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Migrant Ship Capsizes Off Sicily; G20 Says "Urgent Action" Needed on US Debt Ceiling; French Finance Minister on US Budget Crisis, French Economic Turnaround; European Markets Up; JPMorgan Posts Loss; Emerging Markets Fear Tapering; India's Worries; OECD on Debt Ceiling Debacle, Global Economic Recovery; US Budget Battle

Aired October 11, 2013 - 16:00   ET



RICHARD QUEST, HOST: It's the final flourish to a rocky week on Wall Street. The Dow Jones is higher at the end of what a week. It is Friday, October the 11th.

Tonight, get your house in order. G20 leaders tell the United States, do a deal on the debt ceiling.

We are at the IMF headquarters in Washington where finance ministers from across the globe give me their views on the crisis that is unfolding.

Also tonight, Jamie Dimon's disappointment. JPMorgan announces its first quarterly loss under the chief executive's reign.

I'm Richard Quest, live at the IMF, where of course, I mean business.

Good evening from Washington, and to be more precise, from the headquarters of the International Monetary Fund. This is the very grand atrium where all the major meetings take place. And just behind me is the room -- the big room where the G20 has been holding its meetings and where various finance ministers will be getting to grips with the crisis.

Tonight, you're going to hear conversations and interviews with some of the top finance ministers in the world, and they will be giving me their reactions, not only to the US debt crisis, but also to what's happening in their economies.

You're going to hear from the British chancellor of the exchequer, George Osborne. There's the French finance minister, Pierre Moscovici. The Indian finance minister, P. Chidambaram. And Turkey's fine deputy prime minister, Ali Babacan.

You will also hear from the secretary-general of the OECD, Angel Gurria, always good to have him on the program. And we will have the former president of the World Bank, Robert Zoellick. Much there for us to talk about in our program.

We must begin, though, of course, with events taking place off the coast of Italy, off Sicily, to be more precise, where a boat has capsized. It's feared there are deaths, but there are also many survivors of migrant workers who have been rescued. Let's go to Barbie Nadeau, who is in Rome for us tonight. What is the situation? What do we know?

BARBIE NADEAU, CNN INTERNATIONAL CORRESPONDENT: Well, of course, it's dark here in Italy, and it's been a very difficult rescue operation because the seas are rough and there's a sea storm on the way.

This boat went down about 60 miles of the coast of Lampedusa. That means it is not close to land. Rescue boats that went out there -- they came to this disaster from both Malta and Italy -- report that they have about 200 people, including many, many women who are pregnant and many, many children onboard in safety.

They also are estimating that around 50 people have died. They've pulled several of those bodies out of the sea, but they've -- the ship is down, so they're going to have to look at that ship and see if there are other people inside the ship.

This is just one of so many of these shipwrecks, though, in recent months and years here off the coast of Italy as people are trying to get into Europe through Italy's porous borders, Richard. It's a problem that's just growing.

QUEST: We'll talk more about it. Barbie, the moment you have more details to bring us on this, please do come back to us. Barbie Nadeau, who is in Rome. And we will update you with those numbers as we move through the program.

Tonight, the global financial leaders are demanding -- or at least, certainly, deeply worried -- at the state of play for the US debt crisis. The clock is ticking, and bankers and top financial officials are gathered in Washington.

In a statement, G20 policy-makers said, "The US needs to take urgent action to address short-term fiscal uncertainties." What does that mean? It means raise the debt ceiling, reopen the government, and start dealing with the ongoing budget crisis.

I was talking to France's finance minister, Pierre Moscovici, who was very blunt in his comments on the current US crisis.


PIERRE MOSCOVICI, FRENCH FINANCE MINISTER: A default or a kind of default of America would represent such a threat for the world economy. This is why everybody is finally confident. Because when something is potentially so damaging, it cannot happen, and it won't happen.

This is why the message here, of course, we have a worry, because the message of confidence as well for the president and for the Congress. It is of a huge necessity for everybody that a solution must be found and will be found to this problem.

QUEST: But as seen from Europe, even if a solution is found just to get them over this immediate hurdle, it is the consistent drip, drip, drip effect. At least one can arguably say in Europe great structural reforms have been made within the Union to make the thing work better. That doesn't seem to be happening here.

MOSCOVICI: That's true that we made huge efforts, and if I look one year backwards, what I see is that the question here in Washington -- it was in Tokyo, as a matter of fact -- was will the euro survive? Will Greece stay in? Will we make and assist your efforts? And what about your growth and structural reforms? We made it.

But now, we are looking at the global equilibrium, and we need to have as well the emerging countries on track and America to solve this problem in order to have strong growth. Because a strong America and strong American growth is necessary for the world economy.

QUEST: What do you want America to now do?

MOSCOVICI: Well, what it takes in order to put their house in order and to have a greater growth, because America is obviously one of the driving engines, if not the main driving engine, of the world growth, and this is why we are so looking at what happens as far as the shutdown and debt ceiling is concerned. But we also want this country to have a strong political economy.

QUEST: In Europe, now, the great changes that have taken place, the French economy is ever so slowly turning around. But it is slow, isn't it?

MOSCOVICI: France is changing and France is reforming. I'm really tired of French bashing. This country is a great country with a great economy, an attractive economy, especially for American investment. I don't know if you're aware of that, but we are one of the main destinations for American investments.

And American investors find there a high polity of infrastructures, public services, and skilled workforce. But we are changing the labor market, we are reducing public expenditures, we are reforming our pension system, we are acting for competitiveness through reduction of the labor costs. France is really on the move, and it's a country and an economy which you can trust.

QUEST: But what will be your priority for the next 12 months in those reforms? Obviously, at the European level, it is a banking union and a banking single supervisor and getting the ESM to work -- into effect and to run properly.

MOSCOVICI: In France, the main word, the key word is "competitiveness." We need to build a more competitive economy. And that's why we are reducing public expenditure. That's why we are simplifying our legal environment. This is why we are reducing the costs of labor. This is why we are reforming the labor market.

Because what we want is people as well from France and from abroad to invest in this country in order to have a stronger growth and then employment. Growth, job competitiveness, that's the motto of the French government.

QUEST: Can the president get those through? His popularity is low, there is resentment in the country at the changes, they're being forced through. Can he succeed to get them through?

MOSCOVICI: When the results come -- and they are coming -- we are out of recession, we are now getting into a slow but strong, solid growth. We are reforming the country. I'm quite certain that we have the resources and the assets to be a strong country. And popularity will come again after.


QUEST: That's France's finance minister, Pierre Moscovici, talking to me earlier. The European markets trading on the back of what they had seen from the previous session on Wall Street, and that, of course, has been a very bullish strong, over 300 points.

So, it's not surprising that Europe did follow suit. London had a debut of impressive proportions for Royal Mail. The shares were up 38 percent. It boosted the FTSE or to the London generally, up nearly 1 percent. Xetra DAX was up as well, smaller gains in Paris. The best of Europe is up 1 percent.

On Wall Street, of course, the talking point not only debt crisis, but JPMorgan and what's happening with the US bank. The US bank swung to a hefty $380 million loss. It's the first third quarter loss for Jamie Dimon since he took over in 2004.

And what's interesting about it was the legal costs: $7.2 billion after tax for Q3. Jamie Dimon pointed out there was a strong underlying performance across the bank. Consumer banking, investment, all were doing very well. Revenue was down. And Jamie Dimon said it's all because of legal bills, and there may be more legal bills on the way.

During a conference call with reporters, he said, and I quote, "I wish we could reduce the uncertainty for investors, but we can't."

You will be aware, of course, that JPMorgan Chase is facing regulatory investigations and legal action on numerous fronts, whether it's for misselling of certain assets, whether it's for regulatory -- things that they did wrong, all of which is taking its toll on the bank's bottom line as we see today.

Alison Kosik is at the New York Stock Exchange. Alison, one executive at JPMorgan bank said to me today anonymously, he said, we are being regarded as the slot machine for the US government.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, someone's got to be the poster child for the US government, and I guess the US government has picked JPMorgan Chase. And you know what? JPMorgan is one of those Teflon companies, though. Imagine getting a bill -- a legal bill for $7 billion after taxes.

But then you look at how shares performed today. Investors didn't seem to be too rattled. You know why? Because part of it is because investors, they're relieved to have a little bit more clarity on the size of these potential losses.

Also, there was the expectation it was going to be a rough quarter anyway. And you've got JPMorgan also trying to play defense on this, right? You've got them taking steps to fortify the company for more future problems --

QUEST: Right.

KOSIK: -- spending a billion dollars, adding thousands of employees to monitor risks so it has a better chance of staying out of legal trouble and staying off the radar of the US government. Richard?

QUEST: You've still got to admit, it's a very hefty amount of money to put aside to pay the legal fees and the lawyers --


QUEST: -- and the fines. All right, Alison Kosik at the New York Stock Exchange. I'm trying to work out in my mind -- in my head, just looking at those numbers, where the Dow finished for the week. I'm guessing it was up, and then down for the week overall. I'll have the exact number for you in a little moment or three.

Coming up after the break, you've already heard the view from Europe. Next, we'll hear from India's finance minister, P. Chidambaram, and the secretary-general of the IMF, Angel Gurria. More voices on the crisis of what's happening at the IMF.


QUEST: Member countries from the G24, particularly the emerging market economies, are asking the IMF to help provide more support and shield them from the financial shocks that will inevitably come when the US Fed begins tapering.

In a statement, the G24 said, "We are concerned by the higher volatility in global financial markets following indications of exit from unconventional monetary policies." Call that quantitative easing, QE. They say, "We believe more needs to be done by the Fund to support countries in warding off global tail risks and minimizing output losses."

One country that was already attacked by market speculation was India earlier this year. India saw its currency beaten down by some 20 percent before the central bank finally raised interest rates to protect the rupee. India's finance minister, here at the IMF, said when it comes to the problems, and specifically now the debt ceiling crisis with the United States, he'd never seen anything like it.


P. CHIDAMBARAM, INDIAN FINANCE MINISTER: This is an unusual spectacle. We haven't heard of parliaments shutting down the executive. This happens only in the United States. So, we are concerned, but we hope that they will resolve their crisis soon.

QUEST: The IMF, in its World Economic Outlook, the WEO, quite dramatically reduced India's growth for this year. You mustn't have been pleased with that. The governor made it clear he wasn't.

CHIDAMBARAM: I am not pleased, either. I am going by the IMEX track record, I think they revised their forecasts so often that I don't think they are forecasts at any particular point of time is very relevant. Our own calculations show that we'll grow at a much better rate than what IMF is forecasting.

QUEST: What can you tell me is your forecast for now?

CHIDAMBARAM: All my economic advisors place it between 5 and 5.5 for the whole year.

QUEST: That's a huge difference from the Fund's numbers.

CHIDAMBARAM: Well, the Fund's numbers are not the way we measure it.

QUEST: How will you manage the very deep changes that are now taking place in India, both for example the way the government has opened up FDI, the way in which you've restructured the economy. But at the same time, balancing that with the needs of a rural community, a rural population. How are you going to balance this?

CHIDAMBARAM: Well, I hope that we can recover or restore the situation that we found between, say, 2004 and 2008: high growth, large revenues, and ability to deal with the demands of the rural poor and the urban poor. And that, I think, is the ideal combination: high growth, very large revenues, and using those revenues to deal with the requirements of the poor.

QUEST: If you can't, you're in trouble.

CHIDAMBARAM: If we can't, I'll be disappointed. So, we'll have to take steps to restore high growth.

QUEST: Such as?


QUEST: Fiscal.

CHIDAMBARAM: -- growth is a function of investment.


CHIDAMBARAM: Investment is a function of savings. So, our savings are high. We have to restart the cycle.


QUEST: That's the finance minister of India. And one of the advantages of being at the IMF and of coming here and hearing the finance ministers and the central bankers speak is that there is an honesty and a depth to their discussions that, frankly, you don't get at other international meetings or at summit meetings around the world. And that's why so many of them come here.

And for instance, a warning today that interest rates around the world will have to rise sharply if the US does not raise the debt ceiling. The warning came from the secretary-general of the OECD, Angel Gurria, who again, like others here, was quite blunt about what was going to happen.


ANGEL GURRIA, SECRETARY-GENERAL, OECD: Well, first of all, we have to disappear the big uncertainties that are clouding the largest economy in the world. Hopefully there will be a deal. Hopefully there'll be a resolution to the question, both of the budget as well as to the question of the debt ceiling of the United States. That is first and foremost, that's immediate, that's a week from today, and clearly this can really throw a big problem.

QUEST: There are people on Capitol Hill who say it is not the problem that people like you say it is.


GURRIA: Well, it's a question of the people of the United States who would not be paid, the people in the government who would not be paid, the people who hold the bonds of the United States that would not be paid. It is the value of the stocks in the world that would drop, it is the value of the bonds of the United States that would drop in value and increase in interest rates.

And it is the whole of the interest rates of the whole of the world that will rise because the perception is that we are in a riskier atmosphere. So, add all of those costs, and you will see it is a very substantial risk.

QUEST: You don't believe the US will default any more than the market at the moment believes.

GURRIA: We thought that there was an absolutely impossibility, and we are six days away. The question is, how can we possibly get to the debt cliff -- this is a new cliff, there was a fiscal cliff, it was avoided somewhat. We had sequestration, which is a form of a smaller cliff in which we actually fell.

Now there's this debt cliff, and the whole thing continues inexorably towards that date. So, let's hope it doesn't happen, but the possibility that it may is rising every moment.

QUEST: When we talk about other issues now, transformation, transition, epic change, the managing director says. The OECD constantly tells countries that they need to do more. They need to make structural changes faster. It's not happening fast enough.

GURRIA: It is happening not fast enough in some countries, but there are important changes in education issues, there are important changes in innovation policies, in taxation policies, in competition policies, in the question of regulatory flexibility, so labor reform --

QUEST: So, why is so many parts of the world -- the emerging markets are slowing down, Europe is only just out of recession, the United States possibly slowing as well, China slowing --


GURRIA: You can't blame --

QUEST: -- it's miserable.

GURRIA: You can't blame large exporting economies for slowing down when the buyers of the goods and services, i.e. the United States and Europe, et cetera, are not buying, are not growing.

QUEST: No, but there's not much chance for much hope out there at the moment.

GURRIA: Oh, yes. What I would say is stay the course. Continue with the policies that we have embarked on, and we are starting to see some results. Spain is ultimately now balanced. Their current account, it has a surplus with Europe. The United Kingdom, by staying the course, is now growing. It has created jobs.

The United States continues to create jobs. This is why it's so important. The UK was a bright spot -- the US was a bright spot in the world. Suddenly, it hits this question of the shutdown. This is why we should disappear it.


QUEST: Angel Gurria, the secretary-general of the OECD with a robust defense of the current policies around the world.

Slowdown in economic growth is happening. It is a concern to the world economy and to the finance ministers and central bankers. But what part does the United States -- what blame should be attached?

After the break, Robert Zoellick, the former president of the World Bank, joins us to talk about what more needs to be done in Washington and elsewhere. QUEST MEANS BUSINESS, live at the IMF.


QUEST: Welcome back, QUEST MEANS BUSINESS, live at the International Monetary Fund headquarters in Washington. It is shutdown day 11 for the US federal government.

There is optimism a deal could be done, but frankly, what talks have taken place, nothing has emanated. Different measures are being put forward by different caucuses of both Democrats and Republicans in both House and Senate.

If we talk about what the president's been up to, President Obama spoke to the House speaker, John Boehner, this afternoon. The White House spokesman Jay Carney said the president, quote, "has some concerns with the latest proposal from House Republicans." He's indicated a willingness to consider a short-term debt deal, but the president won't make concessions in order to reopen the government.

Robert Zoellick joins me now, former president of the World Bank, but also, of course, former US trade representative, deputy White House chief of staff. Bob Zoellick certainly knows and has pulled over the years many of the levers of power in Washington. How worried are you, Mr. Zoellick, that as this gets closer, the positions are becoming more entrenched and an accident waiting to happen?

ROBERT ZOELLICK, FORMER WORLD BANK PRESIDENT: Well, Richard, it's always a pleasure to be with you. I'm a little less worried now, for the reason that you said, which is the parties are finally negotiating. And I think there's still a long way to go, and I think the focus on the fiscal and spending issues is very important.

The president seemed reluctant to engage in negotiations with the Republicans even though he would negotiate with the Iranians, and now President Assad. So I hope the process now steps forward.

QUEST: I was going to ask you who do you blame in all of this, but I think in your last answer, you just told me.

ZOELLICK: No, I don't blame one side or the other. I think in the US system, unlike a European parliamentary system, you have a separation of powers. And so, I was at the treasury in the late 80s when the Democratic Congress tried to leverage the debt limit to get various policy changes. We had to negotiate. We didn't like it, but we had to do it.

When President Obama was Senator Obama, he voted against the debt limit. So, this is politics, and it's, however, dangerous politics, for the reason you said. So, I hope they not only take the steps to extend the debt limit, deal with the question of getting the government back running, but also deal with the fundamental spending issues that are at the core of this.

QUEST: Talk about -- let's talk about that, because the US deficit has dropped dramatically, 4 percent and something this year, as a percentage of GDP. So to some extent, the necessity for deficit reduction certainly doesn't seem to be the headline reason for doing a major deficit deal.

ZOELLICK: Well, I think that's one reason why, actually, some of the Republicans are trying to focus attention on the issue because they don't want the situation here to become what it was in Europe, where you had some of these expenditures and social welfare programs build up and up and up, and they're extremely painful to deal with as people now can see in Europe.

So, the unfortunate thing about this, Richard, is for example, Paul Ryan, the House budget committee chairman, came up with an article recently, he talked about some very modest changes. Over time, retirement age changes, as we did in 1982 for our basic entitlements programs, cost of livings changes.

If you make those changes now, you don't run into the wall 10 or 15 years from now. That's what people are concerned about because it affects the long-term prospects for US growth.

QUEST: Mr. Zoellick, in previous World Bank and IMF meetings where you and I have talked, we've worried about emerging markets, we've worried about European growth, we've worried about all different areas of the world and certainly relates to poverty. Now, everybody here is worried about the United States. Are they right to be worried about the US?

ZOELLICK: Well, I think that there's -- there are issues that, frankly, are going to have to be dealt with. I certainly wouldn't suggest people playing this to the point that you don't extend the debt limit.

But I do think that one has to keep an eye on some of the global issues. For example, at the World Bank, obviously, you focus on the developing countries. As you've probably seen, there's been some hits to the values of some of those markets, partly because of their own policies, partly because of the Fed tapering, but the fundamental story is still one of a structural shift of growth.

So, some of the things that you were talking about with Angle Gurria about ways to increase productivity, ways that China changes its growth model, ways that Brazil and India get back on their feet and get growth going again, those are going to be very important for the long-term growth --

QUEST: Right.

ZOELLICK: -- just as those productivity changes will be important in the US and Japan and Europe. So, it would be a shame if these meetings only focus on the immediate, because the long-term story is the one that's going to make the world a better place and deal with those poverty issues.

QUEST: Robert Zoellick, former president of the World Bank, at the other side of Washington, perhaps not missing too much being over here stuck in the meeting rooms of the IMF and World Bank. Good to see you, Mr. Zoellick, as always. Thank you for joining us.

When we come back after the break, the British finance minister, the chancellor of the exchequer, George Osborne, has more reason than most to look smug. I'll explain why after the break.


QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. First, the news headlines. This is CNN and on this network, the news always comes first. More than 200 people have been rescued after a migrant boat capsized near Lampedusa off the southern coast of Italy. The armed forces of Malta say it recovered four bodies from the shipwreck. Strong tides pounding India's eastern shoreline as the nation braces for what could be the region's strongest ever cyclone. Rough seas, high winds and heavy rain are already battering the coast as tropical cyclone Phailin intensifies about 24 hours before it's expected to make landfall.

The prime minister of Libya has described his abduction as an attempted coup by former rebels, and he called it an act of terrorism. Ali Zidan was kidnapped at gunpoint on Thursday from a luxury hotel in Tripoli and held for several hours before he was released.

Well, a California jury has cleared the automaker Toyota of responsibility for the death of a woman in a 2009 crash from sudden and uncontrollable acceleration. Toyota blamed the accident on driver error and calls the decision a bellwether. Dozens of similar suits in the United States are currently awaiting trial. The British chancellor George Osborne said today that he'd had meetings with John Boehner, the speaker of the House, and with Jack Lew, the U.S. treasury secretary and with various other members of the U.S. government, and they had reassured him about the position that they were all committed to reaching an agreement on the debt ceiling and on reopening the U.S. government. When it's put all together and the possibility of a short-term deal just to raise the ceiling for six weeks, I asked George Osborne whether he favored a longer agreement that would offer more certainty to the global economy.


GEORGE OSBORNE, BRITISH CHANCELLOR: Well I think the whole world would like the U.S. to be able to resolve its budget issues and not to have constant you know return to this issue of either the budget or more seriously the debt ceiling. But that's for the American policymakers to work on that -- they're the people accountable for that.

QUEST: The IMF upgraded the U.K.'s economic growth forecast for this year and next, and very strongly the most of all, you must have been obviously pleased when you attempted to say to your critics, 'Told you so.'

OSBORNE: Well, the British economy is turning a corner, and I think that's because we have stuck to a clear economic plan to fix our public finances, make sure our banks are strong, make sure we've got a (inaudible) economy. But I'm not remotely complacent because I am well aware this is still the early stages of recovery around the world. We've got to sustain our recovery, so this is not a moment to declare victory -- far from it -- it is a moment to redouble our efforts to make the recovery a lasting one in the U.K. and make sure we're the most competitive place in the world to do business.

QUEST: Can the U.K. withstand much more squeezing of the economy in that sense? Is it time to ease up just a little bit on that?

OSBORNE: We've got a very clear plan to put our public finances in order, we still have a deficit and in my view is far too high, so we got to deal with that. That enables us to have an (inaudible) monetary policy, and alongside that, we're doing big supply side reforms with structural reforms to improve our infrastructure, improve our education system, give ourselves the most competitive taxes in the entire world.

QUEST: Banking a single union is crucial, but it's still some way off.

OSBORNE: Well, look, I think the Eurozone needs to do a number of things to make their currency more stable, and one of them is to create a banking union. But obviously as the finance minister for one of the world's largest financial centers in London, you know, I want to make sure that while they go ahead and do what they need to do, the U.K.'s protected, that's why, for example, we launched a legal challenge -- a successful legal challenge -- against the financial transaction tax. So, we'll always be ready to defend the U.K.'s interests and to defend the interests of the global financial system whilst of course recognizing the Euro need to do what they need to do to make their currency work.

QUEST: You have many battles in Europe in the next 12 months, don't you? To protect the U.K.'s interests as seen by the government, and to protect the city of London, as seen by the need for the financial sector.

OSBORNE: Well, I wouldn't say they're battles. I think the whole of Europe benefits from having a global wholesale financial center in London and -

QUEST: A protected sector -- all by yourself.

OSBORNE: -- it's protected in the sense that we want it to be stronger and bigger. We want London to be the absolute preeminent place you come and do your international financial business. And whether it's the tax regime we've created, or the infrastructure in the city or the pro- business climate we've got in London, it's the place to come and do your business.


QUEST: That's the British finance minister, the chancellor of the exec (inaudible), George Osborne. You've heard many voices on tonight's program from the very top of economies large and small, advanced and developing and emerging. And so we turn finally to the deputy prime minister from Turkey, a country that is at the heart of many of the issues -- not only of course for developing and developed economies, but also on the borders of emerging areas like Syria with the issues there. I asked the deputy prime minister when he looks at the global financial position, how Turkey was faring.


ALI BABACAN, TURKISH DEPUTY PRMIE MINISTER: Well, let me look at our part of the world, especially Europe and the (developing) Europe. Turkey is actually going to be the country which has the highest growth rates in that part of the world -- in the amount of developing countries. The growth in developing countries are actually happening mostly in Asia. In our part of the world, the growth rates are not that high, so our growth rate estimations for next year which is 4 percent, then 5 percent -- 5 percent in 2015 and 16, are actually among the highest in our neighborhoods.

QUEST: Is that good enough for the needs of Turkey?

BABACAN: Well, nowadays we should look at the quantity of growth -- this is very important -- but also quality of growth as well. When we talk about quality of growth, financial sustainable job growth is very important. Social sustainable job growth is very important. Also environmental sustainable job growth is very important. So then the (inaudible) (growth) and our economic strategies for future, we just don't look at the growth of today or tomorrow, but we look at the sustainable growth for the next three, five to 10 years. Sometimes you have to sacrifice to this growth in order to have a more sustainable and healthy growth for medium to long term, and that's exactly what we are doing in Turkey right now.

QUEST: Turkey is an emerging market. It stands to be affected by tapering, by the withdrawal of quantitative easing, by the money flowing back in -- are you worried that the -- are you worried that the Central Banks, the ECB, BOE and (inaudible), may mismanage or may not get this -- well, not mismanage. Are you worried that they may not get it right?

BABACAN: Well, we have been discussing this over the last six months and at the G20 table and on other occasions so that the major central banks -- the reserve currency central banks like (FIT), ECB, Bank of Japan -- they should be in very well coordination so that the normalization of the monetary policies -- actually going to normal -- should be in a sequential format, not synchronized. And that is probably what's going to happen. (FIT) will probably start first, and then probably ECB, we don't know even when and how because ECB is I think very conscious that they should not (inaudible) anything which would raise the interest rates of borrowing for the Eurozone countries especially (inaudible) Eurozone countries, and Bank of Japan is still in the process of just loosening more and more (inaudible) some kind of growth.

QUEST: You could still get caught badly between them all, couldn't you?

BABACAN: Well, we have gone through similar cases before when we look at the last five years, ten years. It's not the first time that this is happening. The good thing is this is actually going back to normal, and this is happening because of the growth coming in the U.S., maybe later on in the Eurozone, and hopefully in Japan as well. So, going back to normal is a good thing.


QUEST: Ali Babacan of Turkey -- the deputy prime minister -talking to me. My word, it's been a very odd few days here in Washington. All the finance ministers in one place, central bankers all talking about the elephant in the middle of the room, and that elephant is the U.S. debt ceiling crisis. All worried about what's going to happen and how they can deal with it. But powerless to do anything about it because the decision's being taken on the other side of Washington. One thing is certain, in 20 odd years of covering the IMF and World Bank, I don't think I've ever quite been to an annual meeting like it where everybody's worried and there's not a single thing they can do except wait and hope. And that is "Quest Means Business" for this Friday night in Washington. I'm Richard Quest at the IMF and World Bank. Whatever you're up to in the hours ahead, I hope it's profitable. I'll be in New York on Monday.


ROBYN CURNOW, ANCHOR AND INTERNATIONAL CORRESPONDENT FOR CNN: You're watching "Marketplace Africa," I'm Robyn Curnow. Sub Saharan Africa has seen a 300 percent increase in the number of tourists visiting here since 1990. That's according to the latest World Bank figures released just this month. And many of those visitors will leave behind the cities to go and relax in some of Africa's last remaining wild spaces. And the responsibility to protect those spots is no longer just the job of conservationists, but of communities as well.


ANDREW PARKER, CONSERVATIONIST: This is the perennial Sabi River, and you know it's been flowing like this for (eons), and we have a responsibility to -- as custodians of South Africa's wildlife heritage -- to uphold this heritage and ensure its protection.

CURNOW: This is Andrew Parker's office, the birthplace of wildlife tourism in South Africa. Sabi Sand is the country's oldest private reserve, and on any given day, guests are bound to see some of Africa's big five -- water buffalo, elephants and of course rhino. But Parker's job as a conservationist is coming with increasing costs.

PARKER: You know if we can't save one of the big five, one of Africa's most charismatic species, what chance have we of protecting the smaller, less charismatic, more vulnerable species?

CURNOW: Poaching is driving up the price of live rhino, as more and more resources are devoted to its protection. In Asia, a growing middle class with more disposable income is fueling an increase in demand for rhino horn. Consumers incorrectly believe the horns have medicinal properties, and with the rising demand, the cost of protecting rhinos is rising too.

PARKER: As much as we increase the risk, all it'll do is it'll drive up the price of the horn, it'll raise the stakes, the poachers will become more organized, will be better prepared to fight for their way in and their way out, so the stakes will just continue to climb, and the cost of protecting rhino will be become huge and perhaps unaffordable for a lot of rhino owners.

CURNOW: Sabi Sand is now spending 50 percent of its annual maintenance budget on security as this pristine patch of African bush becomes the frontline in the fight to save the rhino.

PARKER: There's no question that this a (inaudible) to all.

CURNOW: Parker says he's tried just about everything to keep the rhinos on his reserve safe.

PARKER: We have adopted a canine unit using dogs, we've tried contaminating the horns of the rhinos in an effort to try and reduce the reward.

CURNOW: But the battles continue to be won by increasingly sophisticated criminal syndicates.

PARKER: You know the conservation areas in South Africa have been sheltered against organized crime, and I think they caught us napping quite honestly. I think we were caught unprepared, the level of sophistication that the criminal syndicates are displaying in terms of their tactics is proving overwhelming from a law enforcement perspective.

CURNOW: From 83 rhinos poached in 2008 to 448 dead in 2011 to this year, when it's is estimated 1,000 rhinos will be slaughtered for their horn according to the South African government.

JULIAN RADEMEYER, AUTHOR OF "KILLING FOR PROFIT": The real concern is that this is one day -- will be the only place that you'll see them if something doesn't change quite quickly.

CURNOW: Julian Rademeyer is author of "Killing for Profit," a look in to the illegal trade.

RADEMEYER: I think the rhino trade is getting significantly worse. We're seeing poaching numbers go through the roof. In the last four years, we've lost more than 2,200 rhino. That is seven times the number that we lost in the preceding 27 years.

CURNOW: This is about sophisticated criminal networks, isn't it?

RADEMEYER: Yes, incredibly sophisticated criminal networks -- highly ingenious criminal networks who are adept at finding their way around regulations and loopholes. Extremely dangerous syndicates too. You know these are people who are prepared to kill and die in some cases for a few kilograms of rhino horn. For the syndicate bosses there is very low risk. The people who are paying the price -- the people who are taking all the risks -- are the poachers that are being recruited. We've had cases recently where three Mozambican poachers were sentenced to 16 years in prison. And they were paid around $600 for a rhino that they were supposed to kill and get the horns from.

CURNOW: So, the Africans are at the frontline essentially, and what is the impact on local villages then?

RADEMEYER: Well, I think if you travel to the villages in southern Mozambique, they're incredibly poverty-stricken villages, there are very, very few opportunities there. And people are offered an incredibly stark choice. They can either cross through the Kruger illegally, try and find work in Johannesburg and get paid a pittance or they can walk into Kruger, find a rhino poacher and hand the horns over to a syndicate. And there's steady stream of people waiting to be recruited who are essentially (kin) fodder for these syndicates.

CURNOW: How do you see this playing out?

RADEMEYER: I think it's going to get very much worse before it gets any better. At the moment, we're losing the war, and as we've seen in the past if you looked at what happened with the black rhino population from the 1960s to the mid 1990s, in the 1960s there were roughly 200,000 black rhino in Africa. By the mid '90s that had been reduced to a population of just over 2000. When the slide begins, it happens quite rapidly and quite spectacularly. And the concern in South Africa is that the tipping point when breeding rates are outstripped by poaching, it could reached as early as 2015.

CURNOW: Next, why outside communities could be key for conservation inside the park.


SANIOS KNUNA, VILLAGE LEADER: We are on the door, we are the first one.

CURNOW: Tribal leader Sanios Knuna's village sits just three kilometers from the gates of Sabi Sand. When rhino poachers came through two weeks ago, community members chased him away. It's a story that conservationist Andrew Parker knows needs to be repeated.

PARKER: We have to find ways to include communities and really transfer meaningful benefits to communities from conservation so that they too have something to lose if our heritage goes down the drain.

CURNOW: But in South Africa, unemployment is high. In the 27 communities surrounding Sabi Sand, just one in eight villages has a job.

PARKER: There's no question that 20 years ago in South Africa we should have been including communities as equity stakeholders in the value chain. You know if that were the case -- if the communities had a real and direct vested interest in the future of wildlife in South Africa, it's very unlikely that the criminal syndicates would have been able to gain a foothold in South Africa and be able to carry out the crimes that they are carrying out at the moment.

CURNOW: Now Parker says his reserve is in a race to include communities in the conservation economy. But author Julian Rademeyer says in South Africa, it isn't an easy sell. There's a disconnect in in Vietnam between the consumers and the product that they're using, but there's also sometimes a disconnect between the local villagers that live, perhaps or border some of these national parks. And they often are used to kill the rhinos.

RADEMEYER: Yes, I think that South Africa plays into so many social issues, it touches on issues of land, land rights, it touches on issues of poverty. You have cases and you know in South Africa game farming and farming runners has been seen for so long as almost a -- you know -- a wealthy white enterprise, that local villagers are excluded. People you know had been under apartheid for instance had been removed from areas to make way for game farms and some of our larger national parks. So there are real issues there. And I think that is an incredible challenge. How do you include those communities? You know the same extends to Mozambique. How do you include the communities in southern Mozambique? How do you make them benefit from a place like Kruger? Because where they're sitting, all they see is this immense wealth across the border. That means absolutely nothing to them.

CURNOW: At Sabi Sand it starts with increasing employment opportunities inside the park for community members like Rexun Ntimane.

REXUN NTIMANE, GUIDE: Where we can go? There's nowhere else. We need to support tourism, and the tourism owners will have put something into the community, and it makes it work. We need to create relationship in short.

CURNOW: Beyond jobs, that relationship offer means investing in schools and social programs outside of the reserve.

NTIMANE: As a community leader, we have to save the rhino. To save our people for their job and the benefit of money flowing back into the community. If we don't do that, where all the people will go?

CURNOW: On the western perimeter of the reserve, Parker takes us to a spot he watches closely.

PARKER: One of our key suspects in the fight against rhino poaching lives in this village, and it's -- our jurisdiction ass a law enforcement agency stops at the fence. So we have no jurisdiction legally to go beyond this fence. We can't go into this community and arrest him. You know, increasing the conservation areas in South Africa and even across the rest of Africa are becoming islands imbedded in a sea of rural poverty. So obviously there's a lot of people from these villages that are employed in the reserves, but it's more than employment, you know, it's -- I think we need to give the people of Africa a stake in conservation, you know, it's critical. If we are to combat rhino poaching or any kind of poaching for that matter.

CURNOW: Winning hearts and minds in the war to save Africa's rhinos.


CURNOW: And of course you can always find us online -- I'm Robyn Curnow. Thanks so much for watching. See you again.