US at a loss to deal with new Middle East intifada

By Eric S. Margolis

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ARE we looking at a Middle East version of the 1989 uprisings across Eastern Europe that brought down its Communist regimes and the Soviet Union?  

There are certainly strong similarities between the old Soviet East Bloc and the spreading intifada across America’s Middle East Raj. Corrupt, repressive governments; rapacious oligarchies; high youth unemployment and stagnation; widespread feelings of frustration, hopelessness and fury.

But there is also a big difference. The principled Soviet leader, Mikhail Gorbachev, and the Communist rulers of Eastern Europe, refused to turn their army’s guns against the rebelling people.

In Tunisia, where the Arab uprising began, the army has so far stayed admirably neutral. But in other Arab states now seething with rebellion – Egypt, Algeria, Yemen, Morocco, Libya – there may be no such reservations. Their ruthless security forces and military could quickly crush the uprisings unless the soldiers refuse to shoot down their own people – as happened in Moscow in 1991.

Washington is watching this growing intifada in its Middle East Raj with alarm and confusion. Ignore the Obama administration’s hypocritical platitudes about Middle East "democracy". All of the authoritarian Arab rulers now under siege by their people have been armed, financed and supported for decades by the US. Only in the Arab Gulf oil states is there real stability and genuine government concern for citizens’ welfare.

Secretary of State Hillary Clinton urges "restraint" on both sides. One supposes she means those being beaten by clubs, or tortured by electric drills must show proper restraint. Egypt, as this column has long said, is a ticking bomb. Half of 85 million Egyptians subsist below the UN’s US$2 daily poverty level.

Hosni Mubarak has ruled Egypt with an iron fist since 1981. All opposition to his regime has been crushed. But now Mubarak’s time may be running out. Nobel-prize laureate Mohammed al-Baradei has returned to Egypt to challenge Mubarak and his designated successor, son, Gamal. Arab league chief Amr Moussa may also move against Mubarak.

Washington has previously lauded Mubarak for "wise leadership" and "stability". The US pays Egypt over US$2 billion annually not to confront Israel, to jail Islamists, and to keep Hamas in the open air prison of Gaza. The US Congress provides half of Egypt’s food. Since Israel effectively controls the US Congress, Israel exercises extraordinary influence over Egypt.

So far, none of the intifadas across the Arab world have produced effective leadership. But this could soon change.

Now, thanks to the bombshell "Palestinian Papers" leaked to Al-Jazeera, Mahmoud Abbas’s Palestinian Authority has been exposed as an eager collaborator with Israel and its West Bank occupation. The endless Israeli-Palestinian "peace talks" are shown to be a total fraud. Israel’s Mossad and its Palestinian Quislings have worked closely to destroy the democratically elected Hamas government in Gaza.

We also learn from these papers that in 2008, US Secretary of State Condoleeza Rice proposed shipping millions of Palestinian refugees to Latin America. This after Israel, financed by the US, imported one million Russian settlers, many of them not even Jewish. One is reminded of British proposals in the 1930’s to move Germany’s endangered Jews to Kenya.

This was Washington’s modern version of US-taxpayer financed ethnic cleansing of Muslims and Christians.
The "Palestinian Papers" and Wikileaks show the US government often indistinguishable from Israel, and at all times taking Israel’s side. So much for being an honest-broker.

The US-Israeli backed Palestinian Authority has lost its last shreds of credibility. This news will surely fan the flames spreading across the Arab and greater Muslim world as their peoples realise the full extent of the betrayal of the Palestinians.

These dramatic events are poorly understood by most North Americans. The US and Canadian media frame news of the regional intifada in terms of the so-called war on terror, and a false choice between dictatorial "stability" and Islamic political extremism. Much of what’s happening is seen through Israel’s eyes, and is badly distorted.

Platitudes aside, there is little concern in the US about bringing real democracy and modern society in the Arab world. Washington wants obedience, not pluralism, in its Middle East Raj. As with the British Empire, democracy at home is fine but it’s not right for the nations of the Arab world.

Eric S. Margolis is an award-winning, internationally syndicated columnist, writing mainly about the Middle East and South Asia. Comments: letters@thesundaily.com

TM & NTT Com to Construct Submarine Cable System Worth RM427mil

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Telekom Malaysia (TM) has teamed up with Japan's NTT Communications (NTT Com) to build a new US$140 million (RM427 million) international submarine cable system to enhance Internet protocol communications in the region.

TM's Group Chief Executive Officer, Datuk Seri Zamzamzairani Mohd Isa said the submarine cable system will have six fiber pairs to be developed at a cost of US$412 million.

He said TM will own two pairs named Cahaya Malaysia which will span a distance of 7,000 kilometers and link Malaysia to Hong Kong and Japan utilizing dense wavelength division multiplexing technology (DWDM).

"NTT Com will own the remaining four fiber pairs which they plan to develop with other regional carriers to provide landing points in the Philippines and Singapore," he told reporters after the signing of an agreement here today.

The signing ceremony was witnessed by Minister of Information, Communications and Culture Datuk Seri Utama Dr Rais Yatim.     

Zamzamzairani said the project funded internally by the company, would enable TM to improve latency connectivity by 25 percent.

"Phase one of the cable system linking Malaysia to Japan will be completed by the middle of 2012, while phase two linking Malaysia to Hong Kong is expected to be completed by the end of 2012."

Zamzamzairani said the cable system is the first in the region based on 40 gigabits per second (Gbps) DWDM technology with a design capacity of 15 terabyte per second.

He said the cable system will be capable of supporting the upcoming 100Gbps DWDM technology which will effectively raise its capacity to several times its initial capacity.

"This cable system will also provide an alternative, diverse routing within the Asia-Pacific region to avoid areas prone to seismic activities which are hazardous to undersea cables," he said.

Currently, TM owns or leases capacity on more than 10 submarine cable systems, which span more than 60,000 fiber routes miles around the globe, including several submarine cable routes that it uses to carry traffic between the Asia-Pacific region and North America.


- Bernama

How to guarantee roaring book sales

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MONDAY STARTERS By SOO EWE JIN ewejin@thestar.com.my

YOU have to hand it to the Americans. They really know how to market themselves.

Just before Battle Hymn of the Tiger Mother hit the bookstores, its author Amy Chua wrote an essay for the Wall Street Journal entitled, “Why Chinese mothers are superior”.

The resulting controversy certainly boosted sales of this book.

Suddenly, everyone wanted to give Amy, a professor at Yale Law School, a piece of their mind, even without reading the book.

As one reviewer remarked: “The book is actually rather tame... the frenzy over an excerpt was more exciting than the actual book.”

And, true to form, Hollywood is already thinking of bringing the book to the screen.

I am sure Amy’s two earlier books, Day of Empire and World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, will generate even better sales now.

Across the Causeway, we see Singapore’s Minister Mentor Lee Kuan Yew generating as much debate with the release of his latest book Lee Kuan Yew: Hard Truths to Keep Singapore Going.

And closer to home, the Interlok issue continues to fester even though I get the feeling the majority of those who commented have not even read the book.

As the people in public relations, and also the politicians, will say: “Bad publicity is better than no publicity.”
If only such book-related controversies are a reflection that we are indeed a book-loving society, then not only will more books be sold, but prices will also come down because of increasing demand.

In this fast-paced world of ours, I wonder how many of us really find the time to read books.

Malaysians now read an average of seven or eight books in 2010, according to a study by the National Library on the public’s reading profile. This is certainly a vast improvement compared with 1996, when Malaysians read an average of two books a year.

The average may go up a bit more if the National Library includes the new generation of e-Book readers.
Friends who invest in e-Book readers often tell me how many books they have downloaded, all accessible at the touch of the screen. Yes, but do they ever get read, I wonder.

I am one of those strange people who read a number of books at any one time. They are placed in strategic sections of the house, one in the living room, one in the toilet, one in the bedroom, you get the idea.

Occasionally, I may get a book that I simply cannot put down, and so the book will go wherever I go.

Recently, I finished John Grisham’s latest novel, The Confession, in three sittings. But that was still not as good as my dear octogenarian friend, Peter, who stayed awake till the early hours to finish the book even faster. I must be careful what I buy him for Christmas next year.

A friend gave me a clip-on reading light recently and I find that when everyone has gone to bed, and all the lights in my home have been turned off, that little light always reminds me that light shines brightest when it is darkest.

In the same way, I believe, reading can truly enlighten darkened minds – if we choose our reading material with care.

• Deputy executive editor Soo Ewe Jin is struggling to clear his bookshelves of books that his two sons grew up with but finds that the process is very difficult because every book holds such fond memories of his early parenting days. He is happy to declare that unlike Amy the Tiger Mother, he is just a Pussycat Father.

Higher income status will help grow real estate sector

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THE REAL ESTATE WITH ANGIE NG  angie@thestar.com.my

WE are in very interesting times when changes are happening in almost every sphere of our lives and in every part of the world. We are certainly experiencing first hand the age old saying that “the only constant thing is change”.

With change comes challenges and opportunities. To avoid being left behind, all alike from the common folks to governments and organisations should be proactive and take the necessary steps to be part of the big wheel of change.

One of the big changes underway for the country is the need to take the big step forward to become a high income nation. This is indeed a welcoming change that will allow all working Malaysians to progress up the income ladder and to look forward to bigger pay checks and maintain a higher standard and quality of living.

Widening the pool of high income earners is certainly good for the country to take a leapfrog forward across all the economic sectors. This is because it will promote higher domestic consumption and more sustainable growth for the country.

In the real estate sector, one of the keys to ensure sustainability in the local market is to increase the people's per capita income at least to the level of the other developed countries in Asia.

Unless we grow our per capita income, we will not be able to move up the value chain and see a phenomenal growth in our real estate sector.

The vast difference in per capita income compared with the high income countries of Singapore, Hong Kong, South Korea and Taiwan could be the reason for the big property price gap here compared with that in those countries. Likewise in the other sectors, there are also many growth opportunities to be tapped by moving up the value chain.

It does not help that the country is still dependent on so many foreign workers which is causing substantial outflow of foreign exchange to the other countries. Instead of relying on these supposedly lower wage foreign labour, it is time to revert back to our own Malaysian workforce which will have substantial spillover benefits to the local economy.

Although the pay structure will have to be revamped upwards, employing our own workers will ensure that they will be duly employed and prevent them from getting involved in other undesirable activities if they remain unemployed.

Like many high-income countries such as Singapore, Hong Kong and Taiwan, foreigners should only be allowed to work as domestic maids and high skilled and critical professional jobs that are in short supply locally.

This way, the people's wages will have a chance to move upwards and not kept artificially low like what is happening now. There will also be less outflow of funds from the country.

In the real estate sector, one of the most obvious changes is the rapid appreciation of property valuation and the sudden windfall for many property investors.

The sharp rise in property prices in some parts of the country has caused both anxiety and excitement depending on which side of the scale one is at.

Developers certainly have a big role to play in the way property prices move. The pace and size of their project launches will determine the supply coming into the market.

When there is still a strong pent-up demand for more affordably to higher priced houses like what is happening now, it will help if developers speed up on their launches and help to ease the supply flow.

The price of a property when it was first launched is an important factor, but beyond that, the rate of how much a property will appreciate or depreciate is dependent on a number of factors including demand and supply. While location is a major factor that determines a property's value, other important considerations include infastructure network, accessibility, security, and the amenities and facilities provided.

I have observed that while there are townships and neighbourhoods that continue to be relevant and look refreshing and happening, there are also many that are dreary without much going for them. Of course, the value of properties will also differ accordingly.

Developers should continue to establish strong rapport with their buyers even after the projects are handed over to buyers.

We should give the thumbs up to developers who consider the handing over of completed projects as the beginning of their relationship with their customers.

They continue to listen to their buyers, help to form active and engaging community activities and add value to the townships they build.

It is important not to undermine good after-sales service as they can work wonders for a developer's reputation and promote loyalty and repeat purchase from customers.

• Deputy news editor Angie Ng hopes to see developers sprucing up parks in their townships instead of cannibalising them and deprive residents of a healthy form of recreation.

The new normal

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The business landscape has changed fundamentally; tomorrow’s environment will be different, but no less rich in possibilities for those who are prepared.

This short essay by McKinsey’s worldwide managing director, Ian Davis, is a Conversation Starter, one in a series of invited opinions on topical issues. Read the original essay, then see what readers had to say. 

It is increasingly clear that the current downturn is fundamentally different from recessions of recent decades. We are experiencing not merely another turn of the business cycle, but a restructuring of the economic order.

For some organizations, near-term survival is the only agenda item. Others are peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal. The question is, “What will normal look like?” While no one can say how long the crisis will last, what we find on the other side will not look like the normal of recent years. The new normal will be shaped by a confluence of powerful forces—some arising directly from the financial crisis and some that were at work long before it began.

Obviously, there will be significantly less financial leverage in the system. But it is important to realize that the rise in leverage leading up to the crisis had two sources. The first was...

The global economic landscape has changed after the 2008 financial crisis

WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

I PARTICULARLY like the annual Per Jacobsson Lecture.

Per was the managing director of the International Monetary Fund (IMF) who died in May '63. By September, I had joined the IMF where I remained for about a year. Per's long shadow dominated its work, starting with the creation of the Finance Committee of League of Nations working alongside Sir Arthur Salter, Maurice Frere and Jean Monnet.

At the annual meetings of the IMF/World Bank, the Per Jacobsson Lecture is delivered by the very best from anywhere in the world to share their experiences and beliefs. Last October, Mohamad A. El-Erian spoke on “Navigating the New Normal in Industrial Countries”. He is the CEO of PIMCO, the world's largest bond fund manager.

The new normal for the US

El-Erian coined the term “New Normal” in 2009 which has since become widely used. It now means many different things to many different people. Indeed, it has spawned applications in almost every field - in technology (referring to its transformative power); lifestyle (US women getting fatter); medicine (early puberty in girls); management (constant change); higher education (less state financial support); the new rich (showing off its purchasing power); the internet (new mindsets for innovation); etc.

For El-Erian, the economic crisis of 2008 changed everything. He used the new normal to codify for the US a new era of slower growth with much higher than normal unemployment; increased government regulation in the face of wide-ranging banking reform and fiscal austerity; and decreased US role in the global economy. There is no returning to “business as usual”. The US, Europe and the world now needs a re-configuration of mindsets, institutions and approaches. Those who recognise this early and act on it will fare better this year: “a year that promises both the best and worst of times for businesses.”

Fresh data showed the US economy limping toward the end of 2010, its fitness much improved in the last year, but with the recovery still hobbled by high unemployment. — AFP
 

How the new normal will shape up will depend on its reaction to and interaction with a number of challenges. In my view, the US economy is today still facing the aftershock and lagged effects of major policy and institutional changes since the crisis; a new political configuration; and continuing disarray in the financial services industry.

In the process, we can begin to see the convoluted impact from the interplay of factors like the healing of financial markets and the second round effects of the European debt crisis; continuing high unemployment; and a re-configuration of the medium term landscape, bearing in mind that sooner rather than later, the US will need to credibly tackle its deficits and debt. All these get very complicated in terms of where the eventual outcome will be.

Suffice to say that the US is already in for a very bumpy ride to the “new normal”. Much of the growth we have seen is artificial - the result of the biggest fiscal and monetary stimuli in US history. The stimulus was not designed well enough to get back to a strong self-sustaining growth path. And now that most of the 2008/2009 packages have ended, the new expansionary programmes have begun to hold back any back-slides. At some point private sector initiative and entrepreneurship will need to take over as the engine of growth.

Even so, growth today remains anaemic - a recovery muddling along at too slow a pace to create enough new jobs or become a durable expansion. Overall, the size of the economy still hasn't surpassed its last peak in the fourth quarter of 2007, three years on.

Unlike the recovery in the 80s, this time the rebound reached 5% for one quarter before decelerating to today's un-recovery-like speed. GDP in the fourth quarter of 2010 is expected to rise at a 3.5% annual clip. For 2011, forecasters have now shifted their predictions to 3% plus growth. Statistically, growth is here and there. But for most Americans, it still feels like recession. The US economy needs to grow at 2.5%-3% a year to keep unemployment from rising. The rule of thumb is - need to grow 2 extra points over a year to bring unemployment down 1 point.

Nobel laureate Paul Krugman suggested that even with 4% growth a year on from now, US unemployment would be “close to 9% at the end of 2011 and still above 8% at the end of 2012 whatever the recent economic news, we're still near the bottom of a very deep hole.” Unemployment, including underemployment, stands at a high 17.5%. Unemployment among 20-somethings is at least 15%.

In the new normal, consumers' purses still hold the key; they continue to face strong headwinds. High unemployment has changed their behaviour. The financial crisis also left behind loads of debt. Some 5.5 million US households are tied to mortgages that are 20% higher than their home values.

Consumers have since been spending relatively less, leading to feeble consumption growth. De-leveraging (reducing gearing-up on debt) explains why growth since 2009 has been so slow. Consumption accounts for 70% of US GDP and it grew less than 2% so far. Overall, household debt is too high - 90% of GDP (last seen in 2005); it will take years to return to 80%, last seen in 2002/2003. Underlying it all is its low savings rate. De-leveraging is slowly working. Personal savings peaked at 6.3% in July, but has since fallen to 5.3% reflecting much pent-up demand. Rising savings is good in time. The trouble is the transition. History suggests savings need to be 8%-10% to make a credible comeback. It's not yet there.

How the US adjusts to the new normal hinges on how it addresses four new challenges:

How far will the balance shift from markets to government? More government is a reality, even though their involvement in markets is still non-commercial. Nevertheless, businesses will now need to factor in more influential public policy risk.

How is this growing involvement to be financed? Markets get edgy with worries of crowding-out and rising debt servicing. In the end, US needs fiscal austerity and budget surpluses. History teaches this is easier said than done.

How will US role in global economy change? The US provides two global public goods: US$ as reserve currency and deep & transparent financial markets. Today, both are questionable; the more the world does, the less their exposure to US assets. The US needs to get off denial and lead international monetary reform efforts.

De-risking the financial system: how far will it go? This is politically driven. At risk is the flow of credit that lubricates activity. The old normal was a world where credit flowed freely. Now, with ever present systemic risk, credit will no longer be easy, and its cost will rise.

There is still the inflation risk.

The new normal for euro zone

Global crises have dramatically changed the euro zone's economic orientation. Growth reflected disappointing performance in US, euro zone and Japan. They all share a common trait: all are mired in debt “sucking their capabilities and constraining their efforts at remedial measures”. Credible growth remains elusive. Euro zone is also confronted with a policy dilemma: a choice between fiscal restraint now and continuing stimulus to secure sustainable growth. Unlike the US (choose growth now and tackle budget deficit later), most euro zone nations opted for (or forced into) fiscal austerity now, hoping budget discipline would help growth more than renewed stimulus. The euro zone's choice is based on fear, according to the European Central Bank's (ECB) Jean-Claude Trichet, of the “solid anchoring of inflationary expectations”. Even now, policy makers are grappling with the surge in global food and commodity prices before inflation hits, as in mid 2008. The European obsession with inflation is far, far more intense than in the US where job creation is the number 1 issue.

For Europe, fiscal austerity and debt reduction is the new normal - to fend off inflation in the face of rising risks from sovereign debt contagion and euro's survival.

The spread to Portugal, Spain, even Italy, is of serious concern. So much so, O. Issing (the much respected former ECB chief economist) warned that Europe's reaction coupled with unsound fiscal policies in some nations, threatens “the survival of the monetary union financial rescue of Greece and Ireland risks setting in motion an unstoppable momentum towards a transfer union', and gives rise to potential for blackmail on more solid member states the resulting tensions may prove fatal for the euro.”

There are no easy answers. An unbalanced recovery (Germany now expands solidly) with peripheral nations lagging far behind, could upset the balance, enhancing the risks.

The new normal for emerging nations

The disparity in growth between the US, Europe, Japan and emerging nations is well known. Less well known is Asia's three biggest developing nations (China, India & Indonesia) witnessing the emergence of a viable middle class.

The chase to join this evolving consuming class has become the new normal in Asia. As I see it, this year could mark the tipping point when Asia's export-led growth turns inward towards more self-generated growth. Not only in China (1.4 billion people) but nations including India (1.2 billion), Indonesia (240 million), Thailand (66 million), Vietnam (89 million) and less obvious Philippines (98 million), have gathered enough growth momentum to spin a growing consuming class.

Its emergence beyond the prosperity that exists in Japan, South Korea, Taiwan, Singapore, Hong Kong and Malaysia will have far-reaching consequences.

“Consuming China” now has about 300 million people with significant discretionary spending; their “GDP” is equivalent to two thirds the size of Germany's.

China is not alone. India, with a middle class of about 75 million (200 million by 2015) is like China in 2001. Indonesia now has a middle class not far behind India's.

Together they are witnessing something new a growing consuming class outside the big urban areas.
Nomura estimated that by 2014, retail sales in China may surpass that of the US.

The new normal in Asia is for growth to be increasingly driven by the newly empowered and aspirational middle class.

Today, China purchases more cars and mobile phones than the US and soon will buy more computers. Realistically, Asia's middle class is not yet ready to spur global expansion. But it will soon enough drive a larger share of Asia's growth.

Even in economics, the new normal is viewed differently depending on whether you are American, European or Asian. But one thing is for sure: it means fundamental change to face new realities following the 2007/2008 great recession.

For Malaysia, the new normal is reflected in national transformation programmes to elude the middle-income trap (see this New Year column on The Mystique of National Transformation” and:

• transform Malaysia into a high income, inclusive & sustainable economy through invigorating the private sector

• enter a new era of higher growth, driven by rising productivity from innovation and smart human resource deployment. To succeed, the underlying drivers must be very robust in practice.

I think the government has a good grasp of the issues it needs to tackle to set the new normal.

l Former banker Dr Lin is a Harvard-educated economist and a British Chartered Scientist who now spends time writing, teaching and promoting the public interest. Feedback is most welcome: email: starbizweek@thestar.com.my