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Quest Means Business
HSBC Considers Moving Out of UK; European Markets Up; NASDAQ Hits 15-Year High; Greece Urged to Move Faster on Reforms; Greece's Risky Negotiation Strategy; Greece Demands Cash from Local Governments; Apple Watch Goes on Sale; Apple's Threat to Swiss Watches
Aired April 24, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
We have reached the end of the week. The Dow might have barely eked out a gain, but the NASDAQ is at a new all-time high. It is Friday, the
24th of April.
Getting away from it all -- the tax, the regulation, all of that uncertainty over Europe --
(AUDIO GAP)
HARLOW: -- to distress from Apple.
I'm Poppy Harlow and this is QUEST MEANS BUSINESS.
Good evening and welcome to the program. Tonight, one of the world's biggest banks is threatening to leave British shores and leave a political
hornets' nest behind it. HSBC is blaming tough regulation, uncertainty over UK -- over the UK's future in the European Union as the two driving
factors for this
You are looking at footage of the banking giant's current headquarters at London's Canary Wharf. It is HSBC's biggest office in the world, and
that means thousands upon thousands of jobs.
An obvious choice for a new headquarters would be, of course, Hong Kong, where HSBC already has a very strong presence. And Hong Kong's
monetary authority says it, of course, would welcome the bank with open arms. After all, that is what the H stands for in HSBC.
The bank moved from Hong Kong to the UK as its headquarters back in 1993. Now, the bank's chairman, Douglas Flint, has real concerns over
changes in regulations in the UK since the financial crisis. Also, HSBC cannot sidestep fears over the uncertainty that lies ahead for Britain and
its place within the European Union.
With a general election less than two weeks away, this announcement has become highly, highly political. The leaders of Britain's two main
parties have been trading insults as to who is to blame for HSBC potentially wanting to just walk away.
The Labour Party argues that businesses like HSBC are scared of the Conservatives' promise to offer up a referendum on the future of Britain in
the EU.
(BEGIN VIDEO CLIP)
ED MILIBAND, LABOUR PARTY LEADER: I think the intervention from HSBC is very significant today. They say it's a number one economic uncertainty
that our country faces, withdrawal from the European Union. This does go to a question of priorities and what is the in the interests of our
country.
I think the last thing our country needs is two years of an internal debate about whether we should leave the European Union or not, but that
isn't what I want to happen.
(END VIDEO CLIP)
HARLOW: But Conservatives point out it isn't only Europe that HSBC is worried about. Prime Minister David Cameron says regulation is the key
concern for the banking giant. He argues banks would be worse off under a Labour government.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: Well, London is, I think the world's leading financial center. We've improved London as a financial
center not least by changing the way we regulate banks so that we wouldn't have to bail them out with taxpayers' money in future, as the last Labour
government had to do.
But it is an important reminder of how vital it is that we keep a pro- enterprise, pro-business, pro-employment policy in our country, of keeping taxes low, making us an attractive place to invest.
And all the time I've been prime minister, that is what we've been doing, which is why we see record levels of inward investment coming here
to Britain. We must keep on that approach and not put it at risk.
(END VIDEO CLIP)
HARLOW: And I've been speaking with Britain's shadow business secretary, Chuka Umunna, who is in full-swing election mode. I started by
asking him about those regulations that are causing so much head-shaking in the halls of HSBC and Britain's corridors of power. He was very keen to
discuss the views of the HSBC chairman.
(BEGIN VIDEOTAPE)
CHUKA UMUNNA, UK SHADOW BUSINESS SECRETARY: Well actually, the statement that Douglas Flint read out at the annual general meeting there
was actually very candid. He acknowledged that there were major reputational issues for his own bank coming out of recent revelations into
the activities of the Swiss arm, the Swiss private bank.
But he also acknowledged some of the major problems that were exposed in the wake of the global financial crisis of 2008, 9, and some of those
have still been carrying to recently, with the ethics scandal and, of course, libor rigging before that. And there was a general acknowledgment
in his comments that the center needed to get its own house in order, and that the regulatory environment needed to be improved.
So, it wasn't actually in that sense so critical of the reforms as really just saying given that those reforms have happened and the field on
which we're playing has slightly altered, of course you take stock, and I don't think that's unreasonable.
[16:04:55] HARLOW: Well, let me point this out: he did make very clear that the bank believes that the levies that it pays are too high in
the UK, right? Looking at last year alone, HSBC paid the government the highest levy of $1.1 billion and said 58 percent of that charge did not
relate to the UK banking activities of the bank.
UMUNNA: Well, I think that we have global banks here. The global financial crash cost the UK around 1.3 trillion pounds. I don't think in
that context it is unreasonable to ask those in the sector to pay a bit of a bigger contribution into the UK exchequer.
Now, I accept -- I can hear, maybe, there'll be market makers and others watching this program who will say, well, look, HSBC didn't take
public funds in the way that the Royal Bank of Scotland did, or Lloyd's Banking Group did. That's true.
But they did benefit from the measures that the UK government -- and of course, the US and others took measures, too -- took to prevent the
entire system collapsing upon itself. And of course, HSBC would have benefited from that, too.
So, I don't think it is unreasonable to ask for these universal and other investment banks to make a bit of a bigger contribution.
HARLOW: But here's the thing: 80 percent of HSBC's profit in 2014 came from Asia, 80 percent of that $12 billion. And when you look at how
these levies are decided on, they're decided on the size of the balance sheets.
So, does HSBC have a point there that it wants less cumbersome, as it would call them, levies and regulation? And you've got Conservatives who
would say, look, it's the Labour Party who's actually planning to regulate these banks even further.
UMUNNA: Well, here's the thing: there is consensus on the need to tighten up regulation. And in fact, in terms of the bank levy, that was
actually introduced by a Conservative chancellor of the exchequer, George Osborne. So, there is a degree of political consensus on that in the UK.
But hey, look, if I was the chairman of a big universal banking corporation like HSBC, of course you're not going to be arguing A, for the
institution of a levy, or B for it to be increased. Of course you're going to argue for it to be reduced. In some senses, that is what your
shareholders would have expected of you.
But we as policymakers have to weigh all the different interests in society and ensure we've got a policy matrix that works for everyone and
not just a few people.
(END VIDEOTAPE)
HARLOW: Let's discuss the political row in the UK over HSBC with Gillian Tett. She's the US managing editor of the "Financial Times." She
joins me live right here in New York City. Thank you so much for being with me. I appreciate it. It is good to have you on the program. And
let's be --
GILLIAN TETT, US MANAGING EDITOR, "FINANCIAL TIMES": Great to be here.
HARLOW: Let's begin with this. We have heard, look, clearly he was in full election mode. You hear it from Labour, you hear it from
Conservatives so close to the election. But who do you think has a stronger argument at this point in time when it comes to HSBC and why
they're threatening to leave.
TETT: Well, I think the reality is that HSBC is engaged in saber- rattling right now. That's how we described it in the "Financial Times" tonight. And it is not the first time that HSBC has dropped these hints.
It's indicated that it's pretty unhappy about the regulatory climate over and over again.
But it also has a business reason for wanting to look further east, which is that most Western markets are pretty mature. Asia is really where
the growth is. So, it has made these hints before. It's been very clever in terms of blaming both the European issue and the tax issue --
HARLOW: Right.
TETT: -- equally, so it managed to steer a line between the two sides. But you just have to look at one number, which is 750 million.
That's the amount of eventually extra tax that HSBC had to pay last year because of the one-off bank levy. And that's a very large number. And
there was a feeling that the governments are clamping down too aggressively on banks.
HARLOW: It's a very important point, because when you look at the levy that they paid last year, something like $1.1 billion based on the
size of their balance sheet, but 80 percent of their profit came from Asia.
So -- but clearly they haven't made up their mind, because if HSBC had made up its mind, they wouldn't even need to threaten. Do you see this as
a threat to get the government to back away from some of these regulations?
TETT: Absolutely it's a threat. It's also an attempt to show shareholders that they're not being negligent by ignoring these costs. The
750 million figure I cited was 750 million pounds sterling.
HARLOW: Right.
TETT: Which is a big number for a levy to be actually imposed on a bank. And what really concerns HSBC and many of its shareholders is that
although this was originally presented as a one-off measure, the government's now indicating it may anything but. So, they're looking
potentially a long regulatory tunnel.
The problem, though, is that if HSBC was to move to Hong Kong, while the Hong Kong regulators are pretty widely respected around the world and
by many HSBC shareholders, having China as, essentially, the dominant power overseeing you potentially in the future is not something that many
shareholders would be very excited about.
[16:10:03] So, it's a lot of saber-rattling right now. Who knows whether it will actually lead to anything concrete?
HARLOW: That's a very important point you make, and certainly one they're considering in the C Suite at HSBC.
Let me ask you this: looking outside of HSBC at other big banks that call London their headquarters, at least in Europe, do you believe that
they are more concerned right now about the levies they're paying because of this increased regulation or possibly more regulation coming from the
Labour Party if they win, if you listen to the Conservatives.
Or do you think that they are really unnerved by the uncertainty of the UK's position within Europe as a whole?
TETT: Well, there are two things to notice here. The first thing, as far as the banks are concerned, right now -- and I was talking to a senior
banker the other day -- what's going on is really not a beauty contest in geographical terms, in terms of different centers competing for bank
business.
It's more like an ugly contest. Where is the worst of all worlds or the worst possible place to be? Because there are big problems in the UK
right now with London, as far as the banks are concerned. But New York is not entirely welcoming either. And while Switzerland or Singapore might
have some advantages, they also have big drawbacks, too.
So, the banks are thinking hard about geographical location. The other big question, though, is London as a haven or a center for the
internationally-mobile elite. Because the Labour government has indicated that it does plan to crack down quite strongly on those internationally-
mobile wealthy people. And that in many ways is an even bigger reason for banks like HSBC to be rethinking where they're based.
HARLOW: Gillian Tett, US managing editor for the "Financial Times," joining us this Friday evening. Thank you so much, we appreciate it.
TETT: Thank you.
HARLOW: European indexes were up Friday, finishing the week with gains. Markets backed off from those midweek highs that we saw after
inconclusive talks, to say the least, about Greece.
In Athens, Greek stocks rose more than 3 percent on hopes of positive talks between Merkel and Tsipras. Meanwhile, HSBC shares are up nearly 3
percent.
US markets closed the day higher. The Dow posted a modest gain. The NASDAQ -- the NASDAQ is what it is all about, hitting an all-time record
high. CNN Money's Paul La Monica here to talk with us about it. The NASDAQ is on fire. Not only a 15-year-high, as we were saying yesterday,
but an all-time high.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: All-time high was briefly above 5100 this morning and it didn't close above that. So, we're
still waiting for it to get that intra-day record of 5132, March of 2000. Good chance we'll probably get there sometime soon the way these earnings
have been.
You had strong results from Amazon and Microsoft. They really led the way. Amazon was up 14 percent today, all-time high. Microsoft up 10.5
percent. Google was the laggard, it was only up 3 percent.
HARLOW: And we have Apple coming Monday?
LA MONICA: We have Apple coming Monday after the bell. That is obviously the next big tech stock to be reporting, and the next big test, I
think, for the NASDAQ. Clearly, a lot of high expectations for Apple.
All the hype about the watch, but that just went on sale, so we're not going to get any numbers about that yet, but iPhone sales will probably be
big again.
HARLOW: Yes. And we'll talk about the Apple Watch a little bit later in the program. Have a great weekend, Paul La Monica.
LA MONICA: Thank you, Poppy, you, too.
HARLOW: And thank you so much.
Well, talks to resolve Greece's debt troubled and with no progress. Not only that, but officials have heaped criticism on the Greek finance
minister. We'll discuss, next.
(COMMERCIAL BREAK)
[16:15:03] HARLOW: Talks to resolve Greece's economic future have ended with really no progress at all. Greek finance minister Yanis
Varoufakis met with eurozone finance ministers this week. Eurozone officials are reportedly very critical of him, calling him a, quote, "time-
waster" and a "gambler."
Varoufakis, on the other hand, said the talks are actually going pretty well and making progress. So, where's the disconnect? The head of
the eurogroup said that things did not end so well.
(BEGIN VIDEO CLIP)
JEROEN DIJSSELBLOEM, PRESIDENT OF THE EUROGROUP: It was a very critical discussion. We came to an agreement two months ago, and today, of
course, we had hoped to hear a positive results and an agreement on which we could then take a decision. And we are still far from that. So, yes,
it was a very critical discussion.
(END VIDEO CLIP)
HARLOW: And European officials now say time is, indeed, running out for Greece. There are three key issues that Varoufakis is supposedly
gambling on. The first, the Greek budget. Europe has set various budget targets in exchange for bailout money, but Varoufakis says Greece cannot be
expected to meet them all because all the austerity is making the economy too weak.
Europe agreed back in February that the bailout deal could be rejiggered, basically, but won't make any promises until the next issue is
sorted. And that is Greece's reform program. Europe doesn't just want budget cuts, it also wants long-lasting structural reforms on things like
taxation and corruption in Greece.
Right now, it says it simply is not seeing enough progress on that front, and until it's happy with Greece's overall plan, it will not hand
over any more bailout money.
And that brings us to the biggest problem of all, Greek funding. The current bailout money stops flowing at the end of June. Beyond that, there
is no guarantee that Greece can pay all of its bills, and it has $4 billion worth of payments that are due in June.
Before Varoufakis was finance minister, he was an academic specializing in game theory. Our Clare Sebastian looks at how this
strategy can shed light on the negotiations.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN PRODUCER (voice-over): At the heart of game theory, conflict, cooperation, and eventually, a mathematical solution. At
least, that's how it works in theory.
UNIDENTIFIED MALE: For Greece, there is certainty --
(AUDIO GAP)
UNIDENTIFIED MALE: There was still no firm common ground.
UNIDENTIFIED MALE: But it can't possibly be business as usual in Greece.
SEBASTIAN: In 2004, the now Greek finance minister, Yanis Varoufakis, published this academic text on game theory. His co-author was Shaun
Hargreaves Heap.
SHAUN HARGREAVES HEAP, CO-AUTHOR, "GAME THEORY: A CRITICAL INTRODUCTION": Marketing games of the sort that Yanis and the Greek
government are involved in don't have unique solutions in that sense.
SEBASTIAN: Hargreaves Heap says that while game theory won't solve the Greek crisis, it does offer some useful principles.
HARGREAVES HEAP: Where there is a genuine, as it were, insight from game theory, notes the people who are likely to concede the most in a
negotiation are those who have the most to fear from if you fail to make the agreement.
SEBASTIAN: In the case of Greece and Europe, both sides have plenty to fear if Greece defaults and leaves the eurozone. And both are putting
on an optimistic face.
DIJSSELBLOEM: Grexit is simply not on the table, it's not discussed.
VAROUFAKIS: We are intent --
(AUDIO GAP)
VAROUFAKIS: -- people.
SEBASTIAN: Game theory is about principles, not specifics. Solving the Greek crisis requires both.
HARGREAVES HEAP: What the terms of the agreement are, games theory doesn't tell us what it should be. But what they say is both sides will be
-- both lose if they leave the table with the cake still on it, because they've failed to agree how to cut it up.
SEBASTIAN: One thing we do know, it will test even the most experienced of game theorists.
SEBASTIAN (on camera): What was he like as a thinker? What was your experience working with him?
HARGREAVES HEAP: He was lots of fun to work with. We had lots of good arguments, lots of good discussions. We're both academics who believe
in the positive value of dispute.
SEBASTIAN (voice-over): Clare Sebastian, CNN, London.
(END VIDEOTAPE)
HARLOW: With cash running out, the Greek government has issued an emergency decree asking state agencies and municipal coffers to hand over
their reserves. I spoke with the mayor of Athens, George Kaminis, about how local governments and the public are responding.
(BEGIN VIDEOTAPE)
GEORGE KAMINIS, MAYOR OF ATHENS: Well, things all those last years have been very bad for my country. OK that today's meeting was a
disappointment, let's say. But we are still confident, and I'm optimistic. I firmly believe that we're going to arrive to an agreement with the
European Union.
HARLOW: What makes you so confident? Because as the weeks go by, I think more and more people think that a Greek exit could happen.
[16:19:57] KAMINIS: There's a very solid basis to be confident in that 80 percent of Greek people, they want to remain in the euro, they want
our country in the European Union. We belong to the court of the European Union, and those people are determined to work for that.
HARLOW: You have been the mayor of Athens for nearly five years, now --
KAMINIS: Yes.
HARLOW: -- since 2010. Can you give me a sense of what it is like day-to-day for the average citizen living there? Just their concern level
and the real-world impact on them?
KAMINIS: Of course, it's for many people, not only marginalized people, as it was in the past, many people who used to have their jobs only
a few months ago, they are in difficulty, very severe difficulties.
But at the same time, there are people who are like tourists, who arrive in Athens. They stay for a week, and they say, where is the crisis?
Because it's a lovely city, a vibrant --
(AUDIO GAP)
KAMINIS: At night, the capacity restaurants are full with people. You don't realize very well if you remain as a tourist.
HARLOW: And I understand that, and I understand you want the tourism to continue, as it has. It's very important for the economy, but --
(CROSSTALK)
KAMINIS: And this year, we have a new record on tourism arrivals.
HARLOW: But for the people, the people of your city, of Athens, you still have 26 percent unemployment. How are they getting by?
KAMINIS: Well, in a great difficulty and among young people, it's almost 60 percent.
HARLOW: Yes.
KAMINIS: So, that is one supplementary or even the most important reason to insist on remaining in the eurozone, and we have to foster
entrepreneurship, create new business and create jobs for the people.
HARLOW: So it's not -- it sounds like it's not necessarily about bringing the old jobs back. You're talking about entrepreneurship,
starting new businesses, opening new doors for citizens.
KAMINIS: Oh, yes, of course. We have to modernize the economy. Because for so many years, things didn't go well, but we used to live well
on the loans, on the bank loans. Now, we are facing the reality, and the reality can be very, very cruel. So, we have be innovative in every, every
aspect.
(END VIDEOTAPE)
HARLOW: Well, the Apple Watch makes its first highly-anticipated appearance in select stores worldwide, and guess who has one. Our Samuel
Burke got his hands on one. We'll show you the goods next.
(COMMERCIAL BREAK)
HARLOW: Apple Watches made their debut on store shelves, but do not try to buy the new smart watch in the Apple Store. They will be on display
there, but just a handful of high-end shops around the world are selling the device for now. CNN technology correspondent Samuel Burke somehow got
one -- why am I not surprised you got one --
(LAUGHTER)
HARLOW: -- some way, somehow? -- and has an assessment. How does it feel? How does it operate? Do you like it?
SAMUEL BURKE, CNN TECHNOLOGY CORRESPONDENT: Right away when I put it on, I liked the feel of it. If you want to get a lot of "likes" on
Facebook, take a picture with an Apple Watch. Everywhere I'm going, everybody wants to see it. People are looking at it, they want to just
view it.
It was pretty easy to use, not quite as intuitive as an iPhone. But one thing that I already don't like about it is the audio quality. Because
don't forget, you can actually make phone calls on this thing.
And so, someone called me, and I was listening to it, and I almost had to kind of put my ear up to it to be able to hear, and it's not -- I think
they tried to make it so it wasn't loud enough to disturb my colleagues, but I just couldn't hear from it.
HARLOW: Can you show me, how would you make a -- put it up to your ear, is that how you would do it? You have to put it all the way up to
your ear?
[16:25:03] BURKE: In theory. Right now, I'm just clicking the CNN app, because I still don't quite remember the phone call app. So, I just
want to show off the CNN app for company's sake. But someone calls you, you just click a button, and you should -- they want you to be able to hear
like this, just from the way I'm sitting right now.
But I actually couldn't hear, so I kind of had to do this type of thing to hear it. And even then, the audio quality wasn't great.
HARLOW: Yes.
BURKE: So --
HARLOW: All right.
BURKE: -- hold off, use your iPhone for the phone calls for now.
HARLOW: Right.
BURKE: This is the $400 model.
HARLOW: Pretty snazzy. Oh, that's not the $17,000 model? I was wondering which one.
BURKE: I decided to keep that at home.
HARLOW: I was wondering which one you had. Samuel Burke, have a great weekend. Thank you so much.
Well, the much-anticipated smart watch poses a big threat, frankly, to Switzerland's age-old watch industry. That is according to Elmar Mock, who
helped revive the business as co-inventor of Swatch. He joins me now from Switzerland. Thank you for being with me, sir. I appreciate it.
ELMAR MOCK, CO-INVENTOR, SWATCH: Hello.
HARLOW: Hello. Let's begin with this. Your initial assessment of the Apple Watch. How much do you think the traditional watch industry
should be worried?
MOCK: I think it's a fantastic opportunity also for the normal watch industry who meets a new world which opened now, and they are going in the
right direction. So, I appreciate very much the Apple Watch. And I think it's a chance for the watch industry to also join this movement.
HARLOW: But can Swiss watchmakers who are putting out their own smart watches, do you think they can compete with the technology of the Apple
smart watch?
MOCK: It will not be exactly the same technology. But I think they can seriously compete. So, I think it's really an opportunity, and they
have a solution, and I know a solution.
HARLOW: Think about the Apple Watch, I think about charging it. Because you do, you have to plug it in, you have to charge it. Do you
people -- think people are going to want to take their watch off at night and charge it like their phone?
MOCK: I think the functions are really great, and I think it makes life also easier. So why don't charge during the night? I think we
charge also our phone. For ten years ago, I was charging my phone every week. Now I have to charge it every night.
I don't say that is the only way, but I don't think it's very great. I may be more afraid about the fact that she's not tight today. But I
think that she will become more and more better. So, we have a chance, and it's the first one, and they will have other ones, and it's really going in
the right direction.
HARLOW: It's interesting. You've said that Apple will really hurt companies operating at the mid-price level, like a Swatch, for example,
right? So this initial one is below $400, they go all the way up to $17,000. I wonder if you think, though, Apple is maybe making a mistake
trying to compete at the high end with those high-end watches?
MOCK: I don't think they've made a mistake. I'm not sure that the really high-end are affected. But the middle range, of course they are
affected. You must imagine that Apple and the other competition -- I think, Samsung is at present, (inaudible) are present, Sony also. So, I
think they will be maybe 50 million pieces a year who will be sold out through this new channel.
What is fantastic, it's also a new distribution. It's a new way to go on the market. I think it's a fantastic opportunity, and these 50 million
watches who are sold out sell with this price. It will compete with the middle segment, of course. But it's not -- every competition is also
something very healthy.
HARLOW: How many people, sir, do you believe are going to make the mistake of getting in the shower with their Apple Watch on?
MOCK: A lot. A lot, of course.
(LAUGHTER)
MOCK: That they will recognize they made a mistake. I was also wearing some electronic item with me, and I will go in under the shower.
So, it's -- you make it once or twice, and after, you can make progress yourself. Of course, waterproof will have to become once.
HARLOW: Yes.
MOCK: But if your life is coming easier, and if you have pleasure with this product, you will also accept a little bit of disadvantage. But
of course that will change.
HARLOW: I am certainly fascinated by it and can't wait to try one myself. Thank you so much for joining us. Especially as a Swatch fan, I
appreciate all you've done for the watch industry. Sir, have a wonderful weekend.
MOCK: OK, thank you very much, and have a good time, too.
HARLOW: Thank you.
Well, switching gears here. It has now been two years to the day since that horrific, horrific factory collapse in Bangladesh where 1100
people were killed, thousands more injured. We're going to find out if workers' conditions have improved.
[16:29:42] (COMMERCIAL BREAK)
[16:32:00] HARLOW: Hello, I'm Poppy Harlow. Coming up on the next half hour of "Quest Means Business," The CEO of Heathrow Airport tells me
what he's hoping to see from the upcoming U.K. election.
Also, two years ago since the Rana Plaza building collapsed, how much is really changed for Bangladesh's factory workers?
Before that though, here are your top business headlines this hour.
Armenia is marking 100 years since the mass killings of Armenians during the First World War. Russian President Vladimir Putin and French
President Francois Hollande condemned the deaths at a ceremony today. But the issue remains politically sensitive as Turkey and others insist that
the killings should not be considered genocide as Armenians considers them.
In Italy, authorities say that they have broken up a terror cell with links to al-Qaeda, and the Vatican may have been one of its targets. At
least nine people have been arrested. Some of the 18 suspects are accused of involvement in a bombing in Pakistan that left more than 300 people dead
or wounded.
Authorities say they expect more activity from a volcano in Chile. This coming in the coming hours. Calbuco has already erupted twice this
week, spewing some 60 centimeters of ash in some places. Some 4,500 people have now had to evacuate the region. The ash has now spread to neighboring
Argentina which is not surprising considering Chile's slender geography. Look at those images - wow.
And the captain of a migrant boat that capsized in the Mediterranean last weekend has appeared in court. The 27-year-old Tunisia national is
accused of causing the tragedy that killed hundreds. He has been detained and he has been - he has denied being in charge of that vessel.
It has been two years since the Rana Plaza factory collapse in Bangladesh. More than 1,100 people lost their lives that day when the
eight-story building collapsed. It was the deadliest disaster the world's garment industry has ever seen and it sparked outrage about dangerous
conditions for hundreds and hundreds of workers.
Since the collapse, brands and retailers have contributed millions of dollars to a compensation fund for injured workers and their families.
Still, campaigners say much more needs to be done. Maggie Lake reports.
(BEGIN VIDEOCLIP)
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: More than 1,100 people dead, thousands injured, livelihoods destroyed. Two
years after the Rana Plaza disaster, the wounds are still not healed. And despite stepped-up inspections, rights groups say conditions in many
Bangladesh factories remain perilous.
[16:35:01] JOHN SIFTON, HUMAN RIGHTS WATCH: There could another Rana Plaza tomorrow. It's less likely, but it's still possible.
The residential buildings have been converted into factories. A lot of them have had floors added - they're very unsafe.
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: Today there is only rubble where Rana Plaza once stood amid a continued
push to win more compensation for disaster victims. More than two dozen Western clothing brands including Benetton, Children's Place, The Gap and
Walmart have paid some $24 million to a compensation fund.
But labor groups say brands collectively must to more. The needs of former Rana Plaza workers are just too great
ABBY MCGILL, INTERNATIONAL LABOR RIGHTS FORUM: This tragedy has left very severe physical and psychological wounds on many of the people who
survived it. And it's making it difficult for those people to find jobs.
LAKE: Aid groups hope to raise at least $30 million from these brands which used contractors based in Rana Plaza to manufacture clothes. Human
rights officials say brands must use their influence because garment (AUDIO GAP) stilled denied basic rights that could save lives.
SIFTON: We're simply asking the Bangladesh government to allow them to organize in the union so that they can address their grievances to
factory owners. The brands could do a big thing by simply telling the Bangladeshi government to make that a reality.
LAKE: But as pressure to hold down clothing costs persists, labor groups fear new disasters to come.
MCGILL: Western retailers and brands are setting prices for clothing that squeeze the producers in developing countries to the point where these
kinds of accidents are absolutely inevitable.
LAKE: On the second anniversary of the worst workplace disaster in modern history, (AUDIO GAP) in Bangladesh remains intense. Maggie Lake,
CNN New York.
(END VIDEOCLIP)
HARLOW: Well the Bangladesh ambassador to the United Nations says Western companies and consumers have to be willing to pay a little bit more
to benefit the workers and clearly to keep them safe. Last week Richard asked him if the situation has even improved.
(BEGIN VIDEOCLIP)
ABDUL MOMEN, BANGLADESH AMBASSADOR TO THE UNITED NATIONS: There has been short-term, medium-term, long-term efforts. The government was - it
is a wakening call. Whole nation get into it. This shows -- this what I'll talk to you -this shows one thing - that if people are committed and
partners also help, we can achieve goals and we did.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Buy no one doubts that people have got desires and
goodwill to do it. The question is whether or not government has the wherewithal to enforce it and private industry now is determined to spend
the money and invest?
MOMEN: Yes, see the government has imposed so many new rules. For example, we had only five - only few numbers - counted number inspectors.
Now we have almost 300 inspectors and we increased the bill - government has increased the budget for it - 300 times.
Now do our workers they paid law (ph)? Well, we have increased 219 percent. There are 3,200 factories, more than half has been inspected.
And not by government alone -- it by Western countries, the supplier and buyers - both Accord and Alliance -- and out of those they have done almost
1,800 inspections. Out of that only 2 percent appeared to be non- (inaudible) and they're closed down.
QUEST: Right. Now do you think that although there's obviously work to be done from the Bangladeshi side, does the consumer in the West has to
recognize they have to pay more? Because obviously if the downward price pressure comes, it's going to hit at the weakest point, which is the
laborer in the factory in Bangladesh.
MOMEN: I agree with you. This is an area we have not achieved much. We hope that because this wait is very long, companies increased 219
percent and the varieties of instruments. But we expected that the global community will rise to the occasions and they will pay extra few cents so
that, you know, those people who suffers most, they could be benefitting.
QUEST: So who needs to do more?
MOMEN: I think we have to do a more job (ph) in the sense that we have to create a global consciousness that we must help together.
QUEST: Oh, that's easy to same, Ambassador, but tell me in practical terms - do the companies - the H&Ms, the Prime Arts, the stores - do they
need to charge consumers more so they can pay more?
MOMEN: I think they make enormous amount of profit as you know. One tie to do in Bangladesh, it costs - you can buy it, let's say, $1.00. But
when they sell it here, it's $75.00. The marketeers they're making all the profit - huge corporate profit. So I think these big companies should come
forward and pay a little extra. I' m not asking for too much - little extra - 25 cents, 50 cents. It can do magic for all.
(END VIDEOCLIP)
[16:40:11] HARLOW: Jryki Raine is the general secretary for IndustriaLL Global Union. He joins me now from Geneva. Thank you for being
with me this evening, sir. We just heard what he said - that people will pay more - saying the global community will rise to the occasion, they will
pay more.
Maybe, maybe I'm a skeptic but I'm not so sure about that. Are you?
JRYKI RAINE, GENERAL SECRETARY, INDUSTRIALL GLOBAL UNION: No, not at all, Poppy. In Australia in a poll, 80 percent of the respondents said
that they are prepared to pay more for their clothes if they know that they are made in decent conditions with living wages and safe work places which
are still not the case today.
HARLOW: So they will. I'm very glad to hear that. I would hope that it would play out like that in practice. When you look at more than 1,100
people died - thousands were injured in that collapse.
When you look at some of these companies that your union has called out and called on a collective responsibility for brands like Benetton,
Mango, Walmart, Carrefour to contribute more. Why specifically call out those companies?
RAINE: Because we feel that the brands who are producing in Bangladesh, they share a collective responsibility of profoundly flawed
production model which was not safe, it was not sustainable. The good news today is that we are only $2.7 million short of the $30 million target in
the compensation fund which is defined by the ILO experts. So now it's the time for the brands to do the right thing and close one of the most
shameful chapters in the history of the global garment industry.
HARLOW: Well especially when you think about how much money these corporations bring in, you have three and a half million people in
Bangladesh that work in the garment industry. The minimum wage that they are paid is about 25 pounds a month. Why do you think it is that we
haven't seen an improvement on that front in terms of the wage front to where it needs to be, which is about double that just for a living wage?
RAINE: Well the reality is that the minimum wage in Bangladesh is $68 a month and that is the reason why all the workers are working at least 60
hours a week. It's a question of pressure, Poppy. So now IndustriALL, Unit (ph) and the Clean Clothes Campaign have been campaigning for a living
wage.
So my challenge tonight is to H&M, to Zara, to Walmart and to Gap to work together within IndustriALL. Let's go to Bangladesh, let's go to
Cambodia, let's put in place bargaining structures where the brands also pay a bit more to enable living wages for all these millions of workers.
HARLOW: You have said that not a single factory can be called 100 percent safe yet. And some companies have responded that - like Disney
right after the collapse pulling out completely. Others would say that is not the answer because then the jobs go away.
RAINE: And that is also our line. And Bangladesh is a poor developing country. They desperately need these millions of jobs for the
workers. But they have to be sustainable jobs with living wages safe conditions and reasonable working hours.
We know that these brands were making tens of billions of dollars of profit every year can afford to pay a bit more to the factory owners and be
part of the solutions where we make sure that part of that price also goes to the workers. So that is something that we want to work together with
the brands.
HARLOW: Jyrki Raine live with us in Geneva this evening. Thank you, sir, for being with us and for the important work you're doing. We
appreciate it very much. Quick break - we're back in a minute.
(COMMERCIAL BREAK)
[16:46:13] HARLOW: "We will work with all parties. We will work with any government." That is a declaration from the chief executive of
Heathrow Airport not far from London. John Holland-Kaye spoke with me a short time ago and covered plenty of ground from the contentious third
runway proposal to Heathrow's strong results.
Airport revenues and passenger traffic were up in the first quarter of this year. Passengers voted Heathrow the best airport in Western Europe.
But the first question I asked him has to do with the upcoming U.K. election and whether he's concerned Britain may eventually leave the
European Union.
(BEGIN VIDEOCLIP)
JOHN HOLLAND-KAYE, CEO, HEATHROW AIRPORT HOLDINGS: I think we have many benefits that come from membership with the European Union just within
the aviation sector. We can see the growth that has been in low-cost carriers through the easy access they have to European markets.
That's benefitted all consumers and businesses and I think that's something that we should protect. And in the future we're going to see a
new single European sky coming in which reduce emissions, reduce costs, it'll allow more capacity on the air roofs that's so vital to trading
around the world and that's a real benefit to being part of the E.U. So I hope we won't make it a hasty decision on this. We do need certainty for
business so that we can investments.
I think that Heathrow is not going to change things, particularly we're a very successful and stable business. We have a good international
base, we have over 80 carriers from all over the world flying into Heathrow. So we will continue to do well, regardless of the decision. But
there are many benefits from being part of the European Union.
HARLOW: What's driving the traffic increase? Is this more of your traditional carriers or is this about new carriers that are popping up and
benefiting from lower oil prices and just bringing in more capacity, more travelers?
KAYE: Well at Heathrow we are operating at capacity. We can't have any more flights coming in and out. So what we're seeing is more routes
being introduced by largely existing carriers to the growth markets of the world. So since last year we've had Avianca flying to Bogota in Colombia.
That's a route that's doling very well.
We just had Vietnam Airlines start a new service. They've moved up from Gatwick flying to Vietnam. That's a really important service to one
of the highest-growing markets in the world.
So we're seeing that happening. We're also seeing carriers putting on more seats to European markets. So BA's been very busy and we're seeing a
lot more transfer passengers coming through Heathrow.
HARLOW: Heathrow is trying to persuade regulators to allow Heathrow to build a third runway. How is that going? Where does it stand?
KAYE: Well it's going very well in terms of winning support for expansion at Heathrow. I think it's been clear for a long time that
Heathrow is the best solution economically. We'll create 180,000 jobs in the U.K. all across the country -- over 200 billion pounds for the British
economy.
But we're also seeing growing support locally because people want the jobs that will come - 40,000 jobs for local communities, tackling youth
unemployment. That's a really big price.
But we've also been listening to the local community and we've announced a big noise insulation program which will be world leading --
160,000 homes and schools being insulated from noise and that means that more people are now saying Heathrow's the right solution - it can be
delivered sustainably, it can be delivered within climate targets with lower emissions and Heathrow's the right answer for the local communities
and the right solution nationally.
(END VIDEOCLIP)
HARLOW: Well the U.S. secretary of defense has launched a national security initiative in Silicon Valley. We'll tell you more about that
next.
(COMMERCIAL BREAK)
[16:51:20:] The U.S. Department of Defense is partnering with tech companies to boost its capability to fight cybercrime. Video (ph) D (ph)
aims to harness the latest innovations to fight cyberattacks, secure its networks and support military operations.
Well the U.S. defense secretary was in Silicon Valley on Friday as part of a two-day visit to try to woo some of those executives in Silicon
Valley.
I spoke with the CEO of Accenture, a huge worldwide consulting and technology services firm and I asked him how much the chief executive that
he works with are really focusing on cybersecurity and how concerned he is about the threat.
(BEGIN VIDEOCLIP)
PIERRE NANTERME, CHAIRMAN AND CEO, ACCENTURE: It is a huge challenge. If you're talking with a CEO, it's clearly security is now in their top
three priority concern and challenges that need to get right. And is similar for a company like Accenture, if you will.
So we're watching all the evolutions from a situated standpoint extremely carefully.
We are operating in this business and we have a great practice to advise our clients how to deal with security issues, especially around the
data privacy, data integrity, data protection and many bills and many regulations as well and policies are figured out around the world in the
United States but as well in Europe.
We are participating to many of the forum in order to create a world which is going to be more secure and where security is going to be center
stage.
HARLOW: You have predicted that a digital revolution is coming in three ways and that this is going to be huge for the way the businesses
around the world are run. How is it going to impact them and where is it going to create opportunity?
NANTERME: I mean it's an amazing revolution we are facing with the digital revolution enabled by what we are calling the Smagda (ph) to show
the mobile, the analytic and the Cloud technologies. And indeed the three ways you are referring to are going to be first, the digital consumer with
everything (ph) like you know interact between the companies and the consumer.
The digital enterprise of course -- how you digitalize all the operations of a company, but the most important way in which it's going to
start - and it's starting recently - they're about the digital operations, what we are calling the Internet of Things.
HARLOW: You say these companies need to take risks to be successful. I wonder what you would compare this digital revolution to in past history
in terms of big shifts that companies have had to live through and try to thrive through?
NANTERME: Yes, I mean the common wisdom today is to compare the digital revolution with the electricity. You'll remember this revolution
long ago totally changed the way the business operated at the time and I guess it's probably the best proxy for what's happening with the digital -
HARLOW: Wow.
NANTERME: It's a - it's an incredible rethink in the way you're addressing your client's need and the way you think of your operation, but
as well in the way you can create global businesses extremely rapidly in a nimble and a fast way.
HARLOW: Do you think that especially the millennial generation is focused on what a company they are possibly going to work for actually
stands for? Where they stand on gun rights, where they stand on gay marriage - issues like that? Do you believe people are now considering
that before they take a job?
NANTERME: I'm sure they are, and at Accenture this year we're going to work with 95,000 people. But I think we have a great experience on
recruiting people, attracting people, but as well reading their minds, if you will - understanding their motivation. We're working on this every
minute of every day.
Again, they want to come and work for a company with a purpose, they want to fulfill a goal which is going far beyond career and very
importantly they want to make a contribution and it's going to be very important for companies like us to provide an environment which could
fulfilling that goal.
(END VIDEOCLIP)
[16:55:13] HARLOW: In a moment here on "Quest Means Business," if you missed out on tickets to the Mayweather versus Pacquiao huge boxing match
coming up, we have your solution. I'll tell you what it is next.
(COMMERCIAL BREAK)
HARLOW: So if you cannot afford the heavyweight prices like most of us for next week's hugely-anticipated boxing match, we've got a way you
still might be able to see Floyd Mayweather and Manny Pacquiao in person.
In an unusual step for a boxing match, tickets for the prefight weigh- in - those just went on sale, the price obviously much more affordable than the fight itself. They're just ten bucks. Promoters say proceeds from the
weigh-in tickets will be donated to charity.
This comes after tickets for the fight itself sold out in about one minute on Thursday. The cheapest seat you can find on the secondary market
for the fight -- $5,000. Some of those floor seats went for up to $50,000.
All the hype about this fight has done wonders for Johnny Dagami's profile. He is a former factory worker in the Philippines who just happens
to look exactly like Manny Pacquiao. Now, he's even found someone to dress up as Pacquiao's trainer and he says they're going to take their show on
the road.
(BEGIN VIDEOCLIP)
ROMEO JAMERO, FREDDIE ROACH IMPERSONATOR: We've become a duo - you know, duo? Seeing comedian. What is that? I told (ph) practice (ph)
training Cantanny (ph) Manny and then the comedy Freddie (ph) to any kind of a stage.
HARLOW: So I think if Pacquiao wins, he needs to give half of his winnings to that guy. All right, that is "Quest Means Business." Thanks
so much for being with us this Friday evening. I'm Poppy Harlow in New York. The CNN U.K. election debate is next. Stay right here.
END
