Global ambitionsMember statesseek to advancecase for moreopen tradePage 2

Inside »

Tax havencrackdownMomentum buildsfor greatertransparencyPage 2

OpinionLeaders needto show theyremain in controlof their destinyPage 3

Stability offerspeace dividendExpectations buildof great thingsfrom tourist tradePage 4

AgriculturePolicy makers steerNorthern Irelandin direction offoreign tradePage 4

FT SPECIAL REPORT

G8 SummitMonday June 17 2013 www.ft.com/reports | twitter.com/ftreports

In many ways it is something of asurprise that the G8 is still meet-ing. It was formed in the 1970s,and its membership reflects thatera. The eight nations that meet

in Northern Ireland this month arethe ones that comprised the advanced,industrialised economies 40 years ago– plus Russia, which was added to thegroup in the 1990s as a consolationprize for losing the cold war.

Following the financial crisis of2008, it seemed suddenly apparentthat the G8 was no longer anadequate steering group for the worldeconomy. Globalisation had trans-

formed the world, and a wider grouphad to be represented at the table.

The first summit of the G20 wasconvened in Washington in the after-math of the collapse of Lehman Broth-ers in 2008. This larger group includedthe biggest emerging economies –such as China, India and Brazil. Itwas the G20 that, at a London summitin 2009, agreed on emergency meas-ures to reflate the world economy.

At its next meeting in Pittsburgh,the assembled leaders let it be knownthe old G8 would be folded into thebigger organisation. Gordon Brown,then Britain’s prime minister, said:

“The old system of international eco-nomic co-operation is over. The newsystem, as of today, has begun.”

And yet, almost four years later, MrBrown’s successor, David Cameron, ishosting a G8 summit. So whatexplains the surprising resilience of agroup that was dubbed an anachro-nism just a few years ago?

Institutional inertia doubtless playsa part. Formally scrapping the G8would have involved offending someof the smaller members – such as Can-ada and Italy – who cherish theirmembership of this elite club. Butworld leaders have crowded diaries

and they try to avoid pointlessmeetings, so inertia alone is not asufficient explanation.

The real reasons for the G8’s sur-vival lie elsewhere. The first and mostimportant is the rediscovery of thenotion of “the west”.

The group of countries that aremeeting in the UK no longer includeall of the world’s largest economies.But, with the exception of Russia,they share high living standards anda commitment to liberal democracy.

They are a more coherent groupthan the G20 – which includes nationswith very high levels of poverty, such

as India, as well as autocracies, suchas China and Saudi Arabia.

Faced with high unemployment inboth Europe and the US – as well asthe long stagnation of Japan – the G8nations are looking for fresh ways tostimulate their economies.

As a result, there is talk of negotiat-ing big, new regional trade agree-ments. The US and the EU havebegun talks on forming a transatlan-tic free-trade area. Meanwhile, the USis exploring the formation of a Trans-Pacific Partnership to free up trade,

Continued on Page 3

Old alliancegives west achance forfinal stand

The nations at themeeting still form a bigenough bloc to shape the global trading andregulatory environment, saysGideonRachman Meeting point: the Hands Across the Divide monument in Londonderry, designated the UK’s first City of Culture. David

Cameron, the prime minister, chose Northern Ireland as the summit’s location to help revive its flagging local economy Alamy

2 ★ FINANCIAL TIMES MONDAY JUNE 17 2013

G8 Summit

GDP growth for 2012Annual % change

Brazil5.5

4.1

6.0

South Africa25.2

9.2

India**12.5

5.2

Canada7.3

US8.1

The G8 and its place in the world

** Oxford Economics estimatesSource: IMF

SSSSo th Africacaaa25.2

SSSSSoSouSouSSSS th A

a****diaaI512.55

IIInIndIndIndiaiaia

4.11444444 1

6.06666 0

299.299.299.2

BBBrazililillll5.555 5555

BBBBBBrBrBrBraBraBraBraBBBBBBBBBBBB z

US8.1UUUUSUS

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5.2555555 2

Size of the economy2012

Population2012, number of people

Current account balance2012 (%)

-10 -5 0 5 10 15 20 25

Saudi ArabiaGermany

RussiaSouth Korea

ChinaJapan

EUArgentina

ItalyMexico

BrazilFrance

IndonesiaUSUK

AustraliaCanada

IndiaTurkey

South Africa

G8$36tn

Brics $14tn

Brics

2.9bn

G8 0.9bn

G20

$62tn

World $72tn

Russia0.1bn*

Russia$2tn*

SouthKorea

Japan

Russia

China

Saudi Arabian.a.

IndonesiaIndonesiaIndonesia

Australia

Germany

Mexico

Argentina

10.20.210 20 2

* Intersection not to scale

World 7.0bn

G20

4.5bn

= Unemployment rate

2012 (%)

EuropeanUnion = -0.2

Below 0 - contraction

0 to 1 - slow growth

1 to 3 - moderate growth

3 to 5 - strong growth

Above 5 - fastest growth

FT graphic, research: Valentina Romei

Boosting globaltrade and pre-venting protec-tionist measuresin advanced econ-

omies have long been sta-ples of G8 summit agendas,and varying degrees ofurgency have been paid tothem. This year’s gatheringcomes as huge stepstowards substantial tradeliberalisation have beenlaunched in all the coun-tries participating in thesummit.

The US and the EU –including the UK, which ishosting the summit, as wellas France, Germany andItaly – are about to beginnegotiations on a Transat-lantic Trade and Invest-ment Partnership thatmarks the boldest attemptyet to cut tariffs andremove regulatory barriersto trade between the twogiant economic blocs.

Meanwhile, on thePacific, the US is trying towrap up negotiations on aTrans Pacific Partnershipwith 11 other countries,including G8 club membersCanada and Japan.

Each of these potentiallyhuge trade deals has its dif-ficulties, political obstaclesand no certainty of a suc-cessful conclusion. But theyshow a convergence of opin-ion among G8 nations thatmore open trade is a way ofbolstering sluggish eco-nomic growth without add-ing to budget deficits thathave already strained pub-lic finances in manynations. Even Russiahas became a World TradeOrganisation (WTO) mem-ber.

David Cameron, UKprime minister and summithost, has been a cheerleaderfor the effort because ofexpectations that someprogress can be madetowards setting up the firstround of transatlantic nego-tiations as quickly as possi-ble. “An EU-US trade dealcould add tens of billions toour economies,” he said lastmonth.

“Everything is on thetable, with no exception,”Mr Cameron added, brush-ing off attempts – particu-larly from other EU nations– to exclude sensitive topicssuch as agriculture and

cultural products from thenegotiations.

The balance of power inthe global economy hasshifted dramatically inrecent years, away fromoverwhelming dominationby the G8 to a system inwhich emerging economies

such as China, India andBrazil, are critical for thesmooth functioning ofworld trade.

However, the G8 membershope that trade deals suchas the EU-US agreementand the Trans PacificPartnership could prompt

more action within thebroader G20 group of coun-tries, or even efforts at theWTO in Geneva to rescueelements of the stalledDoha round of multilateraltrade talks.

That may be wishfulthinking. North-south and

east-west divides at theWTO remain significant asnegotiators seek to buildconsensus for even themost basic steps, such assmoothing customs clear-ance procedures around theworld, known as trade facil-itation.

But transition at the helmof the WTO, with Braziliandiplomat Roberto Azevêdoscheduled to take over asdirector-general after PascalLamy of France departs onAugust 30, offers somepotential for bridge buildingand a fresh effort at

compromise within theinstitution.

What is clear is thatworld trade growth is lack-lustre.

According to WTO datareleased in April, it fell to 2per cent in 2012 from 5.2 percent in 2011 and was

expected to rebound onlyslightly to 3.3 per cent thisyear. This is all well belowthe average 6 per centgrowth before the 2008financial crisis.

The slow growth in worldtrade was mainly attributedto poor demand in Europe,caused to a great extent byits sovereign debt crisis.

Mr Lamy said: “Theevents of 2012 should serveas a reminder that thestructural flaws in econo-mies that were revealed bythe economic crisis havenot been fully addressed,despite important progressin some areas.”

He also warned, however,that, in spite of all theefforts in advanced econo-mies to press ahead withbilateral trade deals, protec-tionism might intensify,rather than retreat, aroundthe world.

“As long as global eco-nomic weakness persists,protectionist pressure willbuild and could eventuallybecome overwhelming. Thethreat of protectionism maybe greater now than at any

time since the start of thecrisis, since other policiesto restore growth have beentried and found wanting,”Mr Lamy said.

The most recent flare-upin trade tensions has comebetween the EU and Chinaover the European decisionto impose tariffs on importsof Chinese solar panels,which the US has also done.That move was itself thesubject of a fractious debatewithin Europe, with Ger-many taking China’s side,along with other Europeancountries who opposed theEU on the matter.

But China reacted thismonth by announcing aninvestigation of wineimports from the EU, nota-bly hitting G8 memberssuch as France, Italy andSpain, on anti-subsidy andanti-dumping grounds.

These spats may not besufficient to spoil Mr Cam-eron’s G8 trade liberalisingbonanza. They highlight,however, how difficult glo-bal consensus still is toachieve in matters of inter-national commerce.

Opinions converge in favour of more open tradeGlobal ambitions

Efforts are afoot toremove regulatorybarriers, writesJames Politi

‘Structural flawsthat were revealedby the economiccrisis have not beenfully addressed’

Rarely has a commitmentfrom the Group of Eightleading countries been bro-ken so quickly as its pledgeto leave discussion of theglobal economy to theGroup of 20.

Stating unequivocally in2009 that the G20 would bethe “premier forum forinternational economic co-operation”, many G8 lead-ers, finance ministers andcentral bank governors nowthink that promise was mis-taken.

The change of heartstems not from a new rele-vance or legitimacy of theG8. Even before the 2008-09financial crisis, it had longgiven up its position as theoverwhelming force in theglobal economy.

On a purchasing powerparity basis, the seven lead-ing western economies andRussia accounted for 46 percent of global output in2007, a figure that the Inter-national Monetary Fundnow estimates to be only 40per cent and declining.

Rather, it arises out of afeeling that the size and for-mality of G20 meetings sti-fles debate and understand-ing. Quietly, the G7 (exclud-ing Russia) have begunmeeting again at regularinformal intervals atfinance minister level andthe G8 has restored discus-sion of the global economyas a central feature of the

2013 Loch Erne G8 summit.After May’s G7 finance

ministers and central bankgovernors meeting in Ayles-bury, outside London, dele-gates joined forces in prais-ing the small size and thefree-flowing discussion. SirMervyn King, the departingBank of England governor,even said: “I can’t recallanother G7 meeting wherethe atmosphere was one ofa genuine exchange ofviews.”

Leaders of the G8 willstill have much to chewover in Northern Irelandregarding the short,medium and long-termhealth of their economies

Immediately on theirminds is the phenomenonthat is “Abenomics” –Japan’s combination ofputting in place highlystimulatory monetary andfiscal policies aimed atshocking the economy outof almost a quarter of a cen-tury of decline and fallingprices.

While everyone wouldlike to see the world’s third-largest economy emergefrom its torpor, the methodsbehind Abenomics are caus-ing some concern thatJapan is also pursuing asurreptitious beggar-thy-neighbour strategy.

The change in policy hassent the yen tumbling, witha dollar buying 30 per centmore yen at the end of Maythan last September, eventhough the policy is aimedat boosting domesticdemand and ending defla-tion.

South Korea has urgedthe G8 to take action totackle what Hyun Oh-seok,its finance minister anddeputy prime minister,

called the “unintended con-sequences” of Japan’s mon-etary easing. Saying hisconcerns were shared byGermany, he said, “we needsome kind of co-ordinatedefforts to prevent thesekinds of unintended side-ef-fects from [Japan’s new]monetary policy”.

Although the US has notpublicly criticised Abenom-ics, senior Treasury officialsstress the need for Japan tomeet the G7’s commitmentto avoid excessive move-ments in currencies.

The uneasy truce on cur-rencies is likely to persist atLoch Erne despite mount-ing tensions, as the G8 hasother pressing concerns forthe medium term. This

spring the InternationalMonetary Fund categorisedthe world economy as“three speed” and all G8economies are in the twoslower lanes. Forecastsseem to indicate that theywill stay there, while therapidly growing emergingeconomies steam ahead.

G8 members know theystill face strong headwindsfrom the financial and eco-nomic crisis – the financesof households, banks andgovernments are weak,leading to a lack of spend-ing confidence – and their

medium-term priority is torepair the damage done sothat businesses feel ableagain to invest and house-holds to spend.

Although there are diffi-cult sequencing decisionsand no easy answers, G8leaders are aware there isno alternative to repairingtheir economies. If they fail,the prognosis is continuedtepid growth at rates farlower than the historicalnorm and prolonged unem-ployment, particularlyamong young people.

All hope that the fore-casts of slowly strengthen-ing advanced economies –led by the US but with theeurozone and the UK alsoemerging from recession –will come to pass and thatpositive moves will notdampen pressure forreform.

For, in the longer term,G8 leaders are aware thatany legitimacy they have toinfluence the rest of theworld on economic mattersdepends on the examplethey set. While the G8 willcontinue to decline as aneconomic force, if its mem-bers show the ability todevelop and modernise aslarge, rich and dynamicsocieties, they still have thepower to take the lead.

A great deal depends onwhether the world can sus-tain much faster globalgrowth in order foradvanced and emergingeconomies to prospertogether. The G8 cannotanswer that at Lough Erne.But if the discussions arefruitful in helping advancedeconomies commit the cri-sis firmly to the past, theG8 can show the benefits ofeconomic co-operation.

Long-term legitimacy requiresability to set economic exampleGrowth prospects

Outlook will giveattendees much tochew over, writesChris Giles

The 2013 summit has thepotential to go down in his-tory as “the turning pointin the battle against taxevasion and avoidance”,according to David Cam-eron, UK prime minister.

He has called on govern-ments to “break down thewalls of corporate secrecy”by introducing central reg-isters for corporate owner-ship. Talks will also focuson the cross-border sharingof tax information andwhether companies shouldbe encouraged to reportwhat they pay in the coun-tries in which they operateon a voluntary basis.

Because of growing publicanger over high-profileexamples of avoidance andevasion, European leadershave backed an interna-tional tax crackdown. InApril François Hollande,France’s president, said“tax havens must be eradi-cated worldwide” after apolitical scandal involving asecret account held by hisformer budget minister.This year Angela Merkelcommitted to finallyputting “an end to taxhavens at the G8 meeting”.

Developing countries alsowant change. Kofi Annan,former secretary-general ofthe UN and chairman of the

Africa Progress Panel, said:“The extensive use made byforeign investors of off-shore-registered companiesoperating from jurisdictionswith minimal reportingrequirements actively facili-tates tax evasion. It is allbut impossible for Africa’sunderstaffed and poorlyresourced revenue authori-ties to track real profitsthrough the maze of shellcompanies, holding compa-nies and offshore entitiesused by investors.”

Jeffrey Owens, formerhead of tax at the Paris-based Organisation for Eco-nomic Co-operation andDevelopment, says tax hasthe potential to be the lasttrade barrier. “Transpar-ency is central to develop-ing countries achieving self-sustaining growth, as itenables them to counter taxevasion capital flight andcorruption, which flourishin an opaque environment.”

It is hoped that greatertransparency will come as aresult of US measures intro-duced in 2010. The ForeignAccount Tax ComplianceAct (Fatca) has forcedbanks and governments toexchange tax informationwith the US, which threat-ened a 30 per cent withhold-ing levy on foreign banksthat did not divulge USclient information.

EU governments are toadopt a version of Fatca,and the UK has made simi-lar agreements with itsCrown dependencies andoverseas territories.

Momentum is growing forthe adoption of automatic

exchange of tax informa-tion, a far more effectivemeans of deterring anddetecting evasion than thetreaties promising toexchange information “onrequest” signed since 2009.Angel Gurría, OECD secre-tary-general, has said: “Thepolitical support for auto-matic exchange of informa-tion on investment incomehas never been greater.”

Many offshore financialcentres are wary of such

agreements, citing concernsabout the loss of business toless transparent jurisdic-tions, clients’ fears aboutconfiscation by predatorygovernments and practicaldifficulties relating to theirlack of an income tax sys-tem. They say they havealready made big conces-sions, unrecognised by bigjurisdictions.

Large countries, particu-larly the US and to someextent the UK, are underpressure to introducetougher standards to reducecorporate secrecy. US states

form nearly 2m companieseach year, almost alwayswithout obtaining thenames of the people whowill control them.

A 2011 World Bank studyfound that, of the 40 juris-dictions reviewed, only Jer-sey required beneficial own-ership to be identified andrecorded. It found so-calledtax havens had “higherstandards in corporatetransparency, at least at thecompany-formation stage,than those in other coun-tries”. The compliance costsof setting up and policingregistries are likely to beserious factors in determin-ing whether the G8 pushesthis proposal.

The G20 is leading thedebate over tax rules affect-ing multinationals but theG8’s push for greater trans-parency is likely to affectbig companies, too.

In May, Michel Barnier,European commissioner forinternal market and serv-ices, said the EuropeanCommission wanted largecompanies to report allprofits earned, taxes paid,and subsidies received on acountry-by-country basis.This requirement will be inplace from January 1 2015for banking and industriessuch as mining. The G8 islikely to encourage volun-tary country-by-countryreporting but may wantcompanies to divulge thisinformation to tax officials.

Momentumbuilds for taxtransparencyHavens crackdown

Public anger isforcing governmentsto act, reportsVanessa Houlder

‘Abenomics’ israising concern thatJapan is pursuinga ‘beggar thyneighbour’ strategy

Kofi Annan: Africa has a hard time tracking profits Getty

‘Capital flightand corruptionflourish inan opaqueenvironment’

FINANCIAL TIMES MONDAY JUNE 17 2013 ★ 3

G8 Summit

If only they did not feelobliged to produce a grandcommuniqué. This month’smeeting of leaders of theadvanced industrialnations promises to bewhat diplomats mightkindly call a stocktakingexercise. Barring anunexpected breakthroughon Syria, the presidentsand prime ministers of theGroup of Eight nations areunlikely to have much tosay. But form, protocol andmany attendant journalistsdemand they must saysomething – and at length.

In the early days of thefireside chat (when therewere five rather than eightat the table and myriadpresidents of the EU hadnot muscled in on the act)it was considered enoughthat the world’s leadersexchanged ideas andthoughts on the crises ofthe moment. And therewere plenty of crises in thedecade spanning the late1970s and early 1980s.

That was before 24/7rolling news, Facebook,Twitter and all the otherparaphernalia of the digitalera. We live in the age ofimpatience. The world’sleaders had better producesomething lest the mediain Lough Erne tell votersback home that theCaesars have beentwiddling their thumbs asthe world burns.

What is more, this year’shost David Cameron isbadly in need of a goodstory. The British economyis mired in stagnation andthe prime minister’s ownConservative party isflirting with the idea ofleaving the EU. At leastthe G8 allows Mr Cameronto play the role ofinternational statesman fora day or two.

The trouble is, thesummit eight are no longerthe world’s leaders. Backin the good old days theoriginal five – the US,Germany, France, Britainand Japan – carried mostof the world’s economicmuscle. They did notalways agree, but whenthey did they couldcommand an audience,even if the now defunctSoviet Union might

subsequently try throw aspanner into the works.

That was before the riseof the rest – China, India,Brazil, South Africa andothers – challenged theeconomic and politicalhegemony that hadbelonged for two centuriesto the nations borderingthe northern Atlantic rim;and before Barack Obama,the US president, declaredthat the present centurywould belong to thenations of the Pacific Rim.

Then, of course, there isVladimir Putin, theirascible Russian presidentstill psychologicallytrapped in the supposedglory days of the SovietUnion. Russia is presentlyon the path to political andeconomic decay. Mr Putin’scontribution to globalgovernance is to demand

attention by messingthings up.

It seemed a good idea tooffer a place at the toptable to the leader of thenew republic in an effortto bind post-communistRussia to the west. At thevery least, it would provideassurance to the Kremlinthat its views were takenseriously as Nato and theEU began to expandeastward. The assumption,though, has beenconfounded by Mr Putin.

The Russian leaderdescribes the collapse ofthe Soviet Union as thegreatest tragedy of the 20thcentury. Two decades andmore after the fall of theBerlin Wall he still caststhe west as the enemy and,ludicrous though it mightseem, he still presentsRussia as the global equalof the US. He craves“respect”, but when it isafforded he knows it is notmeant.

No one much wants totalk to Mr Putin at suchsummits – but they feelobliged to, anyway.Russia’s remaining powerremains its capacity to say“No”. In the case of Syria,this comes at terriblehuman cost. So far, some80,000 Syrians have died inPresident Bashir al-Assad’sbrutal war against his

opponents. Better humourthe Russian leader, hisfellow summiteers willthink, in the hope thatMoscow may at some pointbe embarrassed by themurderous antics of itsSyrian ally.

Russia aside, there is acase for the cohesion ofthe west. For all Europe’stroubles, economic andpolitical, and the US’s newambivalence about itsglobal role, there areshared values,assumptions, standards andinterests to be protected.

Real power may intheory now belong to thewider G20, encompassingas it does the rising aswell as the establishedpowers, but that groupingis at once cumbersome andbeset by mutual suspicions.

If they act as one, the

original five, joined duringthe 1980s by Italy andCanada, have a betterchance than anyone else ofsetting the global agenda.

If they are sensible, theywill spend their time inNorthern Ireland cuttingaway the obstacles to atransatlantic trade andinvestment pact and givingencouragement to parallelnegotiations for atranspacific partnership.

These seven nations stillaccount for about half theworld’s economic output,providing them with aunique capacity to set theterms of global economicgovernance and trade.

But if they cannot agreeamong themselves, a lastopportunity to modernisethe international order willbe lost. Who will care thenabout the G8?

Pressure builds on leaders to show they can still shape events

Philip Stephens

No one muchwants to talk toMr Putin – butthey feel obligedto, anyway

Gideon RachmanChief foreign affairscommentator

Philip StephensChief political commentator

Jamie SmythIreland correspondent

Chris GilesUK economics editor

Vanessa HoulderTax correspondent

James PolitiUS economics and tradecorrespondent

Xan RiceNigeria correspondent

Carol RyanFreelance journalist

Adam JezardCommissioning editor

For advertising details,contact: Robert Grange,+44 (0) 20 7873 4418, email:robert.grange@ft.com

Contributors »

and has persuaded Japan totake part in the talks.

These initiatives reflectthe fact that the energy hasgone out of the Doha roundof trade talks, conductedunder the auspices of theWorld Trade Organisation.

US and European politi-cians also feel that theirelectorates might be morereceptive to new trade dealsbetween rich nations thanthey are to opening theirmarkets to countries withmuch lower wage levels.

The “rise of the rest”, inother words, the big emerg-ing economies of Asia andLatin America, has alsoreminded western nationsthat they can no longertake their domination of theworld’s economy forgranted.

That has also increasedthe incentives for the G8nations to press ahead withan EU-US trade deal.

As one German diplomatexplains: “Even the US is

Continued from Page 1

no longer large enough toshape global norms on itsown. The EU cannot do italone either.

“Together the EU and theUS would still form a largeenough trade bloc to shapethe global trading and regu-latory environment.

“But this situation willnot last forever. This maybe the west’s last chance,and we should seize it.”

This kind of argumentexplains why trade ques-tions will be at the very top

of the G8 agenda in North-ern Ireland.

The fight against tax eva-sion will also feature promi-nently.

Until recently, this wasan issue that divided G8nations – with the Frenchdesperate to crack down on“fiscal paradises”, while theBritish and the Americanswere warier.

The US is now leading thefight against bankingsecrecy around the world.In a climate of austerity,

the UK government is alsotaking a much less relaxedattitude to tax havens. MrCameron has even promisedto get tough with havensthat are under Britishjurisdiction, such as theCayman Islands.

The G20, like the G8, hadmade the fight against taxevasion a high priority.

But, in the aftermath ofthe financial crisis, thenew organisation has disap-pointed some of the highhopes that were invested init at the beginning.

It has become apparentthat the G20’s biggest merit– the size and diversity ofits membership – is also itsbiggest flaw.

The larger group hasproved too disparate tomake much progress onissues that it singled out forattention – such as tax eva-sion and climate change.

By contrast, the G8 is asmaller and more coherentgroup. At this month’s sum-mit it will strive to demon-strate that it is also bothrelevant and powerful.

Alliance has chance to make final standHosting a Group of Eightsummit at a luxury golfresort set in an idyllic rurallocation is becoming almosta routine event for the UKfollowing its choice ofGleneagles in Scotland whileholding the G8 presidency in2005. But inviting theworld’s most powerfulleaders to the five­starLough Erne resort in CountyFermanagh, Northern Ireland,has raised a few diplomaticeyebrows abroad.

The resort is a primeexample of the recklessproperty speculation thatcrashed the economies inthe Republic of Ireland andNorthern Ireland, wherehouse prices have halvedsince the boom in 2008.Anti­austerity campaignershave likened the resort,which administrators haveput on the market for £10m,to the hotel in the 1980horror movie The Shining.

Set on a dramatic 600­acre peninsula overlookingLough Erne, the hotel hasbeen spruced up for the

arrival of US PresidentBarack Obama andcompany.

The golf course, designedby six­time major winnerNick Faldo, always had agood reputation and the ThaiSpa, which caught fire theday before the G8 venuewas announced by DavidCameron, has been restored.

“I think David Cameronchoose County Fermanaghfor the G8 because it is themost beautiful part of theUK,” says Arlene Foster,Northern Ireland enterpriseand tourism minister, whorepresents the area in theNorthern Ireland assembly.

The surroundings suit MrCameron’s desire to returnthe summits to the style ofa “fireside chat” thataccompanied the firstmeeting convened by formerFrench President ValéryGiscard d’Estaing in 1975.

The location reflects theprime minister’s wish toshowcase the progress inthe Northern Ireland peaceprocess and boost an

economy recovering from adeep recession.

“The prime minister feltbringing the G8 to NorthernIreland would have a biggerimpact than hosting it inEngland or Scotland,” saysTheresa Villiers, secretary ofstate for Northern Ireland.

“It will shine a spotlight onhow Northern Ireland hasbeen transformed in recentyears by the peace process,”she says.

In the face of a continuingthreat from dissidentRepublicans opposed to thepeace process, 3,600 UKofficers will join 5,000Northern Irish police toprovide security at thesummit.

“The location of thesummit will be the safestplace in the world at thattime,” says Ms Foster. “Thisis also a very symboliclocation, given that 25 yearsago a bomb in the nearbytown of Enniskillen killed 11people,” she says.

Jamie Smyth

Lough Erne Choice of venue raised eyebrows overseas

The problems of tackling thecorruption that has oftenfollowed the development ofmining and oil concessions indeveloping countries has

been put high on the G8’s agenda.Setting out his key objectives for

the meeting, UK prime minister DavidCameron last month pointed to SierraLeone and Liberia as examples wherea chaotic scramble for wealth hadallowed an illicit diamond trade toflourish and fund appalling conflicts.Keeping track of where profits in oil-rich states are spent can also be prob-lematic (see box, right).

“We have a duty to make sure thatresource wealth does not fuel conflict,corruption and crime,” said MrCameron.

Hence, he insisted, he would beplacing the need for greater transpar-ency on mineral extraction – along-side open trade and fighting taxevasion – at the top of his “to do” listat the summit.

The UK prime minister alongsideFrançois Hollande, the French presi-dent, announced last month that bothcountries would sign up to the Extrac-tive Industry Transparency Initiative(EITI).

It demands that foreign companiespublish details of what they pay forextracting natural resources so citi-zens in countries where oil, gas andmining groups operate know howthese resources are being managed bytheir governments.

The EITI is just one of the mecha-nisms through which western govern-ments are attempting to tackle thehistoric scourge of corruption that hassurrounded parts of the so-calledextractive sector.

In the US, clauses in the Dodd-Frank financial reform act that

require such companies to discloseforeign payments are aimed at thosetempted to make corrupt payments inorder to win concessions.

The EU, meanwhile, reached a dealin April on legislation that mandatesoil, gas, mining and logging compa-nies to declare payments to govern-ments. European commissionerMichel Barnier welcomed the deal –which was endorsed by the Europeanparliament last Wednesday – and saidit would deliver “a new era of trans-parency to an industry which is fartoo often shrouded in secrecy”.

The EITI now has 23 member coun-tries that it says are fully compliantwith its standards and 16 candidatecountries awaiting full accreditation.

The transnational initiative has alsoattracted the support of more than 70major oil, gas and mining companies,including ExxonMobil, Royal DutchShell, Rio Tinto, BHP Billiton who arebacking the call to stamp out corruptpractices.

They are joined by a list of institu-tional investors, including Calpers,the Californian pension fund, JPMor-gan Asset Management of the US, andAviva and Aberdeen Asset Manage-ment of the UK.

EITI’s supporters admit theproblem it continues to face in broad-ening its membership and ensuringthe fair distribution of wealth in coun-tries that formally seek to complywith its strictures.

In its latest progress report ClareShort, the former UK minister whochairs the organisation, pointed outthat the government of conflict-riddenDemocratic Republic of Congoreceives less than $13 per person peryear from its rich mineral resources.

Gavin Hayman, director of cam-paigns at human rights group Global

Witness, says it remains to be seenwhat difference these shifts in lawsand support for transparency initia-tives will make in ensuring that thebenefits of a natural resource go tothe right places, particularly inAfrica.

If the revenues are spent well, theresults could be transformational, hesays. He argues there should beclearer information on how wealthflows between companies and states:“Transparency is the right place tostart, but the wrong place to stop.”

Organisations such as the AmericanPetroleum Institute (API) have contin-ued to campaign against implementa-tion of the Dodd-Frank Act.

The API has argued that the forcedrelease of sensitive payment informa-tion could potentially benefit rivalnational oil companies not necessarilyfacing the same obligations. That, theorganisation has argued, damagesboth US companies and consumers.

A number of prominent countriesincluding China, which has emergedas a key participant in the acquisitionand development of mining andhydrocarbon assets in the developingworld, remain outside the EITI.

Even so, Mr Hayman argues thatmany Chinese companies operate incountries that are part of the initia-tive. “When they are affected by EITIthey must play by the rules,” hecomments.

Fight againstmineral rightsabuse is highon agenda

MiningExtractive industry faces demands forgreater transparency, saysMichael Kavanagh

When petroleum accounts for morethan two­thirds of a government’srevenues, you might think its prioritywould be to measure how much oil isproduced a month. But not in Nigeria,which has been pumping oil for than50 years with help from some of theworld’s biggest energy companies.

Production statistics are vague andoften far out of date. When the countryis said to produce 2.2m barrels of oilper day, it might be many tens ofthousands of barrels more or less.

“We don’t know how muchoil the companies arepumping here,” saysNnimmo Bassey, anenvironmental activist.“We are very far awayfrom transparency at apolitical and corporate level.”

Independent studies backthis up. In May, think­tankRevenue Watch releasedits ResourceGovernance Index,measuringgovernance in the

oil, gas and mining sectors in 58countries. Nigeria came 40th, with ascore of 42 of 100. This placed ittowards the bottom of the “weak”category, behind countries such asPapua New Guinea, Sierra Leone andGuinea, and two places away from the“failing group”. Government “reportingpractices” were thought especially weakbecause of a “lack of contracttransparency and incomplete reportingon most aspects of the petroleumindustry”.

The consequences of this laxity,which allows the cover­up of what

Nigerians call “leakages”, areimmense. Nigeria earned about$50bn from oil in 2011, more

than the then total value ofinternational aid to all of sub­Saharan Africa. Yet povertylevels remain at 62 per cent, and

many in the oil­producingNiger Delta region live in

squalor.The authorities in

the capital Abujaare aware of theproblems, butreluctant to act.The Petroleum

Industry Bill, which is meant totransform the sector, lists one objectiveas “promoting transparency andopenness in the administration of thepetroleum resources of Nigeria”. Yet –five years after it was drawn up – thebill remains stalled in parliament.Increasing openness would meanreducing opportunities for politicalpatronage – a disincentive for anygovernment to make changes.

Critics such as Mr Bassey, say theblame also lies with oil companies,which benefit from the lack of accuratemeasurement of petroleum production,weak enforcement of environmentalstandards and minimal reportingrequirements. A deal for an oil block inwhich $1.1bn passed from Anglo­Dutchcompany Shell and Italy’s Eni throughthe government to a company linked toa former oil minister and convictedmoney launderer only came to lightbecause of court proceedings in the USand UK involving consultants who claimto have brokered the agreement.

“The companies operating in Nigeriaare fighting not to have to reveal howmuch they pay to the government,” MrBassey says.

Xan Rice

Nigeria Crucial oil industry reforms stall as vested interests fight shy of regulation

Benefit system: David Cameron, UK prime minister, at a G8 forum in London. Social impact bonds pay dividends based on success in delivering public services Bloomberg

Makeover: the Lough Erne golf resort receives a spruce­up AP

Activist:Nnimmo Bassey

4 ★ FINANCIAL TIMES MONDAY JUNE 17 2013

G8 Summit Northern Ireland Focus

Northern Ireland hasbecome a prime Europeanlocation for investment insoftware development andtechnical support centres.

IT in the province boastsa mix of 800 indigenoussmall and medium-sizedcompanies, such as Newry-based First Derivatives, and100 multinationals, includ-ing IBM, the New YorkStock Exchange and Citi-group.

“IT has been a focus formany years in terms of ourforeign direct investmentactivities,” says Brian Dola-ghan, director of technologyand services with Invest NI.

“Back in the 1980s we hada number of software devel-opment and telecoms com-panies set up, which formedthe bedrock of the sector,”he adds. “IT security hasbecome a big area of spe-cialism in recent years,along with financial serv-ices technology since inves-tors like the New YorkStock Exchange and Chi-cago Mercantile Exchangeset up here.”

According to Momentum,the province’s informationtechnology trade associa-tion, IT pumps £1.4bn ayear into the local econ-omy.

Despite rising unemploy-ment in other industries,universities are expandingIT courses to keep pacewith recruitment demands.

IT employs 13 per cent ofthe workforce and theNorthern Ireland executiveplans to increase the

number of IT employeesfrom 28,000 to 50,000 by2018. Northern Ireland wasthe first European countryto reach 100 per cent broad-band coverage, part of agovernment strategy tomake a peripheral economyattractive to investors.Competitive operating costsand the quality of the work-force are other factorsattracting overseas compa-nies. The province hasEurope’s youngest and fast-est-growing population anda large pool of English-speaking graduates. Two-thirds of IT and telecomsprofessionals hold a degree-level qualification, com-pared with half in the restof the UK.

The University of Ulsterand Queen’s University Bel-fast have a strong IT focus.The Centre for Secure Infor-mation Technologies, theUK’s largest cyber securityresearch lab, was set up atQueen’s in 2009 and worksclosely with industry. It hasa three-year partnershipwith technology consult-ants Infosys to develop solu-tions for cyber threats aris-ing from cloud-based busi-ness models.

John Healy, a director atCiti, which has been heresince 2005, says this kind ofcollaboration is attractiveto foreign companies.“Northern Ireland covers arelatively small area,where you are able to bringtogether the differentpillars of government,academia and industry, andthat means you can bepretty innovative. It is un-usual and positive to havethat level of engagement.”

Citi’s Belfast office iswriting software used ontrading floors in Londonand New York. Originallyenvisaged as a technologycentre of 375 people, it nowemploys nearly 1,200 intechnology, operations andcompliance departments.

“We were successful atattracting the right kind oftalent,” says Mr Healy.“There is a strong traditionin the delivery of softwareproduct here.”

Northern Ireland also sitsin a very good timezone, headds, and “we are able toface both east and west toservice our clients’ needs”.

IT crowdattractsforeigninterestTechnology

Province punchesabove its weight inindustry terms,reports Carol Ryan

The topic of agriculture andfood was high on theagenda when Peter Robin-son, Northern Ireland’sfirst minister, and MartinMcGuinness, the deputyfirst minister, travelled eastlast month to strengthentrade links with China. Inparticular, they discussedexporting more dairy pro-duce from Northern Irelandwith Liu Yandong, China’svice-premier.

China has a chronic dairyshortage, compounded by adistrust of domestic prod-ucts following an infant for-mula scandal in 2008 thatleft 300,000 babies sick. Thedemand for safe milk prod-ucts is voracious.

The visit coincided withthe publication of a govern-ment sponsored agri-foodreport that showed howmuch Northern Ireland’spoliticians have turnedtheir gaze to agriculture.

Agri-food is one of thecountry’s most successfulindustries and it is a prior-ity for the government, saysArlene Foster, enterpriseminister. “When I cameinto this job five years ago,a lot of people were talkingabout agriculture as a sun-set industry, but that wasshort lived. Now most coun-tries are talking about thegrowth of the world popula-tion and the increase indemand for quality foodthat will bring.”

The Agri-Food StrategyBoard’s Going for Growthreport sets out ambitioustargets to develop the sec-tor up to 2020. The agricul-ture and food industry isworth £5bn to Northern Ire-land’s economy, employs100,000 people – one in fiveof private sector jobs – andmakes up 25 per cent ofmanufacturing output.

It has grown steadily dur-ing the economic downturnwhile other sectors remainbecalmed. The report setsout plans to create 15,000

jobs and increase annualsales to £7bn. Three quar-ters of this growth is tocome from exports, in keep-ing with a government aimto rebalance the economytowards stronger overseassales.

Northern Ireland is wellplaced to profit from theincrease in world fooddemand as the global popu-lation inches towards 9bnby 2050. It is less exposed toextreme weather conditionsand water shortages, andexports more than 70 percent of what it produces.

Moves to make the sectormore outward looking andglobally competitive areunder way. “We have been

working to get exportlicences in place,” saysTony O’Neill, chairman ofthe agri-food board. “Overthe next few years, newmarkets will open up andthe opportunities are unbe-lievable. We could put allour milk into baby food pro-duction, send it over toChina and it would stillonly be a fraction of Chi-nese demand. That is thesort of thing that gives usgreat hope for the future.”

Developments in thedomestic market have beenpositive for farmers. Thehorse meat scandal hasgiven an unexpected boostto local producers as bigretailers, keen to reassureconsumers they have short-ened the supply chain, com-mit to buying more meatfrom local suppliers.

Moy Park, Northern Ire-land’s largest poultry sup-plier, has seen its ordersfrom Tesco increase by 250per cent as a result. “If yousource meat by the cubicmetre, frozen, from conti-nental Europe,” says IanMarshall of the UlsterFarmers Union, “and thatmeat subsequently passesthrough six or seven trad-

ers before it gets to you,then you have to questionthe quality.”

He adds: “Customers aremore aware of provenancenow so there are opportuni-ties for farmers arisingfrom the scandal.”

The ending of EU milkquotas in 2015 will aid fur-ther growth in dairy farm-ing. Northern Ireland hasnot been as constrained byEU milk quotas as othermember states because ithas been able to utiliseunderproduction in the restof the UK to nearly doubleits output since 1995.

The province alreadyexports 80 per cent of the2bn litres of milk it pro-duces annually, more thanthe combined output ofScotland and Wales.

“Global demand for milkis growing at 2 per cent peryear, particularly in Bricsand Africa,” says DavidDobbin, chief executive ofDale Farm, the region’slargest dairy producer,which has invested £50mover the past five years toincrease capacity. “Post2015, there will probably bea surge in production fasterthan the market can absorband that will hit Europeanmilk prices. But the marketwill find an equilibrium,and the long-term opportu-nities are fantastic.”

Farmers aim to creamprofits from milk salesAgriculture & food

Moves are under wayto take advantage ofincreasing demand,writes Carol Ryan

On FT.com »

Online coverageThe latestnews, views andopinions fromLough Ernewww.ft.com/g8

There are few businesses inNorthern Ireland that canclaim to be popping cham-pagne corks every day. Theprovince is still in recovery

following a deep recession and a col-lapse in property values. However,since opening last year, the TitanicBelfast visitor centre has sold morethan 1,376 bottles of bubbly,welcomed 807,340 visitors and hostedmore than 350 conferences.

“It’s been a hugely successful year,not only for Titanic Belfast, but alsothe city in terms of tourism,” saysTim Husbands, the centre’s chief exec-utive. “It has acted as the anchorproject for growth helping to createvibrant tourism and service sectors inBelfast for not only 2012 but for manyyears to come.”

Clad in 3,000 glittering aluminiumpanels and shaped as four radiatingships’ prows that resemble a starwhen viewed from above, Titanic Bel-fast is the most expensive tourismproject ever completed in NorthernIreland. It cost £97m to build and isone of several prime projects, includ-ing the completed Giant’s CausewayVisitor Centre and a proposed peaceand reconciliation centre at theformer Maze prison, which aim totransform the tourism sector andboost the economy.

“Northern Ireland needed an inter-national signature tourism attractionto draw people here and now it hasone,” Mr Husbands says.

Some 15 years after political leaderssigned a peace deal to end three dec-ades of sectarian conflict in NorthernIreland, political stability is offeringopportunities to attract more visitorsto the province.

A “peace dividend” and increasedinvestment in tourism resulted in thenumber of nights spent by overseasvisitors’ taking holidays in the coun-try more than doubling to 504,000 in2009, up from 213,000 in 2001. Theoverall number of nights spent byoverseas visitors increased to 1.9m in2009, up from 1.5m in 2001.

The Northern Ireland Executive iskeen to sustain the momentum of thetourist trade, which is sees as a keydriver of economic growth. The regionis home to several important and big-ticket events in 2013. As well as host-ing the G8 summit, which ministers

hope will put Northern Ireland in themedia spotlight, Londonderry hasbecome the first UK City of Culture.

The Turner Prize, the most impor-tant event in the UK’s contemporaryart calendar, will be held here, as willperformances by the Royal Ballet andthe London Symphony Orchestra. Thecity will host Fleadh Cheoil na hÉire-ann, Ireland’s traditional music festi-val, in the province for the first time.The tourism board is using thesummit as part of its promotionalcampaigns and has a programme forthe hundreds of international journal-ists attending it.

“We will highlight the fantastic,locally produced food we are servingto world leaders, the golf courses andthe beautiful scenery in Fermanagh,”says Alan Clarke, head of the North-ern Ireland Tourism Board. The most

important part of hosting the G8, MrClarke feels, is the chance to changeperceptions of Northern Ireland.

Continuing sectarian tensions andsporadic attacks by dissident Republi-cans opposed to the peace process canmake the region a hard sell to over-seas visitors.

Civil unrest sparked by Loyalistprotests over reduced flying of theUnion Jack at Belfast City Hall lastyear captured international headlines,reinforcing negative stereotypes builtup during 30 years of the “Troubles”.

Stability is the key to growing tour-ism, say industry chiefs, who admitthe recession, which caused houseprices to halve since 2007, is also mak-ing it difficult to attract privateinvestment. Business tourism, inparticular, needs additional facilities.Belfast still has few exhibition

facilities besides its prime conferencecentre, the Waterfront Hall, and plansto add to their number have been con-strained by cash concerns.

The province’s retail sector is strug-gling, with almost one in five shopson its high streets boarded up, thehighest rate in the UK, according tothe British Retail Consortium.

The Northern Ireland Executiveaims to increase earnings from tour-ism to £1bn by 2020, compared with£536m in 2010. Its objective is to rebal-ance the economy from an over-reli-ance on the public sector, but tourismexecutives say more investment isneeded to reach such goals.

“Bank credit is tight,” says MrClarke. “In particular, banks need toappreciate the potential for the hotelsector. We need more accommodationto meet our 2020 growth targets.”

Titanic success raises hopes for tourismTravel tradeGreater political stability is offering opportunities to rebalance a struggling economy, reports Jamie Smyth

‘Over the next fewyears, markets willopen up and theopportunities areunbelievable’

Closed down: a vacant store in Belcoo, County Fermanagh, that has graphic images pasted on to it so it appears to be a working butchers’ shop Reuters

Two-thirds of ITand telecomsprofessionalshold a degree-levelqualification

A ’peace dividend’ has led to anincrease in the number of nightsspent by overseas visitors’