Anil Ambani to monetise Santacruz HQ

MUMBAI: Troubled tycoon Anil Ambani will be leasing out or selling the Santacruz group headquarters as part of a debt-trimming exercise, people directly aware of the matter said. The group has mandated property consultancy firm JLL to advise on a transaction that, if it’s sold, could fetch up to Rs 3,000 crore. The recently built, 7-lakh-sqft HQ is located on nearly 4 acres along the Western Express Highway in Mumbai.

Last week, TOI reported that Japanese giant Sumitomo bid Rs 2,300 crore for a three-acre plot in Bandra Kurla Complex.

Ambani will move his group office back to Reliance Centre at Ballard Estate in south Mumbai, which is lying vacant currently. Anil Ambani gained the Ballard Estate office in mid-2005 after he and his elder brother Mukesh divided the Reliance empire among themselves. It was from the basement cafeteria of this property that the younger sibling announced the demerger formula for his set of companies from Reliance Industries (RIL), the last step in the split of the energy-to-telecom conglomerate built by their father.

Anil Ambani may be out of billionaire club

At Tuesday’s close of trading on Dalal Street, the combined market capitalisation of all of Anil Ambani-controlled Reliance Group companies was nearly Rs 5,400 crore, or about $773 million. Anil Ambani holds less than 75% stake in each of the six companies in his group. Younger of the two Ambani brothers, Anil’s worth much less than the billion-dollar mark.

A Reliance Anil Dhirubhai Ambani Group (ADAG) spokesperson confirmed the development, but declined to share details at the moment.

Ambani, who has vowed to repay lenders through a massive de-leveraging exercise, would prefer a long-term leasing out of the property, though the option of an outright sale wouldn’t be ruled out in the event of an attractive offer. Sources said strong, long-term lease agreements were imperative for better capital valuation in case of a sale.

The latest move is aimed at making Reliance Infrastructure, which owns the property, almost debt-free. The infra developer that executes power, toll roads and metro rail projects has a debt of just under Rs 5,000 crore. The overall group debt is estimated at about Rs 75,000 crore.

The plot came into the Reliance fold following the acquisition of BSES, a power distribution utility operating in Mumbai and Delhi. The original BSES hub was torn down and all Reliance Anil Dhirubhai Ambani Group companies moved into the newly constructed building in February 2016.

Anil Ambani says committed to meet debt obligations

Reliance Group chairman Anil Ambani on Tuesday assured the stakeholders that the group is committed to meet all payment obligations in a timely manner. He said that the group has repaid the principal of Rs 24,800 crore and made interest payments of Rs 10,600 crore between April 1, 2018, and May 31, 2019, despite challenging conditions and no financial support from financiers.

The total FSI potential of the building is 11.2 lakh sqft, though the current leasable area is around six lakh sqft. The proposal from Reliance has met with good response from banks and insurance companies, sources said.

As the younger Ambani makes Reliance Centre the HQ again, one thing that will help him will be saving on travelling time as his residence Sea Wind isn’t far from Ballard Estate.

Hopes of fuel prices, govt finances easing early recede

NEW DELHI: The agreement between Opec, the grouping of 14 oil exporting countries, and Russia to extend the production cut deal by up to nine months is likely to keep fuel prices elevated and government planners worried over the impact of high crude prices on efforts to rev up economic growth and splurge on social spending.

The deal was implemented in 2017 for a year to rescue oil prices from their crash course since 2014 because of a glut in supply. But it was extended in March 2018 as fear of prices declining again due to rising exports from the US amidst global economic slowdown suppressing demand loomed.

The deal so far managed to keep oil prices range-bound between $65 and $70 a barrel. But the US sanctions on Venezuela and Iran disrupting a large chunk of supply and the military tension between Washington and Tehran over Strait of Hormuz, a key oil trade route, as well as US-China trade war have injected volatility into the market.

This does not augur well for consumers or the government’s finances. Fuel prices have been moving in a narrow band in tune with global crude, except a few spikes. But this will change with an extended period of oil market volatility and high prices.

That will pinch consumers by making fuel costlier and squeeze government ability to spend on big-ticket social welfare plans such as providing drinking water, medical cover to poor or crop insurance for farmers. Costlier crude also pushes up the government’s subsidy liability and India’s merchandise import bill, which drains foreign exchange reserves and effect the rupee’s value. All of these adversely affect the cost of living.

Oil prices have climbed over 25% since the start of the 2019. Rating agencies reckon every $10 per barrel increase in crude prices shaves off 0.4% of GDP by widening the current account deficit by $12 billion or so.

PM Modi is reported to have shared India’s apprehension over high crude prices and stressed the need for an equitable oil market with stable prices at the G20 meeting. Oil minister Dharmendra Pradhan has been working the phone through last week, calling his Abu Dhabi and Saudi Arabia counterparts, seeking their active support to calm the markets and keep oil prices at reasonable levels.

Ironically, the only hope of stable oil market appears to lie in the dampened demand scenario due to slowdown in global economic activity and the ongoing US-China trade war. Both are expected to act like a speed breaker for oil prices.

New Delhi: Congress on Sunday slammed the Centre over the rise in fuel prices and said the ruling BJP had returned to power to “fleece” people.
Congress spokesperson Randeep Surjewala said petrol price in Delhi rose from Rs 69.93 per litre on June 22 to Rs 70.40 per litre on June 30, an increase of Rs 0.47 per litre in a week.
He also compared diesel prices and said they were at Rs 63.78 per litre on June 22 but rose to Rs 64.22 per litre on June 30, a hike of Rs 0.44 per litre. “BJP back to fleece people. Rising petrol-diesel prices in past eight days burdening middle class and farmers,” Randeep Surjewala said on Twitter.
In separate tweets on the deepening farm crisis and alleged gag on media, Congress also criticised the NDA government. “Post 2018 floods in Kerala, farmers’ miseries abound as state and central government apathy continues unabated,” Surjewala said. “Tea production down by 120 lakh tonnes. Rubber production down by 15,000 tonnes. Pepper, banana and nutmeg crops suffering too. Wake up call,” he added.

Investment watchdog working to protect elderly Canadians from financial exploitation

One of the watchdogs for Canada’s investment industry says it’s working towards creating regulatory safeguards for clients who may be targets of financial exploitation, particularly seniors.

The Investment Industry Regulatory Organization of Canada says a survey done for IIROC found wide public support for having tools and rules in place to protect vulnerable clients.

The idea of having a “trusted contact” on file, who can be consulted by an investment professional who suspects a client is being exploited or vulnerable, was supported by 93 per cent of 1,000 people surveyed for IIROC.

WATCH: Money 123: Spending less from your RRSP could leave your loved ones with less

Story continues below

IIROC is a private-sector body that shares responsibility for regulating about 160 Canadian investment dealers, including subsidiaries of the country’s major banks.

Andrew Kriegler, IIROC’s chief executive officer, says that the next step is to work out the details with other regulatory bodies including the provincial and territorial regulators represented by the Canadian Securities Administrators.

While there’s strong support for putting protections in place, he says “Canadians want us to do it right.”

“And doing it right . . . means respecting privacy and not compromising that in a rush to do a simple answer.”

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The desire for privacy runs deep with many people and investment professionals want to be sure they don’t overstep a line if they interfere with a client’s decision, Kriegler suggests.

“Viewed from one perspective, that’s an intrusive act. It’a surrendering of control,” he says.

“It may be done for exactly the right reasons . . . but, inherently, that’s a surrendering of control, a surrendering of privacy, a surrendering of mastery over your own life, over your own decisions.”

“And I think that’s inherently a tricky question.”

But Kriegler says there’s also evidence, from one of Canada’s largest groups representing older people, that there is need for some sort of protection for seniors.

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He cites an estimate from the Canadian Association for Retired Persons that about one-in-five older Canadians are subject to elder financial abuse and notes that dementia may also reduce the abilities of people as they age.

Immigrants are another potentially vulnerable group, although IIROC hasn’t collected information on that front.

“We didn’t address that question in the survey work,” Kriegler says. “It would be speculation but I think reasonable speculation.”

In fact, he says, all of the issues are likely magnified when a client is uncomfortable or unfamiliar with the system and that’s one reason IIROC wants to tread carefully in conjunction with other Canadian regulatory bodies.

WATCH: How to make your money work for you

They would include the CSA members and the Mutual Fund Dealers Association, another of the financial industry’s self-regulating organizations.

The survey, conducted by The Strategic Counsel, involved 1,000 people selected from IIROC’s online advisory pool of 10,000 investors.

Besides support for establishing a trusted contact, the Strategic Counsel survey of 1,000 people found 89 per cent of respondents supported giving investment advisers and firms the ability to put a “temporary hold” on account activity.

Support was also high (86 per cent) for providing a regulatory “safe harbour” to protect investment advisers who second-guess a client’s instructions, either by placing a temporary hold or consulting the trusted contact.

“I think investment dealers want regulatory certainty and that’s what’s behind the whole safeharbour idea,” Kriegler says. “This gives them the cover to take the right actions on behalf of the client.”

Fund transfer via RTGS, NEFT set to get cheaper from Monday

MUMBAI: Fund transfer through RTGS and NEFT systems is set to become cheaper from Monday after the Reserve Bank of India decided it will not impose any charges on such transactions.

After announcing its decision to waive all charges on fund transfer through RTGS and NEFT systems from July 1, the Reserve Bank of India (RBI) had also asked banks to pass on the benefits to customers from the same day.

The real-time gross settlement (RTGS) system is meant for large-value instantaneous fund transfers, while the national electronic funds transfer (NEFT) system is used for fund transfers of up to Rs 2 lakh.

“With a view to push the digital transaction, the RBI has decided not to charge the RTGS and NEFT transactions. This would help banks reduce the fees from customers for these transactions,” Indian Banks’ Association Chairman Sunil Mehta said in IBA’s newsletter.

The country’s largest bank SBI charges between Re 1 and Rs 5 for transactions through NEFT and between Rs 5 and Rs 50 for RTGS route.

To provide an impetus to digital funds movement, the central bank had decided to do away with the processing charges and time-varying charges levied on banks by the RBI for outward transactions through the RTGS, as also the processing charges for transactions processed in NEFT will be waived by the Reserve Bank of India.

Currently, the RBI “levies minimum charges” on banks for transactions routed through its RTGS and NEFT system.

Banks, in turn, levy charges on their customers.

The RBI has also constituted a high-level committee under IBA Chief Executive V G Kannan to examine ATM charges and fees by banks amid demands for reviewing the levies.

The use of automated teller machines (ATMs) has been growing significantly and there have been persistent demands to change ATM charges and fees.

China warns of long road ahead for deal with US after ice-breaking talks

BEIJING/OSAKA: China and the United States will face a long road before they can reach a deal to end their bitter trade war, with more fights ahead likely, Chinese state media said after the two countries’ presidents held ice-breaking talks in Japan.
The world’s two largest economies are in the midst of a bitter trade war, which has seen them level increasingly severe tariffs on each other’s imports.

In a sign of significant progress in relations on Saturday, Chinese President Xi Jinping and US President Donald Trump, on the sidelines of the G20 summit in Osaka, agreed to a ceasefire and a return to talks.

However, the official China Daily, an English-language daily often used by Beijing to put its message out to the rest of the world, warned while there was now a greater likelihood of reaching an agreement, there’s no guarantee there would be one.

“Even though Washington agreed to postpone levying additional tariffs on Chinese goods to make way for negotiations, and Trump even hinted at putting off decisions on Huawei until the end of negotiations, things are still very much up in the air,” it said in an editorial late Saturday.

“Agreement on 90 percent of the issues has proved not to be enough, and with the remaining 10 percent where their fundamental differences reside, it is not going to be easy to reach a 100-percent consensus, since at this point, they remain widely apart even on the conceptual level.”

Trump also offered an olive branch to Xi on Huawei Technologies Co, the world’s biggest telecom network equipment maker. The Trump administration has said the Chinese firm poses a national security risk given its close ties to China’s government, and has lobbied U.S. allies to keep Huawei out of next-generation 5G telecommunications infrastructure.

The Chinese government’s top diplomat, State Councillor Wang Yi, in a lengthy statement about G20 released by the Foreign Ministry following the delegation’s return to Beijing, said the Xi-Trump meeting had sent a “positive signal” to the world.

Though problems between the two countries remain, China is confident as long as they both follow the consensus reached by their leaders they can resolve their problems on the basis of mutual respect, Wang said in the statement released late Saturday.

Trump’s comments on Huawei, made at a more than hour-long news conference in Osaka following his sit-down with Xi, generated only a cautious welcome from China. The word “Huawei” was not mentioned at all in the top diplomat’s appraisal of G20.

Wang Xiaolong, the foreign ministry’s special envoy of G20 affairs and head of the ministry’s Department of International Economic Affairs, said if the United States does what it says on Huawei then China would of course welcome it.

“To put restrictions in areas that go beyond technology and economic factors will definitely lead to a lose-lose situation. So if the U.S. side can do what it says then we will certainly welcome that,” Wang told reporters.

The pause in tensions is likely to be welcomed by the business community, and markets, which have swooned on both sides of the Pacific due to the trade war.

Jacob Parker, vice-president of China operations at the US-China Business Council, said returning to talks was good news for the business community and added much needed certainty to “a slowly deteriorating relationship”.

“Now comes the hard work of finding consensus on the most difficult issues in the relationship, but with a commitment from the top we’re hopeful this will put the two sides on a sustained path to resolution.”

China’s position as the trade war has progressed has become increasingly strident, saying it would not be bullied, would not give in to pressure, and that it would “fight to the end”.

Taoran Notes, an influential WeChat account run by China’s Economic Daily, said the United States was now aware that China was not going to give in, and that tariffs on Chinese goods were increasingly unpopular back home.

“We’ve said it before – communication and friction between China and the United States is a long-term, difficult and complex thing. Fighting then talking, fighting then talking, is the normal state of affairs,” it said.

‘Golden age’ of Australian economy fades as dark clouds loom

SYDNEY: Australia‘s record-breaking economic run isn’t about to end because of a ban on plastic bags – as one lobby group spuriously claimed – but consumers are buying less, offering a cautionary tale for the rest of the world.

Once dubbed the “Goldilocks economy” for avoiding the pitfalls of the global financial crisis, Australia has seen 27 years of uninterrupted expansion – unprecedented in the developed world.

But the outlook appears increasingly bearish, and resilient Australia’s faltering growth could be the canary in the coal mine for the world economy.

The economy grew just 0.4 percent in the first three months of this year, after near-zero expansion in the second half of 2018.

Strip away gains from population growth and the country is technically in a recession.

“The big issue is the consumers,” National Australia Bank chief economist Alan Oster told AFP.

Like many advanced economies, Australia’s unemployment rate is not too bad, but like elsewhere there has been a troublesome mixture of high personal debt and stagnant wages.

In response, Australians are being more thrifty — spending less on eating out, paying little heed to almost constant high street discounts, and, crucially, spending less on rent and accommodation.

House prices in Sydney have now fallen almost 15 percent from their peak two years ago.

The downturn has exposed weakness in the Australian economy that had been masked by China’s insatiable appetite for Australian commodities.

The economy now looks less like Goldilocks and more like the emperor with no clothes.

That’s a big lesson for the rest of the world as it picks up the pieces after the financial crisis, Gabriele Gratton of the University of New South Wales said.

“The Australian economy didn’t diversify enough and it exposed itself to a situation where Australian households are highly indebted,” Gratton told AFP.

Chinese growth also contributed to the sharp rise in housing prices as both locals and foreigners piled into the market, particularly in the major cities Sydney and Melbourne.

But the Chinese economy has been losing momentum in recent years, reducing the demand for commodities and properties in the sun.

“If prices do not collapse, then nothing happens. But if prices do collapse, it will cause the type of (problems) that we’ve seen in Ireland or in Spain,” Gratton said.

The Reserve Bank, which just a year ago appeared more likely to raise interest rates, has reversed course and cut, with more cuts expected.

With interest rates already so low, stimulus spending could be on the cards. But both the central bank and the government have limited room for manoeuvre.

“The problem is you don’t have the policy instruments that we can pull now that we pulled in the global financial crisis,” Oster said.

Despite the pessimism, most economists do not believe Australia will slip into recession.

The Australian dollar has been weakening, boosting exports, state and federal governments have been splashing out on public services such as healthcare and infrastructure, and population growth remains strong.

Prime Minister Scott Morrison has promised to cut taxes and red tape.

But forecasts over the last year have been repeatedly over-optimistic.

Central bank governor Philip Lowe has taken the unusual step of asking the government to spend more — lest the porridge go cold.

Capital market crucial for economy; RBI taking efforts to expand investor base: Viral Acharya

NEW DELHI: Outgoing RBI deputy governor Viral V Acharya on Saturday said capital markets play crucial role in the economic development of a country and the Reserve Bank has been taking efforts to expand the investor base.

Capital markets provide financial resources for the long-term sustainable development of the economy, therefore it is considered an important element in the macro-financial policy toolkit, Acharya said.

He was delivering a speech on Development of Viable Capital Markets – The Indian Experience’ at Indian School of Business, Hyderabad.

The US-based economics professor, who resigned as RBI Deputy Governor earlier this month – six months before the scheduled end of his term in office – said capital markets are also vital to reach the objectives such as financial stability and the transmission of monetary policy.

“There has been a conscious and continuous effort by the Reserve Bank to expand the investor base and thereby liquidity of the markets it regulates, while preserving financial stability,” Acharya said.

He said the investor base of India’s G-Secs (government securities) has expanded over the past decade in the form of increase in the share of holdings by insurance companies and corporate, while there has been a corresponding decrease in share of holding by commercial banks.

In parallel, calibrated access for global investors through the FPI route is helping broaden the investor base, while also bringing in diversity of trading views and strategies, he said.

The Committee on Global Financial System (CGFS) had constituted a working group in 2018-19 to examine global trends in capital market development.

It was also tasked to identify various factors, including legal, institutional, structural and conjunctural, that foster development of robust capital markets and consider the role of policy.

The working group, co-chaired by the People’s Bank of China (PBOC, Li Bo) and the Reserve Bank of India (RBI, Viral V Acharya), focussed on issues, primarily related to the development of markets in bond and equity securities.

The CGFS report has identified two types of drivers of capital market development. One that creates an enabling environment for financial development and second, which are more capital market specific such as easy access to high-quality material information, diversity in investor base, and efficient market ecosystem for trading, he said.

On the policy front, Acharya said there is an enabling environment with the macroeconomic stability factors in place due to stable growth and low inflation.

Among others, Acharya said promoting market autonomy through rationalising regulatory guidelines and procedures, development of financial market institutions and infrastructure, and macro-prudential management of investment restrictions for domestic and foreign investors are the factor that have come from the policy front to develop the capital market in India.

Donald Trump hints at softer stance on Huawei

OSAKA: President Donald Trump said on Saturday that US companies could sell equipment to Chinese telecom giant Huawei, indicating a potentially softer position on a key sticking point in the US-China trade war.

“US companies can sell their equipment to Huawei,” Trump told reporters in Osaka hours after sealing a tariff truce with Chinese President Xi Jinping.

“We’re talking about equipment where there’s no great national security problem with it.” It was not immediately clear whether Trump’s comment marked a material change in the stance toward Huawei, which has essentially been barred on national security grounds from accessing crucial American technology or operating in the US market.

The US fears that systems built by Huawei — the world leader in telecom network equipment and number two smartphone supplier — could be used by China’s government for espionage via built-in secret security “back doors”.

Huawei vigorously denies that and says the US has never provided proof to substantiate it.

Last month the US government added Huawei to an “entity list” of companies barred from receiving US-made components without permission from Washington.

Trump’s comment on its face does not mark a change from current practice.

But it could be read by financial markets as a positive signal that his administration may be open to negotiating on Huawei when bilateral trade talks resume.

However, any softening on Huawei could meet resistance from a bipartisan US congressional movement that is calling for a hardline on the firm.

A Huawei spokesperson told AFP the company had no inital comment.

Trump has imposed tariffs on $200 billion of Chinese imports in an effort to force Beijing into intellectual property protection and other reforms of a trading system that Washington says gives China huge unfair advantages.

But Trump and Xi struck a ceasefire deal on Saturday, with Washington vowing to hold off on further tariffs and the two sides agreeing to restart trade negotiations.

A news agency reported earlier this week that Xi planned to ask Trump in Osaka to ease up on Huawei as a precondition for signing a possible trade deal.

Asked by reporters in Osaka what was discussed regarding Huawei, a Chinese foreign ministry official said he did not know, but that China would welcome lifting the US ban.

“Putting restrictions on technology will lead to a situation where all sides lose. So if the US lifts the sanctions, we would welcome that,” said the official, Wang Xiaolong.

Huawei founder and CEO Ren Zhengfei said earlier this month that its overseas smartphone sales had fallen by up to 40 per cent as a result of the ban.

B737 Max software outsourced to $9 hour engineers

It remains a mystery at the heart of Boeing Co’s 737 Max crisis: how a company renowned for meticulous design made seemingly basic software mistakes leading to a pair of deadly crashes. Longtime Boeing engineers say the effort was complicated by a push to outsource work to lower-paid contractors.

The Max software — plagued by issues that could keep the planes grounded months longer after US regulators this week revealed a new flaw — was developed at a time Boeing was laying off experienced engineers and pressing suppliers to cut costs.

Increasingly, the iconic American planemaker and its subcontractors have relied on temporary workers making as little as $9 an hour to develop and test software, often from countries lacking a deep background in aerospace — notably India.

In offices across from Seattle’s Boeing Field, recent college graduates employed by the Indian software developer HCL Technologies Ltd. occupied several rows of desks, said Mark Rabin, a former Boeing software engineer who worked in a flight-test group that supported the Max.

The coders from HCL were typically designing to specifications set by Boeing. Still, “it was controversial because it was far less efficient than Boeing engineers just writing the code,” Rabin said. Frequently, he recalled, “it took many rounds going back and forth because the code was not done correctly.”

Boeing’s cultivation of Indian companies appeared to pay other dividends. In recent years, it has won several orders for Indian military and commercial aircraft, such as a $22 billion one in January 2017 to supply SpiceJet Ltd. That order included 100 737-Max 8 jets and represented Boeing’s largest order ever from an Indian airline, a coup in a country dominated by Airbus.

Based on resumes posted on social media, HCL engineers helped develop and test the Max’s flight-display software, while employees from another Indian company, Cyient Ltd., handled software for flight-test equipment.

Costly Delay


In one post, an HCL employee summarized his duties with a reference to the now-infamous model, which started flight tests in January 2016: “Provided quick workaround to resolve production issue which resulted in not delaying flight test of 737-Max (delay in each flight test will cost very big amount for Boeing).”

Boeing said the company did not rely on engineers from HCL and Cyient for the Maneuvering Characteristics Augmentation System, which has been linked to the Lion Air crash last October and the Ethiopian Airlines disaster in March. The Chicago-based planemaker also said it didn’t rely on either firm for another software issue disclosed after the crashes: a cockpit warning light that wasn’t working for most buyers.

“Boeing has many decades of experience working with supplier/partners around the world,” a company spokesman said. “Our primary focus is on always ensuring that our products and services are safe, of the highest quality and comply with all applicable regulations.”

In a statement, HCL said it “has a strong and long-standing business relationship with The Boeing Company, and we take pride in the work we do for all our customers. However, HCL does not comment on specific work we do for our customers. HCL is not associated with any ongoing issues with 737 Max.”

Recent simulator tests by the Federal Aviation Administration suggest the software issues on Boeing’s best-selling model run deeper. The company’s shares fell this week after the regulator found a further problem with a computer chip that experienced a lag in emergency response when it was overwhelmed with data.

Engineers who worked on the Max, which Boeing began developing eight years ago to match a rival Airbus SE plane, have complained of pressure from managers to limit changes that might introduce extra time or cost.

“Boeing was doing all kinds of things, everything you can imagine, to reduce cost, including moving work from Puget Sound, because we’d become very expensive here,” said Rick Ludtke, a former Boeing flight controls engineer laid off in 2017. “All that’s very understandable if you think of it from a business perspective. Slowly over time it appears that’s eroded the ability for Puget Sound designers to design.”

Rabin, the former software engineer, recalled one manager saying at an all-hands meeting that Boeing didn’t need senior engineers because its products were mature. “I was shocked that in a room full of a couple hundred mostly senior engineers we were being told that we weren’t needed,” said Rabin, who was laid off in 2015.

The typical jetliner has millions of parts — and millions of lines of code — and Boeing has long turned over large portions of the work to suppliers who follow its detailed design blueprints.

Starting with the 787 Dreamliner, launched in 2004, it sought to increase profits by instead providing high-level specifications and then asking suppliers to design more parts themselves. The thinking was “they’re the experts, you see, and they will take care of all of this stuff for us,” said Frank McCormick, a former Boeing flight-controls software engineer who later worked as a consultant to regulators and manufacturers. “This was just nonsense.”

Sales are another reason to send the work overseas. In exchange for an $11 billion order in 2005 from Air India, Boeing promised to invest $1.7 billion in Indian companies. That was a boon for HCL and other software developers from India, such as Cyient, whose engineers were widely used in computer-services industries but not yet prominent in aerospace.

Rockwell Collins, which makes cockpit electronics, had been among the first aerospace companies to source significant work in India in 2000, when HCL began testing software there for the Cedar Rapids, Iowa-based company. By 2010, HCL employed more than 400 people at design, development and verification centers for Rockwell Collins in Chennai and Bangalore.

That same year, Boeing opened what it called a “center of excellence” with HCL in Chennai, saying the companies would partner “to create software critical for flight test.” In 2011, Boeing named Cyient, then known as Infotech, to a list of its “suppliers of the year” for design, stress analysis and software engineering on the 787 and the 747-8 at another center in Hyderabad.

The Boeing rival also relies in part on offshore engineers. In addition to supporting sales, the planemakers say global design teams add efficiency as they work around the clock. But outsourcing has long been a sore point for some Boeing engineers, who, in addition to fearing job losses say it has led to communications issues and mistakes.

Moscow Mistakes


Boeing has also expanded a design center in Moscow. At a meeting with a chief 787 engineer in 2008, one staffer complained about sending drawings back to a team in Russia 18 times before they understood that the smoke detectors needed to be connected to the electrical system, said Cynthia Cole, a former Boeing engineer who headed the engineers’ union from 2006 to 2010.

“Engineering started becoming a commodity,” said Vance Hilderman, who co-founded a company called TekSci that supplied aerospace contract engineers and began losing work to overseas competitors in the early 2000s.

US-based avionics companies in particular moved aggressively, shifting more than 30% of their software engineering offshore versus 10% for European-based firms in recent years, said Hilderman, an avionics safety consultant with three decades of experience whose recent clients include most of the major Boeing suppliers.

With a strong dollar, a big part of the attraction was price. Engineers in India made around $5 an hour; it’s now $9 or $10, compared with $35 to $40 for those in the US on an H-1B visa, he said. But he’d tell clients the cheaper hourly wage equated to more like $80 because of the need for supervision, and he said his firm won back some business to fix mistakes.

HCL, once known as Hindustan Computers, was founded in 1976 by billionaire Shiv Nadar and now has more than $8.6 billion in annual sales. With 18,000 employees in the US and 15,000 in Europe, HCL is a global company and has deep expertise in computing, said Sukamal Banerjee, a vice president. It has won business from Boeing on that basis, not on price, he said: “We came from a strong R&D background.”

Still, for the 787, HCL gave Boeing a remarkable price – free, according to Sam Swaro, an associate vice president who pitched HCL’s services at a San Diego conference sponsored by Avionics International magazine in June. He said the company took no up-front payments on the 787 and only started collecting payments based on sales years later, an “innovative business model” he offered to extend to others in the industry.

The 787 entered service three years late and billions of dollars over budget in 2011, in part because of confusion introduced by the outsourcing strategy. Under Dennis Muilenburg, a longtime Boeing engineer who became chief executive in 2015, the company has said that it planned to bring more work back in-house for its newest planes.

Engineer Backwater


The Max became Boeing’s top seller soon after it was offered in 2011. But for ambitious engineers, it was something of a “backwater,” said Peter Lemme, who designed the 767’s automated flight controls and is now a consultant. The Max was an update of a 50-year-old design, and the changes needed to be limited enough that Boeing could produce the new planes like cookie cutters, with few changes for either the assembly line or airlines. “As an engineer that’s not the greatest job,” he said.

Rockwell Collins, now a unit of United Technologies Corp, won the Max contract for cockpit displays, and it has relied in part on HCL engineers in India, Iowa and the Seattle area. A United Technologies spokeswoman didn’t respond to a request for comment.

Contract engineers from Cyient helped test flight test equipment. Charles LoveJoy, a former flight-test instrumentation design engineer at the company, said engineers in the US would review drawings done overnight in India every morning at 7:30 a.m. “We did have our challenges with the India team,” he said. “They met the requirements, per se, but you could do it better.”

Multiple investigations – including a Justice Department criminal probe – are trying to unravel how and when critical decisions were made about the Max’s software. During the crashes of Lion Air and Ethiopian Airlines planes that killed 346 people, investigators suspect, the MCAS system pushed the planes into uncontrollable dives because of bad data from a single sensor.

That design violated basic principles of redundancy for generations of Boeing engineers, and the company apparently never tested to see how the software would respond, Lemme said. “It was a stunning fail,” he said. “A lot of people should have thought of this problem – not one person – and asked about it.”

Boeing also has disclosed that it learned soon after Max deliveries began in 2017 that a warning light that might have alerted crews to the issue with the sensor wasn’t installed correctly in the flight-display software. A Boeing statement in May, explaining why the company didn’t inform regulators at the time, said engineers had determined it wasn’t a safety issue.

“Senior company leadership,” the statement added, “was not involved in the review.”

G20: India pitches strongly for fight against FEOs

OSAKA: India has pitched strongly to deal with fugitive economic offenders, and Prime Minister Narendra Modi has flagged the issue at all global forums, the country’s Sherpa to G20 Suresh Prabhu said on Saturday.

“We strongly put forward the need for to deal with fugitive economic offenders. It has been a strong agenda, we have been working on tax evasion, corruption, economic offences and fugitive offenders running away (from the country). We have also been very strongly championing this,” Prabhu told a media conference, detailing about the deliberations of the meeting.

He said that Prime Minister Modi has raised these issues at all global forums.

“We strongly feel that we as a global community must act in unison to deal with such issues of people committing economic offences and running away from their national domicile country,” he told reporters post G20 Sherpa’s meeting.

On the query that why India didn’t join the Osaka declaration on digital economy, Prabhu said the reasons have been communicated to the Japanese Prime Minister Shinzo Abe.

But he also clarified that India strongly believes in digital economy and has taken host of measures, including a huge number of bank accounts to thrust its digital agenda.

“India has a very massive programme on digital transactions. We have opened bank accounts of a large number of people. Many transactions are happening through the digital forms,” he said.

Prabhu, who was the railway minister in the first term of the NDA government, also said that the country’s railways has almost 8.1 billion passengers per year, and many of them buy tickets through digital platforms.

“So, digital is something which we all believe in, we have a market which is growing including the e-commerce market. Therefore, we believe in that digital economy and also at the same time we have a very close relationship with our dear friend Japan but we have already communicated the reasons to them,” Prabhu said.

Among others issues that India raised during the summit were on climate change, clean energy, environment protection, agriculture, tourism and systemic shift towards providing social security and financial benefits for the ageing population.

Prabhu said India also put emphasis on building a quality infrastructure that is a necessity for growth.

He also said that infusion of technology in all spheres of life will create economic opportunities for all as well as bridge the digital divide, and improve the quality of life.

“For that, quality infrastructure will play a very important role. In economy, finance will be an important issue and therefore issues related to global finance whether it is related to sustainable and modern tax system, whether related to technological innovation which can deliver benefits in financial markets … all these issues were also discussed,” he told reporters.

Prabhu said India’s Prime Minister Modi has been championing that “we need anti-corruption measures at global level. So, fight against corruption should be done at all levels by all the G20 members by combating foreign bribery and ensure each G20 country has a law to enforce it, that people committing economic crimes in one geography will not be able to run away to the other and escape the clutches of law”.