dio and telematics sup-
for an Icahn representative. plier Harman International In-
Fellow billionaire investor dustries Inc., and Siemens AG’s
John Paulson also obtained a $4.5 billion takeover of Mentor
board seat. Graphics Corp., which produces
Waging a campaign against design software for automotive
an activist is typically distract- and other applications.
ing for management. For a fi- Intel rival Qualcomm Inc.
nancial firm like AIG, such bought automotive chip sup-
fights can be tricky as manag- plier NXP Semiconductors NV
ers try to maintain the confi- for $39 billion.
dence of ratings companies Recent acquisitions of auto
and customers. The uncer- makers by Nissan Motor Co.
tainty of potential change in and Peugeot SA resulted in
the company’s strategy can much lower valuations for
slow new business. companies that sells millions
The next CEO at AIG will be of vehicles. Mitsubishi Motor
the firm’s seventh since 2005, Corp. and Opel were both
when a period of turmoil be- snapped up for under $3 bil-
gan. In 2008, AIG nearly col- lion each.
lapsed and required one of the Unlike the capital-intensive
biggest bailouts of the finan- business of building cars, sup-
cial crisis, at nearly $185 bil- plying the guts of tomor-
lion. AIG fully repaid taxpayers row’s automobiles is a growth
by the end of 2012 by selling target for spreading the Inter-
almost half of its assets and net of Things. That involves
Please see AIG page B2 Please see INTEL page B4
ALAN DIAZ/ASSOCIATED PRESS
The owners of Neiman Marcus are in talks with Hudson’s Bay.
eliminating overlapping back the six months ended Jan. 28.
office functions and closing Standard & Poor’s recently
some stores. cut its credit rating on Neiman
Neiman, like many other de- to triple-C-plus, well into junk
partment store chains, is territory, saying there was a
struggling with falling sales. substantial risk of default
On Tuesday, it reported a loss given weak mall traffic trends
of $140.6 million as revenue and a highly promotional retail
fell 6.7% to $2.65 billion for environment.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, March 15, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Altera ........................ B12
American International
Group.........................B1
Andreessen Horowitz.B4
Ares Management......B1
Audi...........................B12
B H
Berkshire Hathaway...B2
Blackstone Group ..... B11
BMW ......................... B12
Burger King
Worldwide ................ A1
C LSL Property
CBOE Volatility Index.B1
Countrywide..............B11
D Macro Risk Advisors .. B2
Dandong Hongxiang
Industrial..................A2
E Mobileye .............. B1,B12
EchoStar......................B4
Exxon Mobil................A5
F Development Bank; and North
Facebook......................B4
Fiat Chrysler
Automobiles ............B3
INDEX TO PEOPLE
A I
Adesina, Akinwumi .... B8
Akino, Mitsushige ...... B1
B K
Baker, Richard.............B1
D Kayyem, Najla...........B11
Dhlomo, Khanyi .......... B6
E Krauch, Ryan.............B11
Embley, Simon..........B11
F Lighthizer, Robert ...... A6
Frank, Ivan ................ B11
G .....................................B8
Ghosn, Carlos..............B5
H M
Hancock, Peter............B1
Hogg, Charlotte..........A4
MICHAEL NAGLE/BLOOMBERG NEWS
William Ackman’s firm took a $4 billion loss in selling its stake.
Valeant’s Stock
Drops Sharply
On Ackman Exit AIG
BY MICHAEL RAPOPORT
Shares of Valeant Pharma-
ceuticals International Inc.
tumbled to their lowest level
since 2009 on Tuesday morn-
ing after hedge-fund titan Wil-
liam Ackman capitulated and
sold his stake in the struggling
drug company.
Valeant shares traded on
the New York Stock Exchange
at $10.97, down nearly 9.4% at
midday. They have traded as
low as $10.50 on Tuesday,
their lowest level since May
2009. Valeant stock has fallen
24% this year and has lost
Mr. Ackman’s exit
from Valeant also
appeared to weigh on
the company’s bonds.
more than 95% of its value
compared with its highest
point in August 2015, following
questions about Valeant’s busi-
ness practices and accounting.
Mr. Ackman’s firm, Persh-
ing Square Capital Manage-
ment LP, took a loss of roughly
$4 billion when it sold its 8%
stake in Valeant. Mr. Ackman
and Pershing Square Vice
Chairman Stephen Fraidin are
on Valeant’s board but won’t
stand for re-election.
Mr. Ackman had made a big
bet on Valeant shares starting
in 2015, but he sold the stake
after concluding he couldn’t
recover his losses, people fa-
miliar with the matter told
The Wall Street Journal on
Monday. Pershing Square said
Monday that the sale will en-
able it to realize a large tax
loss and “dedicate more time
to our other portfolio compa-
THE WALL STREET JOURNAL.
BUSINESS & FINANCE
Ford Motor..................B4
Foxtons Group...........B11
Fyodor
Management
Group.......................B11
Okta.............................B4
A Gap in North Korea Sanctions
Biotechnologies........B6 P BY KATY BURNE
G Peugeot-Citroen..........B3
At least four North Korean
G4S..............................A4 Q
banks under U.S. Treasury
General Motors ..... B3,B4 Qualcomm.................B12 sanctions remain on the Swift
R money-transfer messaging net-
Hudson's Bay..............B1 work, even after the network
Renault........................B5
I S deactivated a handful of the
country’s banks sanctioned by
Intel......................B1,B12 Sequoia Capital...........B4 the United Nations—the latest
L Snap.............................B4 sign that a squeeze on Pyong-
SpaceX.........................B4 yang has failed to completely
Services.................B11 T shut off the regime’s access to
M Tesla..........................B12 the global banking system.
Toshiba........................B1 The U.S. Treasury-sanc-
tioned banks that remain on
ALI HAIDER/EUROPEAN PRESSPHOTO AGENCY
Micropole .................... A4 V
Swift include the state-owned
Mitsubishi Motors......B5 Volkswagen.................B3 Foreign Trade Bank of the
W Democratic People’s Republic
N Westinghouse of Korea, the country’s pri-
Electric.....................B1 mary foreign-exchange bank;
Neiman Marcus
Group ....................... B1 Y Kumgang Bank; Koryo Credit
Nissan Motor..............B5 Yext ............................. B4
East Asia Bank, according to
O Z people familiar with the net-
Och-Ziff Capital ZTE..............................A1 work.
A search on Swift’s website A Swift stand in 2013. Pyongyang apparently still has access to the global banking system.
listed active bank identifier
codes for the institutions as of
Monday.
through fronting companies.
Calls to the permanent mis-
tutions, processing tens of
millions of payment instruc-
operates completely outside of
the U.S.
N The U.S. designated the sion of North Korea to the U.N. tions, including through a If a European bank traded
Foreign Trade Bank for sanc- weren’t returned, and at- large facility in Culpeper with a sanctioned North Ko-
Icahn, Carl...................B1 Njoroge, Patrick..........B6 tions in 2013, saying it facili- tempts to reach the banks County, Va. rean bank using a U.S. inter-
Ireland, Jay ................. B8 O tated weapons-of-mass-de- were unsuccessful. But Swift, because of its mediary or correspondent
Orji, Uche....................B6 struction programs in North Swift, formerly known as the European base, has been more bank, the U.S. firm would have
Korea. The other three were Society for Worldwide Inter- responsive to EU sanctions a legal obligation to block the
Kagame, Paul..............B7 P
sanctioned in December as the bank Financial Telecommunica- than U.S. ones, a Treasury offi- flow of funds, the Treasury of-
Paulson, John..............B1 U.S. targeted entities it said tion, doesn’t itself move money cial said. Companies in the EU, ficial said.
Knight, Jessica ........... A2 Platt, Alison..............B11 supported the North Korean between customers and coun- including Swift, are required Swift said in a statement
R government and its weapons tries. by law to comply with U.N. that “any decision to lift or
L programs following the na- It is a member-owned coop- sanctions. But Swift would impose sanctions on countries
Ridley, Steve.............B11
tion’s September 2016 nuclear erative operating under Euro- have to comply with U.S. law, or individual entities rests
Robben, Rich.............B11
test. pean Union law that provides including U.S. sanctions on solely with the competent gov-
Littlefield, Elizabeth L Ross, Wilbur...............A1 The apparent sanctions gap the messaging platform neces- North Korea, only where its ernment bodies and legisla-
S raises questions about how sary for users to order pay- activities fall under U.S. juris- tors.”
Lu, Hansen................B11 Steenland, Douglas MB2 easily North Korea could move ments to one another. diction, the Treasury official The company said that it
currency through alternative While based in Brussels and said. had a legal requirement to
T banking channels, something regulated by Belgian authori- Nothing in the U.S. sanc- comply with EU regulations,
Marchionne, Sergio .... B3 Thakkar, Ashish..........B6 the U.N. said the country has ties, the company interacts tions regime prohibits Swift’s being incorporated under Bel-
Mishkin, Frederic........A2 Tsunakawa, Satoshi ... B1 been known to do in the past daily with U.S. financial insti- activities when the company gian law.
UPS Gives Raises Despite Missed Goals
BY PAUL ZIOBRO based pay that wasn’t fully tied to long-term performance long-term awards valued at
paid out due to weak results. targets. $860,000 that were granted in
Top executives at United Compensation based on the “The only way the pay is September.
Parcel Service Inc. took home prior three years’ financial re- delivered is if the company Steven Hall, founder Steven
higher compensation in 2016 sults was paid out at 72% of performs to the target expec- Hall & Partners, a compensa-
even as the parcel carrier the target. tations,” UPS spokesman tion consultant that wasn’t in-
missed many of its perfor- The Atlanta-based carrier’s Steve Gaut said. He said the volved in UPS’s decision mak-
mance targets. board also boosted salaries board asked consultants to ing, said companies may give
The reason? A second pay for top executives by 10% review compensation in early such awards to keep execu-
raise and special stock awards during the September review, 2016 and the board made tives from considering other
given to senior leaders, includ- just six months after the typi- changes in the fall when the offers, especially if stock op-
ing Chief Executive David Ab- cal annual salary review in recommendations were avail- tions aren’t as valuable as
ney, toward the end of last March, which increased sala- able. originally expected.
year. Mr. Abney’s total com- ries about 4%. Mr. Abney, a four-decade The company said its three-
pensation was 21% higher than UPS says the higher salary UPS veteran who took over as year performance missed tar-
the previous year. and one-time grants were de- CEO in 2014, made $13.7 mil- gets for revenue growth, oper-
The September equity signed to keep the company’s lion in total compensation for ating return on invested
awards were valued at $2.6 pay competitive with peers, 2016, according to the filing. capital and total shareholder
million for the top five execu- and to also tie more of the His salary of nearly $1.1 mil- returns. Those goals were set
tives, according to a Securities compensation to future per- lion was 6.3% higher than the year Mr. Abney took over
and Exchange Commission fil- formance. The stock options 2015. The estimated value of as CEO. The company also
ing on Tuesday, and helped vest over five years and the stock and option awards rose missed some of its 2016 finan-
offset some performance- restricted stock awards are 22% to $10.2 million, including cial targets.
shares fell 9% on the Feb. 14
disclosure of a $3.04 billion
fourth-quarter loss and addi-
tional bad news the next day:
in 2014.
At last week’s board meet-
ing, Mr. Hancock explained
how his team had reduced the
parture during their executive
session, the people said. Such
sessions exclude the CEO and
other members of manage-
nies and new investment op- Continued from the prior page lowered targets for improving risk of additional reserve ment.
portunities.” began to focus on improving two closely watched profit charges by signing a reinsur- Mr. Steenland and several
Valeant replaced its chief results in the remaining busi- measures. ance agreement in January other directors then summa-
executive last year and is try- nesses. The results included a $5.6 with Berkshire Hathaway Inc. rized the sentiments to Mr.
ing to move away from the Mr. Hancock said in a billion boost to claim re- In addition, the company has Hancock in his 30th-floor cor-
strategies that once made it a memo to employees last week serves. Some of the charge dramatically reduced its expo- ner office overlooking the
market darling but later came that he was leaving because, applied to policies sold during sure to some types of liability East River, the people said.
under criticism, such as buy- “without wholehearted share- the financial crisis, when rival insurance sold to U.S. busi- Mr. Hancock told the group
ing other drug companies and holder support for my contin- executives have said AIG un- nesses such as trucking firms, he should step down “if he
drastically boosting their ued leadership, a protracted dercut them on prices to keep while also sharply reducing does not have the unwavering
drugs’ prices. period of uncertainty could revenue flowing. expenses, among other steps. full support of the entire
But Valeant is coping with undermine” turnaround ef- More alarming to some an- Some AIG board members board,” according to a person
a $30 billion debt load and is forts. Mr. Icahn said last week alysts and investors, the found management’s presen- familiar with the matter.
anticipating declines this year he supported the board’s ac- charge also applied to policies tation compelling. “Peter and As part of the transition
in its revenue and adjusted tions. sold from 2011 through 2015. his team were doing a good process, AIG has hired an ex-
earnings before interest, taxes, Mr. Hancock appeared to Mr. Hancock directed the job,” one person said. ecutive-search firm to help it
depreciation and amortization. be making headway in im- property-casualty unit from Still, the independent di- look for a new CEO, a person
It is trying to sell assets but so proving results, but AIG 2011 to 2014 and became CEO rectors leaned toward his de- said.
far hasn’t been able to seal
larger deals.
Mr. Ackman’s exit from
Valeant also appeared to
weigh on the company’s
bonds. Valeant’s 5.875% unse-
STREET to Friday’s close. In February
they moved together in
seven out of 19 trading days,
or 37% of the time, against
Vanishing Volatility
Implied volatility for the S&P 500 has tumbled, but the inverse
link between stocks and the VIX gauge of volatility isn't as
cured notes due 2023 traded Continued from the prior page just 18% in the 20 years up strong as usual.
Tuesday morning at 74.75 But volatility traders care to November’s U.S. election.
60 VIX
cents on the dollar, down from as much about a melt-up in While the pattern of VIX
75.75 cents at the end of Mon- stocks as they do about the changes has been eccentric, its
40
day and 78 cents on Friday, ac- more common meltdown, actual level is extremely low:
cording to MarketAxess. Its and the risk of being caught The VIX has been lower only
20
new secured bonds are faring out by a jump in shares is 6% of the time since 1990.
better, with its 7% notes due also seen to be rising. This is largely because the big 0
2024 still trading above par at Pravit Chintawongvanich swings by sectors within the
100.75 cents, compared with at options broker Macro S&P 500 have largely offset 2500 S&P 500
101 cents Monday. Valeant’s re- Risk Advisors in New York each other, keeping realized
cent refinancing helped push says the hunt for yield last volatility down, while strong 2000
out its debt maturities, giving year pushed more investors inflows helped lift everything.
it more time to raise cash by to sell call options as a way Once inflows dry up or the 1500
selling assets. to generate income (although sectoral rotations stop cancel-
“We appreciate the support in reality they are selling po- ing out, volatility will no lon- 1000
and guidance that Bill and tential future gains). ger be hidden.
Steve provided during a chal- As the market goes up, For now, the market is be- 500
lenging time,” Valeant said those calls become a liability, having oddly, and it shows the
Monday night. The company prompting the investors to dilemma investors face. Stocks 0.0 VIX and S&P 500 correlation*
said it was “fortunate to have buy back calls to avoid being are expensive, yet the global –0.2 Lower means
the benefit of a talented and hit if there is a melt-up. The economy has been picking up stronger
experienced group of directors buying makes calls more ex- and the new U.S. administra- –0.4 movement in
opposite
who share our strategic vision, pensive, and so pushes up tion promises corporate tax –0.6 directions
believe in our prospects and implied volatility. cuts and a fiscal boost.
are dedicated to turning the The pattern has been Both meltdown and melt- –0.8
company around for the bene- slightly less strong this up look more likely than –1.0
fit of all shareholders and month than last, with the usual. The calm on the surface
2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17
stakeholders.” VIX and S&P 500 moving in of the S&P 500 also means it
—Sam Goldfarb the same direction on two is cheaper than normal to *30-day correlation of daily changes
contributed to this article. out of seven trading days up hedge against either, or both. Source: Thomson Reuters THE WALL STREET JOURNAL.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | B3

BUSINESS NEWS

U.S. to Review Fuel Rules Volkswagen Says

BY MIKE SPECTOR

President Donald Trump

New Gains Likely
rattled car executives for BY WILLIAM BOSTON whether he would be open to
months by threatening a stiff talking with Fiat Chrysler, said
border tax on Mexican imports WOLFSBURG, Germany— Volkswagen is “more open to
and questioning their commit- Volkswagen AG forecast partnerships now than we
ment to U.S. jobs. higher sales and earnings de- used to be.” He added that he
Now, he’s granting them a spite continued costs from the isn’t currently in contact with
much desired reprieve—on company’s emissions-cheating Fiat Chrysler CEO Sergio Mar-
fuel-economy regulations. scandal. chionne.
Mr. Trump heads to Detroit The German car maker on Volkswagen last week
Wednesday, a trip coinciding Tuesday offered details of its pleaded guilty to criminal
SHAWN THEW/EUROPEAN PRESSPHOTO AGENCY

with the expected reversal of results from last year, for which charges for rigging diesel-
an 11th-hour Obama adminis- it recently released headline powered vehicles to cheat on
tration decision to lock in numbers. The giant automotive government emissions tests,
tougher targets for tailpipe group returned to a profit, re- capping the final significant
emissions. bounding after the diesel crisis U.S. legal settlement expected
The Environmental Protec- led to a 2015 loss that was the in a deception that hammered
tion Agency, after weeks of in- worst in its history. the German auto company’s
dustry lobbying, plans to re- Volkswagen still faces a reputation and finances.
open a review of the challenge convincing investors For the new year, Volks-
regulations. The standards call it will deliver strong earnings wagen forecast a 4% increase
for companies to sell vehicles in coming years after racking in sales revenue, moderately
averaging 54.5 miles a gallon, up more than $25 billion in higher vehicle sales, and a
or roughly 40 mpg in real-world President Trump is flanked by GM CEO Mary Barra and Fiat Chrysler CEO Sergio Marchionne. fines, penalties and compensa- pretax return on sales of be-
driving, by 2025 and would re- tion in the U.S. to settle crimi- tween 6% and 7%.
main in place in the meantime. outside the U.S. uary with other car executives. tion, a Trump adviser pledged nal and civil litigation related
Auto makers contend the Car companies in recent The EPA’s final determina- the incoming administration to the diesel scandal.
targets, which start toughen- months have spotlighted U.S. tion made Jan. 13 required “a would review the car regula- Last year “did not turn out
ing in 2022, will be difficult to commitments, and in some thoughtful and collaborative tions. to be the nightmare year that
The auto maker
meet with low gasoline prices cases changed foreign-invest- decision-making process” but The electric and hybrid cars many predicted for Volks- returned to a profit
steering consumers to higher- ment plans. Mr. Trump in turn the agency instead “opted for auto makers contend are wagen,” Chief Executive Mat-
emitting and fuel-thirsty touted their moves, even when political expediency and needed to meet the standards thias Müller told reporters.
last year, after crisis
pickup trucks and sport-utility they were long-planned and jammed through” the decision, currently make up only a “Even though much work lies led to a loss for 2015.
vehicles. The EPA found auto not necessarily responses to wrote John Bozzella, head of a sliver of U.S. sales. Mitch Bain- ahead of us, Volkswagen is
makers are capable of meeting his criticisms. Washington lobbying group wol, head of a Washington lob- back on track.”
the standards without relying At the same time, auto representing foreign car mak- bying group representing a The company recently re-
too much on electric-car tech- makers pushed to undo the ers with U.S. operations, in a dozen car makers, said in a ported net profit of €5.14 bil- The outlook for 2017 was
nologies, and that the rules EPA’s final determination letter asking regulators to re- letter to the EPA’s Mr. Pruitt lion ($5.48 billion) for last neither as detailed nor as ro-
would cut oil consumption and made a week before Inaugura- open the review. that complying with the cur- year, after a record loss of €1.6 bust as investors had hoped,
greenhouse-gas emissions, tion Day that locked in future An industry-funded report rent standards would cost the billion for 2015. Volkswagen causing Volkswagen’s widely
while saving consumers $92 emissions targets. from Indiana University re- industry $200 billion. generated 2016 revenue of traded nonvoting preference
billion at the fuel pump. The process wasn’t ex- leased last week urged regula- Any efforts to eventually €217.3 billion, an increase of shares to slip 0.5% to €144.78
Mr. Trump is set to make pected to be completed until tors to “reconsider the sched- relax the emissions and mile- nearly 2%. The company sold in afternoon trading on the
remarks from a Ypsilanti, April 2018. The agency regu- ule and explore a variety of age standards likely would 10.4 million vehicles in 2016, Frankfurt Stock Exchange.
Mich., testing center for con- lates tailpipe emissions and refinements” to the current face lawsuits from environ- overtaking Toyota Motor Corp. VW-brand operating profit
nected and self-driving cars. often expresses future targets standards, which it contends mentalists and consumer as the world’s largest auto declined 11% to €1.9 billion last
The appearance gives the Mo- in terms of fuel economy. would boost vehicle prices and groups, with support from maker by sales. year.
tor City—home to three U.S. Senior executives from Gen- threaten 600,000 jobs before congressional allies, arguing Mr. Müller also said he Although the Volkswagen
auto makers—additional atten- eral Motors Co., Ford Motor losses ebb. GM and Chrysler’s 2008 and hasn’t given much thought to passenger-car business is the
tion to efforts to compete with Co., Fiat Chrysler Automobiles While car makers have been 2009 government rescues a potential alliance or merger company’s biggest division,
Silicon Valley on future auto- NV, Toyota Motor Corp. and pining for the EPA to reverse stemmed partly from commit- with Fiat Chrysler Automo- most of the company’s profit
mobile technology on top of other manufacturers wrote to course on reviewing emissions ting too much to high-margin biles NV after General Motors comes from its luxury brand
the coming regulatory relief. Mr. Trump in February seek- standards, the move is in line gas guzzlers. Co. decided to sell its Euro- Audi and sports-car maker
For car makers, reconsider- ing to have the review re- with Mr. Trump’s pledge to “Donald Trump is waging a pean business to Peugeot SA Porsche.
ing the review of emissions opened, and lobbying groups dismantle Obama-era climate- war on the environment,” said of France. “We haven’t really Porsche remained robust in
and fuel-economy standards for the companies followed change regulations. Mr. Pruitt Sen. Edward Markey (D., entertained the question,” he 2016, posting a nearly 14% rise
opens the door to potentially with letters to Scott Pruitt, last week questioned whether Mass.) during a recent confer- said. “I have nothing to say in earnings to €3.9 billion.
rolling back costly environ- Mr. Trump’s recently-con- the EPA can regulate carbon ence call. “Undoing the fuel ef- about that.” But Audi is struggling. The
mental regulations after they firmed EPA administrator. emissions and expressed ficiency standards would harm Shares in Fiat Chrysler brand’s new-car sales edged
suffered unrelenting Twitter Ford CEO Mark Fields lobbied doubt about their contribution consumers, harm our energy were up 0.5% at €10.46 in Mi- up slightly last year, but earn-
missives from the president Mr. Trump directly during a to global warming. A day after security and increase global lan on Tuesday afternoon. ings slipped nearly 6% to
concerning their investments White House breakfast in Jan- November’s presidential elec- warming pollution.” Mr. Müller, when asked €4.85 billion.

Bring us your ideas.

We’ll make a
difference together.
Create change for communities that need it most—join The Wall
Street Journal’s Financial Inclusion Challenge, sponsored by MetLife
Foundation. The Journal invites nonprofit and for-profit enterprises to
submit innovative ideas that help the poor gain access to basic financial
services in the Asia-Pacific region.

Finalists will present their innovations at the Financial Inclusion dinner in

Hong Kong, where the winner will be chosen. All finalists will be invited
to the first Wall Street Journal D.LIVE conference in Asia, where they
will network with the biggest names in tech and take part in a workshop
session for startup executives.

The deadline has been extended to March 22, 2017—submit

your ideas now.

LEARN MORE WSJ.COM/FinancialInclusion

FOLLOW Facebook.com/WSJFinancialInclusion
SHARE #WSJInclusion

SPONSORED BY

© 2017 Dow Jones & Co. Inc. All rights reserved. 6DJ4995
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, March 15, 2017 THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Software Startups Follow Snap Facebook

Bans Use
IPO filings by Okta eral big tech companies, in-
and Yext stoke hopes
after a weak year
cluding Microsoft Corp. and
Oracle Corp.
Okta says it has more than
Of Data
for tech offerings
2,900 customers including
professional networking site
LinkedIn Corp., casino opera-
For Spying
BY SCOTT AUSTIN tor MGM Resorts International BY DEEPA SEETHARAMAN
and Twentieth Century Fox,
Two software startups, which is part of 21st Century Facebook Inc. said on Mon-
Okta Inc. and Yext Inc., are Fox Inc. day that data about its users
trying to pick up where Snap Venture-capital firms to- can’t be used for surveillance,
Inc. left off, becoming the first gether own the majority of cracking down on a method po-
tech companies to file for an Okta after investing over $200 lice departments allegedly used
initial public offering after the million. Among its biggest in- to track protesters and activists.
blockbuster IPO by the parent vestors are Sequoia Capital, The social-media company
of Snapchat earlier this with a 21.2% stake, and An- updated its data policies to
month. dreessen Horowitz, which explicitly prohibit using “data
Neither startup is a house- owns 19.6%, according to obtained from us to provide

BRENDAN MCDERMID/REUTERS
hold name like messaging app Okta’s filing. tools that are used for surveil-
Snapchat, but they both aim to Yext, founded a decade ago, lance.” Facebook didn’t define
capitalize on the fast-growing offers cloud software that lets surveillance in the policies.
cloud-computing market. companies manage and sync The move comes after the
San Francisco-based Okta, their publicly accessible infor- American Civil Liberties Union
which was last valued at $1.2 mation—such as address, in October published docu-
billion, has gained recognition phone number and menu de- ments by a startup, Geofeedia,
among corporate IT managers tails for a restaurant chain— that detailed how it tracked
overseeing the growing use of Many bankers have predicted a breakout year for tech IPOs following Snapchat’s March offering. on more than 100 services in- activists during protests in
web services in the workplace. cluding Google Maps, Baltimore and Ferguson, Mo.,
New York-based Yext, valued Of the few tech companies cess to private capital remains contractors a single secure Instagram and Yelp. in 2015 and 2014 after two
at over $500 million in 2014, that went public last year, readily available. On Monday, login for the various websites The company’s revenue black men were killed during
helps businesses manage their most of them surged out of the chief executive of home- and mobile applications they rose 38% to $88.6 million in encounters with the police.
online identities among ever- the gate day only to have their rental firm Airbnb Inc.—val- use. Okta touts its security, the first nine months, for a Geofeedia’s marketing mate-
growing web services. shares reverse course. Nutanix ued this month at $31 billion identifying employees and loss of $28.6 million. Yext is rials, revealed by the ACLU,
Many bankers and venture Inc., for example, more than after raising $1 billion in fund- contractors remotely and al- also primarily a subscription showed how police were able
capitalists have predicted a doubled in its market debut ing—suggested at a conference lowing them to access corpo- business, offering packages to track social-media activity in
breakout year for tech IPOs in last September, but the soft- that the company could be rate information from any de- ranging from $199 to $999 a specific neighborhoods and get
2017 after the slowest year for ware company lost about one- ready to go public next year. vice. year. It warns that about 22% real-time alerts through Geo-
U.S. tech offerings since 2009. third of its value earlier this Okta and Yext are growing In the first nine months of of its revenue is tied to five feedia. The firm also urged po-
But so far Snap has been the month after issuing a weak quickly but remain unprofit- last year, Okta’s revenue rose customers. lice to follow hashtags on Face-
only tech IPO, and few compa- outlook. Nutanix is still trad- able as they plow a majority of 90% from a year earlier to Venture firms also own book, Instagram and Twitter
nies have filed to go public. ing at about 30% above the their revenue into sales and $111.5 million, on a loss of $65 most of Yext after investing Inc. associated with the Black
Software maker AppDynamics IPO price. marketing. million. Okta makes most of over $100 million. Sutter Hill Lives Matter movement. (Insta-
Inc. was bought by Cisco Sys- There are few signs that a Started in 2009 by two its money from subscriptions, Ventures is the largest share- gram is part of Facebook.)
tems Inc. in January for $3.7 tech company as big as Snap— early employees of Sales- ranging from $1 to $4 a month holder with a 23.6% stake. The report sparked a debate
billion days before it was to go valued at about $24 billion— force.com Inc., Okta sells soft- per user depending on the ser- —Maria Armental among advocacy groups about
public. will go public this year as ac- ware that gives workers and vices. It competes against sev- contributed to this article. how closely Facebook was mon-
itoring the way third parties
used its data, considered one of

INTEL friend? There are great part-

nership opportunities out
there.”
Thus far, auto makers have
“Auto companies need Big
Tech as much as Big Tech
needs auto companies,” said
Phil Magney, founder of Min-
the world’s richest sources of
information on its users.
“Now more than ever, we
expect companies to slam shut
Continued from page B1 struggled to compete with neapolis-based technology re- any surveillance side doors
embedding computing power tech companies in areas such search firm Vision Systems and make sure nobody can use
ATEF SAFADI/EUROPEAN PRESSPHOTO AGENCY

and connectivity into every- as dashboard infotainment or Intelligence. “They both bring their platforms to target peo-
day objects, and making mapping. At the same time, different assets to the table ple of color and activists,” said
money from cars that collect tech companies have faced a and realize they can’t do it all Nicole Ozer, who is technology
loads of data and become a learning curve and grown to by themselves.” and civil liberties director at
platform for a suite of ser- appreciate how difficult it is Intel’s acquisition seems to the ACLU of California.
vices, much like a smart- to build a car from scratch. bear that out. The company
phone. Ford, General Motors Co. remains more than an arm’s
“It just shows you the kind and others are investing heav- length from auto makers as
of companies that are consid- ily to catch up, spending on Mobileye sells to larger sup-
The social-media
ering this space interesting,” proprietary technology to de- pliers, not directly to vehicle- company is asserting
said Ford Motor Co. Chair- velop autonomous vehicles or assembly plants.
man Bill Ford, speaking at the hiring teams of software engi- “Tech companies are realiz-
its power in the face
South by Southwest Interac- neers. Others aren’t plowing Intel has struck a deal to buy Mobileye for $15 billion. ing that auto suppliers [have] of law enforcement.
tive Conference in Austin af- down that path. Fiat Chrysler become the critical ‘bridge’
ter Intel’s deal was an- Automobiles NV, for instance, Both Apple Inc. and car making, they have nar- into [the] auto industry,” said
nounced. “The question then is outsourcing its self-driving Google’s parent have wavered rowed their scope to autono- David Leiker, an auto analyst
for us at Ford is, are they program to Alphabet Inc.’s on how they want to enter the mous driving systems, leaving with Robert W. Baird & Co. By prohibiting the use of its
friend or foe? And if they are Waymo, formerly known as auto industry. Once thought the metal bending to Detroit —Eliot Brown data to track citizens, Face-
foe, can they turn into a Google’s car project. to be considering getting into and its rivals. contributed to this article book is asserting its power in
the face of law enforcement. It
also reveals the increasingly

Insurance Boost Ordered for SpaceX Rockets

dominant role it plays in dis-
seminating information.
Facebook’s granular data
about its users is hugely
BY ANDY PASZTOR valuable to advertisers and
developers who want to
A SpaceX rocket that was reach narrow segments of
scheduled to lift a commercial people. But it has landed in
satellite into orbit from Flor- trouble for privacy violations
ida before dawn on Tuesday and potential misuse.
carried five times as much lia- Last year, Facebook
bility coverage for prelaunch amended its advertising pol-
operations as launches in pre- icy to no longer allow mar-
vious years. keters to target groups by
The higher limit, mandated ethnicity when they bought
by federal officials, reflects housing, employment and
heightened U.S. concerns credit-related ads. The move
about the potential extent of followed an investigation by
damage to nearby government news site ProPublica that it
property in the event of an ac- had been able to exclude any
cident before blastoff. At this Facebook members with an
point, it isn’t clear what “ethnic affinity” when pur-
prompted the imposition of chasing an ad targeted to us-
higher liability coverage on ers looking for a home.
Space Exploration Technolo- After the ACLU’s investiga-
gies Corp. tion, Facebook, Instagram and
The launch was scrubbed Twitter banned Geofeedia from
JOE SKIPPER/REUTERS

due to high winds, and the using the platform. Since then,
next attempt is scheduled for Facebook has cut off other de-
early Thursday. velopers from using its data
Before approving this for creating or marketing tools
month a license authorizing meant for surveillance, the
launch of a Falcon 9 rocket company said Monday.
from the Kennedy Space Cen- The increased liability coverage reflects concerns about potential property damage in the event of an accident before blastoff. Twitter acted more swiftly
ter to transport an EchoStar than Facebook, updating its
Corp. broadcast satellite into 39A, where Apollo missions to what prompted the more ex- idant into boosters. million in coverage for poten- policies in November to rule
orbit, the Federal Aviation Ad- the moon blasted off decades tensive insurance require- SpaceX supporters, how- tial damage to nongovernment out the use of its data for
ministration mandated at least ago, had similarly heightened ments. In a statement, the ever, dispute that explanation, property from a lower stage re- surveillance.
$63 million liability coverage prelaunch insurance coverage agency indicated it determines saying the higher insurance turning to land vertically using Facebook’s moves come at a
for government property that requirements. liability coverage on a case-by- limits result solely from a dif- its own thrusters. time when Chief Executive
could be damaged by pre- Last year’s accident, which case basis, depending on an- ferent launch location that has The roughly 12,000-pound Mark Zuckerberg has broad-
launch activities. occurred at nearby Cape Ca- ticipated rocket trajectories, more government property in satellite slated for launch ened Facebook’s remit from
Until this year, the required naveral Air Force Station, de- launch locations and other the vicinity. Tuesday was supposed to go “connecting the world” to cre-
coverage for such operations stroyed the rocket, creating a variables. Still another insurance is- up in late 2016, but that mis- ating its “social infrastruc-
was $13 million. fireball that also destroyed a “Each application is evalu- sue is looming for SpaceX. The sion was scrubbed due to the ture.” One focus for Mr. Zuck-
The amount of coverage re- commercial satellite and dam- ated and determinations are FAA, in conjunction with other September explosion. erberg is whether Facebook
quired for the flight itself—to aged the launch facility. made” regarding “terms and federal agencies, will soon Unlike many recent “prevents harm, helps during
pay for possible damage to The company’s coverage re- conditions for the protection have to set liability coverage launches, the satellite’s weight crises, and rebuilds after-
government property in case quirements for prelaunch op- of public health and safety,” requirements for SpaceX’s means that after the main en- wards.”
the booster malfunctions and erations at Vandenberg Air according to the statement. A plans to launch reconditioned gines stop firing, the Falcon 9 Facebook credited the ACLU
parts fall back to earth—hasn’t Force Base in California didn't spokesman declined to com- boosters that already have won’t have enough fuel left in and two other advocacy
changed. FAA records show change after the explosion. ment on whether the 2016 ac- flown to space. its tanks to attempt a con- groups, Color of Change, and
the license was issued on SpaceX’s rocket fleet was cident specifically influenced The company has projected trolled return and landing. But the Center for Media Justice,
March 1. grounded until January, and the latest license require- that this year it will send up SpaceX increasingly is focused for helping the company for-
This week’s planned launch the damaged Air Force pad ments. as many as six rockets with on upgrading the rocket’s re- mulate its response to broader
is the second Falcon 9 mission isn’t expected to resume oper- Some industry officials and such used first stages and usable features, with company public concerns about social-
from the venerable Florida ations until the summer. The others said the revised insur- main engines, which SpaceX officials saying that strategy media surveillance.
space center since a Septem- company’s fueling procedures ance limits reflect elevated describes as “flight tested.” will provide data to improve In a collective statement,
ber 2016 rocket explosion dur- have been changed as a result concerns related to last fall’s In an unrelated instance, the reliability as well as lower the groups called this a “first
ing routine ground tests at a of the accident, and some de- accident, particularly potential FAA significantly raised manda- launch costs. The first launch step.” Facebook didn’t specify
nearby Air Force pad. sign changes to the rocket are hazards stemming from tory liability limits in July 2016, of a refurbished Falcon could how it would monitor whether
A February launch by expected later. SpaceX’s unconventional load- when the agency required come as early as the end of its data is being used accord-
SpaceX from the same pad, The FAA didn’t elaborate on ing of supercooled fuel and ox- SpaceX to carry an extra $140 the month. ing to policy.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | B5

MANAGEMENT
Carlos Ghosn,
Nissan’s ‘Le Cost
‘Car makers will
adapt to everything.
We’re operating in

Killer,’ Grapples
100 different
countries...’

With Next Move

Executive who forged alliance with Renault, Mitsubishi on what it takes
to manage three firms: being ‘extremely disciplined, extremely organized’
BY JOHN D. STOLL cleaner and more autono- san and my office at Mitsubi-
mous machines is his biggest shi—on top of going from
It has been nearly two de- job. Mr. Ghosn recently sat time to time into the opera-

DAVID BECKER/GETTY IMAGES

cades since Carlos Ghosn down with The Wall Street tions just to make sure that
showed up in Japan to re- Journal in New York. we don’t lose contact with
shape a wilting Nissan Mo- Edited excerpts: the reality. You know, the
tor Co. Mr. Ghosn, raised in United States, China, India,
Brazil and Lebanon and edu- The Wall Street Journal: How Brazil, Russia and Europe.
cated in France, shattered do you fully turn over the
cultural norms with an ag- reins at Nissan to Mr. Sai- WSJ: Looking at today’s po-
gressive downsizing cam- kawa? litical atmosphere, with Nissan CEO Carlos Ghosn says making cleaner and more autonomous vehicles is his biggest job.
paign. It earned Mr. Ghosn: Everything is very themes like Brexit and
BOSS him the title “Le concrete. I used to chair the “America first,” is globaliza- of this adaptation for the and the new rules that are you need to ask your dad?”
TALK Cost Killer.” executive committee; he’s tion at risk? consumer? Nobody is going going to hopefully happen From time to time they ask
Nissan, which going to chair the executive Mr. Ghosn: I still believe glob- to say, “I’ve got a tax on the this year are going to guide you, if there is trouble. Give
tied up with Re- committee. I used to chair alization is an unstoppable border. I’m going to include us—trade rules, tax rules, your opinion. But I always
nault SA in 1999, was re- the nomination committee; force, but globalization is it in my price,” because etc.—everybody believes that say, don’t feel obliged to fol-
born. He shifted Nissan’s fo- he’s going to chair the nomi- facing challenges because you’re competing. Every time is going to happen in 2017. low it.
cus toward the profitable nation committee [and so people have forgotten the you have a high cost, the last This is going to help us make
U.S. market, while also jump- on]. It’s very simple. Every- advantages that it has thing you want to do is to much better decisions. WSJ: Do you benefit from
starting Renault and blend- one knows that the ultimate brought. If you spend your adjust your price. So you’re her insights into the auto in-
ing two very different corpo- decision maker is going to time not talking about the going to try to absorb the WSJ: What have you learned dustry or millennials?
rate cultures. Saikawa-san, and he will benefits of globalization, in- cost the best way you can. so far about dealing with the Mr. Ghosn: This is a genera-
Mr. Ghosn, 63 years old, have to confer with the stead focusing on some of Trump administration? tion we are very interested
turns Nissan’s helm over to board about strategy and the excesses or some of the WSJ: How could Nissan be Mr. Ghosn: We need obviously in, so letting them react in
Hiroto Saikawa on April 1, a performance of the company. frustration it creates, you affected? to listen and act when they front of products, technology
move that followed some end up in a situation where Mr. Ghosn: Today we practi- decide, not before. I do not trends, colors—is very inter-
soul searching. “You need to WSJ: How do you manage to people don’t understand why cally have full capacity in want to pre-empt anything. I esting. They are amazingly
ask yourself the ques- oversee three different com- they need to continue to feed North America. We’re using just want to make sure we’re homogenous in this genera-
tion,“Where am I the most panies and an alliance opera- into this trend. every single plant. Our plant following what the adminis- tion. They like the same
useful, where I am the most tion? in Tennessee is the largest tration wants. thing and they dislike the
needed, where can I contrib- Mr. Ghosn: You have to be ex- WSJ: Can you handle changes plant in North Amer- same thing.
ute the most?” he said. tremely disciplined and ex- to Nafta or other trade ica—642,000 cars we’re WSJ: Your 29-year-old So it’s pretty clear in what
There’s no shortage of op- tremely organized. I have agreements? working on in three shifts. daughter Caroline runs a direction you should go.
tions. Mr. Ghosn remains four places where I work. Mr. Ghosn: Car makers will Our plant in Canton (Missis- company. Does she lean on
chairman of Nissan, in addi- One is Amsterdam, where I adapt to everything. We’re sippi) is not far from full ca- you for advice? Watch the video
tion to leading the boards of
Renault and newly acquired
Mitsubishi Motor Corp. He
am managing the synergies
of the alliance; then you
have Paris for Renault and
operating in 100 different
countries and in many coun-
tries you have political
pacity. Our plants in Mexico
are full capacity. So frankly
we are an easy case because
Mr. Ghosn: The last thing
(young people) want is ad-
vice from their father. Their
WSJ
.COM
and find more
management
coverage at
says helping reinvent the al- then in Tokyo I have two change, regime change. The we are going to need to add colleagues and everyone else WSJ.com/
liance’s automobiles as places—headquarters at Nis- question is, what is the cost capacity in North America is going to say, “Oh my god, Management

H-1B Visas Keep Down U.S. Tech Wages, Study Finds

BY JOHN SIMONS search on immigration of highly shortage of American tech ers. The agency says the
skilled workers—not solely workers. U.S. employers can freeze will give it time to ad-
Silicon Valley has long por- H-1B holders—found overall sponsor up to 85,000 H-1B dress a backlog of applications
trayed the U.S. visa program positive effects on wages across holders a year. The visas last and help it improve overall
for skilled foreign workers as a variety of job sectors. for up to three years and hold- H-1B visa processing times.
a win-win, providing much- John Bound, a professor at ers can seek one renewal, Jennifer Hunt, former chief
needed tech talent and fueling the University of Michigan and which allows for a total stay of economist at the U.S. Depart-
innovation and economic one of the authors of the new six years. ment of Labor under President
growth. study, said he and his fellow Sustaining and expanding Obama, said she’s noticed an
PATRICK T. FALLON/BLOOMBERG NEWS

Critics—including President researchers focused their pa- the H-1B program has long increasingly politicized re-
Donald Trump—have said that per on the 1994 to 2001 period been one of the tech industry’s sponse to research on immi-
the H-1B visa program disad- because it was the longest top lobbying concerns. gration and wage inequality.
vantages American workers by stretch of time when employ- Under a president who has She said she would have
allowing companies to hire ers claimed all available H-1B encouraged the nation to hire preferred that Mr. Bound and
cheaper foreign labor for roles visas. However, in an earlier American and buy American, his co-authors focus on more
that would have gone to U.S. paper, they found that a simi- such findings could make the recent time periods, but added
workers. lar model did “a good job cap- industry’s fight more difficult. that the paper is “the best
A new research paper on turing the movement of wages As president-elect, Mr. work we have by a long way”
the effects of the H-1B visa and employment in the 2001 to Trump hinted that his stance in quantifying the “negative”
program on workers suggests Influx of skilled foreign workers led to fewer jobs and lower 2011 period,” Mr. Bound said. on H-1B program may have effects of high-skilled immi-
the influx of skilled foreign wages for American tech workers, a new research paper shows. “There is little reason to softened. gration.
workers has historically led to believe the overall impact of The U.S. Citizenship and The paper, “Understanding
lower wages and employment University of California, San the H-1B visa program and em- high-skilled immigrants on the Immigration Services recently the Economic Impact of the
for American tech workers. Diego, analyzed employment, ployment of U.S. workers in U.S. economy has changed dra- announced that it will tempo- H-1B Program on the U.S.,”
Such findings could further wages and other factors over the field would have been as matically since 2001,” he said. rarily suspend fast-track pro- written with co-authors Nico-
inflame debate around immi- an eight-year period ending in much as 10.8% higher in 2001. Since the Immigration Act cessing of H-1B visas for up to las Morales of the University
gration of high-skilled work- 2001. They found that, while Giovanni Peri, an economics of 1990 established the H-1B six months starting in April. of Michigan and Gaurav
ers, but some economists cau- the visa program bolstered the professor at the University of visa for college-educated for- The halt means immigra- Khanna of the University of
tion against making too much U.S. economy and corporate California, Davis, said the new eigners, tech employers have tion services won't allow California, San Diego, was
of the result. profits, tech-industry wages research is noteworthy, but relied on the program as an sponsoring companies to pay published in February by the
Economists from the Uni- would have been as much as would like to see more studies important source of labor to an extra fee to expedite their nonpartisan National Bureau
versity of Michigan and the 5.1% higher in the absence of on the issue. Mr. Peri’s own re- make up for a persistent applications for foreign work- of Economic Research.
© 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ52246

An Ambitious Your Invitation to a Global Adventure of Innovation

Circle the globe on a first-of-its-kind, 19-day expedition with acclaimed experts,
Adventure Awaits including WSJ and National Geographic Editors in Chief Gerard Baker and Susan
Goldberg, aboard a specially outfitted Boeing 757. See firsthand how technology
and creativity are revolutionizing societies with innovations that are making a
Celebrating Human Ingenuity: global impact.
An Exploration of Technology and Creativity by Private Jet
DESTINATIONS:
SILICON VALLEY, KYOTO OR NARA, SINGAPORE, JAIPUR, SEYCHELLES,
KIGALI AND VOLCANOES NATIONAL PARK, JERUSALEM, BARCELONA

BOOK SOON, JOURNEY DATES:

OCTOBER 22-NOVEMBER 9, 2017

This exclusive expedition is almost sold out—

reserve your seat today.

WSJandNatGeo.com (800) 941-0935

 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

JOURNAL REPORT

B6 | Wednesday, March 15, 2017 THE WALL STREET JOURNAL. © 2017 Dow Jones & Company. All Rights Reserved.

‘We consider the ‘We are trying

Trump effect and to make it easy Leaders Look
the policies of for people to do To Impact of
the new U.S. business in the
administration to country.’ Electricity—
be the biggest
risk for Kenya.’
Uche Orji, CEO of
Nigeria’s sovereign-
And Trump
wealth fund At The Wall Street Journal’s
Patrick Njoroge,
inaugural conference on Investing
governor of Kenya’s
in Africa: Technology, Transition
central bank
& Growth, top African business
RED PHOTOGRAPHIC LTD. (4)

leaders and policy makers dis-

cussed solutions for some of the
continent’s biggest challenges.
Among the central issues
raised at the gathering in Lon-
don last week was enhancing
the power supply across Africa,
which business leaders, both

Two Countries, Two Outlooks

Patrick Njoroge and Uche Orji discuss
the prospects for Kenya and Nigeria
Africa today is a continent with
starkly contrasting growth stories.
Kenya, with its diversified econ-
omy and relatively strong institu-
tions, weathered the recent crash in
commodities prices fairly well, while
nations more dependent on oil and
mining, such as Nigeria, took a hit.
Patrick Njoroge, Kenya’s central
bank governor, and Uche Orji, chief
executive officer of the Nigeria Sov-
ereign Investment Authority, talked
with Joe Parkinson, The Wall Street
Journal’s Africa bureau chief, about
where investment in Africa is flowing
now and what new opportunities
and risks are emerging.
Edited excerpts follow.
A better year?
MR. PARKINSON: Kenya has emerged
as a poster child of resilience, not
least because you’ve had more suc-
cess than many of your peers in di-
versifying your economy. What en-
abled you to get that leg up?
GOV. NJOROGE: The most important
thing was just having a very robust
and dynamic private sector. That
without a doubt allowed us to bene-
fit from an obvious advantage re-
lated to geography—we are very
close to a lot of the other coun-
tries—and in terms of diversifying
production sectors and exports.
It wasn’t a specific policy that led
to this outcome. Rather, the private
sector saw opportunities and capi-
talized on them. Now, external inves-
tors are seeing the benefit of that di-
versification, and they’re investing
in Kenya, using that as a launchpad
for potential activities in sub-Saha-
ran African.
MR. PARKINSON: Uche, the outlook in
Nigeria over the past couple of years
has been very different. What has the
sovereign-wealth fund been doing to
mitigate the impact of the downturn,
and are you starting to see the begin-
nings of a shift in the cycle?
MR. ORJI: For Nigeria, the latest sta-
tistics will probably suggest that
we’re nearing a bottom.
My view had always been that
2017 will be a much better year than
2016 was. And to that extent, we
started to shift the investment focus
of the Nigeria Sovereign Investment
Authority from external-focused in-
vestments to domestic. Up until now,
our domestic focus was less than 6%.
We anticipate by the end of the year
we should be nearing somewhere in
the teens in terms of the invest-
ments we’re making domestically, as
the downturn has turned up signifi-
cant buying opportunities.
The other thing I would point to
is that it’s also an economy in transi-
tion. Nigeria’s economy is more di-
versified than people give it credit
for. What isn’t diversified is govern-
ment revenue—90% comes from
oil—but oil accounts for less than
20% of gross domestic product. Agri-
culture is about 30% to 35%. There’s
manufacturing, and other sectors.
So the challenge is trying to link
the diversified economy to govern-
ment revenue, improving tax collec-
tions and ensuring that we can man-
ufacture to a standard for exports.
MR. PARKINSON: Kenya has been a
continental leader in technology. But
there has been criticism that some of
these technology companies perhaps
are better at getting headlines than
actually making profits. How is the
sector evolving in Kenya, and what
can the government do to provide
the best possible environment to
make it profitable?
GOV. NJOROGE: The government has
been pushing them to focus more on
solving particular problems. What-
ever innovation or innovative tool
these firms come up with, they need
to ask themselves: “What is the
problem that this thing is going to
address?” So don’t create an imagi-
nary problem and try to solve that;
see what problems are out there—
there are tons of them—and work on
those. Be focused on the customer.
And all of those opportunities, of
course, are good for the bottom line.
The Trump effect
MR. PARKINSON: Clearly there are op-
portunities in Nigeria, but there also
are concerns about the policy envi-
ronment. What message do you have
Risk Factors
Participants in the Journal’s Investing in
Africa conference said the biggest risk
to Africa’s economic outlook this year is:
Strong
dollar/ Poor policies
inflation 61%
26%
U.S. protectionism | 8%
Hidden debt | 4%
THE WALL STREET JOURNAL.
for people who may want to get back
into Nigeria, but would like more
clarity?
MR. ORJI: We are trying to make it
easy for people to do business in the
country. That’s everything from visa
policy to the ease of opening ac-
counts to the ease of setting up busi-
nesses. A lot has been done.
It’s very clear what’s happening in
agriculture. The sovereign-wealth
fund is investing a lot in agriculture
in Nigeria. We’ve done it two ways.
One is direct investment, and the
second is we’ve created an invest-
ment fund with a South African-
based company to invest in agricul-
ture in the country.
It’s amazing what there is to do.
Nigeria has fewer than 5,000 trac-
tors for the size of the country.
What an opportunity that is.
MR. PARKINSON: If the Trump admin-
istration’s protectionist rhetoric be-
comes reality, how will that affect
Africa?
GOV. NJOROGE: We consider the
Trump effect and the policies of the
new U.S. administration to be the
biggest risk for Kenya and, from my
perspective, for all of Africa and the
entire world.
If they [don’t implement] policies
that are protectionist, that would
have us growing at rates of 3% or so.
That isn’t very high, but it’s good.
But if we get a very aggressive,
protectionist policy, that will be det-
rimental to emerging markets and,
in the long run, to the U.S. as well.
And so you can very well see a
scenario that will end up being nega-
tive for global growth. That is terri-
ble for Africa. That’s terrible for
Kenya. We are very open, our econo-
mies. So to the extent that we de-
pend on the global economy, we will
actually get hurt in all this.
onstage and off, described as an
essential step toward accelerat-
ing African nations’ economic
growth. Delegates and speakers
also explored technology’s role
in enabling innovation, especially
in health care, agriculture and
education, driven by the needs
of Africans, not from the power
center of Silicon Valley.
Attendees examined the im-
plications of the Trump adminis-
tration for Africa. Speakers ex-
pressed concern that the new
administration might reduce the
U.S. engagement with Africa,
and a poll during the conference
showed two-thirds of attendees
believed President Trump would
be bad for Africa. But a survey
of 1,000 Kenyans conducted live
during the event by mobile
phone found respondents
roughly evenly split over the
president’s impact on Africa.
President Paul Kagame of
Rwanda said it was too early to
say what President Trump’s im-
pact would be but emphasized
that African nations should fo-
cus more on helping themselves.
“Maybe it will push African na-
tions to think about…doing
more trade and investment with
each other,” he said.
—Dan Keeler
INSIDE
Rwanda President Paul Kagame on
Africa in an age of populism, B7
Jay Ireland of GE and former OPIC
chief Elizabeth Littlefield on
solving Africa’s power puzzle, B8
Akinwumi Adesina, head of the
African Development Bank, on
five key steps to a more
prosperous Africa, B8

How Innovation in Africa Can Be Encouraged

Khanyi Dhlomo and Ashish Thakkar on where the potential is, and what’s blocking it
How is innovation in Africa
different from innovation in
Silicon Valley? And how can
innovation in Africa be en-
couraged? Dan Keeler, fron-
tier-markets editor of The
Wall Street Journal, discussed
those questions with Khanyi
Dhlomo, founder and chief ex-
ecutive of Ndalo Media, a pub-
lisher based in South Africa,
and Ashish Thakkar, founder
of Mara Group, a pan-African
investment group with opera-
tions in banking, real estate,
infrastructure and technology.
Edited excerpts follow.
Meeting real needs
MR. KEELER: What about inno-
vation in Africa? Khanyi, what
sort of things are you seeing
that are inspiring you?
Catalysts for Growth
What participants in the
Journal’s Investing in Africa
conference said would
most effectively foster
innovation in Africa
Greater
internet
access
Improved
22%
education
56% Government
incentives
20%
Innovation labs | 2%
THE WALL STREET JOURNAL.
MS. DHLOMO: There’s a lot of
innovation happening in Af-
rica. But it’s not necessarily
sexy in sort of the globally ex-
pected way. Much of the inno-
vation is around solving prob-
lems and meeting real human
needs.
For example, Fyodor Bio-
technologies has created ma-
laria testing kits designed for
the African market. You can
use them at home and they
are urine-based. The company
is producing about two million
of them now.
MR. KEELER: And those tests
are, like $2 each, correct?
MS. DHLOMO: Exactly, they’re
about $2 each. So I think for
investors and for entrepre-
neurs to succeed in Africa,
whether they are African or
not, is to look at what are the
needs that people have?
Where are the struggles?
Where’s the pain? And create
‘The biggest
enabler for
African success
is actually not
necessarily
external.’
Khanyi Dhlomo,
CEO of Ndala Media
around that. Rather than tak-
ing products that are success-
ful elsewhere and pushing
them onto the market.
MR. KEELER: Are you saying
that Africa needs to deal with
things like malaria and basic
needs before you can do the
sort of big, leapfrogging inno-
vation?
MS. DHLOMO: Because of some
of the disadvantages that the
continent faces, I think the
real good work, the profitable
and meaningful work, is com-
ing from innovations that are
aimed at really changing lives.
And it’s not just about ma-
laria, it’s also about education.
In South Africa, there’s a com-
pany called Rethaka Trading
that’s incorporating solar en-
ergy into school bags for
schoolchildren in rural areas.
During the day, the bags are
charged with solar energy. In
the evenings, the same bags
‘We’re actually
creating real
innovative
solutions which
are changing
lives.’
Ashish Thakkar,
founder of the Mara
Group investment firm
provide light for children to
do homework in rural areas
without electricity.
So that’s an amazing inno-
vation. And it’s not necessarily
about disease, it’s about edu-
cation and moving the conti-
nent forward. But it’s not nec-
essarily the kind of innovation
that would come out of Silicon
Valley, because those are not
challenges that they deal with.
But the intellect, the cre-
ativity, is comparable.
MR. THAKKAR: We’re actually
creating real innovative solu-
tions which are changing lives,
which are being used on a day-
to-day basis by our people
across the continent. And I
think we’re seeing we’re liter-
ally at the tip of the iceberg
on this.
The fact that we’re going to
have, as a continent, 700 mil-
lion smartphones within five
years is going to be game
changing. From edu-tech to
health-tech to ag-tech, all of
these things are not going to
be luxuries, they’re going to
be norms. And I think that’s
what’s going to change things.
When you think about com-
merce, the fact that by 2025,
Africa’s going to be spending
$75 billion on online shopping
just shows you the potential.
Traditional retail is going to
be disrupted. Lagos, 20 million
people, how many shopping
malls does it have? It’s going
to be disrupted. But in order
for it to work, we’ve got to fo-
cus on the enabling ecosystem.
Enabling innovation
MR. KEELER: Let’s talk about
that enabling environment.
What does that actually look
like?
MS. DHLOMO: For me, the big-
gest enabler for African suc-
cess is actually not necessarily
external, in terms of money
coming in. It’s in Africans
working together to unite
markets and make it easier to
trade between countries.
There’s huge potential there.
MR. KEELER: Talk a bit more
about the environment that
propagates innovation, that
fosters it, Ashish.
MR. THAKKAR: It’s several dif-
ferent things. There’s access to
capital, but in the form of
debt, but also in the form of
equity, it’s still lacking. When
you think about public policy,
when you talk about breaking
down borders, the East Afri-
can community has been a
fantastic example of how re-
gional integration has hap-
pened pretty quickly, and it’s
actually really working and
happening.
But is there such a huge de-
mand that’s being called upon
from within inter-Africa
trade? In my opinion, not yet.
Yes, there is a demand, but is
it really to that extent that we
have to find a solution now?
When entrepreneurial de-
mand actually insists on some-
thing happening, it happens.
The African Union passport is
a fantastic example. These
were really entrepreneurs very
frustrated with the fact that if
you’re a British or an Ameri-
can citizen, you can travel
around our continent easier
than you can as a fellow Afri-
can citizen. It’s mad.
Now that’s happening.
Many initiatives of that na-
ture, when there’s a serious
demand being pushed by the
mass, things will happen.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | B7

JOURNAL REPORT | INVESTING IN AFRICA

Rwanda’s Fate in ‘Maybe we needed to be

doing more in the area of

An Age of Populism governance and cooperation.’

Rwanda President Paul Kagame

President Paul Kagame talks foreign

investment, African trade and political critics
Rwanda’s economy is one of been very much a leader in the tration. Maybe it will push Af-
Africa’s best performers, and globalization movement. If rican nations to think about
many say President Paul Kag- President Trump makes good what we can do for ourselves
ame has played a big role in on his promises to be an as- to develop our economies and
that. sertive nationalist, what does engage in more trade and in-

RED PHOTOGRAPHIC LTD.

A former rebel leader cred- it mean for Africa and vestment with each other.
ited with helping end Rwanda, in particular?
Rwanda’s genocide in 1994, MR. KAGAME: If President MR. BAKER: The political
Mr. Kagame has championed Trump is still being figured trends in much of the devel-
economic changes that out by those who elected him, oped world do seem to be
opened up the nation’s econ- it’s probably going to take us turning against globalization.
omy and created significant some time to understand what Can the kind of global eco-
growth. the new administration means nomic cooperation we’ve seen your government is that de- risky. It was partly because coming back to hit you.”
But Mr. Kagame has faced for Africa. in the past 20 years—and that spite Rwanda’s favorable eco- they were associated with the
his share of criticism, too, If you look at previous U.S. has benefited Rwanda—sur- nomic performance, there isn’t party in power, and we wanted MR. BAKER: Is it fake news, the
about his grip on power and administrations, there are a vive the populist trends we’re a level playing field for inves- to see a difference made in criticism of you?
whether Rwanda offers a level number of good things that seeing? tors because government-sup- our country. MR. KAGAME: There is no ef-
playing field for all investors. happened [for Africa in terms MR. KAGAME: I think it can ported businesses get favor- fort to follow things and find
Mr. Kagame sat down with of trade and health]. But over- survive, but not on the basis able treatment. Is that a fair MR. BAKER: So no private-sec- out what happened or why it
Wall Street Journal Editor in all when you look beyond that, of one entity doing a favor for criticism? tor companies, domestic or happened. It’s always, “Oh,
Chief Gerard Baker to discuss, you don’t find a clear U.S.-Af- another entity. MR. KAGAME: Those behind foreign, are facing unfavorable somebody has been arrested.
among other things, the move rica policy in place for those All of this, whether it’s na- such criticism may be thinking treatment? It is President Kagame who
toward populism in the U.S. years. tionalism or populism or glob- it is fair, but I think it is MR. KAGAME: No. And I would has arrested him. This person
and Europe and what it might So when a new administra- alism, is driven to a great ex- mostly based on ignorance. challenge anybody to bring must have been in the right,
mean for Africa as a whole tion comes, you want to wait tent by self-interest. And if Here are a few facts. One, in any proof of that. and the government is in the
and for Rwanda. and see what they want to people realize there is more to 2009 about $140 million or so wrong.” This happens year in
Edited excerpts follow: do—not so much for Africa be gained by working together, came here in the area of direct Fake news? and year out.
but with Africa. Because I then that might come back. Or foreign investment. By 2014 MR. BAKER: Let’s talk about You say I changed the con-
No clear policy want to see Africa get its act this may force people to find we had $560 million coming in political conditions in Rwanda. stitution. I didn’t.
MR. BAKER: President Trump together and be able to do out what was wrong in the from outside. And the trend is You’ve been elected twice, two
hasn’t spoken much about Af- business with the U.S., or with first place with the system we continuing in that direction. seven-year terms, with enor- MR. BAKER: It was ratified in a
rica, but we do know that he any other country. had. Maybe we needed to be Two, Crystal Ventures, [a mous majorities. You’ve referendum.
stands for a very assertive na- Some positive things might doing more in the area of gov- government-backed invest- changed the constitution to en- MR. KAGAME: If you want the
tionalism. You, of course, have come out of a Trump adminis- ernance and cooperation, so ment company], started dur- able you to run for a third truth, it is the people who
that where one gains, the ing the liberation struggle, term. By any measure, you ob- changed the constitution, not
other also is gaining. way before we came into viously have been very popular me. And even if I hadn’t
Rwanda Rising Better Health As we wait to see what un- power. And when we came to in Rwanda, but your oppo- agreed to run for another
Gross domestic product, Life expectancy at birth folds, Africa should be learn- power, it continued, but on the nents say you have been si- term, the opposition would
in current U.S. dollars in Rwanda ing lessons and saying, basis of transparency and ac- lencing your critics. How do have had something to say.
“Maybe we shouldn’t be en- countability up to this day. In you respond to that? My satisfaction lies in the
$9billion 70 years
tirely depending on this. We fact, it was made public that MR. KAGAME: You have made it fact that we haven’t been in-
8 60 should also be doing certain Crystal Ventures, which was appear that your political sys- volved in doing anything
7 things with each other.” TriStar before that, invested in tem is perfect and you want wrong against our people. We
50 Africa has lots of natural areas that weren’t attracting others to emulate it. But you are developing our country. If
6
5 40 resources and plenty of human investments either domesti- keep being surprised by what we don’t take care of our-
capital. How for all of these cally or from outside. your own system is producing. selves, nobody will. And as
4 30 decades have we failed to or- For example, it initiated Some of the things that are long as Rwandans want to do
3 ganize, to come together, to bringing telephone companies unfolding, whether in Europe it, we will do it.
20
2 make full sense of this? Intra- into Rwanda. And when this or America, haven’t surprised As other nations struggle
10 African trade and investment gained the interest of the pri- me. I saw this coming. with their own situations, we
1
0 is still very low. Why is that? vate sector, Crystal Ventures When you hear about fake will be listening for the les-
0
pulled out. news and all kinds of stuff, I sons they want to give us. But
2000 ’05 ’10 ’15 2000 ’05 ’10 ’14 MR. BAKER: What about invest- So they were going into ar- sit back and think, “What you we will not be distracted from
Source: World Bank THE WALL STREET JOURNAL. ment? One of the criticisms of eas that people thought were have been hitting us with is what is good for our country.
© 2017 Citigroup Inc. Citi and Citi with Arc Design are registered service marks of Citigroup Inc.

The world’s city isn’t New York

or London or Beijing.
It’s not Lagos or Sao Paulo
or Dubai.
Today, the world’s city is
wherever you are.
Wherever you bring your ideas,
drive, passion, and a hope that
someone will believe in you.
What if a bank made that its job?
Wherever people come together
to create or build something,
we’re there to help make it real.
For over 200 years.
All around the world.

THE WORLD’S
CITI. IT’S
WHEREVER
YOU ARE. citi.com/progress
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, March 15, 2017
JOURNAL REPORT | INVESTING IN AFRICA
‘Tariffs slowly climb up,
election time comes,
boom, tariffs decrease.’
The Key to Getting More Power to Africa
GE’s Jay Ireland and former OPIC chief Elizabeth Littlefield say the most important element is trust
It’s estimated that Africa country has had the experi-
needs $600 billion in infra- ence of developing a project
structure investment between and they’re seeing a lot of in-
now and 2030, largely for vestment interest, they want
power generation. Many such to go back and renegotiate the
projects face local opposition tariffs that were negotiated
over environmental impact with a pioneering developer
and displacement of people. who came in long before that
Investors, for their part, worry country got hot.
about whether country leaders That’s probably one of the
will stick to the terms agreed most damaging things that can
to in hammering out deals. be done. Because uncertainty
Neanda Salvaterra, a re- is public enemy No. 1 for a pri-
porter for The Wall Street vate investor.
Journal, discussed plans and
concerns about African power MS. SALVATERRA: Some of
development with Jay Ireland, these price tariffs that end us-
president and chief executive of ers are paying can be quite
GE Africa, and Elizabeth L. Lit- steep. Are they paying reason-
tlefield, former president and able tariffs?
CEO of the Overseas Private In- MS. LITTLEFIELD: This issue of
vestment Corp., the U.S. gov- trust and trustworthiness, for
ernment’s development-finance me, is the most important
agency. Edited excerpts follow. thing between governments
and developers in the power
Frequent uncertainty sector in Africa. Both sides
MS. SALVATERRA: What lessons have a lot they can do to im-
can foreign investors learn prove. On the private sector
from African power projects in side, it is true, I think, that
general? some developers have taken
MS. LITTLEFIELD: These are advantage of information
very difficult deals to do, obvi- asymmetries or whatever to
ously, and they take an awfully push through transactions
long time. The temptation in that were probably not fair at
many projects is that once a the very beginning.
©2017 Dow Jones & Co. Inc. All rights reserved. 3DJ5131
The Wall Street Journal would like to thank
the sponsors of the Investing in Africa Conference
for their generous support.
Lead Sponsor
Strategic Patron
Media Partner
FO R M OR E IN FOR M AT IO N
O N U P COM IN G CON F E R E N CES ,
PLE ASE V I S I T CO N F EREN C ES .WS J.CO M
Jay Ireland, president
and CEO of GE Africa
But I like to think that’s an
unusual case. On the flip side,
when it comes to trust, people
used to think that the regula-
tory framework was the most
challenging thing and the big-
gest concern of developers.
Now when we talk to develop-
ers from OPIC and the other
direct foreign investors, it’s
actually not at all the regula-
tory framework, it’s execution
capability and political will.
Because we recognize that
the political will to offer cost-
covering tariffs, to award con-
cessions and contracts, takes a
lot of guts for a leader, and of-
ten there’s really no incentive
for them to do that, for me it’s
really trust and trustworthi-
ness: the trust to be brave and
do the right thing from a pri-
vate-sector perspective, but
also ensuring that private-sec-
tor operators aren’t taking ad-
vantage of the situation.
Success is possible
MS. SALVATERRA: Can you give
us an example of countries that
have done a good job at this?
MR. IRELAND: Kenya is proba-
bly one. They have separate
companies—a generation com-
pany, a distribution company,
and a transmission company.
Each one has its own financial
incentives and understanding,
and capability to make the
right decisions of investment,
etc. So I think that’s one.
South Africa, with Eskom
[the state-owned power pro-
vider] also. But in a lot of
ways the industry is basically
subsidizing the consumers,
where in the U.S. it’s pretty
Power Supply
Installed electrical generating capacity, 2015, in gigawatts
AFRICA
Natural gas 77.7
Coal 44.5
Oil 37.4
Hydro 28.3
Nuclear 1.9
Bioenergy 0.6
Other renewables* 5.8
TOTAL 196.2
*Wind, solar, geothermal, and tide and wave
Source: International Energy Agency World Energy Outlook 2016 THE WALL STREET JOURNAL.
Five Essential Steps to a
More Prosperous Africa
Akinwumi Adesina of the African Development Bank
starts with lighting up and feeding the continent
As president of the African De-
velopment Bank, Akinwumi
Adesina has a vision of how
the bank can help the conti-
nent reach its economic poten-
tial and provide a better life
for its people. He laid out that
vision in an interview with
Matina Stevis, Africa business
correspondent for The Wall
Street Journal. Here are edited
excerpts of their conversation.
MS. STEVIS: For the past year
and a half or so, you’ve been
heading up an institution that
is extremely important for the
continent of Africa. Tell me
about the last year and a half.
MR. ADESINA: Five things are
very important for me—the
High Fives strategy of the
bank.
First is to light up and
power Africa.
Second is to feed Africa, be-
cause I come from an agricul-
tural background, and I know
it makes no sense to be spend-
ing $35 billion a year import-
ing what you should be pro-
ducing and exporting, right?
And if you don’t do anything
about that, by 2025, Africa
will be spending $110 billion
importing food. Goodness, for
what reason? So that’s our
second priority, is to help Af-
rica feed itself, become com-
petitive in agriculture.
The third is to industrialize
THE WALL STREET JOURNAL.
‘Uncertainty is public
enemy No. 1 for a
much the opposite. The pay-
ment for power for U.S. indus-
trials is much cheaper than I
would pay as an individual. It’s
the opposite in South Africa.
Transmission needs
MS. SALVATERRA: How can we
get the private sector to invest
in transmission?
MR. IRELAND: That’s a good
question. We’re not interested.
The issue is, it’s expensive. It
PCT. REST OF PCT.
SHARE WORLD SHARE
39.6% 1,530.6 24.7%
22.7% 1,906.3 30.8%
19.1% 408.0 6.6%
14.4% 1,179.3 19.0%
1.0% 401.8 6.5%
0.3% 117.8 1.9%
3.0% 659.2 10.6%
6,197.2
‘It makes no
sense to be
exporting raw
materials and
complaining
that you are
poor. We must
industrialize.’
Akinwumi Adesina,
president of the
African Development
Bank
Africa. Of course, you can’t
have that if you don’t have
power. And so industrializing
Africa would mean, instead of
selling cocoa beans all the
time, it is actually making
money from chocolates, be-
cause that market for cocoa is
highly unstable. But again, I’ve
never seen the price of choco-
late go down. The price of
chocolate always goes up.
I’ve never seen the price of
shirts or nice dresses go down,
they always go up. But the
price of cotton always goes
down. So it makes no sense to
be exporting raw materials
and complaining that you are
poor. We must industrialize.
Another one is regional in-
tegration. Because Africa has
to trade with itself. Only 13%
of trade today is within the
continent. But for that, you
need good roads.
And finally for me, the most
important of these High Fives
projects is to improve the
quality of life of the people of
Africa. A week before I took
on my job as president of the
African Development Bank, I
went to Senegal, to a place
called Gorée Island.
This is the place where they
took the slaves, and they threw
them into the boats. And I got
back into my car and I said to
myself with all the emotions
involved, “Well, all these folks
private investor.’
Elizabeth Littlefield,
former president and
CEO of OPIC
RED PHOTOGRAPHIC LTD. (3)
typically is done by develop-
ment institutions, or govern-
ments, or whatever. It gets back
to what Elizabeth said, which is
the political will. We’ve all seen
it in Africa. Tariffs slowly climb
up, election time comes, boom,
tariffs decrease.
So the private sector’s sit-
ting there going, “Well, back
to the uncertainty issue.” You
can’t make a 20-year invest-
ment decision on something
that’s going to fluctuate like
that every four years for elec-
tions, or whatever it might be.
MS. LITTLEFIELD: Off-grid
power has had such a boom in
recent years that in many cases
that’s going to obviate the need
for transmission grids to con-
tinue to be built. And in fact,
some of the emphasis folks
were making particularly in
South Africa is on improving
the quality of the grid, not just
extending it. Because in many
cases the grids are so unreli-
able that they need develop-
ment. There are people within
reach of the grid that already
aren’t able to get power.
Off-grid, for me that’s the
most exciting new develop-
ment in power in Africa.
went from here against their
own will.” But today, you’ve
got literally tens of thousands
of young Africans that are, of
their own will, jumping on
rickety boats and going
through the Mediterranean.
And thousands of them are
dead at the bottom of that
Mediterranean Sea. Now,
that’s clearly not the Africa I
want. I want an Africa that
can create jobs, that can make
a lot of young people use their
skills well, that can create
hope. An Africa where they
can stay. And so that’s why we
are investing, as the bank, in a
massive effort today, called
Jobs for Africa’s Youth. The
goal is to help countries to
generate 25 million jobs over
the next 10 years
MS. STEVIS: What are your
plans to reform the African
Development Bank to be the
competitive institution it can
be, and use and leverage its
local knowledge?
MR. ADESINA: First and fore-
most, we have developed a
new development and busi-
ness model for the bank,
which basically is to decentral-
ize the bank. The bank is now
decentralized. It’s closer to its
clients.
We’ve got regional offices
in West Africa, East Africa,
Central Africa, North Africa
and Southern Africa. The Afri-
can Development Bank is the
voice of Africa on develop-
ment. And the greatest thing
we have is not money, it’s
knowledge. And knowledge is
power. And so I want our bank
being there constantly with
countries to be able to do that.
That’s going very, very well.
And we restructured the
bank and created a whole new
vice presidency [just for elec-
tric power]. Because I know
without power, Africa is going
nowhere.
You’re looking at a bank
that is leaner, that is faster,
that’s more efficient, that’s
more impact-driven.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | B9
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B10 | Wednesday, March 15, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 12 p.m. New York time
Last Year ago
19609.50 t 24.25, or 0.12% Year-to-date s 2.59% 373.54 t 1.10, or 0.29% Year-to-date s 3.35% 2360.85 t 12.62, or 0.53% Trailing P/E ratio * 24.68 23.02
High, low, open and close for each 52-wk high/low 19633.75 14952.02 High, low, open and close for each 52-wk high/low 375.69 308.75 High, low, open and close for each P/E estimate * 18.27 16.72
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 1.98 2.27
All-time high: 2395.96, 03/01/17

* P/E data based on as-reported earnings from Birinyi Associates Inc.

20000 380 2380

19500 370 2340

19000 360 2300

18500 350 2260

Session high
65-day moving average
DOWN UP 65-day moving average
t

Session open Close 18000 340 2220

Close Open 65-day moving average
t

17500 330 2180

Session low
Bars measure the point change from session's open
17000 320 2140
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

International Stock Indexes Data as of 12 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 12 p.m. ET
World The Global Dow 2662.30 –14.47 –0.54 2193.75 • 2694.43 5.3 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1764.46 –7.81 –0.44 1471.88 • 1956.39 2.8 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 940.75 2.25 0.24 691.21 • 1044.05 18.5 5.250 Australia 2 1.890 51.7 52.6 59.9 110.6 1.902 1.841 2.065
4.750 10 2.931 33.2 31.9 27.9 74.2 2.945 2.748 2.703
Americas DJ Americas 567.71 –3.34 –0.58 480.90 • 577.65 5.1
3.000 Belgium 2 -186.7 -177.8 -135.2 -0.498 -0.536 -0.392
-0.495 -187.4
Brazil Sao Paulo Bovespa 65403.40 –130.90 –0.20 46520.81 • 69487.58 8.6
0.800 10 0.962 -163.8 -166.2 -155.8 -144.0 0.964 0.911 0.522
Canada S&P/TSX Comp 15444.72 –100.10 –0.64 13217.17 • 15943.09 1.0
0.000 France 2 -0.487 -185.9 -184.2 -174.9 -137.0 -0.466 -0.507 -0.410
Mexico IPC All-Share 46867.27 –233.87 –0.50 43902.25 • 48956.06 2.7
0.250 10 1.110 -148.9 -153.4 -141.5 -142.1 1.092 1.054 0.540
Chile Santiago IPSA 3500.24 –15.43 –0.44 2998.64 • 3519.84 8.6
0.000 Germany 2 -0.811 -218.3 -219.2 -203.9 -141.1 -0.816 -0.797 -0.451
U.S. DJIA 20815.27 –66.21 –0.32 17063.08 • 21169.11 5.3
0.250 10 0.451 -214.8 -215.7 -209.9 -167.9 0.470 0.370 0.282
Nasdaq Composite 5841.90 –33.88 –0.58 4574.25 • 5911.79 8.5
0.300 Italy 2 0.026 -134.6 -134.8 -127.7 -100.2 0.028 -0.034 -0.042
S&P 500 2360.85 –12.62 –0.53 1991.68 • 2400.98 5.5
1.250 10 2.363 -23.6 -25.6 -23.9 -65.6 2.370 2.230 1.306
CBOE Volatility 12.12 0.77 6.78 9.97 • 26.72 –13.7
0.100 Japan 2 -0.257 -162.9 -163.2 -146.3 -112.8 -0.256 -0.220 -0.168
EMEA Stoxx Europe 600 373.54 –1.10 –0.29 308.75 • 375.69 3.4 0.100 10 0.090 -251.0 -253.9 -237.2 -200.5 0.088 0.097 -0.044
Stoxx Europe 50 3102.53 –5.84 –0.19 2626.52 • 3120.09 3.1 4.000 Netherlands 2 -0.786 -215.8 -219.2 -195.6 -141.4 -0.816 -0.713 -0.454
France CAC 40 4970.16 –29.44 –0.59 3955.98 • 5022.10 2.2 0.750 10 0.714 -188.6 -189.6 -194.2 -158.5 0.730 0.527 0.376
Germany DAX 11992.68 2.65 0.02 9214.10 • 12082.59 4.5 4.450 Portugal 2 -0.029 -140.1 -135.7 -127.0 -66.9 0.019 -0.028 0.291
Israel Tel Aviv 1435.09 –5.02 –0.35 1372.23 • 1504.42 –2.4 2.875 10 3.975 137.5 135.6 154.2 78.6 3.982 4.011 2.747
Italy FTSE MIB 19575.38 –131.57 –0.67 15017.42 • 19810.77 1.8 2.750 Spain 2 -0.096 -146.9 -146.8 -152.7 -95.9 -0.092 -0.284 0.001
Netherlands AEX 510.29 –1.61 –0.31 409.23 • 514.04 5.6 1.500 10 1.883 -71.6 -73.1 -80.0 -50.8 1.895 1.670 1.453
Russia RTS Index 1063.69 –5.45 –0.51 818.95 • 1196.99 –7.7 4.250 Sweden 2 -0.559 -193.1 -193.0 -176.3 -157.7 -0.554 -0.521 -0.617
Spain IBEX 35 9911.50 –84.40 –0.84 7579.80 • 10091.40 6.0 1.000 10 0.748 -185.1 -185.5 -171.8 -134.3 0.771 0.751 0.618
Switzerland Swiss Market 8671.62 –11.43 –0.13 7475.54 • 8702.62 5.5 1.750 U.K. 2 0.083 -128.9 -127.8 -111.8 -41.1 0.098 0.125 0.549
South Africa Johannesburg All Share 51699.46 –155.92 –0.30 48935.90 • 54704.22 2.1 4.250 10 1.238 -136.2 -137.8 -106.1 -40.8 1.248 1.408 1.553
Turkey BIST 100 89136.53 –293.20 –0.33 70426.16 • 91437.77 14.1 1.125 U.S. 2 1.372 ... ... ... ... 1.376 1.242 0.960
U.K. FTSE 100 7361.36 –5.72 –0.08 5788.74 • 7394.61 3.1 2.250 10 2.600 ... ... ... ... 2.626 2.469 1.961
Asia-Pacific DJ Asia-Pacific TSM 1534.32 2.66 0.17 1308.52 • 1540.02 7.8
Australia S&P/ASX 200 5759.10 1.80 0.03 4924.40 • 5816.30 1.6 Commodities Prices of futures contracts with the most open interest 12 p.m. New York time
China Shanghai Composite 3239.33 2.30 0.07 2806.91 • 3282.92 4.4 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
Hong Kong Hang Seng 23827.95 –1.72 –0.01 19694.33 • 24201.96 8.3 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/13/2017
India S&P BSE Sensex 29442.63 496.40 1.71 24551.17 • 29442.63 10.6 One-Day Change Year Year
Indonesia Jakarta Composite 5431.59 22.21 0.41 4704.22 • 5472.32 2.5 Commodity Exchange Last price Net Percentage high low
363.25 2.25 0.62% 387.25 357.50
Japan Nikkei Stock Avg 19609.50 –24.25 –0.12 14952.02 • 19633.75 2.6 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 1002.50 -3.50 -0.35% 1,088.25 992.00
Malaysia Kuala Lumpur Composite 1722.47 0.55 0.03 1614.90 • 1728.66 4.9
Wheat (cents/bu.)
CBOT
CBOT 431.00 0.50 0.12 477.00 416.25
New Zealand S&P/NZX 50 7177.09 –17.69 –0.25 6562.96 • 7571.11 4.3
Live cattle (cents/lb.) CME 107.300 -0.800 -0.74 109.625 103.150
Pakistan KSE 100 48539.06 –116.66 –0.24 32623.02 • 50192.36 1.5
Cocoa ($/ton) ICE-US 2,047 30 1.49 2,273 1,869
Philippines PSEi 7261.75 28.66 0.40 6563.67 • 8102.30 6.2
Coffee (cents/lb.) ICE-US 142.90 0.55 0.39 159.30 136.70
Singapore Straits Times 3143.40 –3.75 –0.12 2729.85 • 3147.15 9.1
Sugar (cents/lb.) ICE-US 18.21 0.03 0.17 21.21 17.96
South Korea Kospi 2133.78 16.19 0.76 1925.24 • 2133.78 5.3
Cotton (cents/lb.) ICE-US 77.21 0.34 0.44 79.46 71.55
Taiwan Weighted 9744.21 46.87 0.48 8053.69 • 9799.76 5.3 Robusta coffee ($/ton) ICE-EU 2173.00 9.00 0.42 2,279.00 2,093.00
Thailand SET 1543.15 7.64 0.50 1356.69 • 1591.00 0.01
Copper ($/lb.) COMEX 2.6455 0.0200 0.76 2.8360 2.4800
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1204.70 1.60 0.13 1,264.90 1,149.70
Silver ($/troy oz.) COMEX 16.995 0.023 0.14 18.540 16.000
Currencies London close on March 14 Aluminum ($/mt)* LME 1,894.50 -3.00 -0.16 1,939.00 1,688.50
Tin ($/mt)* LME 19,250.00 -50.00 -0.26 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 5,805.00 76.00 1.33 6,156.00 5,518.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,296.00 33.00 1.46 2,445.00 2,022.00
20%
Europe Zinc ($/mt)* LME 2,757.50 44.50 1.64 2,958.50 2,555.00
Yen
s Bulgaria lev 0.5442 1.8375 –1.1 Nickel ($/mt)* LME 10,200.00 130.00 1.29 11,095.00 9,430.00
10
s
Croatia kuna 0.1433 6.977 –2.7 Rubber (Y.01/ton) TCE 262.00 -1.90 -0.72 n.a. n.a.
Euro Euro zone euro 1.0647 0.9393 –1.2
0 Palm oil (MYR/mt) MDEX 2754.00 31.00 1.14 3,123.00 2,697.00
Czech Rep. koruna-b 0.0394 25.382 –1.2
Denmark krone 0.1432 6.9829 –1.2 Crude oil ($/bbl.) NYMEX 48.19 -0.75 -1.53 57.50 47.71
–10 s WSJ Dollar index
Hungary forint 0.003422 292.24 –0.7 NY Harbor ULSD ($/gal.) NYMEX 1.4884 -0.0122 -0.81 1.7752 1.4784
Iceland krona 0.009065 110.32 –2.3 RBOB gasoline ($/gal.) NYMEX 1.5958 -0.0070 -0.44 1.9065 1.5824
–20 Norway krone 0.1162 8.6036 –0.5
0.2461 4.0627 –3.0
Natural gas ($/mmBtu) NYMEX 3.000 -0.107 -3.44 3.5070 2.7370
2016 2017 Poland zloty
Russia ruble-d 0.01684 59.368 –3.1 Brent crude ($/bbl.) ICE-EU 50.76 -0.59 -1.15 59.53 50.25
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1118 8.9459 –1.8 Gas oil ($/ton) ICE-EU 450.00 -5.25 -1.15 523.50 446.75
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 0.9928 1.0073 –1.1
Turkey lira 0.2670 3.7456 6.3 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1287 7.7683 0.2
Ukraine hryvnia 0.0371 26.9435 –0.5
Argentina peso-a 0.0644 15.5379 –2.1
India rupee
Indonesia rupiah
0.0152
0.0000748
65.7744
13365
–3.2
–1.2
U.K. pound 1.2168 0.8218 1.5 Cross rates London close on Mar 14
Brazil real 0.3161 3.1634 –2.8 Middle East/Africa
Japan yen 0.008729 114.56 –2.1
Canada dollar 0.7420 1.3478 0.3 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.003143 318.20 –4.6 Bahrain dinar 2.6529 0.3770 –0.1
Chile peso 0.001494 669.40 –0.1 Australia 1.3208 1.6071 1.3113 0.0115 0.1701 1.4062 0.9804 ...
Macau pataca 0.1250 8.0004 1.1 Egypt pound-a 0.0552 18.1250 –0.04
Colombia peso 0.0003339 2995.25 –0.2 Canada 1.3478 1.6396 1.3378 0.0118 0.1735 1.4345 ... 1.0202
Malaysia ringgit-c 0.2247 4.4503 –0.8 Israel shekel 0.2728 3.6654 –4.8
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6940 1.4409 –0.2 Kuwait dinar 3.2698 0.3058 0.1 Euro 0.9393 1.1431 0.9325 0.0082 0.1209 ... 0.6971 0.7110
Mexico peso-a 0.0509 19.6446 –5.3
Pakistan rupee 0.0095 104.825 0.4 Oman sul rial 2.5975 0.3850 0.01 Hong Kong 7.7683 9.4516 7.7120 0.0678 ... 8.2697 5.7643 5.8798
Peru sol 0.3044 3.2855 –2.0
Philippines peso 0.0199 50.310 1.4 Qatar rial 0.2746 3.641 0.03 Japan 114.5620 139.4000 113.7400 ... 14.7490 121.9600 85.0200 86.7400
Uruguay peso-e 0.0353 28.350 –3.4
Singapore dollar 0.7073 1.4138 –2.3 Saudi Arabia riyal 0.2666 3.7505 –0.01 1.0073 1.2256 ... 0.0088 0.1297 1.0724 0.7475 0.7626
Venezuela bolivar 0.100150 9.99 –0.1 Switzerland
South Korea won 0.0008704 1148.85 –4.9 South Africa rand 0.0760 13.1524 –3.9
U.K. 0.8218 ... 0.8159 0.0072 0.1058 0.8750 0.6099 0.6221
Asia-Pacific Sri Lanka rupee 0.0065854 151.85 2.3 Close Net Chg % Chg YTD % Chg
0.7571 1.3208 –4.9 Taiwan dollar 0.03231 30.954 –4.6 U.S. ... 1.2168 0.9928 0.0087 0.1287 1.0647 0.7420 0.7571
Australia dollar WSJ Dollar Index 91.74 0.02 0.02 –1.29
China yuan 0.1446 6.9151 –0.4 Thailand baht 0.02832 35.310 –1.4 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 12 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 0.92833% 0.44125% ¥ TakedaPharm 4502 5360.00 0.30 10.86 £ RoyDtchShell A RDSA 2093.50 -1.27 -6.64 Last: 151.75 t 0.29, or 0.19% YTD s 7.6%
Three month 1.13733 0.64195 Asia Titans HK$ TencentHoldings 0700 214.60 -0.37 13.13 € SAP SAP 89.33 0.19 7.87
Six month 1.43239 0.91230 HK$ AIAGroup 1299 48.45 -0.72 10.74 ¥ TokioMarineHldg 8766 5161.00 1.28 7.61 € Sanofi SAN 82.12 0.10 6.79 High 155
One year 1.82344 1.23700 65.04 -0.12 -1.62
¥ AstellasPharma 4503 1541.50 -0.84 -5.05 ¥ ToyotaMtr 7203 6454.00 -1.16 -6.16 € SchneiderElectric SU Close 150
Euro Libor AU$ AustNZBk ANZ 31.89 ... 4.83 AU$ Wesfarmers WES 44.35 0.23 5.24 € Siemens SIE 122.80 -0.08 5.14 Low 145
One month -0.39286% -0.31986% AU$ BHP BHP 23.87 0.93 -4.75 AU$ WestpacBanking WBC 34.88 -0.71 6.99 CHF Syngenta SYNN 441.70 0.16 9.74
t
Three month -0.35429 -0.24286 HK$ BankofChina 3988 3.93 0.77 14.24 AU$ Woolworths WOW 26.33 -0.15 9.25 € Telefonica TEF 10.16 -1.41 15.19 50–day 140
Six month -0.24657 -0.12943 HK$ CKHutchison 0001 96.15 0.26 9.39 € Total FP 46.23 -1.86 -5.12 moving average 135
One year -0.11243 -0.00614 HK$ CNOOC 0883 8.91 -0.11 -8.14 Stoxx 50 CHF UBSGroup UBSG 15.98 -0.68 0.19
130
Euribor AU$ CSL CSL 124.70 -0.03 24.19 € Unilever UNA 46.16 1.58 18.01
CHF ABB ABBN 22.74 0.13 5.87
One month -0.37200% -0.31300% ¥ Canon 7751 3475.00 -0.34 5.46 £ Unilever ULVR 4054.00 1.62 23.13 16 23 30 6 13 20 27 3 10 17 24 3 10
€ ASMLHolding ASML 116.90 0.43 9.61
Three month -0.33000 -0.22700 ¥ CentralJapanRwy 9022 18630 -0.35 -3.12 € Vinci DG 69.94 0.04 8.10 Jan. Feb. Mar.
€ AXA CS 23.62 -1.30 -1.52
Six month -0.24100 -0.13000 HK$ ChinaConstructnBk 0939 6.35 1.60 6.37 £ VodafoneGroup VOD 204.25 0.44 2.20
€ AirLiquide AI 103.50 0.05 -2.04
One year -0.10800 -0.00600 HK$ ChinaLifeInsurance 2628 24.00 ... 18.81 CHF ZurichInsurance ZURN 283.90 0.11 1.25
168.80
Yen Libor HK$ ChinaMobile 0941 84.10 -0.47 2.31
€
€
Allianz
AB InBev
ALV
ABI 100.80
-0.62
-0.10
7.52
0.25 DJIA Stoxx 50
One month -0.06200% -0.06057% HK$ ChinaPetro&Chem 0386 5.85 0.17 6.36 £ AstraZeneca AZN 4872.00 1.18 9.79 Last: 3102.53 t 5.84, or 0.19% YTD s 3.1%
Three month -0.01643 -0.00171 AU$ CmwlthBkAust CBA 84.49 0.23 2.52 € BASF BAS 89.02 -0.02 0.80
$ AmericanExpress AXP 79.41 0.26 7.20
Six month 0.02571 0.02321 ¥ EastJapanRailway 9020 10090 -0.79 -0.10 € BNP Paribas BNP 59.81 -2.24 -1.22
$ Apple AAPL 138.94 -0.19 19.96 3100
One year 0.12757 0.11614 ¥ Fanuc 6954 22360 0.18 12.84 £ BT Group BT.A 334.20 0.78 -8.91
$ Boeing BA 179.28 0.13 15.16
$ Caterpillar CAT 91.83 -0.87 -0.98 3025
Offer Bid ¥ Hitachi 6501 636.70 0.47 0.74 € BancoBilVizAr BBVA 6.80 -1.22 6.02
TW$ Hon Hai Precisn 2317 90.00 ... 6.89 $ Chevron CVX 107.93 -1.30 -8.30 2950
Eurodollars € BancoSantander SAN 5.38 -1.52 8.45
¥ HondaMotor 7267 3536.00 -0.51 3.54 $ CiscoSystems CSCO 34.02 -0.22 12.59
One month 1.0500% 0.9500% £ Barclays BARC 227.25 -1.28 1.70 2875
KRW HyundaiMtr 005380 149000 2.05 2.05 $ Coca-Cola KO 41.91 -0.29 1.09
Three month 1.3000 1.2000 € Bayer BAYN 107.10 -0.14 8.04
2800
HK$ Ind&Comml 1398 5.09 0.59 9.46 $ Disney DIS 112.46 0.84 7.91
Six month 1.4000 1.3000 £ BP BP. 458.25 -1.13 -10.08
$ DuPont DD 80.52 -0.87 9.70
One year 1.7500 1.6500 ¥ JapanTobacco 2914 3840.00 -0.13 -0.10 £ BritishAmTob BATS 5171.00 0.62 11.89 2725
¥ KDDI 2991.00 -1.25 1.06
$ ExxonMobil XOM 81.07 -0.43 -10.18
Latest 52 wks ago 9433 € Daimler DAI 70.74 -0.11 0.03 $ GeneralElec GE 29.59 -0.89 -6.34 16 23 30 6 13 20 27 3 10 17 24 3 10
¥ Mitsubishi 8058 2501.00 -0.38 0.44 € DeutscheTelekom DTE 16.02 0.25 -2.02 $ Jan. Feb. Mar.
Prime rates GoldmanSachs GS 246.15 -0.81 2.80
¥ MitsubishiElectric 6503 1699.50 0.41 4.30 £ Diageo DGE 2295.50 1.08 8.79 $
U.S. 3.75% 3.50% HomeDepot HD 147.11 -0.22 9.72
¥ MitsubishiUFJFin 8306 767.70 -0.03 6.60 € ENI ENI 14.43 -1.50 -6.72 $
Canada 2.70 2.70 Intel INTC 34.76 -1.15 -4.18
1696.50 -0.03 5.57 1691.00
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 213.00 -0.42 1.53
£
£
GlaxoSmithKline
HSBC Hldgs
GSK
HSBA 670.30
0.80
-0.27
8.26 $
2.04 $
IBM
JPMorganChase
IBM
JPM
175.30
91.20
-0.66
-0.18
5.61
5.69
Dow Jones Industrial Average P/E: 21
¥ NTTDoCoMo 9437 2705.00 -1.04 1.58 € INGGroep INGA 14.30 -1.65 6.99 $ J&J JNJ 127.54 0.68 10.70 Last: 20815.27 t 66.21, or 0.32% YTD s 5.3%
Policy rates
ECB 0.00% 0.05%
AU$ NatAustBnk NAB 32.91 -0.69 7.30 £ ImperialBrands IMB 3873.00 0.35 9.33 $ McDonalds MCD 127.91 0.24 5.09
Britain 0.25 0.50
¥ NipponTeleg 9432 4958.00 -0.10 0.94 € IntesaSanpaolo ISP 2.42 -1.55 -0.33 $ Merck MRK 64.40 0.39 9.39 20900
Switzerland 0.50 0.50
¥ NissanMotor 7201 1156.00 -0.13 -1.66 € LVMHMoetHennessy MC 198.10 -0.08 9.21 $ Microsoft MSFT 64.32 -0.60 3.51
¥ Panasonic 6752 1272.00 -1.59 6.94 £ LloydsBankingGroup LLOY 67.42 -1.63 7.85 $ Nike NKE 57.58 1.61 13.29
20250
Australia 1.50 2.00
HK$ PingAnInsofChina 2318 41.95 0.48 8.12 € LOreal OR 177.30 0.48 2.25 $ Pfizer PFE 34.20 0.28 5.31
U.S. discount 1.25 1.00 19600
Fed-funds target 0.50 0.25
$ RelianceIndsGDR RIGD 38.75 -0.64 22.82 £ NationalGrid NG. 985.40 0.49 3.55 $ Procter&Gamble PG 91.21 -0.11 8.48
Call money 2.50 2.25
KRW SamsungElectronics 005930 2068000 1.87 14.76 CHF Nestle NESN 76.05 0.20 4.11 $ 3M MMM 190.97 -0.29 6.94 18950
¥ Seven&I Hldgs 3382 4345.00 -0.80 -2.43 CHF Novartis NOVN 75.70 -0.07 2.16 $ Travelers TRV 122.55 0.33 0.11
Overnight repurchase rates 18300
U.S. 0.58% 0.47%
¥ SoftBankGroup 9984 8434.00 0.25 8.62 DKK NovoNordiskB NOVO-B 237.10 0.72 -6.91 $ UnitedTech UTX 112.10 -0.19 2.26
Euro zone n.a. n.a.
¥ Sony 6758 3635.00 -0.66 10.99 £ Prudential PRU 1704.50 2.40 4.73 $ UnitedHealth UNH 169.17 -0.61 5.71 16 23 30 6 13 20 27 3 10 17 24 3 10
¥ Sumitomo Mitsui 8316 4357.00 -0.11 -2.31 £ ReckittBenckiser RB. 7328.00 0.71 6.42 $ Visa V 89.44 -0.74 14.64 Jan. Feb. Mar.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 112.10 -1.06 14.39 £ RioTinto RIO 3300.00 -0.14 4.48 $ Verizon VZ 49.37 -0.20 -7.51 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 186.00 -0.27 2.48 CHF RocheHldgctf ROG 259.40 -0.08 11.52 $ Wal-Mart WMT 71.04 1.56 2.78 Sources: WSJ Market Data Group; Birinyi Associates
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 15, 2017 | B11

THE PROPERTY REPORT

Shopping Malls Track Your Every Move
Landlords monitor In The Shops at South Town
in Utah, owner Pacific Retail
smartphone use, aim Capital Partners invested mil-
to personalize lions to renovate the shopping
center to add beacons, which
customer experience emit signals to smartphones or
tablets in the vicinity, and multi-
BY ESTHER FUNG media wall displays that include
digital art and advertising.
Add another category to the The Los Angeles-based real-
growing list of companies estate developer also included
monitoring their customers: a 13-by-6-foot interactive wall
shopping-mall landlords. in the dining terrace where
As more shoppers tote children can play a custom-de-
smartphones while browsing in veloped emoji game that draws
stores, shopping-center owners families and increases their
are tracking their movements mall time.
and spending habits to try to Najla Kayyem, senior vice
figure out how best to arrange president of marketing for Pa-
stores and mall layouts to cific Retail Capital Partners,
boost shopping activity. brushed off concerns that peo-
Some landlords measure ple might come to the shopping
how long people stay in the center to game rather than to

J PAT CARTER/ASSOCIATED PRESS

mall, how long they linger in
particular stores or displays
and where they were before
and after heading to the mall.
That gives them a better idea
of which stores benefit from
being in proximity to one an-
other.
Landlords also match shop-
pers’ location data against
their social-media or email ac-
counts and channel personal-
ized advertisements to them.
The moves reflect mall
owners’ eagerness to remain
relevant in the era of internet
shopping. A wave of store clo-
sures by big department-store
chains and other retailers has
left malls around the U.S. with
empty space and a sense of ur-
gency over how best to fill it.
Some investors are betting
against the shares of operators
of weaker malls, increasing the
pressure.
Personalized shopping ex-
periences are becoming a fo-
cus for customers, according
Landlords can match shoppers’ location data against email or social-media accounts to channel personalized advertisements to them.
to the International Council of
Shopping Centers, a trade
group. In its survey of 1,022
adults in February, 39% of the
respondents said they would
visit a mall or shopping center
more often if they received
alerts from stores that are sell-
ing products they are inter-
ested in purchasing.
The patterns that emerge
from the new smartphone-
monitoring techniques can be
useful. Some customers, for
example, are big spenders who
drop more than $20,000 a year
during a few trips to a mall,
while others might visit 50
times a year but barely spend,
said Ivan Frank, vice president
of marketing at Taubman Cen-
ters Inc., one of the nation’s
largest mall owners.
“There is no one silver bul-
let” to reach all of them, Mr.
Frank said.
Known for its high-end
properties such as the Mall at
Short Hills in New Jersey and
the Beverly Center in Los An-
geles, Taubman has been en-
gaging various technology ven-
dors to improve its marketing
strategy.
One vendor Taubman uses
is StepsAway, a cloud-based
platform that delivers store
discounts and promotions to
shop. “There is a direct correla-
tion between the amount of
time and the amount of money
spent,” she said.
Some malls have been using
beacons not only to offer per-
sonalized coupons to the shop-
per’s smartphone but to get
data on how often shoppers
pass by the store and how often
smartphones that sync with court and designate that area they use their phones to make
each mall’s Wi-Fi network. as a place where customers calls or pay for purchases.
Shoppers aren’t required to can compete with each other “It’s not enough to pay for
download an app and are able at games played on their advertising, you’ve got to own
to view offers by store or by phones, with the images pro- your own customer data,” said
category, such as women, men, jected on the screen. Jencey Keeton, director of cor-
children or shoes. “People have to provide ba- porate marketing at Trade-
To use a shopping center’s sic information to play, such as mark Property Co., a shopping-
Wi-Fi or app, customers typically their age, email address, and center developer based in Fort
have to agree to terms and con- you’ve instantly captured Worth, Texas.
ditions that disclose its privacy these customers,” said Steve Still, while the information
policy before they can log in. Ridley, chief executive officer gleaned from mobile technol-
Mobile games also are of FunWall, a social and tour- ogy is promising, landlords are
starting to appeal to landlords nament gaming company. The trying to figure how to harness
looking for other ways to de- data help the mall’s marketing it better.
liver incentives directly to team improve loyalty pro- “You can find an oil well,
shoppers. grams, including promotions but you still have to refine the
Some landlords include a such as gift certificates or free oil before it is usable,” said
screen at a corner of the food drinks. Taubman’s Mr. Frank.

U.K. Housing Downturn Slams Real-Estate Brokers

BY ART PATNAUDE across the U.K. Countrywide growth since 2013 and just half sively to the changing market
AND OLGA COTAGA last week said its 2016 pretax of the 10% growth recorded in conditions,” said Chairman Si-
DANIEL LEAL-OLIVAS/AGENCE FRANCE-PRESSE/GETTY IMAGES

The cooling U.K. housing mar-
ket is taking a toll on real-estate
brokerages and other companies
as transactions dry up.
Countrywide PLC, the U.K.’s
biggest residential property
broker, and London-focused
broker Foxtons PLC each said
last week their profit fell by
more than half in 2016 from a
year earlier.
Uncertainty over the pro-
cess of Britain’s leaving the
European Union and tax
changes have had a signifi-
cant impact on the housing
market, brokers and analysts
said.
“We expect difficult mar-
ket conditions for the fore-
seeable future,” said Alison
Platt, chief executive at
Countrywide, which runs 55
real-estate brokerage brands
profit was £19.5 million
($23.7 million), down 59%
from the year before.
The U.K. housing market
surged in the years following
the 2008 financial crisis. But
after years of rising prices, af-
fordability for new buyers has
become a major challenge.
Renting has become increas-
ingly common.
Brexit worries and changes
to the “stamp duty,” which in-
creased the cost of buying
rental properties by 3%, have
further cooled demand.
Before the stamp duty
came into effect last April,
housing transactions were
averaging more than 106,000
a month, according to the
U.K. tax authority. After a
spike to 172,760 last March
as buyers rushed to beat the
new tax, transactions have
Uncertainty over Britain’s leaving the EU and tax changes have
hurt the housing market. A couple views London listings in August.
averaged about 95,000, the
data show.
Driving the decrease: The
number homes for sale in
February were near record
lows, while demand has re-
March 2016, according to Hali- mon Embley.
fax, the U.K.’s largest mortgage The market in London is
lender. “The recovery in hous- particularly weak. Home prices
ing-market demand has pe- in the U.K. capital in February
tered out,” said Hansen Lu, a fell for the 12th consecutive
property economist at Capital month, according to the RICS
Economics. survey.
Under pressure, real-estate For Foxtons, a housing bro-
companies have been cutting ker, this has led to a greater
costs and shifting focus. focus on its rental and mort-
Countrywide last year gage businesses. While the
closed 200 branches—about a firm suffered from weak trad-
fifth of its total network—and ing volumes—pretax profit was
will close an additional 200 £18.8 million last year, down
over the next four years, Ms. 54% from 2015—“our lettings
Platt said. It has raised £37.8 business proved more resil-
million by issuing new shares ient, whilst our mortgage-
to invest in its digital real-es- broking business also per-
tate business. formed well,” said Chief
mained tepid, according to a LSL Property Services PLC, Executive Nic Budden.
survey of brokers from the the U.K.’s second-biggest es- Foxtons also is shifting
Royal Institution of Char- tate agent, has closed away from central London. The
tered Surveyors. branches, stalled acquisitions group opened seven branches
Home prices rose 5.1% in and invested in digital opera- in 2016 and two outside cen-
February, the slowest pace of tions. The firm “reacted deci- tral London in February.

Fund Investors Load Up on Advertisement INTERNATIONAL INVESTMENT FUNDS

[ Search by company, category or country at asia.WSJ.com/funds ]
Property Debt to Limit Risk FUND NAME
VP Classic-B Units
NAV
GF AT LB DATE CR
AS EQ HKG 03/13 USD
NAV
124.79
—%RETURN—
YTD 12-MO 2-YR
8.9 21.9 1.1
VP Classic-C Units AS EQ HKG 03/13 USD 15.76 9.1 22.2 1.2
BY PETER GRANT taken place in downtowns lion, but the debt fund will VP Classic-C Units AUD H
VP Classic-C Units CAD H
AS
AS
EQ HKG
EQ HKG
03/13 AUD
03/13 CAD
13.00
12.60
8.9
8.8
23.2
22.6
1.8
1.0
around the U.S. as millennials still get repaid its entire $75 VP Classic-C Units HKD H
VP Classic-C Units NZD H
AS
AS
EQ HKG
EQ HKG
03/13 HKD
03/13 NZD
10.71
13.11
8.7
8.7
21.2
22.6
NS
2.7
Data as shown is for information purposes only. No offer is being made by
The state of Kentucky’s $16 flock to urban centers. In New million. At the same time, Morningstar, Ltd. or this publication. Funds shown aren’t registered with the VP Classic-C Units RMB AS EQ HKG 03/13 CNH 11.16 7.1 28.3 NS
U.S. Securities and Exchange Commission and aren’t available for sale to United VP Classic-C Units RMB H AS EQ HKG 03/13 CNH 10.59 10.2 24.4 NS
billion pension fund has long York, debt-fund loans in- many debt funds are posting States citizens and/or residents except as noted. Prices are in local currencies. VP Multi-Asset Fund Cls A HKD OT OT HKG 03/13 HKD 10.01 4.1 NS NS
invested a portion of its as- creased 60% from 2014 to attractive returns, from per- All performance figures are calculated using the most recent prices available. VP Multi-Asset Fund Cls A USD OT OT HKG 03/13 USD 10.15 3.9 7.0 NS
VP Taiwan Fund AS EQ CYM 03/13 USD 18.09 8.0 21.6 5.4
sets in commercial-real-estate 2016, according to a study by centages in the high single NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
funds managed by private-eq- CrediFi, a real-estate data and digits to the midteens, de- For information about listing your funds,
uity firms, but lately it is analysis firm. pending on their lending n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866 please contact: Freda Fung tel: +852 2831
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
more interested in funds that “There’s a lot of high-qual- strategies. CAM-GTF Limited OT OT MUS 03/03 USD 304140.17 0.7 8.6 -4.8 2504; email: freda.fung@wsj.com
make loans than those that ity real estate aside from 100% Some debt-fund managers
buy property. occupied trophy buildings in said they can produce such re-
That is because, like many Midtown Manhattan,” said sults by using leverage to
other big investors, Kentucky Ryan Krauch, principal at boost returns. In other words,
Retirement Systems is wary of
the eight-year run of rising
commercial-real-estate values.
Mesa West. they may lend, say $75 million
at a rate of 5% but borrow $50
million of that at a rate lower
n Website: Https://Www.Valuepartners-Group.Com/ Tel: (852) 2143 0688
China A-Share Fund Cls A AUD H OT
China A-Share Fund Cls A AUD UnH OT
China A-Share Fund Cls A CAD H OT
OT HKG
OT HKG
OT HKG
03/13 AUD
03/13 AUD
03/13 CAD
12.23
11.11
11.31
3.7
1.6
3.6
16.9
11.5
15.1
1.8
1.5
0.9
LIST YOUR
60%
China A-Share Fund Cls A EUR H OT OT HKG 03/13 EUR 11.88 3.4 13.9 1.0
If prices fall, the thinking goes, than 5%. That way, their re- China A-Share Fund Cls A EUR UnH OT OT HKG 03/13 EUR 12.04 4.4 16.7 NS

it is less risky to be a lender

than an owner of a property.
turn is greater than 5%.
But the mushrooming of
China A-Share Fund Cls A GBP H OT
China A-Share Fund Cls A GBP UnH OT
China A-Share Fund Cls A HKD H OT
China A-Share Fund Cls A HKD UnH OT
OT HKG
OT HKG
OT HKG
OT HKG
03/13 GBP
03/13 GBP
03/13 HKD
03/10 HKD
11.91
14.23
12.08
11.78
3.4
6.2
3.5
5.7
18.0
30.7
15.5
11.1
1.2
11.9
1.1
0.9
FUNDS
“Prices are really, really debt funds has prompted some China A-Share Fund Cls A NZD H OT
China A-Share Fund Cls A NZD UnH OT
OT HKG
OT HKG
03/13 NZD
03/13 NZD
12.07
10.64
4.1
6.8
17.3
8.7
1.4
NS
stretched,” said Rich Robben, How much debt-fund loans rose real-estate experts to sound China A-Share Fund Cls A RMB (CNH) OT OT HKG 03/13 CNH 13.22 5.4 19.7 4.5
China A-Share Fund Cls A USD OT OT HKG 03/10 USD 11.75 5.6 12.3 1.1
interim chief investment offi- in New York from 2014-2016 warnings. None of the critics China A-Share Fund Cls A USD H OT OT HKG 03/13 USD 12.03 3.5 15.8 1.3
China Greenchip-A Units AS EQ CYM 03/13 HKD 55.38 8.9 19.1 -5.2
cer of the Kentucky pension are saying a crash is on the China Greenchip-A Units AUD H AS EQ CYM 03/13 AUD 9.36 9.0 19.8 -5.7
fund. “We feel, at this point, way. But some are advising in- China Greenchip-A Units CAD H AS
China Greenchip-A Units NZD H AS
EQ CYM
EQ CYM
03/13 CAD
03/13 NZD
9.09
9.61
8.7
9.0
18.2
20.6
-7.0
-4.8
we’re happy to lend to you and vestors to keep their eyes China Greenchip-A Units USD AS EQ CYM 03/13 USD 9.16 8.8 19.1 -6.1
China Greenchip-A2 QDIs Units AS EQ CYM 03/13 HKD 10.09 8.8 19.0 -5.3
let you take the haircut.” For investors, debt is con- open to the risks. GC Hi Yield Inc - Cls A MDIs GBP H OT OT CYM 03/13 GBP 9.87 5.2 20.4 NS
Last year, debt funds raised sidered less risky than equity Big banks are limited in GC Hi Yield Inc-Cls A MDIs AUD H OT
GC Hi Yield Inc-Cls A MDIs CAD H OT
OT CYM
OT CYM
03/13 AUD
03/13 CAD
9.42
9.49
5.5
5.3
22.4
21.0
14.2
12.6 In print & online. Contact:
$20.4 billion, up from $12.2 because if values plummet, part by new regulations im- GC Hi Yield Inc-Cls A MDIs NZD H OT OT CYM 03/13 NZD 9.77 5.7 23.2 15.3
GC Hi Yield Inc-Cls P HKD Acc sh OT OT CYM 03/13 HKD 14.88 5.5 21.5 12.8
billion in 2015, according to debt-fund managers can fore- posed by the 2010 Dodd-Frank GC Hi Yield Inc-Cls P HKD MDIs sh OT OT CYM 03/13 HKD 9.38 5.6 21.6 12.8
GC Hi Yield Inc-Cls P MDIs SGD H OT OT CYM 03/13 SGD 10.30 5.4 21.3 13.2
data firm Preqin. Big real-es- close, making it more likely financial overhaul that make it GC Hi Yield Inc-Cls P USD Acc sh OT OT CYM 03/13 USD 14.98 5.4 21.4 12.8
tate fund managers Black- they will preserve their princi- more attractive to focus on GC Hi Yield Inc-Cls P USD MDIs sh OT OT CYM 03/13 USD 9.43 5.5 21.5 12.8 wsja.advertising@dowjones.com
GC Hi Yield Inc-ClsA MDIs EUR H OT OT CYM 03/13 EUR 10.32 5.1 19.4 11.6
stone Group LP, KKR & Co., pal investments. Equity own- first mortgages and steer clear Hi-Div Stk Cls A RMB H Acc OT OT HKG 03/13 CNH 11.19 11.9 21.1 5.7
Hi-Div Stk Cls A RMB UnH Acc OT OT HKG 03/13 CNH 13.41 9.5 24.7 7.7
Kayne Anderson Real Estate ers, meanwhile, could suffer of riskier loans. Hi-Div Stk Cls A1 OT OT HKG 03/13 USD 79.69 11.1 18.9 3.3
Advisors, Och-Ziff Capital losses or get wiped out. Critics of debt funds ques- Hi-Div Stk Cls A2 AUD H MDIs OT
Hi-Div Stk Cls A2 CAD H MDIs OT
OT HKG
OT HKG
03/13 AUD
03/13 CAD
9.59
9.71
11.0
11.1
19.1
17.8
3.6
2.3
Management Group LLC and For example, say an equity tion whether the funds will be Hi-Div Stk Cls A2 GBP H MDIs OT OT HKG 03/13 GBP 9.17 11.9 17.8 1.9
Hi-Div Stk Cls A2 HKD MDIs OT OT HKG 03/13 HKD 9.98 11.4 19.2 3.2
Mesa West Capital all closed investor borrows $75 million able to keep up such returns Hi-Div Stk Cls A2 MDIs OT OT HKG 03/13 USD 10.91 11.0 18.8 3.2
Hi-Div Stk Cls A2 NZD H MDIs OT OT HKG 03/13 NZD 9.79 10.9 19.2 4.5
a debt fund in the past year or from a debt fund to buy a as more pile in and compete Hi-Div Stk Cls A2 RMB H MDIs OT OT HKG 03/13 CNH 9.50 12.6 21.7 5.9
started raising one. building that costs $100 mil- with one another. They also Hi-Div Stk Cls A2 RMB UnH MDIs OT
Hi-Div Stk Cls A2 SGD H MDIs OT
OT HKG
OT HKG
03/13 CNH
03/13 SGD
9.94
10.54
9.7
NS
26.0
NS
8.0
NS
Private-equity firm debt lion, putting in $25 million of point out that banks could get Intel-China Converg Fund-A AUD H AS EQ CYM 03/13 AUD 9.76 10.9 16.1 NS
Intel-China Converg Fund-A CAD H AS EQ CYM 03/10 CAD 10.72 5.4 12.3 NS
funds have financed much of equity. If that building’s value more aggressive if the Trump Intel-China Converg Fund-A NZD H AS EQ CYM 03/10 NZD 11.02 7.4 12.9 NS
the residential, retail and of- falls to $85 million, the eq- administration succeeds in Intel-China Converg Fund-A Units AS
Intel-Chinese Mainland Foc Fund AS
EQ CYM
EQ CYM
03/13 USD
03/13 USD
147.69
42.53
10.7
14.8
17.0
22.9
-0.4
2.7
fice redevelopment that has uity investor has lost $15 mil- easing regulation. VP Classic-A Units AS EQ HKG 03/13 USD 277.54 9.0 22.6 1.6
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B12 | Wednesday, March 15, 2017
Brexit’s Weight Pressures Pound
Currency approaches
three-decade lows as
U.K. considers talks
to sever ties with EU
BY RIVA GOLD
Investors are souring on the
pound as the U.K. prepares to
start the legal proceedings to
leave the European Union,
sending the currency back to-
ward three-decade lows even
as officials forecast a resilient
economy.
On Tuesday, sterling fell
0.7% against the dollar to
roughly $1.21, a 19% decline
since June’s Brexit vote.
On Monday, British law-
makers removed the final hur-
dle to Prime Minister Theresa
May triggering Article 50, the
legal mechanism to start a
two-year negotiation process
to leave the European Union.
That marks a new phase for
the currency, some analysts
said.
Many expect sterling to fall
further, driven by fresh uncer-
tainties around the Brexit pro-
cess and a near-record gap in
interest-rate expectations be-
tween the U.K. and U.S.
“Brexit has been looming,
Emerging Markets Show Fed Resistance
BY GREGOR STUART HUNTER
HONG KONG—Bets the Fed-
eral Reserve will raise interest
rates on Wednesday may have
gone from no-chance to odds-
on in a matter of weeks, but
the rally in developing-nation
stocks and bonds has barely
paused.
The MSCI Emerging Mar-
kets Index has gained 6.3% in
2017, besting the S&P 500 in-
dex’s 6%. MSCI’s country in-
dexes for Turkey, China and
Hong Kong have been notable
outperformers, all notching up
double-digit gains this year.
Email: heard@wsj.com
Hurdles to
Health Plan
Have Upside
Bad news for the Republi-
cans’ health-care plan looks
like good news for the
health-care industry.
A Congressional Budget
Office analysis released Mon-
day found that the proposed
American Health Care Act
would cause 14 million Amer-
icans to lose insurance cover-
age by 2018 and 24 million
over the next 10 years. The
brunt of that reduction
would come from rolling
back Medicaid spending.
The attendant reduction in
health spending would lower
budget deficits by $337 bil-
lion, the agency found, while
average premiums for indi-
viduals on public exchanges
are likely to rise by 15% to
20% in the short term as the
individual mandate penalties
are repealed.
Those estimates will make
the bill as presently con-
structed a tough sell in
Washington. The Republican
majority in the Senate is
thin, and several Republican
senators have expressed con-
cern over proposed cuts to
Medicaid spending. The pros-
pect of 14 million Americans
losing insurance in a mid-
term election year can’t be
comforting to politicians who
will soon face the voters.
However, that means a bill
that would harm large
swaths of the industry is
more likely to get a retool-
ing.
That ought to give inves-
tors some comfort. Changes
to the bill that could win
over skeptical politicians
would also likely work in fa-
vor of companies currently
facing significant risks to
their business.
With equity valuations al-
ready high and therefore vul-
nerable across the industry,
pushback on the AHCA is
something investors should
want to see. —Charley Grant
Prime Minister Theresa May in London Tuesday. She could trigger Brexit negotiations with EU now.
but from the date [Mrs. May]
triggers Article 50, Brexit will
have begun,” said Jane Foley,
currency strategist at Dutch
lender Rabobank.
Bearish bets against the
pound have jumped this
month, data from the Com-
modity Futures Trading Com-
mission suggests.
The pound has also been
falling again against the euro
and was down 0.6% on Tues-
day, around a 13% fall since
The nonchalant response to
the turn in Fed expectations—a
quarter-point increase is now
reckoned a near-certainty—is a
contrast to the tailspin that
tighter U.S. monetary policy has
set off in the past.
“We should get rid of this
idea that the Fed is driving ev-
erything,” Luca Paolini, chief
strategist at Pictet Asset Man-
agement. “The Fed can have a
role but the most important
thing is about economic mo-
mentum and earnings momen-
tum.…As long as this is sus-
tained, equities will continue
to rise.”
HEARD ON THE STREET
Intel’s Wager on Driverless Cars
Driving the car of the fu-
ture means Intel has to pay
up now.
Intel was willing to pay a
rich $15.3 billion for Mobil-
eye because the chip maker
effectively missed the smart-
phone revolution, the last
big new source of chip de-
mand. Fully self-driving cars
are still years away from hit-
ting roads en masse, but the
deals are happening now.
Intel stepped up with Mo-
bileye, the Israeli company
known as the eyes of self-
driving and driver-assist car
technologies for its chip-
based camera systems. Intel
is paying 62 times forward
earnings in a deal that will
effectively consume all of In-
tel’s offshore cash and then
some.
This is a gamble that In-
tel’s rival Qualcomm has al-
ready made with its own
pending purchase of NXP for
$39 billion. And it isn’t an
unreasonable one: Full au-
tonomy will essentially re-
quire cars to become rolling
China’s Amazing Disappearing, Reappearing Infrastructure
China’s impressive infra-
structure, which helps drive
demand for everything from
copper wires to Caterpillar
excavators, is a source of
pride for party apparatchiks
and an obsession for com-
modities traders.
The latter are likely to cel-
ebrate Tuesday figures
showing a sharp rebound in
investment in things like
roads and railways in early
2017. But investors should be
warned: The uptick isn’t
likely to last, and it obscures
broader weakness which
could weigh on growth once
it fades.
First, the good news:
China’s infrastructure invest-
ment rebounded sharply to
21% growth from a year ear-
lier in January and February,
up from just 11% in the
MARKETS
the Brexit vote.
Adding to uncertainty
around the U.K., Scotland’s
chief minister said Mon-
day she plans to seek a second
referendum on Scottish inde-
pendence to be held within
two years.
The U.K. economy has so
far defied expectations that it
would be hit hard by Brexit,
expanding 1.8% in 2016.
British officials and many
analysts continue to predict
Cycles of higher U.S. rates
have previously spelled bad
news for emerging markets, in
part because they usually pro-
duce a stronger dollar. That is
costly for countries with heavy
dollar-denominated debts, leav-
ing less to invest in the econ-
omy. Higher U.S. rates also draw
investors to U.S. assets, away
from emerging markets.
Most recently, indications
that the Fed would wind down
its quantitative easing pro-
gram in 2013 sparked huge
losses for emerging markets—
the “taper tantrum.”
Mr. Paolini says that with
FINANCIAL ANALYSIS & COMMENTARY
Growth Drive
Spending by car makers on self-driving features
$45 billion
40 Forecasts
35
30
25
20
15
10
5 self-driving features is ex-
0
2014 ’15 ’16 ’17
Source: Strategy Analytics
supercomputers, which will
need powerful chips to pro-
cess data from cameras, ra-
dar, maps and other inputs.
That creates an important
new market for chip makers
that are struggling with tra-
ditional segments like per-
sonal computers, servers and
even smartphones—all of
which are slowing or are in
decline.
Copper prices have fallen 6%
from a year-high last month.
fourth quarter of 2016, a
four-year low.
Yet excluding infrastruc-
ture, China’s annual invest-
THE WALL STREET JOURNAL.
Bank predicts for the eurozone
in 2017.
But the pound’s continued
weakness shows that investors
believe U.K. growth forecasts
are likely too optimistic.
DANIEL LEAL-OLIVAS/AGENCE FRANCE-PRESSE/GETTY IMAGES
They see a plethora of risks.
Many are betting the uncer-
tainty surrounding Britain’s
future commercial relationship
with the EU, its largest trading
partner, will dent corporate
sentiment.
“The main problem for ster-
ling is just the sheer size of
political uncertainty,” said
Carl Hammer, the chief cur-
rency strategist at Swedish
lender SEB.
Resilience in the labor and
housing markets has helped
cushion U.K. consumers so far,
but confidence is fragile, some
analysts say. Retail sales sank
resilience. in January for a third straight
Last week, the Office for month, a sign rising inflation
Budget Responsibility, the pressures from a falling pound
U.K.’s independent fiscal could deter spending.
watchdog, raised its annual “Forecasts seem optimis-
growth projection for this year tic—you’d think nothing was
to 2% from 1.4% previously. changing,” said Paul O’Connor,
The move echoed that of the multiasset chief at Henderson
Bank of England in February, Global Investors, adding that
which upgraded its growth the official models largely as-
forecasts to 2% this year and sume Brexit doesn’t disrupt
1.6% in 2018. growth and trade.
That is above the 1.8% —Mike Bird
growth the European Central contributed to this article.
global economic growth pick- compared with around 16
ing up—even in Europe—con- times for the MSCI World In-
ditions are right for stocks dex, according to the index
world-wide to continue rally- provider.
ing. The latest encouraging Bonds issued by emerging-
sign: data Tuesday showing in- market countries are also per-
dustrial production in China forming well this year. J.P. Mor-
up by a consensus-beating gan’s Emerging Markets Bond
6.3% in January and February. Index-Plus, which measures to-
Emerging markets in Asia tal returns of U.S. dollar-denom-
are some of the cheapest inated debt issued by govern-
available, Mr. Paolini said, ments and quasi-sovereigns, is
with many exposed to technol- up 2.3% this year, compared
ogy stocks poised to benefit with a 0.6% decline for an equiv-
from a revival in global alent index of global govern-
growth. The MSCI Asia ex- ment debt. Latin American
Japan Index trades at around countries such as Brazil are no-
13 times expected earnings, table outperformers.
has its limits; Intel’s share
price had risen less than 4%
since that deal through Mon-
day, sharply underperform-
ing the PHLX Semiconductor
Index, which had jumped
34% in the span.
Mobileye potentially
brings a big payoff given its
strong position with key
auto makers such as BMW,
Audi and Daimler that are
working on self-driving cars.
Spending by auto makers on
pected to surpass $33 billion
by 2020—double last year’s
’18 ’19 ’20 ’21 ’22 ’23 level—according to Strategy
THE WALL STREET JOURNAL. Analytics. Mobileye projects
it will have revenue of more
That is particularly the than $1 billion in 2019 on the
case for Intel, which still de- strength of its driver-assis-
pends on the sluggish PC tance technology. Fully au-
market for a majority of is tonomous deals would be ad-
revenue, and is also now ditive to that.
grappling with a slowing It is still a long road ahead
data-center business as well. to self-driving cars. But for a
The latter drove the com- company like Intel that can
pany’s last big deal—its afford the rather large toll, it
$16.7 billion acquisition of is one worth taking.
Altera in mid-2015. But the —Dan Gallagher
appeal of defensive moves and Stephen Wilmot
ment growth rate actually brighter. While economic
declined to just 5%, from 7% planners will try to avoid a
in the last quarter of 2016. sharp deceleration in spend-
Real-estate and manufactur- ing ahead of a key Commu-
ing investment both weak- nist Party congress this fall,
ened, despite healthy land most infrastructure in China
sales numbers—in line with is funded locally, not cen-
fourth-quarter 2016 earnings trally. And borrowing condi-
hinting that profit growth tions for local governments
IMAGINECHINA/ASSOCIATED PRESS
for most sectors peaked in have sharply deteriorated af-
late 2016. ter Chinese bonds were pum-
For one particular infra- meled by a market rout in
structure sector, power and December.
utilities, the news was un- Yields on both official mu-
equivocally bad: Investment nicipal bonds and those is-
growth slowed to just 1%, sued by off-balance-sheet
the weakest showing since municipal financing vehicles,
2011. Higher coal prices and which do most of the grunt
overcapacity have eroded work raising capital for in-
power-sector margins: Cop- frastructure, have risen
per is already feeling the sharply since then. Net new
pain, with the metal down off-balance-sheet bond fi-
6% from its year-high set nancing by local govern-
last month. ments totaled just 80 billion
The outlook isn't much yuan ($11.57 billion) from
Oil Drops
Again,
Hurting
Shares
BY RIVA GOLD
AND AKANE OTANI
U.S. stocks fell along with
government-bond yields Tues-
day, as a selloff in the oil mar-
ket deepened.
The Dow Jones Industrial Av-
erage fell 62 points, or 0.3%, to
20819 by midday in New York.
The S&P 500 lost 0.5% and the
Nasdaq Composite fell 0.6%.
Losses in shares of energy
companies pressured major in-
dexes as U.S.-traded crude oil,
which tumbled below $50 a
barrel last week, extended de-
clines. On Tuesday, U.S. crude
was down 1.8% to $47.55 a
barrel. The S&P 500 energy
sector was off 1.5%.
Investors worrying that a
ramp-up in U.S. production
could offset efforts to reduce a
supply glut had sent oil prices
sliding for six consecutive ses-
sions through Monday.
Government-bond prices
strengthened Tuesday, with
the yield on 10-year U.S. Trea-
surys falling to 2.597% from
2.609% Monday, which was its
highest settlement since 2014.
Yields fall as bond prices rise.
Falling oil prices can reduce
expectations for inflation,
which chips away at the re-
turns of long-dated debt.
Shares in Hong Kong and
Japan ended fractionally lower
as traders held off on big posi-
tions ahead of results of the
Federal Reserve meeting
Wednesday and other global
central-bank meetings later
this week.
The Shanghai Composite In-
dex gained 0.1% after data
showed industrial production
and investment accelerated
faster than expected in China
in the first two months of the
year and Chinese housing sales
growth picked up slightly.
WSJ.com/Heard
OVERHEARD
Like most people who go
into academia, Prof. Robert
Kelly wasn’t expecting fame
or fortune. Now he at least
has the former, and it isn’t
for his astute analysis of
Asian affairs.
Better known as “BBC
dad,” his hilariously interrupted
interview has been viewed
tens of millions of times. Mere
pennies for each viewing
would make him one of the
wealthiest men in Busan,
South Korea. But that isn’t
how it works and, according to
a recent advertisement by his
university, he probably
makes around $30,000.
Chump change compared
to the $420,000 earned by
fellow internet meme star
“Chewbacca Mask Mom.” You
don’t even have to be likeable.
Danielle Bregoli of “cash me
outside” infamy reportedly
earns $30,000 per appearance.
Mr. Kelly, if your years of
study have taught you any-
thing, then strike while the iron
is hot—internet fame is fleeting.
December to February,
against 199 billion yuan in
November alone, according
to Wind Info. Yields on AA-
rated municipal-financing
vehicle debt are up nearly
two percentage points since
mid November.
With financing and raw-
material costs both heading
skyward and central-govern-
ment support unlikely to
step up significantly, the
headwinds to a sustained
pickup in infrastructure
building look strong.
Investors should consider
themselves warned: If indus-
trial growth in the rest of
the world slows as well, or
the Chinese housing market
seriously stumbles, commod-
ities and infrastructure-
linked shares will feel the
pain. —Nathaniel Taplin