Economist 1/1/16

  1. THE rise of big emerging economies like China and India, and the steady march of globalisation, have led to a surge in the numbers of people wanting to travel abroad for business or tourism.The most sensible response to this surge in demand for short-term visas would be for governments to streamline the application process and scrap the most onerous requirements. In 2016 America will start requiring visas for some travellers who currently do not need them—if, for example, they have visited Iran, Iraq, Syria or Sudan in the previous five years.In many cases, instead of simplifying the visa process, governments have offloaded it to private contractors.The biggest firm in this growing business is VFS Global, which is part of Kuoni, a Swiss tourism company. Starting from a single premises in Mumbai in 2001, handling applications for American visas, VFS now has more than 1,900 visa centres in 124 countries, processing paperwork for 48 governments.Its main rivals are CSC, with around 10% of the market, and TLScontact, with around 7%.VFS probably enjoys operating margins of 20%, reckons Kathleen Gailliot, an analyst at Natixis, a French bank.VFS accounts for just 5% of Kuoni’s revenues but more than 60% of its operating profits.
  2. James “Jim Bob” Moffett, one of the great wildcatters of the past half-century, presaged his fate in 2012. On December 28th Freeport-McMoRan, the firm he founded and built into a global mining and oil giant, said he was stepping aside as executive chairman.He seems to be the latest casualty of the “Icahn effect”, the toppling of larger-than-life entrepreneurs of the commodities boom after Carl Icahn, a veteran activist investor, buys stakes in their firms and seeks to shift their focus to cost-cutting.Since it invested in Freeport in August, Mr Icahn’s firm has acquired two seats on the board, and the miner has halted the dividend and shrunk operations to stabilise its debt.Two years earlier one of the biggest mavericks of the shale boom, Aubrey McClendon, also came a cropper after Mr Icahn invested in his firm, Chesapeake Energy.
  3. EVERY New Year, cruise lines brace themselves for “wave season”—the first three months of the year, in which nearly a third of all holidays at sea are booked.On December 18th Carnival, the world’s largest operator, with more than 40% of a global market worth nearly $40 billion a year, announced a record $2.1 billion in full-year earnings, 40% up on 2014, thanks to buoyant demand and cheap fuel oil. Along with Royal Caribbean Cruises (RCL) and Norwegian Cruise Line (NCL), the trio now control around 80% of the industry.The big three are now piling into the biggest potential market of all, China.In 2016 Carnival plans to increase the number of its ships in China from four to six.Carnival and RCL no longer send elderly cast-off hulks from America and Europe to China. Now they send their newest and best, such as RCL’s Quantum of the Seas.Such are Carnival’s hopes for the Chinese market that it recently moved its chief operations officer, Alan Buckelew, to Shanghai to oversee the firm’s expansion there.The number of Chinese households earning over $35,000 a year—the figure the industry sees as the point at which foreign travel takes off—has increased from 6m to more than 27m over the past decade.
  4. The dotcom boom turned to bust, emerging markets are now in poor shape and commodity prices have slumped in the past year.Energy, mining and chemicals firms are expected to slash their capital-investment budgets by 20-50%. Property firms are cutting back too.In contrast, internet, software and other tech firms are on a high, with their budgets expected to expand by a quarter or more.In 2016 the combined capital spending of Google and Apple will be $24 billion, almost equal to Exxon’s $28 billion budget.Measured in dollars, the overall picture is of a 15% fall in corporate capital spending by 2017. Allowing for the greenback’s big rise since 2014, the fall will be just 5% or so in local-currency terms. And the figures exclude research-and-development (R&D) spending. That is rising quickly.
  5. It was clearly in part to intimidate feistier members of the country’s online community that the authorities arrested one of the country’s most prominent civil-rights activists, Pu Zhiqiang, in 2014 and eventually put him on trial on December 14th. On the basis of seven messages posted on Weibo, China’s heavily censored version of Twitter, Mr Pu was charged with “picking quarrels and stirring up trouble” as well as “inciting ethnic hatred”. The court handed down a three-year suspended prison sentence, which means that Mr Pu will not be allowed to continue his widely acclaimed work as a lawyer . He inherited an army of internet censors, but despite his efforts to give them more legal muscle (the country’s first counter-terrorism law, passed on December 27th, includes restrictions on the reporting of terrorist incidents), Mr Xi is still struggling.

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