Inflation remains primary concern for Reserve Bank: Subir Gokarn

RBI Deputy Governor Subir Gokarn.

A roadmap for fiscal consolidation and a significant tax reform are needed

Days ahead of the mid-quarter review of the monetary policy, on December 18, Reserve Bank of India (RBI) Deputy Governor Subir Gokarn on Saturday said inflation continued to be the primary concern for the central bank.

His comments come amid growth in the second quarter (July-September) falling to 5.3 per cent, triggering demands for a rate cut by the RBI to boost the economy.

The RBI should not do anything that provide some short-term stimulus to growth, he said at a Bombay Management Association event.

“One action is not necessarily going to make the difference. But there are risks associated as well,” Mr. Gokarn said, adding inflation continued to be the primary concern of the monetary policy.

According to many analysts, the central bank will hold the rates on December 18 as inflation continues to be high, at 7.45 per cent in October.

At the last policy announcement, the RBI had left the short-term lending rates unchanged at 8 per cent.

Mr. Gokarn said the RBI should not fall prey to trying out something opposite if one set of actions, in this case the anti-inflationary stance, was not working.

“The belief that just because something does not seem to be working, the exact opposite is the solution (is incorrect),” he said.

On Thursday, the RBI Governor, D. Subbarao, had hinted that rate cuts were on the anvil as growth had moderated steeply.

“We are expecting that inflation will trend down starting Q4. As we go into our mid-quarter policy on December 18 and the quarterly policy on January 29, we will take into account the growth-inflation trajectory and calibrate our monetary policy accordingly,” the Governor had said.

Above comfort level

However, Dr. Subbarao also said at 7.5 per cent, inflation was still high, though it had come down from its peak.

To tame inflation, the Reserve Bank since March 2010, has announced 13 consecutive rate hikes. However, inflation is still above the RBI’s 5 per cent comfort levels.

Mr. Gokarn said a commitment to walking on a fiscal consolidation roadmap and introducing tax reforms such as Goods and Services Tax (GST) would help the country avoid a downgrade by global rating agencies.

“A roadmap for fiscal consolidation, a significant tax reform (GST) are what we need in terms of giving some comfort on where the fiscal situation is headed, as it creates some resources available for government investments.

“And certainly, if this roadmap is adhered to, then I think the rating downgrade risk is sort of automatically dealt with.”

Noting the positive impact on state finances when VAT was introduced, he said GST would have a similar impact.

“The VAT had tremendously helped the states in reducing their fiscal deficits, and the same kind of dividend is possible with GST as well,” he said, without elaborating further.

Fiscal deficit

On the fiscal deficit, the RBI Deputy Governor underlined the need to invest in capital formation.

Mr. Gokarn said during high growth period of 2004-07, there was a lot of focus on capital formation and the work done on building highways is so far helping the economy.

Talking of the volatile rupee, he said the currency was fanning inflation but also conceded that it was very difficult to protect rates given the relatively small forex reserves and the high current account deficit.

ADB lowers India growth forecast to 5.4 per cent

The Asian Development Bank (ADB), on Friday, cut India’s growth forecast to 5.4 per cent in 2012-13, barely two months after it had made a projection of 5.6 per cent growth for the Asia’s third largest economy.

“India’s growth forecast is revised from 5.6 per cent to 5.4 per cent in fiscal year 2012 and from 6.7 per cent to 6.5 per cent in 2012-13,” the ADB said in its supplement to the ‘Asian Development Outlook (ADO) 2012’

This is the fourth time that the bank has slashed the growth estimates for India.

In the ADO released in April, the ADB had projected India to grow at 7 per cent. But it lowered its estimate to 6.5 per cent in July and further to 5.6 per cent in the ADO October update, citing falling global demand and impact of delayed monsoon on agricultural production.

As regards developing Asia, which comprises 45 nations, the ADB lowered its 2012 growth forecast marginally to 6 per cent from 6.1 per cent. It also revised downward the growth outlook for 2013 to 6.6 per cent from 6.7 per cent projected earlier.

India’s economy has slowed in the recent years on the back of domestic and global factors.

Disinvestment in name only

Earlier in 2012, Securities and Exchange Board of India authorised two new methods for divesting shares — the Institutional Placement Programme (IPP) and Offer for Sale of shares through the stock exchanges (OFS).

After some hiccups, the public sector disinvestment programme got off to a start in late November. The government raised some Rs.800 crore by divesting a 5.58 per cent stake in Hindustan Copper Ltd. through an offer for sale (OFS) through the stock exchanges (OFS). The government’s shareholding in the company before the OFS was at a high 99 per cent.

The budget has fixed a Rs.30,000 crore target from the public sector disinvestment programme for the current year (2012-13). Obviously, offer for sale in Hindustan Copper is only the beginning and the government’s expectation is that the small equity stake sale will be the harbinger of larger issues and higher realisations.

A confident Finance Minister believes that the budget target of Rs.30,000 crore will be achieved even though hardly four months remain before the year-end. The macro-economic target is to contain the fiscal deficit to within 5.3 per cent of the gross domestic product (GDP). With the slowdown being all too pervasive, during the second quarter of this year, the economy grew by just 5.3 per cent, achieving the target becomes especially difficult as revenue targets are unlikely to be met. This raises the expectation from the divestment programme.

According to reports, a number of other companies are being lined up. In brief, the government thinks that there is a momentum, which will be have to be seized.

The government’s optimism is also based on the fact that, so far at least, and unlike most cases of PSE divestment in the past, there has been no major controversy in this case.

It is, however, naive to think that everything is hunky dory.

Hindustan Copper’s stake sale found favour only because it was the first during this year, which, by all accounts, has hardly been favourable for such sale. The primary issue (IPO) market has been in a moribund state for a long time. Two other PSE’s which were being prepared for divestment pulled off because of a realisation that they may not fetch a “fair” price. Pricing decisions have been at the centre of major controversies in the past.

Barely a week after the stake sale, Hindustan Copper’s issue has come under scrutiny for the following reasons:

(1) The offer for sale might, according to some newspaper headlines, have “sailed through” but the fact is that the bulk of the subscriptions came from the government-owned LIC and State Bank of India and other public sector banks. Investor responses, whether from the foreign institutional investors or domestic ones, have been extremely muted.

The government has obviously leaned on these institutions to support Hindustan Copper. There is ample confirmation of this from the fact that LIC, India’s biggest investor with an investment target for this year alone being at a mind boggling Rs.2.4 lakh crore of which 10-15 per cent will be in equities, had its investment guidelines relaxed just in time to enable it to invest on such a large scale.

The temptation to divert a portion of that money to a “just cause” would always be there but to do so is a mockery of LIC’s autonomy. Barely a week before the offer for sale of Hindustan Copper, the government allowed LIC to raise its investment limit in any one company to 30 per cent of the (latter’s) paid-up capital, a move obviously intended to support the OFS. In the process, the government overruled the regulator, the Insurance Regulatory and Development Authority (IRDA), which was not in favour of the relaxation.

It is not for the first time that LIC has been asked to bail out the public sector disinvestment programme. In March last year, it was asked to invest in a big way in ONGC’s share issue.

Since the current market price is way below the price at which it invested, LIC is incurring a big loss on that investment. Early reports are that it will not fare any better with Hindustan Copper.

The message

The message is clear: what is good for the government’s disinvestment programme can be positively injurious to LIC’s policyholders.

(2) The pricing of the OFS has been flawed. The government fixed the base price at Rs.155 a share, which seemed to be at a steep (42 per cent) discount to the pre-issue ruling price.

But the government was not really offering a discount. The share price was not arrived at scientifically. Only a very small quantity of Hindustan Copper’s shares were traded before the offer (less than one per cent), a miniscule float lends itself to manipulative practices especially if a bigger float is in the offing. In the event, the share price fell sharply on the BSE on November 23. Existing shareholders would have taken a beating. If the trend continues, the possibility of new investors — LIC and other government owned institutions — losing money is all too real.

(3) The Hindustan Copper OFS does not meet the canons of a sound disinvestment. According to the official website of the Department of Disinvestment, Ministry of Finance, every citizen has the right to own part of the shares of public sector undertakings, “which are really the wealth of the nation”. Such wealth should vest with the public. In every case, the government will retain at least 51 per cent of the shareholding and management control of the undertaking.

(4) Implicit in the above is the role of the small shareholder. Far from getting primacy, he has once again been ignored in a public sector divestment programme.

In fact, earlier this year, the Securities and Exchange Board of India (SEBI) authorised two new methods for divesting shares — the Institutional Placement Programme (IPP) and Offer for Sale of shares through the stock exchanges (OFS). Both these are meant to simplify the process of public issue, reduce its time-frame and hopefully the expenses connected with the issue. Although to be welcomed for the above reasons, both the methods bypass the retail investor. The OFS of Hindustan Copper reinforces that point.

BSNL on life support as Pitroda’s recommendations gather dust

BSNL’s losses for the last three years already exceed $3 billion at Rs.17,058 crore.

Once a Navratna, the company has accumulated losses of $3 billion

Once India’s leading telecom operator and a Navratna, Bharat Sanchar Nigam Ltd.’s (BSNL) finances now paint a scary picture of a company on critical life support and in the absence of immediate attention, with very little hope of survival.

BSNL’s losses for the last three years already exceed $3 billion at Rs.17,058 crore. This is in spite of the fact that it registered a whopping income of Rs.89,667 crore or $16 billion but outclassed that with an expenditure of Rs.1,07,095 crore or nearly $20 billion, far in excess of this income. [See chart].

Ironically, in the same period that BSNL has seen a steady decline, the telecom sector, in the last decade has gone on to produce several new billionaires. When contacted, Telecom Minister Kapil Sibal told The Hindu that the main crisis was on account of 45 per cent of BSNL’s income going towards salaries as against a 4-5 per cent-level in the private sector. “We are working on an attractive VRS scheme and will eventually boost incomes by leveraging BSNL’s real estate bank, renting out its telecom towers and fibre optics capacity”.

The perfect prescription for BSNL’s revival remains elusive. Sam Pitroda, Advisor to the Prime Minister, had headed a committee to review BSNL’s operations in 2009-10. The committee had recommended selection of the best professionals from the private sector at market rates, and appointment of an eminent person from the private sector as chairman. It suggested separating the post of Managing Director/CEO from CMD and a change of the board’s composition to seven directors — one internal MD/CEO, one non-executive chairman, two government nominees and three external directors.

Mr. Pitroda had recommended providing three-year contracts with specific targets for all key management team members and establishing four independent business units for Fixed Access, Mobility, Enterprise and New Businesses. On the human resource side, the committee had recommended completing the Indian Telecom Service (ITS) absorption process while inducting significant young talent in technology, IT, marketing and sales. A sharp reduction was also suggested through retirement or transfer of one lakh employees through processes such as voluntary retirement scheme (VRS).

Mr. Pitroda had further recommended disinvesting 30 per cent stake through a strategic Indian investor and an initial public offering (IPO) of which 10 per cent should be returned to the government and 20 per cent used for BSNL’s employee VRS, expansion and operations. He had targeted providing 30 million new high-speed broadband connections in the next three years and significantly, unbundling local loop for public and private companies. He also recommended setting up of two separate subsidiary companies for tower-related infrastructure and land bank and other real estate assets.

NO TO SAM

The Telecom Commission deliberated these recommendations and then set up an Internal Committee led by Member Services. The Internal Committee submitted its recommendations on October 29, 2010, based on which the Telecom Commission decided that taking 30-50 professionals from the market at market rates, changing the board constitution or separating the posts of chairman and MD may not be feasible in only one public sector undertaking (PSU) as it may simultaneously trigger protests from BSNL and demand for similar treatment by other PSUs.

Further, the Telecom Commission felt this was not the opportune time for listing and disinvestment of BSNL, as the company was on a downward performance path and disinvestment might not realise the true value of the company. In the absence of listing, option of giving stocks as incentive to key management is also not available. On the issue of VRS, the panel said that VRS across the board might not be required; BSNL could examine option of VRS for select categories, examining financial burden and cost/benefit of the company.

On issues of adopting a managed capacity or managed services model — the view of the Internal Committee that the BSNL Board may take a view — was endorsed, while unbundling of the local loop was a commercial decision, which should be decided by BSNL board after critically examining the issue. On all other issues relating to BSNL’s operational and commercial issues, the Committee has left the decision to the BSNL board. The Telecom Commission also said that it might revisit its decisions relating to disinvestment, VRS and unbundling of local loop “if the need arose in the context of any major policy decisions involving restructuring and repositioning of BSNL”.

Chandrashekhar panel to frame rules for foreign investors

Market regulator SEBI on Wednesday said it has appointed a committee under ex-Cabinet secretary K M Chandrashekhar to frame a single set of guidelines for all types of foreign investors.

The committee will suggest ways to simplify the investment process for all overseas entities like foreign institutional investors, foreign venture capital investors (FVCIs), qualified financial/institutional investors (QFIs), and NRIs, among others, and also to strengthen surveillance over them.

“Why should we have various routes for foreign investment? Why should we have sub-accounts, ODIs, FIIs and QFIs and NRIs and all that? In consultation with government, we have decided to combine these various routes which are present today into one single route.

“And three-four days ago, we set up a committee under former Cabinet secretary K M Chandrashekhar to look into this,” SEBI chairman U K Sinha told reporters here on the sidelines of a capital markets summit organised by industry body CII.

However, he did not share more details like when the committee will submit its report and who are the other members of the panel.

It can be noted that at the last SEBI board meeting held on October 6, it had said that it was looking for ways to streamline foreign investment norms for various categories of investors.

India’s Consulate among missions hit by China counterfeit scam

Consulate General in Guangzhou raises 58,000 yuan in charity event

India’s Consulate General in the southern port city of Guangzhou was among several foreign missions that received counterfeit notes in a fund-raising drive that has stirred a controversy in China over the role of overseas organisations in charity events.

Thirty foreign consulates in Guangzhou held a charity event over the weekend to raise money for a home for local children with disabilities. The event was supported by the provincial Guangdong Foreign Affairs Office — one of the first such events that involved both the Chinese government and overseas missions working together for local charities, which are usually tightly controlled by the authorities.

The Indian Consulate played a key role in the fundraiser, raising close to one-fifth of the total 330,000 yuan (U.S. $53,225) made by the event. The Consulate General of India raised 57,673 yuan (U.S. $9,300) — becoming the single biggest contributor — by selling traditional incense sticks, jewellery boxes and silk and through funds raised from the Indian community, officials said.

An event that was supposed to have generated positive headlines about China working together with foreign countries has, however, found itself caught in controversy after it was discovered that a large amount of the money collected from local visitors was counterfeit.

The local Yangcheng Evening News reported that a group of visitors — apparently looking to take advantage of foreigners’ inability to detect fake notes — had given close to 5,000 yuan in counterfeit notes in “a deliberate and organised act by professional counterfeiters.”

The Indian booth too received a few counterfeit notes, officials said, adding the amount, in their case, was very small.

The event has generated wide attention on China’s microblogs, with many Internet users expressing embarrassment that scam artists took advantage of a charity drive.

But one former official on his microblog criticised the foreign missions for organising the event. He Keng, former deputy director of the National Bureau of Statistics, said the missions had “intended to disgrace us Chinese by holding a charity bazaar and they are shameless.”

“China doesn’t need the 330,000 yuan, not to mention it was Chinese people’s money,” he wrote, according to the Global Times.

Most of the responses to his post, however, criticised his “narrow-mindedness,” the newspaper said, with bloggers expressing sympathy with countries that saw a widely welcomed effort to build bridges — and, in the process, help a deserving local charity — unfortunately overshadowed by controversy.

A Gateway for developed nations to baulk at commitments

Doha event is not going to save world from climate change impact, it has at best managed to keep negotiations alive

 Gas-to-liquid (GTL) diesel buses with the posters “Share the ride, cut the carbon” ferried delegates to the massive Qatar National Convention Centre, where talks concluded last Saturday with a Doha Climate Gateway. Large screens would boast scores of trees (250 or more) and reams of paper (over 2,00,000 sheets) were saved thanks to this “paperless” meeting. But the Doha Climate Gateway is not going to save the world from the impacts of climate change, it has only managed to keep a tedious process of negotiations alive with a faint glimmer of hope.

While most countries agreed to a second commitment period under the Kyoto Protocol, the developed countries, led by the U.S., manoeuvred the world into adopting the Gateway with no commitment on their part to cut emissions or put money on the table.  Japan, Canada, New Zealand and Russia walked away from the second commitment period of the Kyoto Protocol, following the U.S.

NEW COMMITMENT PERIOD

Conférence of Parties (COP) 18 president Abdullah bin Hamad Al-Attiyah said the Doha Climate Gateway marked the beginning of discussions on a universal, legally-binding international agreement on emission reductions, which should be ratified in 2015 and should come into force in 2020. The organisers maintained that governments had taken the next essential step in the global response to climate change. Countries launched a new commitment period under the Kyoto Protocol, agreed on a firm time table to adopt a universal climate agreement by 2015 and a path to raise ambition to respond to climate change.

They also endorsed the completion of new institutions and agreed upon ways and means to deliver scaled-up climate finance and technology to developing countries.

“Doha has opened up a new gateway to bigger ambition and to greater action,” said Mr. Al-Attiyah. 

Christiana Figueres, Executive Secretary of the U.N. Framework Convention on Climate Change (UNFCCC), said: “Doha is another step in the right direction, but we still have a long road ahead. The door to stay below two degrees remains barely open.” She said the Doha agreement was a bridge between the original Kyoto Protocol, which was drawn up in 1997 and which expires at the end of this year, and the next protocol, which was agreed to in principle in Durban (the Durban platform) last year and is due to be signed in 2015. In Doha, she said, all countries had agreed to produce a document detailing their reduced carbon emissions six months in advance of the 2015 COP.

The climate talks were attended by 194 countries with 16,000 participants. The work that began in Bali in 2007 on the long-term cooperative action and extension to the Kyoto Protocol was concluded but real commitments were missing.

The U.N. climate talks failed to deliver increased cuts in carbon pollution, nor did they provide any credible pathway to $100 billion per year in finance by 2020 to help the poorest countries deal with climate change, according to the 700 NGOs who are members of Climate Action Network-International (CAN-I).

  While the Doha talks were supposed to lead to a binding deal in 2015 to cut emissions, countries like the U.S. battled on the issue of equity and the polluters pay principle.  The whole attempt was to get developing countries to commit themselves to reducing emissions as well and go against the principles of equity.  

“IT’S BETRAYAL”

In a statement, Tim Gore, International Climate Change Policy Adviser for Oxfam, said Doha had done nothing to guarantee that public climate finance would go up next year, and not go down. “Developing countries have come here in good faith and have been forced to accept vague words and no numbers,” Mr. Gore said. “It’s a betrayal.” 

 The Gateway has failed to come up with any commitment on midterm finance for the Green Climate Fund or any specified amount of finance. There is an eight-year second commitment period of the Kyoto Protocol with loopholes that allow carry over, use and trading of hot air, say NGOs.

The developing countries did manage to push through a work programme on loss and damage and a decision to establish something on the lines of an international mechanism for loss and damage by the next climate talks in end-2013, which the U.S. is resisting.  

“The blame for the disaster in Doha can be laid squarely at the door of countries like the U.S.A. which have blocked and bullied those who are serious about tackling climate change,” says Asad Rehman, Friends of the Earth International.

‘HOT AIR’ KYOTO CREDITS

Kumi Naidoo, Executive Director of Greenpeace International, in a statement, said: “The talks in Doha were always going to be a modest affair, but they failed to live up to even the historically low expectations. “The pace of progress is glacial. This time Europe, usually seen as a leader on climate change, comes away with dirty hands. Due to a collective failure of political courage, European governments chose to take the side of Poland, which demanded the right to keep ‘hot air’ Kyoto credits awarded to them in the 1990s. Europe also refused to go beyond a 20 per cent target, which would barely decrease them emissions from today’s levels.”

TYPHOON BHOPA

 The Philippines witnessed its 16 extreme climate event during the conference and typhoon Bhopa devastated parts of the country which had not seen such destruction for 40 years. While the world negotiates year after year, it has failed to get developed countries to accept their historical responsibility. Instead of commitments, there is a gateway for the developed nations to resist action.

Maldives for deeper ties with China

Maldives Defence Minister Mohamed Nazim on Tuesday held talks with his Chinese counterpart in Beijing, on a visit that officials said was aimed at deepening military ties between the two countries.

Mr. Nazim told Chinese Defence Minister Liang Guanglie that the Maldives “is willing to cement relations between the two countries and their militaries”, the state-run Xinhua news agency reported.

His visit comes amid deepening economic and diplomatic engagement between the two countries. Tourism from China now accounts for close to one-fourth of the nation’s tourism industry, according to officials, with the market growing 40 per cent last year. Last year, China opened its first Embassy in the Maldives.

General Liang said on Tuesday China would “continue to develop friendly, cooperative and mutually beneficial relations with the Maldives under the principle of building a good-neighbourly relationship and non-interference in internal affairs”.

“China has always positively developed its military relations with the Maldives and hopes to enhance communication and cooperation, promote the construction of both militaries, and safeguard regional peace and stability,” he was quoted as saying by Xinhua.

China views the Maldives as an important Indian Ocean country to court, especially considering its strategically-significant location along sea lines that are being increasingly traversed by Chinese ships on piracy missions to the Gulf of Aden.

General Liang, in an interview with The Hindu in September, said PLA Navy ships “while conducting long-distance voyages, often went to close ports of littoral countries for logistic supply”, but added that media speculation suggesting Beijing was interested in a military base in the region was inaccurate.

“According to the need of escort missions and other long-distance voyages, we would also consider having logistic supply or short rest at appropriate ports of other countries,” he said. “Such logistic supply activities do not have any connection with establishing military bases overseas”.

The Defence Minister’s visit to Beijing comes amid a row between the Maldives and India over the decision to oust airport operator GMR.

Maldives President Mohamed Waheed in an interview with The Hindu on Monday denied reports suggesting that influence from China — or a Chinese company — had played a role in the GMR decision.

“Absolutely no. Absolutely no,” he said. “The only significant cooperation we have with China at this time is through development assistance… like building the museum, housing projects. I don’t think India should worry about it at all.”

Documents link Wal-Mart to gutted firm

A garment with the logo 'Faded Glory', owned by Wal-Mart, within the burnt out garment manufacturing buildding in Dhaka.

Documents uncovered at the Tazreen garment factory in Bangladesh where 112 workers died in a fire two weeks ago indicate that not one but two U.S. apparel makers supplying goods for Wal-Mart were using the factory around the time of the fire.

Two days after the Nov. 24 fire, Wal-Mart said in a statement that it had stopped authorising production at Tazreen and that despite that move, a single supplier, later identified as Success Apparel, had “subcontracted work to this factory without authorisation and in direct violation of our policies”.

The documents found in the factory by officials from the Bangladesh Centre for Worker Solidarity show that a subcontractor for an additional Wal-Mart supplier, International Intimates, was having women’s robes and nightgowns made at the factory for Wal-Mart’s winter season. The documents show that the factory was also making women’s nightwear for Sears.

The documents contain a June 2012 e-mail from International Intimates’ subcontractor to officials at the Tazreen factory confirming plans to produce a robe and nightgown for Wal-Mart as well as a robe and pajama set for Sears. The documents also contain a production report from Sept. 13 showing plans to produce 117,000 of these garments for Wal-Mart.

Another document, dated Nov. 24 the date of the fire shows that Tazreen’s parent company, the Tuba Group, billed the subcontractor, I.T. Apparels, for the “chemise & robe” production.

The documents were found in factory offices that were largely undamaged by the fire and were made available to The New York Times by an intermediary, the Worker Rights Consortium, a factory monitoring group based in Washington that is financed by U.S. universities.

Kevin Gardner, a Wal-Mart spokesman, said that the retailer had stopped authorising production at the plant “many months ago”, but on Monday he again declined to say when or why Wal-Mart had ended such authorisation.

“We are still investigating the facts”, said Mr. Gardner.“If we determine that other suppliers were using a deactivated factory to produce merchandise for Wal-Mart, that’s a violation of our supplier standards. If that is the case, it is unacceptable and we will take appropriate action.”

Documents found at the factory earlier showed that orders in the name of three other U.S. apparel suppliers had been produced at the factory for Wal-Mart within the last year or so. In a statement, International Intimates said it was “conducting a thorough review of this incident”. The company added, “It is critical to note that Tazreen Fashions is NOT one of our approved partners and no one was authorised to make our products there.”

International Direct Group and Topson Downs declined to comment.

Mr. Gardner said Wal-Mart was working with “key stakeholders”, including Bangladesh garment manufacturers, the Bangladesh government and others, “to improve fire safety standards in Bangladesh”.

Scott Nova, executive director of the Worker Rights Consortium, said the new documents raised additional questions about Wal-Mart’s role at the factory.

“If Wal-Mart’s claim that they were the victim of one rogue supplier had any shred of credibility, it's gone now,” he said. “Wal-Mart is limited to one of two options to say, yes, we know these suppliers were using the factory or, two, we have no control over the supply chain that we’ve been building in Bangladesh for more than 20 years.”

In a statement, Success Apparel said it had placed an order with a Wal-Mart-approved subcontractor, Simco, and that Simco, without its authorisation, in turn subcontracted seven per cent of that order to Tazreen’s parent, the Tuba Group.

In a statement, Sears said that it did not know that one of its suppliers had been using Tazreen and that it, too, had terminated that supplier. — New York Times News Service

Defiant North Korea launches long-range rocket

In this April 8, 2012 photo, a North Korean soldier salutes in front of the country's Unha-3 rocket at Sohae Satellite Station in Tongchang-ri, North Korea.

North Korea defied international warnings and fired a long-range rocket on Wednesday, the second launch under its new leader and a clear sign Pyongyang is pushing forward with its quest to develop the technology needed to deliver a nuclear warhead.

Pyongyang’s state media quickly claimed that the country had successfully put a peaceful satellite into orbit with its long-range Unha-3 rocket the North’s stated goal of the launch. But South Korea and Japan said they couldn’t immediately confirm that. The launch was something of a surprise, as North Korea had indicated technical problems with the rocket and recently extended its launch window to December 29.

A rocket expert said North Korea’s rocket appeared to have improved on an April launch, which broke apart shortly after liftoff, but that it might be a day before U.S. officials could determine whether a North Korean satellite was circling the Earth.

The United Nations, Washington, Seoul and others see the launch as a cover for a test of technology for missiles that could be used to strike the United States.

South Korean Defence Ministry spokesman Kim Min-seok told a nationally televised news conference that a South Korean Aegis-equipped destroyer detected the launch at 9.51 a.m., local time, and the first stage fell into the Yellow Sea about a minute later; the rocket then flew over a South Korean island near the border with North Korea a minute after that. The rocket was seen flying west of Okinawa at 9.58 a.m., and then disappeared from South Korean radars, Mr. Kim said.

William Lewis, a spokesman for the U.S. North American Aerospace Defence Command, which tracks such launches, had no immediate information about the reported launch.

Japan protested the launch and said one part of the rocket landed west of the Korean Peninsula and another part was expected to have landed east of the Philippines. South Korean President Lee Myung-bak planned an emergency national security council meeting on Wednesday, and the country’s Foreign Minister Kim Sung-hwan warned that North Korea will face grave consequences.

Jonathan McDowell of the Harvard-Smithsonian Centre for Astrophysics said officials would likely have to wait a day or so to see if the United States can track anything that might have been placed in orbit by North Korea.

Success would be defined as “something that completes at least one orbit of the earth,” he said. But “clearly this is much more successful than their last attempt. It’s at least as good as they’ve ever done. They’ve proved the basic design of it.”