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International Affairs
Business News Month in a Nutshell powers usurped by military dictator
World markets shake as two General Pervez Musharraf, vowed to
Tata Consultancy Services
will partner with Swedish iconic US banks crash: In a stunning promote trade-driven closer ties with
defence and aerospace reshaping of America’s financial land- India and resolved to end poverty and
group Saab for an scape, two venerable Wall Street firms hunger by turning around the faltering
aeronautical design and fell from the shock waves of the credit economy.
development centre. crisis on September 15, 2008. Stocks
Sports broadcaster ESPN across the world tumbled in response 60 killed in Islamabad hotel
Star Sports (ESS) has paid to the latest fallout. Lehman Brothers blast: On September 20, 2008, more
a staggering $ 975 million filed for federal bankruptcy protection than 60 persons were killed and more
for exclusive global after rescue attempts failed. Bank of than 200 injured in what was described
commercial rights for the America, meanwhile, snapped up Mer- as the biggest suicide attack that virtu-
T20 Champions League for
a 10-year period, starting rill. Ominously, AIG, once the world’s ally devastated the entire building of
with the inaugural largest insurance company, had to be Islamabad’s main Marriott Hotel. The
tournament between bailed out by the US government. blast took place about three hours
December 3 and 10, 2008. Goldman Sachs and Morgan Stanley, after President Asif Zardari delivered

Contents or Translation of contents of this document must not be reproduced in any manner without prior permission.
the two most influential securities his maiden address to the joint session
Fearing worldwide impact of
collapse of American firms and the arteries supplying capital of Parliament, less than a km from the
Insurance Group (AIG), the to Wall Street, decided to convert them- scene of the explosion.
United States government selves into retail banks. U.S. financial
has agreed to a $ 85 billion crisis deepened further with 119-year- Aso is Prime Minister of
bailout that gives it control old banking institution Washington Japan: Outspoken nationalist Taro
of the troubled insurance
giant AIG. Mutual deciding to file for bankruptcy Aso, an advocate of spending and tax
protection after selling its banking cuts to boost the economy, has been
The Anil Ambani promoted operations to JPMorgan Chase. The elected Japan’s new Prime Minister to
Reliance Big Entertainment financial crisis virus spread to Asia and take over from Yasuo Fukuda, who quit
(RBE) has sealed the deal Europe. Europe’s biggest bank rescue earlier just as the economy was flirting
with Hollywood’s iconic
director Steven Spielberg’s of the global financial crisis to date with recession and faces further dam-
Dream-Works. The total took shape on September 29, ahead of age from turmoil on Wall Street. The
investment that RBE will a US lawmaker vote on a $700 billion new leader must try to revive the
make in a phased manner toxic debt fund as fears that the plan world’s second-biggest economy
across a number of years will fail gripped financial markets. Mar- despite the constraints of its huge pub-
will stand at about $ 1.5
billion, of which $ 500 kets pivoted on passage of the US lic debt, although he may have scant
million will be via equity and bailout, as investors’ attention turned time to do so if, as media and pundits
the rest will be in debt. The to signs of a gathering recession. predict, he calls an early poll for Parlia-
deal entails producing 25-30 Stocks dropped, with the S&P 500 ment’s powerful lower house.
© The Competition Master.

movies across a four-year index closing at its lowest level in

period.
almost four years. President Mbeki of SA resigns:
The US Federal Reserve Capping a prolonged power struggle
has agreed to convert the Pakistan President Zardari’s within the country’s ruling ANC, South
once high-flying investment maiden address to Parliament: In African President Thabo Mbeki
banks, Goldman Sachs and his maiden address to Parliament on announced his resignation on Septem-
Morgan Stanley, into more
conventional depositary September 20, 2008, President Asif Ali ber 22, 2008, but denied the charge of
institutions. By agreeing to Zardari promised zero tolerance to vio- interfering with justice in a corruption
much tighter Fed regulation lation of Pakistan’s sovereignty and case to nail Jacob Zuma, his challenger
territorial integrity, offered to shed for the top post. In a nationally tele-

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 CURRENT AFFAIRS

as bank holding companies, vised address, President Mbeki told helping to rescue the once prosper-
Goldman Sachs Group Inc and the nation that he had decided to ous nation from economic collapse.
Morgan Stanley moved to avoid the resign after he was asked to do so by Inflation has rocketed to over 11
fate of rivals that either collapsed or the National Executive Committee of million per cent and millions have
were taken over in the worst financial the ruling ANC. In an unemotional fled to neighbouring African
crisis to sweep Wall Street since the
Great Depression. and measured tone, he categorically countries.
denied that he had interfered in the
Nomura, the Japanese securities work of prosecutors. The President Important News in
group, has reached a deal to buy the said the central approach we adopt- Detail
Asian operations of bankrupt US ed has always been to defend the
financial giant Lehman Brothers for
$225 million (1,021 crore). judiciary rather than act in a manner INTERNATIONAL ECONOMY
that would have had a negative World markets shake as two
Swan telecom has become the first impact on its work. iconic US banks crash
of the new mobile licences to have In a stunning reshaping of
made a killing by offloading 45% Israeli Prime Minister America’s financial landscape, two
stake to UAE’s Etisalat for $ 900
million. While a pan-India telecom Olmert quits: Disgraced Israeli venerable Wall Street firms fell from
licence covering all 22 telecom Prime Minister Ehud Olmert, under the shock waves of the credit crisis
circles costs about $ 400 million, public storm on a string of corrup- on September 15, 2008. Stocks
Swan had paid a much lower figure tion charges, submitted his resigna- across the world tumbled in
as it acquired licences to operate in tion of President Shimon Peres on response to the latest fallout of what
only 13 circles. The deal has enabled
Emirates Telecommunications Corp September 21, 2008, paving the way US Presidential nominee Barack
(Etisalat) to finally get a foothold in for his successor Tzipi Livni, the Obama called the “most serious
the Indian telecom space. newly elected leader of the ruling financial crisis since the Great
Kadima party, to form a coalition. Depression of the 1930s”.
Cement manufacturer Lafarge India Olmert’s almost three-year rule was Lehman Brothers filed for fede-
has roped in cricketer Mahendra
Singh Dhoni as its brand marked by Israel’s inconclusive 2006 ral bankruptcy protection after
ambassador. war against Lebanese Hezbollah rescue attempts failed. Bank of
guerrillas, a war on its northern America, meanwhile, snapped up
Jagdish Khattar, former Maruti MD, frontier that exposed the Jewish Merrill Lynch in a $59 billion
has announced his foray into the State’s vulnerability to rocket all-stock transaction. Ominously,
organized multi-brand car sales and
service business with an investment attacks, strengthening of Islamist AIG, once the world’s largest insur-
of Rs 1,000 crore over the next five Hamas faction that has taken control ance company, had to be bailed out
years. The new company is backed of Gaza and dwindling hopes by the US government as it struggled
by Rs 80 crore investment from of a peace agreement with the to raise $40 bn to avoid crippling
Wipro chairman Azim Premji’s Palestinians. credit-rating downgrade.
PremjiInvest
A new chapter was added to the
Sistema, one of the largest public Zimbabwe’s rivals sign his- ongoing saga of financial meltdown
diversified corporations in Russia toric power-sharing deal: Zim- on September 22, even as it marked
and the CIS, has announced that it babwe’s rival political parties signed the end of an era on Wall Street. This
would invest over $ 1.5 billion in a landmark power-sharing deal on time, it was the turn of the remain-
India next year to build a pan-India
telecom network on the CDMA September 15, 2008, which means ing survivors among the Big Five
platform. The Russian major, which President Robert Mugabe will cede investment banks of the US to eat
holds a majority stake in Shyam some of his powers for the first time humble pie. Goldman Sachs and
Telelink, has also announced the in nearly three decades of iron rule. Morgan Stanley, the two most
launch of CDMA services under the Mugabe, main opposition Movement influential securities firms and the
brand Rainbow in Rajasthan.
for Democratic Change (MDC) leader arteries supplying capital to Wall
British consulting firm Axon has Morgan Tsvangirai and Arthur Street, decided to convert them-
agreed to accept a $ 785 million bid Mutambara who heads a breadaway selves into retail banks. The deci-
from HCL. The acquisition will be the MDC faction signed the agreement sion, born out of compulsion rather
largest by an Indian IT company. after weeks of tense negotiations. than choice, has been approved by
Japanese small car maker Suzuki Under the deal, Tsvangirai will the US Federal Reserve. It does not
Motor Corp has launched its fifth become Prime Minister and chair a end here.
global model small car, which will be council of ministers supervising the U.S. financial crisis deepened
launched in India under “A-Star” cabinet. Zimbabweans hope the further with 119-year-old banking
agreement will be a first step in institution Washington Mutual

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brand. The car will be manufactured increase. Fortis became the first Lehman’s stock price into rubble,
at the Manesar plant of Suzuki’s major euro zone bank to buckle and forcing it to filling of bankrupt-
India subsidiary, Maruti Suzuki India under the financial turmoil. cy. On the same note Merrill Lynch
Ltd. In Germany, Hypo Real Estate posted a second quarter loss of
struck a last minute deal with a $ 4.65 billion. Following this, the
Samsung has appointed Abhinav
Bindra, 2008 Beijing Olympic gold consortium of banks to resolve a shares of the two companies came
medallist in shooting, as their brand financing squeeze with the German under pressure.
ambassador for the consumer government providing the credit Lehman Brothers was counting
electronics division. guarantee for £ 35 billion. big on the real estate boom and
On October 5, the European hence had overexposed its invest-
Xchanging Plc, the UK head-
quartered BPO major, has leaders vowed after crisis talks to do ments in the real estate sector. As
announced its intention to acquire all they could to fend off the finan- property prices went bust, so did the
75% stake in the Bangalore-based cial mayhem that has snowballed optimism of Lehman prospect on
IT/ITES firm Cambridge Solutions. out of Wall Street and is now hitting those investments. The fall in real
banks in Europe. French President estate prices was triggered by a sub-
deciding to file for bankruptcy Nicolas Sarkozy, who called the prime crisis.
protection after selling its banking emergency meeting, said govern- Sub-prime, refers to a loan given
operations to JPMorgan Chase. The ments needed to act in a coordinat- to a borrower who does not qualify
fall of Washington Mutual, popularly ed manner. for a regular home loan, because of a
known as WaMu, is viewed as Sarkozy arranged the Paris sum- poor credit record, low income and
the biggest banking failure in the mit in the hope that a show of unity no job security. In the current con-
American history. WaMu, according would help restore confidence in the text, in the US, banks gave out many
to reports, was expected to banking sector and an economy on such loans in their zeal to keep
lose around $19 billion on bad the brink of recession across the ahead of their peers in the banking
mortgages. developed world. sector. The subsequent defaults
The financial crisis virus spread British Prime Minister Gordon coupled with high unemployment
to Asia and Europe Britain’s Finan- Brown said no sound bank would be resulted in major loss of income
cial Services Authority imposed a allowed to fail for lack of liquidity. across the economy. The sub-prime
four-month ban on short selling We will continue to do whatever is issue erupted almost a year ago. The
financial stocks and the US Securi- necessary, he said. sub-prime crisis is a result of indi-
ties and Exchange Commission fol- On October 4, the US govern- vidual incentives and lack of
lowed suit with a 10-day ban. Mean- ment enacted a landmark $ 700 bil- accountability.
while, the world’s central banks lion bank bailout on, but investors
redoubled their efforts to lubricate questioned whether it could contain PAKISTAN
the seized-up money markets. a panic that began on Wall Street and President Zardari’s maiden
Japan, Australia, India and Indonesia spread to become a global financial address to Parliament
pumped in $ 42 billion after the US crisis. In his maiden address to Parlia-
Fed co-ordinated a $ 180 billion Markets pivoted on passage of ment on September 20, 2008, Presi-
package. The bank of England the US bailout, as investors’ atten- dent Asif Ali Zardari promised zero
offered $ 40 billion to banks. tion turned to signs of a gathering tolerance to violation of Pakistan’s
Europe’s biggest bank rescue of recession. Stocks, which had been sovereignty and territorial integrity,
the global financial crisis to date higher before the vote, dropped, offered to shed powers usurped by
took shape on September 29, ahead with the S&P 500 index closing at its military dictator General Pervez
of a US lawmaker vote on a $700 lowest level in almost four years. Musharraf, vowed to promote trade-
billion toxic debt fund as fears that The dollar was also in retreat. driven closer ties with India and
the plan will fail gripped financial What is this crisis all about: resolved to end poverty and hunger
markets. Lehman Brothers and Merill Lynch, by turning around the faltering
In Britain, mortgage lender two the world’s largest financial economy.
Bradford & Bingley became the institutions, booked big losses on In his address Zardari described
second British bank of be taken account of their exposures in some his journey from prison to Presiden-
under the government’s wing since highly risky assets. Lehman Brothers cy after wading through river of
the crisis began. Shares in French posted a loss of $ 3.9 billion (Rs blood and tears. He promised to
bank Dexia tumbled more than 20% 17,500 crore) in the quarter ending fulfil the mission of his slain wife
on a newspaper report that it might June 2008. This created panic Benazir Bhutto and vision of her
launch an emergency capital among investors resulting in fall of father Z.A. Bhutto to end poverty,

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disease and hunger in the country against terrorism. But, he said Pak- stitution Avenue on which key gov-
and build a free, democratic society istan would not tolerate violation of ernment buildings, including the
with equal rights for all without dis- its territorial integrity by any world Parliament House, the Presidency
crimination of caste, creed, gender power in the name of combating and the Prime Minister’s House are
or region. terrorism. located. The suicide bomber then
PML-N chief Nawaz Sharif had turned back and blew himself up in
responded to Zardari’s personal 60 killed in Islamabad hotel the Marriott Hotel Building.
invitation and flew into Islamabad blast About 1,000 kg of explosive was
from Lahore. Zardari walked up to On September 20, 2008, more used in the attack and is reported to
Sharif seated in the Presidential than 60 persons were killed and be the heaviest in scores of bomb
enclosure to embrace him immedi- more than 200 injured in what was blasts in the recent years. The
ately after he concluded his address. described as the biggest suicide impact was felt miles away from the
He was the first President in 18 attack that virtually devastated the scene of the blast.
years since 1990 whose address was entire building of Islamabad’s main The Marriott Hotel was original-
heard without any interruption. Marriott Hotel. ly selected as venue for the Iftar-
Offering to shed the Presidential The blast took place about three dinnar reception hosted by the
powers accumulated by Pervez hours after President Asif Zardari Speaker of the National Assembly on
Musharraf under the 17th Amend- delivered his maiden address to the the fateful day of September 20.
ment, including the authority to dis- joint session of Parliament, less than President Asif Zardari suggested
solve Parliament, Zardari proposed a a km from the scene of the explo- shifting the venue to the Prime
Parliamentary committee to make sion. Minister House at the last minute
amendment and suggest necessary The authorities said the truck and that saved almost the entire
changes. Never before in the history used in the blast first tried to break civil and military leadership of the
of Pakistan has a President given through the heavily barricaded Con- country that attended the reception.
away his powers, Zardari said amid
loud cheers.
But he hurriedly skipped over
the issue of restoration of deposed
judges and perfunctorily referred to
commitment on independence of
judiciary.
On relations with India, Zardari
pledged to carry forward a compo-
site dialogue process for resolution
of bilateral issues through peaceful
means, including that of Kashmir.
He talked about supporting Kash-
miri people’s struggle for fundamen-
tal rights and significantly omitted
the traditional expression of self-
determination. He said both coun-
tries were working out plans to pro-
mote trade across the line of control
in Kashmir and also resolved to
strengthen trade-driven relations
with India as also liberalizing the
visa regime to foster people-to-
people contacts.
The President denounced mili-
tancy and extremism and reaffirmed
commitment to establish writ of the
State in the troubled tribal areas bor-
dering Afghanistan. He said Pakistan
would remain a strong ally of the
international community in its war

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