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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing and on this edition, the talks in Washington to try to end the war in Ukraine.
We'll find out what some of Ukraine's business community wants to hear.
Norway's $2 trillion sovereign wealth fund begins to divest from some Israeli companies in protest at events in Gaza.
What will that mean? Heating up demand, the new appetite for air conditioning in Europe.
And filmmakers find Georgia is no longer on their minds. when it comes to shooting movies.
But first, in Washington, President Trump, President Zelensky of Ukraine and European leaders have been cloistered together in the White House to tried to find a way to end Europe's longest and bloodiest war since 1945.
What we're being told so far is little. President Trump has said the United States will help European nations provide Ukraine with security guarantees. in the event of a peace settlement with Russia.
And the Financial Times just reported that Ukraine has offered a $100 billion weapons deal. in order to win that security guarantee from the US.
But what many Ukrainians desperately want is peace, not at any price. and that includes the business community who've been struggling to keep the economy there going in the face of bombardment from Russia.
Let's talk to Vera Savchenko, who's CEO of BDO Ukraine and is also on the Recovery Committee of the European Business Association.
She's joining us live on the line from Dnipro in South Ukraine.
Vera, I gather you are potentially at least under bombardment.
Yeah, all eastern part of Ukraine now have air alerts on and we are under shelling of drones and we await for missile attacks due soon.
Yes and I bet in those circumstances what's going on in Washington does seem a very very long way away.
Yeah, yeah, yeah. We are all waiting for ceasefire.
It's the most wanted thing. Well, that's what I wanted to talk about, because obviously the terms, if there is a ceasefire, if there's a peace, are still being debated and discussed even as we speak.
What is it that you, for example, trying to sort out the recovery of Ukraine in business terms, would like to see?
What would be helpful to you at this stage?
Ukraine needs to recover. Ukrainian economy needs to recover.
And we cannot... relay on international aid forever.
We need international private business, international investors to come to Ukraine.
But this situation like this, no risk insurance can cover. such risks.
So we really need some ceasefire on the land or in the air to show that Ukrainian business what we can offer, that we can add to the European, UK, US supply chain. what critical minerals we have.
But without ceasefire, unfortunately, risks are too high to work with Ukraine.
Well, yes, I was going to say, I mean, Vera, clearly it's very difficult at the moment.
How much of a problem does Ukraine have economically?
I mean, we know, obviously, it's a huge problem, lives being lost, territory being taken.
But how big a problem is it economically? much is Ukraine able to function economically without this kind of investment?
Ukraine is a big country. I would say the situation on the west of the country is much better than in the east.
So-called frontline territories are suffering the most.
Level of destruction for business is really high.
A lot of assets have been destroyed physically in recent months.
But business is resilient. A lot of businessmen stays in the city, in Kharkiv, in Dnipro, in Zaporizhia.
But we need financial instruments to recover. because sometimes even we cannot get a bank loan. if business is located, for example, 50 kilometers to the front line.
Yeah, and of course, and Vera, the other issue, I mean, there's two things.
One would be to have investment to actually build things that could work, but also there's a lot of reconstruction that's going to be needed.
And business, I guess, will be looking at that.
Yeah, yeah, yeah. We are all looking to recovery of infrastructure, to recovery. of assets of plants and factories which have been destroyed.
So, yeah, reconstruction is a really big thing, and Ukrainian business is really ready to take part in reconstruction.
And we already... Doing the reconstruction, but of course, we need the participation of international private sector and together we can achieve more and faster.
And one very difficult question, Vera. I mean, in the balance between needing to have peace, needing to have at least a ceasefire and needing, of course, to... keep the territorial integrity of Ukraine.
Where does the business community sit? Is it so desperate that they need peace almost at any price?
Oh, it's a difficult question. For sure, Ukrainian business community, it's not ready to... to give our land because I don't know, it's just not in the discussion between business community.
Indeed, indeed, because obviously you want to keep the country in the right position in the right way in order to prosper in the future.
I understand that. Thank you so much. Vera, for talking to us.
Very much appreciate your time and indeed hope you keep safe because I know there are There's at least potentially a bombing situation near you in Dnipro, which is where you've been talking to us.
Vera Savchenko there. Well let's move our attention to Norway.
Now the news that Hamas has accepted the latest Gaza ceasefire. and hostage release proposal from regional mediators, comes as the world's largest sovereign wealth fund has announced measures to divest. from some Israeli companies.
The Norwegian fund, which is worth around $2 trillion, says it's going to pull out of six firms with connections to the West Bank and Gaza.
It currently has around $1.86 billion in companies listed in Israel.
The Finance Minister, Jens Stoltenberg, says more companies could be excluded from the fund's portfolio.
Well, I asked Karen Thorburn, who's Professor of Finance at the Norwegian School of Economics, how significant this was. perspective it is it doesn't really matter from a wealth perspective because it's such a fraction of a percent of the portfolio.
But of course, it's significant that they're doing this now suddenly after political pressure.
And it's from an oil fund, isn't it? This is how all this money comes about.
It's a wealth fund. Is this an intention, do you think, overall to divest from oil? almost any Israeli company.
It could be. At this point, there is no general policy not to invest in Israel, but the fund has expressed that it... want to divest from companies that are directly involved in the war on Gaza.
Is the fund used in I suppose what you might call a political way?
Has that happened before? Very rarely, the whole model is that it's a broad passive financial investor and that it generates as much returns as it can for a given risk.
And then the politicians can use the returns from the fund as they want for any political purpose.
When Russia invaded Ukraine, there were international sanctions against Russia and then the fund, along with all other Western countries. investors divested from Russian equities.
But generally, I don't think it's been a country specifically that's been abandoned that way before.
But you say this is a small fraction of the wealth fund overall, which is absolutely huge, the world's biggest.
But I suppose the amounts involved and the companies concerned...
It might have quite an effect on these Israeli companies.
Some of them, I gather, expected to be quite large banks.
So I think that the direct divestments doesn't have much influence because the fund owns maybe a percent or two of these firms or these companies.
But of course, if it's a signal to other investors, it could have some implications for these firms.
So you think other investors might see what the sovereign fund is doing, and because it's so big and important, might follow suit?
I wouldn't think so. I think it can be a little short term effect if there is a lot of stock that are suddenly sold in the market.
But I don't think it has any longer term effect. effects.
If there were to be, there must be more coordinated international action.
And this fund, it's owned by the Norwegian state, in effect.
So it is, I suppose, a creature of the politicians.
Well, it's not meant to be used for political purposes.
So it's a bit unusual that the politicians suddenly... want to get involved in stock picking, which this is.
And the problem now, I think, is that the fund... says it's made this divestiture based on its own judgment.
But there has been a lot of political pressure.
And the way I perceive it is that it's really... the politicians that have put pressure on the fund to do it, but without making the decision where the decision belongs, which is in the Ministry of Foreign Affairs.
Foreign policy should be decided by the government and not by the fund.
And would a lot of Norwegians perhaps also feel that the fund should be directed to produce the best returns rather than the best political outcomes?
Of course, many Norwegians could think so.
At this point, I think there's been so much press about that this contributes to the war of Gaza that that might be the public opinion.
Although personally, I don't think that these investments, I mean, they don't give the companies any money.
Actually, if anything, they collect the dividends and the returns.
So it's the opposite. So it doesn't, in my view, doesn't really influence the war on Gaza.
Professor Karen Thorburn speaking to me from Bergen. what's been happening on the financial markets.
Peter Jankowskis, Vice President of Research Analysis at Arbor Financial Services in Chicago, joins me, Peter.
Welcome to World Business Report. Thanks for being with us.
We talked at the beginning of the programme, of course, about this ongoing...
Meeting in Washington, many, many leaders there discussing Ukraine.
I mean, have the markets in any way reflected any optimism that peace might be coming?
Not really. Today, the market was down modestly for much of the day and rallied back, basically finished unchanged on the day.
I don't think there was too much of a feeling that something meaningful would come out of that meeting.
Both sides have very firm set positions, and I don't think there's anything that's going to get either side to move off those positions.
Well, certainly, as you say, the investors don't seem to think so.
Let's talk then about something they are perhaps taking a view on.
And, of course, one of the dominant themes, really, the last... year or so has been the growth of these medicines that can be taken that basically quell people's appetite and are very good for getting them. to lose weight.
Now, the big company involved in that, the Danish company, Novo Nordisk, offering, and that is called Ozempic, and they've halved the price of Ozempic in the U.S.
And I think we also saw another company's output called Monjaro doing a similar deal. the price of that being increased coming into Britain recently.
So what's going on with these products? Why is the price jumping up and down?
Well, I think in Novo Nordisk's case, they've been singled out by the Trump administration for the high price of Ozempic and they're probably trying to get out in front of that a little bit to try to prevent more drastic actions or or anything directed at them.
The stock market response was actually positive, surprising when you think about cutting the price of a drug in half, but Nova Nordisk shares were up 3% today on the news.
Or perhaps they think cheaper. Drugs will sell better, I suppose.
But talking about pressure from the U.S. government, it's very interesting what's been mentioned, not confirmed as far as I know as yet.
Again, it might take a 10% stake in Intel, the American chip maker.
What are we reading into that? Well, I think it does make sense from the standpoint of trying to provide a secure supply of chips.
The timing is, I think, somewhat unusual.
President Trump met with the head of Intel just last week, so it's possible that some discussions were had there that led to this.
And Intel is in a tough position right now.
They're looking for capital to expand their foundry business and regrow that business.
So in some ways, it's a good fit strategically for the United States to be doing that.
Now, coming up later this week, of course, is a famous gathering of central...
Jackson Hole in Wyoming, a very beautiful place, is seeing a lot of central bankers get together and talk.
And they've got a lot to talk about, and in particular, I guess, The Fed representative will be talking about the way things are going there.
And earnings, interestingly, company earnings, of course, are in the middle of... company earnings season, or just coming to the end of it, I suppose, have done reasonably well in most sectors.
And I guess Jay Powell will be talking about that.
Yes, he will. They're in a very tough spot right now trying to balance the various forces out there.
We've seen evidence that the labor – Market is slowing down somewhat, less hiring.
As you indicated, corporate profits, though, remain strong, so the stock market is strong.
And at the same time, inflation... is a bit of a wild card.
We haven't seen it consumer prices, but producer prices have been creeping up.
So people are thinking that maybe he will try to speak about the Fed raising rates in September. one way or another.
But my guess is he wants to see more data at this point.
The man in the White House would like to force his hand, wouldn't he?
Yes, he would. President Trump has been calling for reductions of a percent and a half, which is not going to happen.
Thanks very much indeed for talking to me, Peter.
Peter Jankowskis there, Vice President of Research Analysis at Arbor Financial Services.
In Chicago, of course, we'll keep you posted as to what comes out of that Jackson Hole meeting and tell you what they're saying, if indeed they tell us.
Now you're listening to World Business Report from the BBC World Service.
Are you hot? Well, if you're in the Northern Hemisphere, you may well have been experiencing the kind of temperatures this summer that you're not used to, certainly in Europe, even Central and Northern Europe.
It's been the kind of weather that's left people wondering about investing in that staple of many American and Middle Eastern cities, air conditioning.
Now, the demand for AC has been rising in places that don't usually bother with it.
As I heard from Matteo D'Alombra... who is National Specification Manager for Daikin, a Japanese aircon manufacturer. we definitely notice it 100 and not just here in the uk where i'm based, but also across the rest of Europe.
And I do also have very close personal experiences because I'm from Italy originally.
So still plenty of family and friends back home and they all live by their conditioners these days, especially in the early summers.
But even within the UK, traditionally like you would have thought it's definitely a cooler weather in the last few years we've definitely absolutely seen an uprising in terms of the demand, the interest as well from consumer, from end user, just to understand what the options are, what the best options are for their properties, because there's a myriad of them.
I would say the only maybe other consideration to be made that kind of creates a bit of a difference between the various level of demands that we've seen is that traditionally Southern Europe nowadays is a bit more of a replacement market.
Because again, Southern Europe has had air conditioner in residential places for much, much longer.
So many of these are now coming into life.
Are people looking for more powerful air conditioning, perhaps even people who have it already because the temperature is going up?
Some they do, 100%, because as you said, yes, the weather is 100% changing.
And so people are trying to cope with that and to change and upgrade.
One of the nice things as well is some of these systems are modular as well, so they can grow over time to a certain degree.
So they also build with that element of expansion in mind.
So you could start small. Maybe you just do your living room and maybe your bedroom.
And then depending on how it goes, then you can expand. expand at a later date as well.
So yeah, we're definitely seeing that trend as well.
And Matteo, I mean, I guess the question is affordability. these things because it's not cheap necessarily.
I mean, is it a situation where people are saying, well, this is a cost I can afford or are companies like you bringing some of the costs down?
Certainly affordability is a big, big element and it's also something that we've always consider as part of one of the elements that we choose to address when we do new developments and new products. products at every possible price point.
We normally say, for example, in the UK that you could start from as little as £2,000.
So that's about $2,500, $3,000. Yeah, and then it will scale up depending on how big your house, how fancy you want. the air conditioner to be.
If you prefer something that looks a bit more of a design aesthetic elements, or you prefer just a basic air conditioner that does the job, So there's plenty of variety, but you could start, definitely you could test more and be very comfortable in your home.
But it's not just the cost of the outlay at the beginning.
Of course, there's maintenance. I suppose energy costs as well.
I mean, in Britain, people complain about having to put the heating on in the winter.
It depends a lot in the summer as well. That's a big ask, isn't it?
It's certainly something that you need to be planning and you need to be considering, but...
One of the great things about this technology that is continuously evolving over time is becoming more and more efficient over time, meaning that it uses less and less energy.
Plus, we've also seen the rise of, for example, solar power that people have installed in their houses.
And so if you have that, you can run this system for much, much cheaper, sometimes even free when you can leverage that solar production.
Because it's a type of technology that seems to become more and more common across the board.
Also, there's been a sort of different level of incentives and different levels of which government has looked at how can they help.
Plus, just to remind people of one very important Sort of important element.
This system, yes, they do keep you cool during the summer, but they can also keep you warm during the winter.
And they can do so being much, much more efficient than traditional gas boilers.
But that's a good point. I mean, we talk about gas boilers, of course, because of environmental worries.
What you're selling, these air conditioning units, are they environmentally friendly?
They are. They are, absolutely. Again, the environmental aspect is a key driver for us at Daikin.
We've always been at the very forefront of innovation. when it comes to an environmental point of view, using recycled material, using recycled refrigerant, making sure that the profiling that we use progressively become more and more sustainable.
So yes, we're making huge investment across the board to make this system super, super environmental friendly on top of as economical friendly.
Matteo dell'Ombra there of Daikin, the Japanese aircon manufacturer.
Now, where do you think some of the biggest movies and TV shows of the last 20 years have been shot?
Fast and Furious, Stranger Things, The Walking Dead, Spider-Man Homecoming.
Well, it's the US state of Georgia. But how about this recent one?
Famous around the world, please welcome...
The Fantastic Four. Mr. Fantastic. There we are.
That is Fantastic Four First Steps. And it was made largely in the UK. and Marvel is making its next Avengers and Spider-Man at a facility just outside London.
There's been an almost 50% drop in film production spending... in the centre from before now, Georgia, over the past three years.
The reason? That they're abandoning Georgia has less to do with picturesque locations or skilled filmmakers.
They have lots of both. It's mostly down to tax breaks and money. as I heard from Randy Davidson, CEO and founder of Georgia Entertainment.
I think America has been slipping in the last bit due to several issues of union and the evolving nature of the way film and TV productions are being done, the smaller budgets, the different consumption habits, that consumers have and certainly the attractive international incentives that have impacted really every state in America.
But I still feel like Georgia has the best incentive, the best locations. and trained workforce.
We're very hopeful and optimistic that Georgia is ready for whatever is next for film and television.
OK, well, I mean, sell it to me then, Randy.
I mean, Georgia, I get it's partly to do with tax, but it's also, it's got good... I mean, it looks good, doesn't it, on screen?
Yes, it does. One of the key things, and I do think a lot of America losing some of that certainly incentive base, but over time, America still is the backdrop for a lot of stories that sells worldwide.
So I do think there's an attractiveness to location shooting in America.
And especially in Georgia, the climate is right.
We've been in some very difficult climates lately, visiting some areas. but you can shoot year round in Georgia and you have the metropolis, you have the rule, you have the ocean, the beach, the mountains, and it's still a very incredible place that has a massive workforce that's been trained since 2015 when the state decided to do something about the importation of below the line workers for film and television. to make sure that those skill sets were here and available for Georgians to be able to work on.
So does Georgia basically just need to get its act together, the state government, to say, OK, we'll introduce even better tax concessions?
I think what we've decided to do instead is to just make sure that our incentive works very well for independent filmmakers. and feature filmmakers, and that I'm talking about Paramount, Netflix, Amazon, and those things.
I think one of the things that we've done this year and we just passed legislation within the The political structure was to tweak a little bit of the accounting processes to make what, again, I think is the best incentive in the country, make it even better. faster for filmmakers to monetize their incentives and their credits that they have here.
Other than that, definitely considering and the conversation is always there for us to figure out ways to enhance the film incentive and other areas around it.
Another piece of legislation that went through this year for Georgia was a post-production credit. while it's not really aimed at the filmmakers, it's aimed at post-production people, companies that work in Georgia.
It's an example of how I think we can maneuver incentives around the ecosystem of the creative industries and especially film to attract and become more competitive.
So where are your big rivals then, Randy?
Where's all this going that was in Georgia before?
I feel like all the rivals are outside of America.
The exchange rate, the dollar value, certain countries that don't have to provide health or do certain things, are not bound by the Teamsters and union restrictions, I feel like our biggest competitor has been foreign.
Here in America, you still see, if you just follow American news and film, you still see states really rallying to try to create their own incentive.
Texas Nevada, New Jersey. And one of the reasons is that it's becoming, thankfully, more apparent that film production is economic development.
It is tourism. It is money that is generated and poured right back into the community.
So that's the reason other states are standing up and fighting.
And I've feel like, you know, Georgia having all of these years with it under our belt and pretty much virtually unchanged as a credit uncapped 30%, you know, has the predictability that a filmmaker or a studio is looking for in order to plan their project.
You going to get the next James Bond, do you think?
Well, I just read the other day, you know, that Kevin Fague with Marvel said Georgia's still in play.
You know, I mean, they're not doing it here, you know.
You know, they've made other strategy moves and we're definitely looking at James Bond, Fast and Furious episodes.
And, you know, we have some good tie-ins with a lot of the bigger I think if you look into Georgia now, you'll see a lot of the sound stages that have struggled, you know, obviously in the last two or three years. they're really embracing the indie film and the short and the production companies that are producing a lot of short films and episodics and even looking to do a lot more in the gaming and music and touring.
I mean, there's a lot of usage for the skill sets that we've trained our workers for.
So I would love to be the next James Bond, actually, myself.
But I also like it being a Brit as well.
Well, we shall see. Randy Davidson, the CEO, founder of Georgia Entertainment, where the films aren't being made. made so much but at the moment Denis Villeneuve who is the announced director of the next Bond movie is certainly casting around for the next Bond Maybe he's casting around for the next location.
I suggest that Randy and Georgia get in touch with him.
But that's it from World Business Report from me and the rest of the team.
Bye-bye.
