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Saturday 9 July 2011

Bersih D-Day: 1,667 arrested in Malaysian protest after police locking down capital Kuala Lumpur




Malaysia police arrest more than thousand protesters

Romen Bose and Julia Zappei July 9, 2011 - 10:39PM
Malaysian police have fired teargas and water cannon, making 1400 arrests during clashes with protesters who defied government warnings to rally in the capital for electoral reform.

Leaders of opposition parties were among those detained during a massive security operation, but it failed to thwart the outlawed demonstration, which saw 50,000 citizens take to the streets of Kuala Lumpur, according to organisers.

Protesters faced baton-wielding riot officers in front of a downtown bus station, retreating at times and regrouping to push back police lines in a cat-and-mouse confrontation that took place in a downpour.



Some demonstrators fought back by picking up teargas canisters, which they lobbed at police, AFP reporters said.

Opposition leader Anwar Ibrahim was injured during the protest when he fell on to the pavement after a teargas attack and was taken to a hospital as he was feeling unwell, an aide said.

The protesters dissolved into three main groups, and by late afternoon all were trying to force their way through a tight police cordon to a stadium and then to the king's palace to hand over a memorandum detailing their demands.

The police line, however, held firm.

"Why is the government trying to intimidate citizens?" said Mohamad Manij Abdullah, 50, a businessman who joined the rally.

"We are only trying to reform elections and have a free and fair government," he told AFP.

National police chief Ismail Omar told a news conference police had detained 1401 people and were investigating them for illegal assembly although many were expected to be released on bail.

Ismail said barricades around the capital Kuala Lumpur, which had turned it into a ghost town since midnight, would be dismantled if there were no further incidents.

Among those arrested were protest leader Ambiga Sreenivasan and Maria Chin Abdullah. Ambiga told AFP she was freed later on Saturday without being charged.

Abdul Hadi Awang, president of the Pan-Malaysia Islamic Party (PAS), the country's largest Islamic opposition grouping, was also arrested.

The protesters rallied in several areas of the city, but later began to disperse, said Subramaniam Pillay, one of the organisers, who described the day as "a great success".

Student Chew Ai Nee, 30, said: "We have to take to the streets because we have not been given any opportunity to express our demands for change ... the government cannot silence us when we march."

Many of the protesters were shouting "Reformasi!" (Reforms), "God is great" and "Long Live the People".

However, Mukhriz Mahathir, a leading member of the powerful United Malays National Organisation (UMNO), told AFP the government had to act to prevent anarchy.

"We cannot allow a minority group to protest and stir trouble in the country," he said, accusing protesters of provoking the police into firing teargas "so that they can accuse the government of being heavy-handed".

UMNO is the dominant party in the ruling Barisan Nasional coalition led by Prime Minister Najib Razak.
New York-based watchdog Human Rights Watch (HRW) denounced the arrests.

"This is a maelstrom of the Malaysian authorities' own making," said Phil Robertson, deputy director for HRW's Asia Division.

Downtown Kuala Lumpur, normally a hive of activity on weekends, was deserted as major roads into the commercial and tourist district were sealed off.

Meanwhile, about 30 Malaysians living in South Korea rallied in Seoul in support, with another 80 marching through central Hong Kong.

Organisers had called for solidarity walks and demonstrations in countries including Australia, Cambodia, Japan, the United States and Taiwan.

The demonstrators want reforms, including the eradication of vote buying and the prevention of irregularities such as people illegally voting several times during elections.

Bersih (which means clean in the Malay language), which organised the protest, wants to see the use of indelible ink to prevent multiple voting, equal access to the media for all parties and the cleaning-up of electoral rolls.

Malaysia's opposition made major gains in 2008 elections against the ruling coalition, but said they could have won more if voting rules were fair.

The country's next elections are widely expected to be called early next year, with the opposition aiming to end Barisan's half-century rule.

© 2011 AFP

In Pictures: Protests suppressed in Malaysia
Police fired tear-gas and arrested hundreds of protesters in Kuala Lumpur who were calling for electoral reforms.
Last Modified: 09 Jul 2011 13:39

More than 20,000 people demonstrated for electoral reforms across Kuala Lumpur, the Malaysian capital, on Saturday in a rare protest that was declared illegal by police. The protest was called for by opposition groups, including the Coalition for Free and Fair Elections, Bersih (Clean). Police fired tear-gas and water cannons at demonstrators and arrested more than 1,400 people, including top opposition leaders, according to protest organisers. The activists' demands include an overhaul of voter registration lists, tougher measures to curb fraud and fairer opportunities for opposition politicians to campaign in government-linked media. Malaysia's next general election is planned due in 2013.

1) With Kuala Lumpur under police lockdown since the morning, protesters tried to gather and seek refuge inside a railway station before being led outside by police where many were detained and put into police vans. [Saeed Khan/AFP]

2) Protesters display the yellow shirts of the Coalition for Free and Fair Elections, or Bersih (Clean}, during a rally calling for electoral reforms in Kuala Lumpur [Ahmad Yusni/EPA]

3) Riot police stand making a cordon in front of Malaysia's iconic twin towers before demonstrators gather [Saeed Khan/AFP]

4) A Bersih supporter shouts at police during clashes in downtown Kuala Lumpur [Shahir Omar/Reuters]

5) Police use a water cannon to spray Bersih supporters in downtown Kuala Lumpur [Samsul Said/Reuters]

6) A Bersih supporter throws a water bottle at a police water-cannon truck [Mohd Rasfan/AFP]

7) Police face off against thousands of Bersih supporters [Saeed Khan/AFP]

8) A Bersih supporter holds the Malaysian flag in front of a police water cannon [Damir Sagolj/Reuters])

9) Police in riot gear march under heavy rain toward protesters calling for electoral reforms [Saeed Khan/AFP

10) Police face off against thousands of protesters in a scene shrouded by tear gas [Saeed Khan/AFP]

11) A Bersih supporter is detained by police during protests in downtown Kuala Lumpur [Damir Sagolj/Reuters]

12) A Bersih supporter is detained by police during protests in downtown Kuala Lumpur [Saedd Khan/AFP]

13) Bersih supporters are detained by police during protests in downtown Kuala Lumpur [Damir Sagolj/Reuters]

14) Malaysian opposition leader Anwar Ibrahim (C) is surrounded by supporters, one of whom is injured, after a protest in Kuala Lumpur calling for electoral reforms [AFP]

15) Bersih supporters chant slogans during a protest calling for electoral reforms in downtown Kuala Lumpur [Damir Sagolj/Reuters]

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Malaysia police detain hundreds at rally

Police fire teargas as more than 20,000 demonstrators demand electoral reform during five-hour standoff in Kuala Lumpur

Associated Press in Kuala Lumpur guardian.co.uk,
Malaysia protests
Malaysian police attempt to detain protesters during clashes in Kuala Lumpur on 9 July. Photograph: Damir Sagolj/Reuters

Police fired teargas and detained hundreds of activists as more than 20,000 demonstrators gathered across Malaysia's capital on Saturday, demanding electoral reforms in the country's biggest political rally in years.

The opposition-backed rally was the culmination of weeks of intense pressure on the government of prime minister Najib Razak to make election laws fairer and more transparent before general elections expected to take place by mid-2012.

Demonstrators marched in defiance of Najib's administration, which has declared the rally illegal and warned people to avoid it.

Opposition leaders accuse Najib's National Front coalition of relying on fraud to preserve its 54-year grip on power, which has been eroded in recent years amid allegations of corruption and racial discrimination. The government insists the current electoral policies are fair.



Authorities took extraordinary security measures to deter the rally by sealing off roads, closing train stations and deploying trucks with water cannons near the Independence Stadium in central Kuala Lumpur, where activists sought to gather.

Police said in a statement they had detained 924 people, including senior opposition officials, in what they called Operation Erase Bersih, referring to the Bersih (Clean) coalition of groups behind the rally.

Thousands tried to reach the stadium from various parts of Kuala Lumpur, chanting "Long live the people", and carrying yellow balloons and flowers as they marched.

Police fired numerous rounds of teargas and chemical-laced water in repeated attempts to disperse the crowds, causing demonstrators to scatter into nearby buildings and alleys before regrouping.
Police helicopters flew overhead as a brief downpour failed to deter the protesters.

The demonstrators finally dispersed after a five-hour standoff with police. Only several hundred reached the stadium.

Najib insisted on Saturday that the protesters represent a minority, and that most Malaysians support his administration. "If there are people who want to hold the illegal rally, there are even more who are against their plan," the prime minister was quoted as saying by the national news agency, Bernama.

Witnesses said riot police armed with batons charged at some protesters and dragged them into trucks. Some were seen bleeding, but police could not confirm any injuries.

The opposition leader Anwar Ibrahim said on Twitter that he had sustained a "minor injury" when his group was hit by teargas. The Malaysiakini news website said he had a knee injury.

The crackdown "stirred a sense of outrage against the exhibition of raw power by our government", the Bersih coalition leader Ambiga Sreenavasan told reporters. "What is the necessity for a show of might against right? No matter what, right will always prevail," she said, minutes before police detained her and other Bersih officials.

Activists estimated that the total number of demonstrators exceeded 20,000 people, making it Malaysia's biggest street rally since 2007. Some independent news websites estimated there were tens of thousands of people, but authorities did not immediately have an official figure.

The rally has galvanised the opposition and has been credited for a surge in political awareness among the public in recent weeks. Meanwhile, government officials accuse Anwar's three-party alliance of endorsing the rally to cause chaos on the streets and undermine the National Front.

Over the past two weeks, more than 200 other activists have been arrested nationwide for trying to promote the rally. Six are being held under security laws that allow indefinite detention without trial. Most of the others have been released, but some have been charged with laws banning activities linked to illegal assemblies. They face several years in prison if convicted.

The activists' demands include an overhaul of voter registration lists, tougher measures to curb fraud and fairer opportunities for opposition politicians to campaign in government-linked media. The National Front's mandate expires in mid-2013 but many analysts expect elections to be called by next year.

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Hundreds arrested in Malaysian protest

(Agencies)

Hundreds arrested in Malaysian protest
Supporters of the "Bersih" electoral reform coalition are ushered into a police truck near the National Museum after being detained before a planned Bersih rally in Kuala Lumpur July 9, 2011. [Photo/Agencies]


KUALA LUMPUR - Malaysian Police fired tear gas and detained hundreds of activists as more than 20,000 demonstrators massed Saturday across Malaysia's main city demanding electoral reforms in the country's biggest political rally in years.

The opposition-backed rally was the culmination of weeks of intense pressure on Prime Minister Najib Razak's long-ruling coalition to make election laws fairer and more transparent ahead of national polls widely expected by mid-2012.

Demonstrators marched in defiance of Najib's administration, which has declared the rally illegal and warned people repeatedly to avoid it.

Opposition leaders accuse Najib's National Front coalition of relying on fraud to preserve its 54-year grip on power, which has been eroded in recent years amid mounting complaints about corruption and racial discrimination. The government insists the current electoral policies are evenhanded.

Authorities took extraordinary security measures to deter Saturday's rally by sealing off roads, closing train stations and deploying trucks mounted with water cannons near the Independence Stadium in downtown Kuala Lumpur, where activists sought to gather.

Nevertheless, thousands tried to reach the stadium from various parts of Kuala Lumpur, chanting "Long live the people" and carrying yellow balloons and flowers as they marched.

Police fired numerous rounds of tear gas and chemical-laced water in repeated attempts to disperse the crowds, causing demonstrators to scatter into nearby buildings and alleys before they regrouped. Police helicopters flew overhead as a brief downpour failed to deter the protesters.



Najib insisted Saturday the protesters only represent a minority, and that most Malaysians support his administration.

"If there are people who want to hold the illegal rally, there are even more who are against their plan," the prime minister was quoted as saying by the national news agency, Bernama.

The federal police force said in a statement that it detained 670 people in a clampdown called "Operation Erase Bersih," referring to the Bersih coalition of civic groups organizing the rally. Those arrested included several senior opposition officials.

Witnesses said riot police armed with batons charged at some protesters and dragged them into trucks. Some were seen bleeding, but police could not confirm any injuries.

Anwar Ibrahim, Malaysia's top opposition figure, said on Twitter that he sustained a "minor injury" when his group was hit by tear gas. The Malaysiakini news website said he had a knee injury.

The crackdown "stirred a sense of outrage against the exhibition of raw power by our government," Bersih coalition leader Ambiga Sreenavasan told reporters.

"What is the necessity for a show of might against right? No matter what, right will always prevail," she said, minutes before police detained her and other Bersih officials as they walked to the stadium.

As the afternoon progressed, activists estimated the total number of demonstrators exceeded 20,000 people, making it Malaysia's biggest street rally since 2007. Some independent news websites estimated there were tens of thousands of people, but authorities did not immediately have an official figure.

The rally has galvanized the opposition and has been credited for a surge in political awareness among the public in recent weeks.

Government officials accuse Anwar's three-party alliance of endorsing the rally to cause chaos on the streets and undermine the National Front.

Numerous restaurants and stores were closed because of the transportation disruptions and fears of violence.

Over the past two weeks, more than 200 other activists have been arrested nationwide for trying to promote the rally. Six are being held under security laws that allow indefinite detention without trial. Most of the others were eventually released, but some were charged with laws banning activities linked to illegal assemblies. They face several years in prison if convicted.

The activists' demands include an overhaul of voter registration lists, tougher measures to curb fraud and fairer opportunities for opposition politicians to campaign in government-linked media. The National Front's mandate expires in mid-2013 but many analysts expect elections to be called by next year.

Supporters of the Bersih coalition were also planning solidarity marches over the weekend in foreign cities, including in Australia, Britain, France, Hong Kong, Indonesia, Japan, the Philippines, South Korea, Thailand and the United States.

In Washington, State Department spokeswoman Victoria Nuland said that the US has been communicating to Malaysia the importance of respecting human rights, including freedom of expression and assembly.
"We consider it incumbent on all sides to refrain from violence, particularly if we're going to have another rally tomorrow," she told a news conference Friday.
Hundreds arrested in Malaysian protest
Police blocks off the road leading to Dataran Merdeka (Merdeka Square) in Kuala Lumpur July 8, 2011, ahead of Saturday's planned rally by "Bersih", an electoral reform coalition calling for clean and fair elections. [Photo/Agencies]

 Malaysian police locks down Capital


Move comes as opposition group vows to press on with plans to hold pro-democracy rally.


Major roads in Kuala Lumpur, a city of 1.6 million, are closed [AFP]

Malaysian riot police have sealed off access to the capital Kuala Lumpur for the day as an opposition group vowed to press on with plans to hold a mass pro-democracy rally.

Police on Saturday set up roadblocks in the city centre and lorries mounted with water cannons were deployed to prevent the demonstration, which was planned by the opposition and an electoral reform group seeking greater transparency.

Major roads in Kuala Lumpur, a city of 1.6 million, are closed. Electronic signboards on highways leading into the city centre warned of legal action against those joining the protest.

A massive protest could signal that the ruling National Front coalition is losing ground and may spur Najib Razak, the Malaysian prime minister, to delay painful economic and political reforms.

A general election is not due until 2013 but Razak has not ruled out early polls, after economic growth accelerated to a 10-year high in 2010.

"No matter how badly we are repressed or prosecuted, the peaceful voice of the rakyat (people) will be heard in Kuala Lumpur come the 9th of July," protest organisers said in a statement.

The rally is being organised by an opposition-backed group called Bersih, or Clean. It has called for reforms following accusations that the election commission is biased towards the ruling coalition which has been in power since independence from Britain in 1957. The commission denies the charge.

Despite government accusations that the protesters are threatening national security, protest organisers have been adamant that they are pushing for electoral reform.

"The government of the day is not perfect," the pro-government New Straits Times newspaper said in an editorial.

"But be sure of one thing, we don't solve problems on the streets. That is not us, nor our way."

Growing opposition voice

Major street demonstrations are rare in this Southeast Asian country, but the rise of alternative media channels and a growing opposition voice are gradually creating a more vocal Malaysian public.

Tens of thousands of demonstrators demanded reforms at a November 2007 rally, which analysts said galvanised support for the opposition ahead of record gains in a 2008 general election.

The police launched a similar crackdown in 2007.

Razak took power in 2009, and inherited a divided ruling coalition which had been weakened by historic losses in the 2008 polls.

He had promised to restructure the government and economy and introduce an inclusive brand of politics aimed at uniting the country's different ethnic and religious groups.

Razak's approval ratings have risen from 45 per cent to 69 per cent in February, according to Merdeka centre, an independent polling group. But analysts said recent ethnic and religious differences have undermined his popularity.

D-Day for sense to prevail

ANALYSIS By BARADAN KUPPUSAMY

Kuala Lumpur is in lockdown today to protect the public from any untoward incident in the event that any individual or group chooses to defy measures put in place to stop potentially-disruptive rallies.
 
POLICE have locked down Kuala Lumpur, closed the city's roads and placed restriction orders on 91 individuals, including Pakatan Rakyat leader Datuk Seri Anwar Ibrahim and Bersih chairman Datuk S. Ambiga.

 
The order is also placed on leading members of Ambiga's steering committee as well as on Umno Youth and Perkasa leaders.




A magistrate has ordered the 91 people to stay away from certain spots in Kuala Lumpur between 8am and 6pm today, or they would be arrested on sight.
 
In addition to these measures, all major roads leading into Kuala Lumpur have been closed and others monitored to prevent Bersih demonstrators from entering the city individually or in groups and moving in on Merdeka Stadium, their preferred venue for the rally.

 
Presumably, all the roads leading to the stadium would also be closed with police monitoring traffic to prevent demonstrators from reaching the stadium for the rally which is supposed to take place between 2pm and 4pm.

 
Police are also pressing on with their action against those flaunting the Bersih T-shirts and other paraphernalia.

 
It would indeed take a really determined person to run the gauntlet of restrictions and still make it to the stadium by 2pm for a rally that is in great doubt considering all the police actions to stop it from taking place.

 
At a meeting with Bersih leaders, Inspector-General of Police Tan Sri Ismail Omar offered to let them hold their rally at Shah Alam Stadium.

 
However, Bersih leaders rejected it outright even though Selangor Mentri Besar Tan Sri Khalid Ibrahim is on record as holding it out to them.

 
Bersih leaders are well aware of the historical and political significance of Merdeka Stadium, the place where the country's independence was announced.

 
In November 2007, over 40,000 protesters managed to make their way to the palace and Anwar handed the Bersih memorandum to palace officials.

 
Then, the rakyat did experience change. It galvanised them by reinforcing their belief that together they could prove a point that Umno is not infallible.


 
Long years in power does that to any institution.

 
But five years on, the same argument cannot be repeated any more. Umno is not the same Umno as before because it is reforming itself. Neither is the Election Commission stagnant but willing to engage in dialogue with its critics.

 
Nevertheless, Bersih leaders have called on supporters to press ahead with the rally at Merdeka Stadium and they are not averse to defying the order restricting them from being seen near any of the hot spots in the city.

 
“No matter how badly we are repressed or prosecuted, the peaceful voice of the people will be heard in Kuala Lumpur,” the Bersih steering committee said in a statement.

 
“There is no reason whatsoever to ban anyone from entering the city. We have stated time and again that where Bersih 2.0 is concerned, our only intent is to exercise our constitutional right to gather peacefully and call for clean and fair elections.”

 
The stage is therefore set for a showdown between supporters of Bersih 2.0 and the authorities, who are hell bent on seeing that the demonstration fizzles out.

 
The Bersih rally has appeared large on the nation's political screen ever since Bersih held a press conference announcing its intention on June 5.

 
After the King intervened and persuaded Bersih to call off its rally, the coalition of 62 NGOs agreed to move its venue to Merdeka Stadium, knowing well the stadium's operators would not allow it.

 
The failure to not march was a big letdown for Anwar, who had wanted to have the street rally in a test of strength with Prime Minister Datuk Seri Najib Tun Razak.

 
He had wanted the rally so that he could gather and direct the public storm in time for the 13th general election to galvanise the rakyat.

 
Bersih is organisationally weak and has no muscle of its own. It is weak because the NGOs that make up its core membership are also weak organisationally and rely on Anwar for a unifying leadership and on PAS to fill up the Bersih rank-and-file.

 
Behind the individual NGOs in Bersih, there are no lines of supporters able to take a hard knock or withstand a head-on collision with the authorities, except perhaps for the dedicated PAS members.

 
That would be what the critics have always been saying, that behind Bersih 2.0 is Anwar and that Bersih, the coalition for electoral reform, is merely a tool for his political game plan.

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Thursday 7 July 2011

Yellow: What’s behind the shade & Bersih 2.0?





Along The Watchtower By M. Veera Pandiyan

The organisers of Bersih 2.0 should explain their links and funding by the NED.

IT’S been a rather eventful week shaded by the overwhelming colour of yellow. In psychology, the colour is associated with optimism and cheerfulness.

Yellow, the colour of the sun, is linked with laughter, happiness and good times.

People surrounded by yellow feel optimistic because the brain actually releases more serotonin, the happy hormone that influences mood and sense of well-being.

But yellow can also be quickly overpowering if over-used. When intense, it can inflame and also evoke fear.

Studies show that babies cry more in bright yellow rooms and adults are more likely to lose their tempers in such places.

Apparently, energy levels can be taken up by the intensity of the colour to the point of it becoming an irritant.

Primarily, yellow is used to attract attention. That is why most danger signs come in yellow and black.
Spiritually, the hue is said to provide clarity of thought and enlightenment of mood.

Yellow has a very colourful use in language. The terms “yellow belly” or “yellow streak” connote it with cowardice, deceit or betrayal.

During the Middle Ages, paintings by Christian artists depicted Judas by dressing him in yellow.

In China, a pornographic film is called “yellow movie”, unlike the “blue movie” used in the west and elsewhere.

In Arab culture, people can recognise a “yellow smile” – a fake expression. Such smiles are put on when people want to hide their lack of interest, or any other emotion.

It is similar to the French expression of rire jaune (yellow laughter), which means to laugh from the wrong side of the mouth or feigned mirth.

Politically, yellow characterises freedom and moderation in many countries.



In the US, where yellow traditionally has a negative nuance, the Gadsden Flag, a symbol of American independence, has become popular again, especially with “Tea Party” activists.

The yellow flag, with a fierce-looking rattlesnake, coiled and ready to strike, bears the motto: “Don’t Tread on Me”.

The US is also the origin of “yellow journalism” – the phrase to describe irresponsible, exaggerated, lurid and slanderous reporting that can be traced to the late 1800s when two newspaper owners tried to outdo each other with their front-page stories to get the highest circulation.

Joseph Pulitzer (yes, of the Pulitzer Prize fame) who owned the New York World was the first to make use of sensational journalism to impress readers.

For example, his headline for a story on a heat wave that killed many people was: “How Babies are Baked”.

His rival, William Randolph Hearst, who owned the San Francisco Examiner, bought the New York Journal and also bought over Pulitzer’s top writers to outdo the World.

The rivalry was most intense before the Spanish-American War, when both papers churned out outrageous headlines to whip up support for the US, much to the dismay of other publishers and editors.

Both papers were denounced as “yellow journals”, inferring that Pulitzer and Hearst were cowards who chose the easy way to gain readers through sensationalisation and false news rather than responsible reporting.



Back home in Malaysia, critics of the mainstream media have been accused of being “yellow-bellied”, especially with regard to positions taken on the Bersih 2.0 rally.

The organisers of our yellow rally have since agreed to call it off and hold their gathering in a stadium instead after an audience with the Yang di-Pertuan Agong.

If Bersih 2.0 is indeed all about the noble cause of demanding free and fair elections, it must be rightly given the utmost support by all Malaysians.

The organisers of Bersih 2.0, however, must also explain their association and funding by the US’ National Endowment for Democracy (NED).

Even in the US, many questions are being asked about the NED set up in the early 1980s in the wake of negative revelations about the CIA.

According to William Blum the writer of Killing Hope: US Military and CIA Interventions Since World War II, the NED was set up to overtly do what the CIA had been doing covertly for decades.

He described it as a “masterpiece of politics, public relations and cynicism”.

Ron Paul, a Republican Congressman from Texas, described the NED as “nothing more than a costly programme that takes US taxpayer funds to promote favoured politicians and political parties abroad”.

“What the NED does in foreign countries, through its recipient organisations the National Demo­cratic Institute and the International Republican Institute, would be rightly illegal in the US.

“The NED injects soft money into the domestic elections of foreign countries in favour of one party or the other.

“It is particularly Orwellian to call US manipulation of foreign elections ‘promoting democracy.’

“How would Americans feel if the Chinese arrived with millions of dollars to support certain candidates deemed friendly to China? Would this be viewed as a democratic development?” he asked.

With such questions, don’t Malaysians deserve to know more about links between Bersih 2.0 and other Malaysian NGOs funded by the NED?

> Associate Editor M. Veera Pandiyan likes Coldplay’s song “Yellow”.

IMF - Lagarde’s Challenges





Raghuram Rajan

CHICAGO – Now that the dust has settled over the selection of the International Monetary Fund’s managing director, the IMF can return to its core business of managing crises. Christine Lagarde, a competent and well-regarded technocrat, will have her hands full with three important challenges.

The first, and probably easiest, challenge is to restore the IMF’s public image. While the criminal case against Dominique Strauss-Kahn on sexual-assault charges now seems highly uncertain, the ensuing press focus on the IMF suggests an uncontrolled international bureaucracy with unlimited expense accounts, dominated by men with little sense of restraint.

Fortunately, the truth is more prosaic. Top IMF staff face strict limits on their allowable business expenses (no $3,000 per night hotel rooms, despite reports in the press), and are generally underpaid relative to private-sector executives with similar skills and experience.

The IMF, like many organizations where workers spend long trips together, has its share of intra-office romances. But the environment is professional, and not hostile to women. A previous incident in which Strauss-Kahn was let off lightly for an improper relationship with a subordinate clearly suggests that the Fund needs brighter lines for acceptable behavior and tougher punishment for transgressions. But other organizations have dealt with similar issues; the IMF needs to make the necessary changes, and, equally important, get the message out that the DSK incident was an aberration, not the tip of the proverbial iceberg.

Mess in Europe

The second, and perhaps most difficult, challenge facing Lagarde, is the mess in Europe, where the IMF has become overly entangled in eurozone politics. Typically, the IMF assesses whether a country, after undertaking reasonable belt-tightening measures, can service its debt – and lends only when it is satisfied that it can. The entire objective of IMF lending is to help finance the country while it makes adjustments and regains access to private borrowing. This also means that a country with too much debt should renegotiate it down before getting help from the IMF, thereby avoiding an unsustainable repayment burden.

Perhaps swayed by promises of eurozone financial support (and Europe’s desire to prevent default-fueled financial contagion from spreading to countries like Spain and possibly Italy), the IMF took a rosier view of debt sustainability in countries like Greece than it has in emerging markets. But this has not “helped” such countries, for the availability of soft credit from the eurozone or the Fund only enables a greater accumulation of debt.



Ultimately, debt can be repaid only if a country produces more than it spends. And the higher the debt, the less likely it is that the country will be able to achieve the mix of belt-tightening and growth that would enable it to generate the necessary surpluses. Delayed restructuring eventually means more painful restructuring – after many years of lost growth.

If troubled eurozone countries, especially Spain, start growing rapidly again, there is still a “muddle-through” outcome that might work. With too-big-to-save countries like Spain in the clear, the debt of highly-indebted peripheral countries like Greece could be written down through interest waivers, maturity extensions, and debt exchanges. The eurozone – and the European Union – could survive its fiscal crisis intact.

Significant haircut

But having failed to insist on an up-front restructuring, the IMF will face problems. With private investors reluctant to lend more or even to roll over existing debt, the bulk of Greek debt at the time of any restructuring (or whatever it is euphemistically called) will be from the official sector. How the resulting losses imposed on debt holders will be divided between the various eurozone institutions and the IMF is anyone’s guess. For the first time in its history, the Fund might have to take a significant “haircut” on its loans, and it will have to prepare its non-European shareholders for it.

 Being independent

A greater dilemma will emerge if the muddle-through strategy does not seem to be working. At some point, the IMF’s strategy, which should be focused on the distressed country’s citizens and its creditors, should depart from that of the eurozone, which is more willing to sacrifice individual countries’ interests for the larger interest of the monetary union. Lagarde’s challenge will be to chart a strategy for the IMF that is independent of the eurozone’s strategy, even though she has been intimately involved in formulating the latter.

The third challenge for Lagarde concerns the circumstances of her election. It is not inconceivable that a number of emerging-market countries will get into trouble in the next few years. Will the Fund require the tough policy changes it has demanded of countries in the past, or will Lagarde’s need to show that she is not biased towards Europe mean that future IMF interventions will become more expansive and less demanding? A kinder, gentler Fund is in no one’s interest, least of all the distressed countries and the world’s taxpayers.

Finally, there is a challenge that seems to be pressing, but is not. In her campaign for the position, Lagarde emphasized the need for diversity among the IMF’s top management. But what is really needed is the selection and promotion of the best people, regardless of national origin, sex, or race.

Clearly, the IMF’s existing culture and history will bias its selection and promotion of staff towards a certain type of person (for example, holders of PhDs from US universities). That commonality in backgrounds among IMF personnel allows the Fund to move fast in country rescues, not wasting time in endless debate. In the long run, more diversity is needed. But if it is attempted too quickly, in order to paper over the fact that a European is in charge once again, the Fund risks jeopardizing its key strength.

The IMF is perhaps the central global multilateral economic institution at a time when such institutions are needed more than ever. Lagarde arrives to lead it at a difficult time. We all have a stake in her success.
Raghuram Rajan, a former IMF chief economist, is a professor at the University of Chicago’s Booth School of Business.

Wednesday 6 July 2011

Stupid central banker tricks







The euro has rallied against the dollar despite worries about Greece as investors bet on ECB rate hikes.
The euro has rallied against the dollar despite worries about Greece as investors bet on ECB rate hikes. Click chart for more on currencies.
NEW YORK (CNNMoney) -- Greek debt crisis? What Greek debt crisis?

The European Central Bank is meeting this Thursday and is widely expected to raise interest rates by a quarter of a percentage point to 1.5%. That would be the second rate hike by the ECB this year.
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Sure, the austerity vote in Greece is good news since it could mean the worst-case scenario fears about a euro meltdown may not be realized.

But this isn't the end to the difficulties in Greece. Doesn't it seem just a bit odd that the ECB is contemplating more tightening at a time when there are still legitimate worries about the problems spreading to Portugal, Ireland, Italy and Spain? Moody's downgraded Portugal's debt to junk status on Tuesday.

The sovereign debt woes could be disastrous news for banks in France and Germany -- the two big euro zone nations that actually have somewhat healthy economies.

But the ECB, unlike the Federal Reserve in the U.S., only has one mandate: inflation. (The Fed is charged with watching prices as well as employment.)

And even though commodity prices have come back from their peaks earlier this year, they are still somewhat alarmingly high. Crude oil, for example, has crept back above $95 a barrel. So that may be all that ECB president Jean-Claude Trichet needs to justify bumping rates up a bit.

Still, will the move backfire?

Another ECB rate hike would further widen the gap between interest rates in the euro zone and here in the United States. (They've been near zero since December 2008.) The general rule of thumb in the land of paper money is that the higher the interest rates are, the stronger the currency.

Europe cited as scariest risk to economy

But that's a problem from an inflation standpoint. With oil and many other commodities denominated in dollars, the weaker the greenback gets, the more likely it is for commodity prices to go higher.

"An ECB rate hike means a higher euro going forward," said Brian Gendreau, market strategist with Financial Network Investment Corp., a Segunda, Calif.-based advisory firm.

"It seems paradoxical that Europe, with its very serious problems, has a currency that's strong and rising but that's a reality. That means the trading bias is in favor of a lower dollar and higher oil prices," Gendreau added.

It makes you wonder if David Letterman needs to expand his stupid tricks franchise and create one specifically for central bankers.

Other currency experts wondered if the ECB should just leave well enough alone since crude prices have pulled back in the past few months after surging due to Arab Spring-inspired supply disruption fears.



"I don't think the ECB would be doing the right thing with a rate hike. Oil prices are high but inflation pressures have abated quite a bit," said Kathy Lien, director of currency research for foreign exchange brokerage GFT in Jersey City.

Lien said the ECB needs to pay more attention to slow growth in Europe -- even if it's not officially one of that central bank's particular mandates.

"Price stability is the top priority but the more important question is should the ECB be doing this during a fragile point of negotiations with Greece?" she said. "Raising rates makes financing more difficult for people in Europe."

What makes matters more vexing is the fact that it's not as if the ECB won't have other opportunities to raise rates soon if inflation does in fact pick up.

The ECB will meet again on August 4 and has another meeting scheduled for September 8. Wouldn't it be more judicious to wait for at least another month or two to see how the situation in Greece plays out before rushing to raise rates again?



"I am a little puzzled by why the ECB seems so intent on raising interest rates right now. It's not going to ease any of the problems in the peripheral euro countries," Gendreau said.

Still, some think that the ECB rate hike may be a non-event. That's because the euro has already rallied against the dollar this year despite all the negative headlines about Greece, Portugal, Ireland, etc.

"The speculation about a rate hike has been in the cards for a couple of months," said Ian Naismith, co-manager of The Currency Strategies Fund (FOREX), a Sarasota-Fla. Based mutual fund specializing in foreign exchange investments.

Naismith pointed out that just because the ECB is likely to raise rates on Thursday does not mean that this is the beginning of a long cycle of rate hikes. The key is going to be whether Trichet signals that he's still worried about inflation and that more rate increases are on the way.

"Nothing is etched in stone," Naismith said.

Let's hope so. The ECB does seem strangely hell bent on rate hikes even though Europe is still in the midst of major financial upheaval.

But the last thing Greece, other troubled European nations and the rest of the world for that matter, need is for the ECB to make matters worse with ill-timed policy decisions.

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The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks. To top of page

China's competitive advantage






Research from Jack McCann of Lincoln Memorial University, in Tennessee, suggests that China could become the dominant economic power within a few years if it exploits the competitive advantages it is creating politically, culturally, legally and economically.

Writing in the current issue of the International Journal of Sustainable Strategic Management, Jack McCann suggests that China's business and political leaders have long worked to build strong relationships with developing countries. However, it is strengthening of its global political presence that is closely aligned with economic expansion, which could lead to a sustainable dominant position in the world.

The Chinese Communist Party has governed for the past 55 years and remains secure in its position as the sole political party in China. Despite its seeming inability to respond with ease to changes in Chinese society, the Party has nevertheless witnessed an average annual growth of about 10% for nearly two decades and unique stability during the current world economic crises. Indeed, China's merchandise trade has been growing at about 14%, three times faster than world trade, making China the third largest economy as of 2008.



"On paper, globalization poses the long-term potential to raise living standards and reduce the costs of goods and services for people everywhere," says McCann. However, globalization does not mean equitability. China currently produces almost three-quarters of the world's today, nearly two-thirds of its bicycles, a third of its and air conditioners, and half of the world's microwave ovens. "China's pool of cheap labor may dominate world labor markets for decades, giving it a monopoly on cheaply manufactured goods," McCann explains.

There is an intriguing undercurrent to China's development and trade practices that concerns those in the West. "Competitive strategies, currency manipulation, and piracy of intellectual property are causing concern in the and creating protectionist reactions in many countries," adds McCann. It is interesting to note that as China utilizes its various competitive advantages, not least those ethical considerations, it has in recent years become the world's second-largest oil consumer after the US while the US trade deficit with China increases year after year into the hundreds of billions of dollars. Globalization has wrought new opportunities for many nations. China is no different than any other in attempting to make the most of this emerging world order.

More information: "The Chinese competitive advantage" in Int. J. Sustainable Strategic Management, 2011, 3, 1-12
Provided by Inderscience Publishers (news : web)
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