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Quest Means Business
Interview With Rachid Mohamed Rachid; Google Exec Freed; AOL Buys HuffPo
Aired February 07, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN DEFTERIOS, CNN ANCHOR, QUEST MEANS BUSINESS: A huge relief for Google as its regional marketing exec is freed in Egypt.
Turkish delight, a government minister tells us why Egypt should follow their economic example.
And Huffington Post, we'll be hearing from the CEO of AOL and Arianna Huffington on the tech firm's latest takeover.
I'm John Defterios in for Richard Quest. This, of course, is QUEST MEANS BUSINESS.
Good evening.
The speculation had been swirling all day. Now, in the last 40 minutes, Google confirmed they were missing their executive, Wael Ghonim, has been released in Egypt. He had been missing for more than a week after the protests erupted in Cairo. Let's go straight to Frederik Pleitgen in Cairo for more on this.
Frederik, I would imagine a huge relief, but also some reaction on the streets of Cairo. What's the latest?
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Certainly a huge relief for a lot of people, especially in Tahrir Square, because that is, of course, the place where he was picked up January 27. Google actually announced that he had been released in a Tweet, as you said, about 40 minutes ago. There was speculation throughout the entire day on whether or not he had been released. We were in touch with his family and again, and again, they told us that they had not heard from him.
Now he was picked up 10 days ago, here in Tahrir Square, and the Egyptian authorities had not even confirmed or admitted that they had taken. Now, yesterday the Egyptian prime minister, the new Egyptian Prime Minister Shafiq, finally-finally admitted that he was in their custody and said that he would be released sometime today. And now, as you said, we have this confirmation that that has indeed happened. And, of course, yes, that has lead to a lot of people down in Tahrir Square, cheering. They are very happy of course, about the fact that he has finally been released.
And Google, of course, was looking for this man in the past 10 days. And they even put out an urgent appeal to the Egyptian government to let them know if they had him. And, again, for 10 days there was not any sort of word on his whereabouts. And now, finally, however, John we do know that he has been released, John.
DEFTERIOS: There was talk about releasing him at about 4:00 o'clock in the afternoon, Cairo time. Why the delay, Fred? Any indication why?
PLEITGEN: We have no idea why the delay happened. Originally, as you said, the Egyptian prime minister said he would be released today, at 4:00 p.m. We were in touch with his family members. And they told us that they had gotten no word. Then there were several statements saying that he had been released, and then those were retracted. There really is, we really have no idea why this was delayed the way it was. However, it does really blend in to the way that we have been experiencing the sort of Egyptian authorities dealing with this.
Of course, he is not the only person, not the first person to be detained. There are a lot of journalists and human rights activists who have had the same thing happen to them. And in many cases it was very difficult apparently, even for the Egyptian government, even for the prime minister to find out where these people are. So, certainly it is not something that is surprising. But we really don't know why that delay happened, John.
DEFTERIOS: Going back to normal, in a sense, Fred? We had a cabinet meeting. The vice president meeting with the opposition parties, Muslim Brotherhood was included. Ghonim was released today. What is the reaction on the street now? Do they feel inch-by-inch they can get a smooth transition, or way too early to call that?
PLEITGEN: I would say, John, that there are several different realities on the ground here. Of course, as you see behind me, Tahrir Square is still full of protestors. And that alone will not allow this country to go back to normal. And they have already achieved quite a bit. And so certainly there are a lot of people who believe Egypt will never go back to the way it was.
Now, in other parts of Cairo, people are certainly trying to get back to normal. I've seen shop reopen, people trying to get their businesses back up and running. But on the other hand, of course, you have things like the tourism industry. And I can tell you, earlier today I visited the pyramids in Giza, and there was absolutely nothing going on there. No tourists, the pyramids are still cordoned off. And the people there are really afraid that this-that the tourism industry, which is so vital to this country, might have taken a massive dent that could continue well into the future. So, yes, there is a lot of worries, there is a lot of worries about the economy as a whole taking a tailspin. Meanwhile, however, John, people are trying to get their lives back in order. But certainly at this point in time that is a very, very difficult thing to do, John.
DEFTERIOS: Of course, tourism receipts about $13 billion a year before this crisis. One final question, Fred, the banks have been open now. The second day of trading for the banks, themselves. No run on the banks, but any panic at the ATMs or at the bank tellers?
PLEITGEN: Not that I've seen. I've monitored this more yesterday than I did today. I sort of caught it out of the eye today. There were still some lines in front of some banks, but nothing massive, nothing that would go around the block or two. It was maybe, 20, 30 people, that would stand in front of an ATM; people that would be inside, inside a bank to try and pull money there. The gist that I got from people that I have been talking to, is that it was less of a run to try and pull their money out of the bank than it was stocking up on cash because of the fact that they weren't able to access their money for such a long time, since this crisis began.
So, it doesn't look like there is that panic that many people were fearing could happen. However, of course, people here are very starved for cash at this point in time, simply because they haven't had access to a lot of ATMs and banks for such a long time, John.
DEFTERIOS: Yes, I think I'd be panicked, too, if I couldn't get access to may bank account for about a week. Fred Pleitgen with the update there from Cairo. Thanks very much for that.
Well, we got the first indication of how the world sees Egypt's economy, post-uprising, earlier today Egypt tried to raise funds in a treasury bill auction. Let's take a look how it went. It was so-so. Can we say it that way? Here is the headline. They were short about $300 million on the debt sale. Let's see if we can put this in perspective. They were looking to sell about 15 billion Egyptian pounds into the market today. They had to settle on 13 billion pounds. So a total of $2.2 billion worth of the treasury bills. Again, about $300 million short of what they were looking for.
The reason they were short; they didn't go ahead with the one-year treasury. The longest they went out into the market was nine months. And they paid a pretty hefty price for it. The original target was 10.9 percent. That inched up to 11.6 percent. So they are not too sure, when they come back to the market. They have been coming every week, or every other week, but the indications aren't great. They had to pay as much as 11.6 percent.
The other indication here that I think is, perhaps, very worrying is that the international investors decided to stay out of the market entirely. Some of the sources I spoke to today, said this was really a domestic purchase all the way around. The foreign investors hold $25 billion worth of treasuries. My understanding is they were net sellers today. They did not go in the market for these $2.2 billion. It didn't help that the market was only open for 3 hours of trading, from 10:30 local time, to 13:30 local time. So they had a very short window in which to enter, and again, the confidence really wasn't there.
Also, in the last week of course, there has been some real question marks, can we put it, over the market overall? Uprising uncertainty, the credit worthiness downgraded here. All the major houses, Moody's, S&P and Fitch, downgraded the sovereign debt. It doesn't help that Egypt is now in the top tier, probably a party they don't want to be a member of, 17th in the world in terms of their public debt to GDP, that is 80 percent of GDP. And the political uncertainty is only, really, making that a little bit worse.
A little bit earlier I spoke to Rachid Mohamed Rachid. Now you remember, he was the former trade and industry minister. He didn't take a post in the new cabinet. As a result he traveled to Dubai, and then he found out his assets had been frozen. Nothing is clear on that, but I wanted to talk to him about where Egypt goes from here. Let's take a listen from that interview in Dubai.
(BEGIN VIDEOTAPE)
RACHID MOHAMED RACHID, FMR. TRADE & INDUSTRY MINISTER, EGYPT: I have to tell you, I'm very confident about the banking situation in Egypt. I'm very confident about the structure, the reserves, the governance model, despite what we have seen in the streets and despite what we expect as a negative impact on the economy. I feel that the banking system will be able to stand all this pressure. We have done a lot in the last few years and I'm very confident about the governor and the management there, to be able to sail through this crisis here.
DEFTERIOS: President Mubarak would like to stay on, as you know, through the end of August or September, and have a controlled transition. Should he give up that goal? Or does he have to stay in office for this to work, in your view?
RACHID: Well, personally, I believe our best chance for this transition is for the president to stay, because the alternative is chaos and jumping into the unknown. The president has made it very clear four days ago, in his speech, that he will manage the transition with an open mind towards political reform. I think since his speech, in the last four days, we have seen many, many steps that have been taken.
Including the removal of many of the old figures, and many of the old faces, and these have given a lot of comfort that there is some significant change. We have a new leadership in the government, we have new leadership in the party, we have not a committee that is including all the opposition. We have the prime minister, the VP actively now involved in negotiation for the political reform. I believe that our best chance to get a smooth transition is to have President Mubarak continue his term and delivering what he promised us all in terms of the preparation for the election.
DEFTERIOS: What if the opposition parties, including the Muslim Brotherhood, hold that as a condition that before negotiations can move to the next stage, that he should go? Would you still hold that position?
RACHID: Well, I think this is very unrealistic, John, because they have to give us what the alternative. If the alternative is chaos, or because what the constitution says, the constitution says that the president steps down, the head of the parliament takes over, for a period of 60 days, where a new election should be in place for a president. I don't think this is realistic, at all, to assume that this is going to be able to deliver the changes on the political scene, and allow more activity to be involved.
DEFTERIOS: What is realistic, if it takes five or six months to have a controlled transition, what happens to growth in your view?
RACHID: Well, we have to be realistic. Growth will definitely be below what we expected. I think we need to understand that for the economy to continue, to work, and to deliver growth, there are some conditions. One is the establishment of law and order and the security of-in the street. The second one is that for the new government and the new team to show strongly that there is a business friendly environment, and not antagonizing and attacking environment for the business community. Third, the people should be convinced that there will be a smooth transition. And fourth, the most important, that they could also see that the end game is going to be resulting into a strong, stable democratic Egypt.
As you know, Egypt has a huge potential. I believe that our economy, our country, will have a great future. It is only the challenge of how we can manage the next six to seven months now.
DEFTERIOS: Final question, here, the president rushed to sack the previous cabinet. Five of those members were known as very business friendly, they brought in nearly $50 billion of FDI. You were one who had to go. Was that a mistake by the president?
RACHID: Well, at the end of the day the political situation in the country required the new team to be in place. I believe that the existing government has a lot of capability to deliver. But as I said, it will need to show the business friendly environment that people will be looking for. While, I, like all my colleagues will never let Egypt down. This is my country. I've done a lot for it in the last six and a half years. And I'm sure that I will continue to do, not necessarily from the position of minister.
(END VIDEOTAPE)
DEFTERIOS: Once again, Rachid Mohamed Rachid, joining us from Dubai. By the way he is still waiting for a final answer on his frozen assets.
Well, another factor putting pressure on the Egyptian economy is its falling currency. The Egyptian pound fell to a six year low, at one point today. One U.S. dollar currently buys around 5 Egyptian pounds, 5.952. As for the Egyptian stock exchange? That will not reopen until Sunday, according to the latest reports. It has been closed because of the protestor, of course, in Cairo.
We'll have more on Egypt this hour on QUEST MEANS BUSINESS. We'll ask if Turkey can be a model for the future of the Egyptian economy. That is coming up later on QUEST MEANS BUSINESS with an interview with Egemen Bagis, who is the European Affairs commissioner and minister for Turkey.
All sizzle and no stake, the emerging markets are losing some fans along with billions of dollars. Is it just a blip on the investment radar, or is it something more serious?
(COMMERCIAL BREAK)
DEFTERIOS: "We must work together", the words of U.S. President Barack Obama, as he faced Washington's powerful business lobbying group. He told the U.S. Chamber of Commerce that focusing government efforts on infrastructure, education, and research, will put the economy back on track.
The business group has not always been on friendly terms with this administration. But the president sought common ground pointing to the chamber's support of the 2009 Recovery Act. Mr. Obama went on to discuss the global marketplace. And its impact, right now, on the U.S.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As countries like China, India, Brazil, grow and develop larger middle classes, it is profitable for global companies to aggressively pursue these markets, and at times, to set up facilities in these countries.
These forces are as unstoppable, as they are powerful, but combined with a brutal and devastating recession. These forces have also shaken the faith of the American people. In the institution of business, and government, they see a widen chasm of wealth and opportunity in this country. And they wonder if the American Dream is slipping a way.
(END VIDEOTAPE)
DEFTERIOS: President U.S. Barack Obama speaking to the U.S. Chamber of Commerce in Washington. This did not effect Wall Street. U.S. share gaining, the Dow advancing for a sixth trading day. Let's take a look at trading right now. Near the highs for the day. We were in the 80s, on the upside, before; 12,170 with a gain of 78.83 points.
Can we call it a Merger Monday? I guess we can. There are two major merger activities taking place. One in the manufacturing sector and one in the oil services sector and including a U.K. company on the acquisition trail. So, U.S. markets are on a roll this trading day. And they gained more than 2 percent last week. But the shine may be coming off the once white hot emerging markets.
Let's take a look. And there are some indications, if you just look at the cash flow. And that is the closest indicator of what is really happening in the markets. You probably recall in 2010, it was a record year for money going into the emerging markets. Total funds in emerging markets in 2010, $825 billion. Now, that is not just equities. But they have pulled out $7 billion last week, and that is the biggest withdrawal in more than three years, sparked by Middle East turmoil, of course. Rising food inflation also stoking fears of economic instability.
Last year it was a very different picture. I told you about the overall money into emerging markets, $95 billion was in the equity markets alone. So, $7 billion of it coming out, guess where it went? It went right into the G7 markets, like the United States and Germany, of course, Japan. Emerging market stocks have lost 1.8 percent so far this year, after that tear in 2010. The worst performer? That is the Indian flag, right there. Down 14 percent from the peak in November. Many investors plowed their money back into the U.S., Europe and Japan, because they were looking for a safe haven, not knowing how bad the inflationary scenario is going to be, not knowing if Egypt is going to finish up, not knowing where there is going to be a domino effect in, throughout North Africa.
Let's take a look at one of the largest and the one with the greatest expectations for the future. This was the focus, China, by the World Bank. It says China's economic growth will slow to 8.7 percent this year. That is down from that ripping pace of 10 percent in 2010. Growth in 2012, forecast to be 8.4 percent. But taking the longer view, our guest says that the six provinces of China, that are building right now, will be the size of Russia, Spain, or Canada by 2020.
Let's welcome in Zhiming Zhang, he is a research head of HSBC in China. He joins us on Q M B.
Nice to see you, John.
DEFTERIOS: I think I do need to cover the news of the day and that is U.S. markets holding steady, European markets holding steady, Japan is holding steady. No real flight from capitol yet, because of the Middle East, but the first signs of money leaving the emerging markets; $7 billion, not huge. What do you make of it?
ZHIMING ZHANG, HEAD OF CHINA RESEARCH, HSBC: Well, actually what it reflects, I think, is a policy headwind. It is a bit of good news is bad news to the financial markets. Emerging market growth is still going to be much higher than the developed world, but at the same time, higher growth means inflation pressure. And, therefore, all the policy makers are on the defense, and then you are going to see more interest rate hikes across the emerging markets. And in the case of China, you see more bank reserve ratio hikes, and followed by more rate hikes.
DEFTERIOS: But to be candid it looks like the Chinese central bankers are ahead of this vis-a-vis say India, because the consumer inflation, particularly food inflation, in India hit 20 percent. This could be the most vulnerable market-we had discussions at Davos about this and some of the Nobel laureates were saying this is the first one we should keep an eye on.
ZHANG: But in China, I think, it is a bit different, because China, largely is self sufficient in major food categories. Maybe a little bit, I would say, except for the soybeans, which China during the latest president's visit to U.S. they just signed a U.S. $6.8 billion worth of soybeans imports. For the remaining major food categories we are pretty much self sufficient. Plus, keep in mind that China's central government still runs a solid balance sheet, which means government has the ability, if necessary to subsidize farmer, subsidize-
DEFTERIOS: That is what surpluses are for.
We don't have a lot of time, Mr. Zhang. I wanted to talk to you about one other factor here, and that is how the markets are viewing the Middle East crisis right now? There are almost, if you look at the indicators, here, both on interest rates and in equity markets, factor in the best case scenario, that this does not spill over, not only into North Africa, but into the broader Middle East. And they don't have a great track record if you look at the oil embargo of 1973, and the Iranian Revolution. A hit and miss on predicting when the crisis will actually spread. What is your view?
ZHANG: Well, what we think is like this advance has unfolding for the last 10-plus days. So investors have ample time to digest the consequences and the spillover effect to the rest of the economies and markets.
DEFTERIOS: But they want to see the glass half full, that is a fair comment, right?
ZHANG: Exactly. Exactly. So, but latest for the fact, like today, the fact that markets opened, the fact that, you know, Egypt is able to raise money, issue bills in the market, that is all positive indications. Relative-
(CROSS TALK)
DEFTERIOS: Even at a higher interest rate.
ZHANG: Exactly, that is relative to the fear. Relative to the fear last week, which could be, you know, the market might be shut down, in the foreseeable future. Markets always run on relative terms. So the fact that some normality has been restored is positive indicator of what is going on going forward.
DEFTERIOS: It could have been much worse, is what you are saying?
ZHANG: Exactly.
DEFTERIOS: We'll have to see how transition is handled.
Nice to see you.
ZHANG: Thank you.
DEFTERIOS: Thanks for handling the hotter topics of the Middle East, along with your China research.
ZHANG: Thank you.
DEFTERIOS: Once again, Zhiming Zhang of HSBC.
Well, coming up after the break, the Finnish capital is a "Future City" and Richard paid a visit.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Coming up after the break, the serious business of snow clearance in Helsinki. It is "Future Cities" back in a moment.
(COMMERCIAL BREAK)
DEFTERIOS: If you would have to list this winter's hot topics snow would be high on the list, of course, week after week we have watched cities and airports grind to an absolute halt. Chicago, the latest victim, was proving to be a freak winter for many parts of the world. And then there is Helsinki, in Finland, where things just keep on moving. For this week's future cities, Richard Quest traveled to the Finnish capital to find out how this particular city is winning its war on snow.
(BEGIN VIDEOTAPE)
QUEST (voice over): Four months of the year and the Helsinki Peninsula disappears under a white blanket of snow, masking the division of land and sea. And, yet, the Finnish capital keeps its skies, and water, and streets moving. The key to keeping on top of it all is good snow plows.
(On camera): Snow clearance in Helsinki is a virtual military operation. Every10 seconds a truck arrives, dumps its snow, and leaves. Only with this sort of precision can they keep the city moving in the depths of winter. This winter season Helsinki has had its thickest snow cover in more than 50 years. The man in charge is the deputy mayor, Bekka Saouri (ph). He responded by launching Operation Snow War, resorting to special measures to accelerate snow removal in the inner city.
UNIDENTIFIED MALE: It has certainly been major strain. If you look at piles of snow around, around the city, it is hard to know whether there is a car buried underneath or, or is it just snow.
QUEST (voice over): Day and night snow plows trawl Helsinki streets, shoveling and relocating 5,000 truckloads of snow, very 24 hours. Almost a third of the wasted snow ends up in the sea, where tug boats circle continuously helping it melt away.
UNIDENTIFIED MALE: If you stop this for 10 minutes, this freezes over, and that is it, that is the end.
QUEST: Another 3,000 loads get dumped daily, on land. It creates Helsinki's artificial mountain range of snow.
Those who live here are expected to play their part, too.
(On camera): Whose snow is this?
DAN-HENRIK, LANGSTROM, PROJECT MANAGER, HELSINKI CITY: Well, this is actually if the snow is on the street, on the driveway, it is the city's, no? But as soon as we plough it, then it becomes the property's.
QUEST: So that was your snow?
LANGSTROM: Yes.
QUEST: And now it is their snow?
LANGSTROM: Right.
QUEST: And who has to get rid of it now?
LANGSTROM: The property.
QUEST: That is rather good, isn't it?
LANGSTROM: Yes.
QUEST: It means you don't have to get rid of it.
LANGSTROM: No.
QUEST (voice over): Getting the snow out of the way is not just about convenience. It is a matter of safety.
(On camera): Knocking the ice off the roof is of crucial importance. Just recently a large chunk of ice fell from a building and killed a man walking beneath.
(Voice over): No less of a hazard are the city's icy roads. One very famous Fin knows a thing or two about driving in tough conditions. The Formula One driver, Heikki Kovaleinen tells me that without some specialized training you can't even get a driving license.
(On camera): How important is it to learn to drive in these conditions? Because the roads do get gritty pretty clearly, an quickly, in Helsinki and around?
HEIKKI KOVALEINEN, FORMULA ONE DRIVER: Yeah, I mean, the service to clean the roads is excellent in our country. But in any case a little layer of ice is actually forming on the top of the surface, very, very quickly. And the roads, even if they look that there is no free snow there, it is actually icy. So, it is absolutely essential to be able to control the car.
QUEST: The real champion in this city's war on snow, is Helsinki Airport. Unlike many of its European neighbors, Vantaa Airport stayed operational throughout winter. It prides itself on having an infallible maintenance program.
HEINI NORONEN-JUHOLA, HELSINKI-VANTAA AIRPORT: In our situation, since we have five months of snow every year. We have to be able to deal with the snow and ice situation. It is our strategic, competitive edge that this airport is open and operating all of the time.
QUEST: Thanks to this specialized fleet of machines this slick operation can clear a runway in as little as four minutes. The last time Helsinki Airport shut was in 2003, but that was for a mere 30 minutes.
ALEXANDER STUBB, FINNISH FOREIGN MINISTER: From a functional perspective, you know, I think we really have to start looking at different airports around Europe, and understand that the type of climate change that we have, the type of sudden changes that we have, we have to be prepared for the worst. And the worst cannot be five centimeters of snow.
QUEST: Helsinki's airport is clearly the gold standard. In the city, despite strenuous efforts to keep things moving, city hall still has it critics. And some of them are pretty high up.
(On camera): You must have had a wry smile on your face Prime Minister, when you have seen other European countries grind to a halt.
MARI KIVINIEMI, PRIME MINISTER OF FINLAND: Actually, I'm not pleased with my home city's way to handle the snow, because we could have done it better, here, in Helsinki. But compared to other countries, we manage the city as brilliantly.
LANGSTROM: There are no sort of magic tricks here. The only sort of surefire way of preventing the problems would be to sort of build a roof over the city, but that's maybe some way off.
QUEST: Until then, the pile continues to grow, reaching such great heights, it doesn't fully melt before next year's snows start to arrive.
(on camera): Helsinki is at the mercy of winter. It is only by planning for the worst that the city keeps moving. In fact, it is only through its policy of snow-how that Helsinki has any future.
Richard Quest, CNN, Helsinki.
(END VIDEO TAPE)
(COMMERCIAL BREAK)
DEFTERIOS: Welcome back.
I'm John Defterios.
QUEST MEANS BUSINESS continues in just a moment.
First, let's take a look at the headlines at the bottom of the hour.
A silent Twitter account, a frantic search and now word that a Google executive who went missing during the demonstrations in Cairo has been released. It's believed Wael Ghonim was detained by Egyptian authorities on January 28th. Before the marketing executive disappeared, he had warned of a "government war crime." Google Tweeted that his release is, of course, a quote, unquote, "huge relief."
Egypt's new cabinet has met for the first time about a week after being sworn in. The government has shortened the curfew so that it's now 8:00 p.m. to 6:00 a.m.. Over the weekend, Vice President Omar Suleiman met with opposition groups and offered some political concessions but thousands of protesters are still demanding that President Hosni Mubarak step down.
It's official -- Sudan will become two separate countries. Almost 99 percent of voters in Sudan's secession referendum voted for the South to break away from the North. Millions voted in the historic referendum, which followed two decades of conflict between the Arab Muslims in the north and Christians in the South.
One of the items on the agenda in those talks between Egypt's vice president and opposition figures will be how to safeguard the future of the economy, with protesters still calling for President Mubarak to step down. There's been speculation over which direction the economy will take.
Could it become less business friendly?
Or could it follow the route of a country like Turkey?
Let's compare the two economies for a second here and start with per capita income. This is always a pretty good barometer, because people talk about making sure you focus on the lower tier, the poorest of the poor. In Egypt, that stands at $6,000, while Turkey is at almost $13,400. We've seen almost a doubling in the per capita GDP by Turkey since the AKP Party came into power in 2002.
In terms of GDP growth, the World Bank estimates that while the Egyptian economy grew 5 percent last year, Turkey's economic grew by more than 8 percent. Turkey still has some ambitions of its own, not least to enter the European Union at some point.
So what Egypt has to do is really follow the Egyptian or Turkish model going forward. Some worry that they're going to take a turn to the right and go to the Iranian model and shut down the market -- or a more liberal view of Islam and open up the market to investment.
I posed this question to Egemen Bagis.
He is the Turkish minister for E.U. affairs.
I asked him earlier how the AK Party evolved into being a business friendly destination.
(BEGIN VIDEOTAPE)
EGEMEN BAGIS, TURKISH MINISTER FOR E.U. AFFAIRS: Well, the AK Party was elected into government 16 months after its establishment. But the founders of AK Party has been practicing politics in various parties and some of them were practicing businessmen. And they had gone through the difficulties of red tape and bureaucracy. And they knew that in order for us to attract more foreign direct investment, in order for the Turkish economy to grow faster, in order for us to be a credible country for foreign investment, we needed to eradicate some of the red tape and bureaucracy.
And that's why our party prepared a party program and an action plan for the government, which was implemented in the aftermath of the elections and made Turkey a very business friendly country.
DEFTERIOS: has the focus been entirely on, you know, creating wealth?
Per capita income is better than $13,000 and it's double the rate in Egypt. FDI has topped at better than $200 billion.
But the bottom line is focusing on the lowest common denominator in society, the people?
BAGIS: Well, our focus has always been the people, because it's the people that have elected us into office. And when we came into office, the per capita income in Turkey was around $3,000. And now, as you said, it has increased to more than $12,000. And we are trying our best to attract foreign direct investment, to bring new technologies and to produce more for less and provide better living standards to our people.
Of course, the European Union perspectives of the nation have also had a very important influence on the whole process, because with a country that is aligned with the E.U. AKI (ph), that is trying its best to increase the democratic standards, the human rights standards, you also see an increase in the wealth of the people.
DEFTERIOS: The role of the military, what's the lesson Egypt can learn here?
The military is very respected in Egypt and -- and also in Turkey.
Should it serve as a midwife in transition for Egypt right now?
Is that the lesson we can learn from Turkey?
BAGIS: The founders of the republic, the founders of modern Turkey were all -- were all members of the military of the time. And they had a vision. Their dream was to make sure Turkey catches up with the contemporary civilizations. And today's contemporary civilization, as far as I'm concerned, is European Union norms and standards. That's why our military has been very forthcoming in helping us with the reforms in Turkey.
And the former chief of staff of the Turkish military had said that the European Union is the most important Ataturk's dream of catching up with the civilian and contemporary civilization.
I think the Egypt -- the Egyptian military can play a very important role, as well, because the Egyptian military is one of the most respected militaries in the Middle East and they have very well connections, networks, with the international counterparts. And they can help their country establish the democratic standards, human rights standards and also economic wealth standards that are present in the nations around them.
DEFTERIOS: Once again, Egemen Bagis, the E.U. minister for affairs with the European Union, speaking to us from Ankara.
It's worth noting, also, that Prime Minister Erdogan of Turkey was one of the first to suggest that President Mubarak in Egypt should step aside if that's the call from the people.
Well, about 50 percent of Israel's gas comes from Egypt.
And as Fionnuala Sweeney reports, a recent attack on an Egyptian gas pipeline in the Sinai Peninsula has led to growing fears about the country's exposure to Egyptian instability right now.
(BEGIN VIDEOTAPE)
FIONNUALA SWEENEY, CNN CORRESPONDENT (voice-over): A very sore sight for Israeli eyes -- an attack on an Egyptian gas pipeline in the Sinai Peninsula. The incident led to a temporary interruption of supplies to Jordan and Israel and new concerns about how the instability in Egypt may affect the flow of gas to Israel in the future.
GIUL BASAH, GAS ANALYST, IBI INVESTMENT: In 2006, all fuel consumption in Israel was coal and oil. Today, roughly 50 percent of Israel's fuel used comes from gas. And about roughly -- roughly 50 percent of -- of the gas comes from Egypt. That means that Israel is highly dependent on Egyptian gas.
SWEENEY: The supply of gas had been one of the more tangible benefits of a peace deal between Egypt and Israel. But Israel fears that could be under threat in the wake of massive anti-government protests.
BASAH: The population in Egypt, what do they want?
they want economic welfare. The way to do it is not by eliminating the $1 billion a year of income from selling gas. So the rationality is saying that the gas agreement will continue. But rationality is not always the case in the Middle East.
SWEENEY: Israeli Prime Minister Benjamin Netanyahu moved swiftly to reassure Israelis, saying the country was prepared for such scenarios. Israel has been seeking alternative forms of energy, including the Tamar gas field, located roughly 50 miles off the coast of Haifa. It's due to come online around 2013.
UZI LANDAU, ISRAELI MINISTER OF NATIONAL INFRASTRUCTURE: The most important thing for Israel is, of course, to quickly as possible bring to the connection the Tamar new natural gas findings.
SWEENEY: Israeli preparations and hopes for future energy supplies also include the much bigger find of the Leviathan gas field in the Mediterranean. It's one of the largest offshore gas finds of the past decade and officials believe it could be enough to keep Israel energy self- sufficient for decades and potentially turn the country into an energy exporter.
(on camera): But there are obstacles. Lebanon is disputing Israeli claims to the field, saying it lies partly in Lebanese waters and last month wrote to the U.N. secretary general to protest what it called an attack on Lebanese sovereignty, a claim Israel denies. In a region rife with mutual distrust and animosity and an Egypt in crisis, the potential for instability on almost every front remains. And the recent attack on that Egyptian pipeline has added new worries.
Fionnuala Sweeney, CNN, Jerusalem.
(END VIDEO TAPE)
DEFTERIOS: After the break, all that glitter -- the CEO of Randgold will be telling us how and why he's looking to up gold production by at least 70 percent this year.
(COMMERCIAL BREAK)
DEFTERIOS: Randgold Resources has reported a 43 percent jump in full year profits, helped by the soaring price of gold, of course. And the West Africa focused miner says profit would have been even higher but for the political crisis in Cote d'Ivoire, the Ivory Coast.
For this year, Randgold is forecasting a 70 percent jump in gold production.
So I asked the chief executive, Mark Bristow, what will it take to make that forecast happen.
(BEGIN VIDEOTAPE)
MARK BRISTOW, CEO, RANDGOLD RESOURCES: 2010 was really a year of consolidation and -- and, really, I think we've ironed out all the wrinkles that we need to have done to finish our forecast for 2011. The only condition being the fact that, you know, the Ivory Coast situation resolves itself. And we've said by the end of the second quarter.
DEFTERIOS: In fact, if I was an investor and I looked at Cote d'Ivoire or Ivory Coast, I would be very worried that you have so much dependent on the market.
When are you expecting a breakthrough, so you can release some of the production that you've already got one of the mines?
BRISTOW: We've already done that, John. We've sold all the gold that we carried over from last year that we referred to in our results. We managed to sell it all by the end of last week, in fact.
DEFTERIOS: Senegal, Cote d'Ivoire, Mali and the DRC, Congo, these are not easy places to operate.
Are you going to broaden out your portfolio in the future to -- to buffer that risk?
BRISTOW: Well, we started in Mali, where we've got two mines, just recently discovered a third one. And we've just started mining there. It's a gon -- a cordon about 20 kilometers south of our flagship, Bulow (ph) complex.
We've recently spread out our risks by going into the Ivory Coast and -- and last year, we bought the Matar mine (ph) in the Congo. So we have diversified quite a lot.
DEFTERIOS: We're about $80 an ounce off the peak that we saw for -- for gold prices.
What's your projection going forward?
Is the inflationary worries that we see in the emerging markets going to continue to drive up the cost of bullion?
BRISTOW: Yes, John. And I don't think we've seen the -- the -- the first bit of the real, you know, damage that quantitative easing and the money printing that's happened over the last three or four years.
I -- I think there's a more fundamental driver in the -- in the gold industry, as well, in that -- in that the industry itself is ex-growth (ph). And in addition to that, the -- the burgeoning emerging markets, the BRIC countries and the, you know, the sort of -- the growth in the middle class in these countries have also started to show signs of supporting the growth in jewelry, which is not normally the case in a -- in a high gold -- gold market.
DEFTERIOS: BRIC and beyond.
Mark Bristow there talking about the -- the growth from China, India and beyond in the emerging markets.
Gold, by the way, is about $80 from its peak of $1,431 before the close of 2010.
We'll get the international weather forecast.
But first, a brief update on conditions around Perth, Australia, where the brush fires continue.
Guillermo Arduino is at the CNN International Weather Center -- Guillermo.
GUILLERMO ARDUINO, CNN METEOROLOGIST: John, you know, we don't see rain in Perth. At the same time, it is dry. But it could be worse, because the winds are not very significant right now. The fires continue, unfortunately, and we see them in the area. You're going to see now on the satellite picture the plumes associated with the fires. Here they are, smoke plumes, and especially around Perth is where the problems are.
When we look at what has happened lately with the drought, we -- despite all the devastation that we've seen in other parts of Australia, we're -- we are glad to report that the drought is pretty much over except for this area. So over look at Australia, the drought persists in this area, where we have seen the fires and we are seeing the fires.
As far as we continue to read, it's been accidentally started. And we have to trust that the weather is going to continue to be not very windy. We don't see much rain in store. We see a low pressure center closely by and also some clouds in the area. Nothing else to report when it comes to that situation.
Windy but better in Europe, especially in Britain. Even though in the north, we saw very bad conditions. We will continue to see some winds in Copenhagen, but much better in the south. You will see that the winds are now going down in speed, but the north is where we had the problems, here in Scotland, especially with the passing of this system, while in the south, even though we see that the high pressure is giving in a little bit, Italy is going to have a nice weather forecast; also, the Balkan Peninsula.
Spain and Portugal see the increase of clouds. And then we will see some rain. So the nice weather is over.
But look at the observations that we got here in Northwest Europe. So we see some significant rain. London is not reporting bad conditions, as we speak. It is only six degrees, but at least it's not terribly windy. The winds are generated by the high to the -- to the south and the low to the north. But we start to see better conditions overall.
And cold in the United States, John. So our viewers who are coming here, especially in the Midwest, we will see more cold weather ahead.
DEFTERIOS: Cold for you. And we're nearly blowing across the English Channel with those winds that you've been talking about, Guillermo.
ARDUINO: What can we do?
DEFTERIOS: Thanks very much.
Guillermo Arduino in -- in Atlanta.
They've persisted here, that's for sure.
Do all actors have to have some kind of demon?
Find out what Anthony Hopkins thinks about that on "PIERS MORGAN TONIGHT." That star of stage, screen and television, Hopkins talks about his favorite actors, including the other big movie star he shares his hometown with. That's around 15 minutes from now, immediately following QUEST MEANS BUSINESS.
AOL likes the look of The Huffington Post. Arianna Huffington and chief executive, Tim Armstrong, tell us why their combination could mean big business for AOL.
(COMMERCIAL BREAK)
DEFTERIOS: No bells and whistles on Wall Street for the latest cyberspace deal. Shares of AOL are in negative territory right now after it said it's buying The Huffington Post for $315 million. The online media company, which was spun off from Time Warner, is working hard to revive growth and advertising revenue.
With that in mind, AOL is going big on original content and it thinks The Huffington Post fits that bill. The Huffington Post is known for its political coverage, as well as sports and entertainment banter.
The new partnership unit will be called The Huffington Post Media Group. Arianna Huffington, the blog's co-founder, will step as president and editor-in-chief.
A short time ago in New York, Poppy Harlow of CNNMoney.com caught up with her and the chief executive of AOL, Tim Armstrong.
(BEGIN VIDEOTAPE)
POPPY HARLOW, ANCHOR, CNNMONEY.COM: Arianna, you know, this site is so much more than just your business. This is, in many ways, you and who you are and what you've built it to be.
Why was AOL the right partner?
You -- you could have had a number of partners.
ARIANNA HUFFINGTON, CO-FOUNDER, THE HUFFINGTON POST: AOL was the only partner right now that -- that would work for us, because we were not for sale. We were not looking to -- to cash out. Our investors were perfectly happy with the trajectory The Huffington Post as on. So this was not something we were looking for. And it really came organically out of my conversations with Tim and the alignment of these visions. And there was so much I wanted to do with The Huffington Post that was exactly what Tim wanted to do with AOL -- deepening our local coverage, expanding our global coverage, doing much more in the space around women and women's issues, doing much more around community and giving back and service.
Literally, all those were my goals. This is my new year resolution. I remember I sat at an -- an operations meeting with our senior team saying these should be our goals for 2011 and how do we achieve them?
At the same time, because being a small company...
HARLOW: Sure.
HUFFINGTON: -- you know, we had to pick our goals and do it sequentially in order to execute them well and succeed in executing them.
HARLOW: So what are your broader hopes for this partnership?
I mean, do we just continue to see you try to grow online or -- or does this evolve into something beyond that?
HUFFINGTON: What is a beyond online?
(LAUGHTER)
HUFFINGTON: We can cover everything. I mean we can -- I mean that's what is so exciting. Everything we can...
HARLOW: There's not, say, a television push or...
HUFFINGTON: Well, that would be online.
HARLOW: Sure.
HUFFINGTON: I mean the distinctions between online video and television are in -- are becoming increasingly non-existent.
TIM ARMSTRONG, CEO, AOL: Yes.
Just quickly...
HARLOW: Go ahead.
ARMSTRONG: -- I mean, I think one of the things, there's probably three different spectrums we've thought about in the future for advance -- expansion. One is international. I think international is a place that, actually, The Huffington Post and AOL have started to make moves in. We just did a big acquisition in Europe about a month ago, goviral, which is a major video platform. The Huffington Post has multiple areas internationally that they've been looking at. So I think international will be one spectrum.
I think the second spectrum is going to be around the content platforms and content engines we have in general, about getting more people involved in creating content at a high quality standpoint.
And the third is really an expansion in the advertising business. I think the premium brand that one -- that Huffington Post represents and the premium brands that we represent, you know, the brands of the world are thirsty, if you're Coca-Cola or General Motors, to really take your brand to the next level digitally. And I think we offer a platform which is unique and will be a unique proposition not just in this country, but in -- in countries around the world.
HARLOW: I'm getting the sign that we have to wrap this up.
A final quick question. About two weeks ago, some of AOL's business plans were leaked. And a lot of focus was on the volume -- pushing out volume and volume of content. Arianna now, as the editorial head, how do you match the volumes this company wants to see with the editorial direction that you want and the quality of journalism?
HUFFINGTON: Very simple, you just put editors in charge who are passionate about their sites, about what they are doing. And we are finding that when you pick the right people to run the sites, they really run them themselves. I mean I'm finding that whenever something happens, let's say like the Tucson shooting recently...
ARMSTRONG: Right.
HUFFINGTON: -- I didn't even have to tell anybody to -- it was a Saturday morning, to get to work. People started swarming the story, you know, literally, 50 editors just started connecting with each other and doing it because that -- that's what they love to do.
And so it's all about picking the right people, who deeply care about what they are doing.
(END VIDEO TAPE)
DEFTERIOS: Arianna Huffington there with Tim Armstrong, the chief executive of AOL and Poppy Harlow of CNNMoney.com, who had to run to get that interview on the air for QMB tonight.
Well, there are millions of Tweets out there, but we've dug through the 140 character messages of dozens of top business and intellectual leaders to bring you Tweets from the top on this very deal.
Let's start with the man who used to be at the top of AOL, its co- founder and former chief executive, Steve Case: "AOL to buy Huffington Post. Tim Armstrong" -- the man we just heard from -- "says one plus one will equal 11. Really?," he says, with a question mark. "That wasn't my experience."
Tim Armstrong, of course, is the man we just heard from at AOL.
Josh Elman is a former Facebook employee who was nabbed by Twitter. He Tweets: "I find it hard to believe that AOL has become the attractive media company to exit to over Yahoo!! . That shows how much CEOs and exec staff matter these days."
And finally, journalism professor, City of New York University, Jeff Jarvis, Tweets: "Arianna Huffington has been thirsting for local. I had hoped she would bring voice and life to Patch. Perhaps together the -- bring together the regional issues."
Patch is part of a growing number of Web sites in the U.S. focusing on local news. Arianna Huffington will now receive those in her new role. And she wants to roll that out to Chicago, New York and a couple of other big cities in the future."
For Richard's Tweets from the Top, log onto Twitter.com/ -- of course -- richardquest.
We'll take the final check of the markets when we continue on QMB.
Stay with us.
(COMMERCIAL BREAK)
DEFTERIOS: Stocks on Wall Street are trading at their highest level since June, 2008, lifted by two big million dollar take over deals and upbeat earnings reports. Donahier (ph), the diversified industrial company, has agreed to buy laboratory equipment maker, Beckman Coulter, for $6.8 billion and ENSCO says it will acquire the drilling contractor, Price International, for $7.3 million.
Let's take a look at the numbers now. We're off our highs in the last hour. In fact, we were up better than 80 points, trading up 63 3/4 points, at 12155.
We also saw strong gains across Europe, where stocks closed at their highest levels since September of 2008. Strong corporate earnings and growing optimism that the global economy is picking up helped to contribute to today's positive mood. Traders even shrugged off figures showing a 3.4 percent slide in German manufacturing orders.
Mining stocks led today's rise, lifted by yet another jump in metal prices. Gains right across the board, with the biggest gainer being the CAC Currant 40 (ph).
Party time was over for investors in Asia. It was back to work after the lunar new year holiday. The celebrations stretch all over the world. These are pictures from the parade in New York City. There's not too many fireworks on the markets. Small gains for the Chinese and Japanese indices. The Hang Seng Index took a 1.5 percent hit on the day. Those are the numbers right across the board, all in positive territory, with the exception to Hong Kong.
And that's QUEST MEANS BUSINESS.
I'm John Defterios in London sitting in for Richard Quest.
"PIERS MORGAN TONIGHT" is just ahead.
But first, a quick check of the headlines.
END
