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Stephen J. Glain

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Stephen J. Glain

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Stephen J. Glain

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Opportunity Lost, Part II: The Consequences of Incarceration

February 11, 2009 admin
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Al-Sijill 2009-02-12 21:48:57The chaos in Gaza can be traced back to a failed US initiative to ease Israeli pressure on the Palestinian economy. The 2005 Access and Mobility Agreement was subverted, first by Israeli foot-dragging in negotiations with the US government over the terms of a high-tech scanner network, and later, after Hamas's January 2006 victory in parliamentary elections, by Israel's hawkish friends in Washington. However sincere President Barack Obama may be in his quest for Middle East peace, the sad story of the AMA reveals how entrenched in the American political process are interest groups hostile to the prospect of an independent Palestine and a viable economy on which to build it.

Washington responded to Hamas’s election triumph with a financial embargo on the Palestinian Authority. The Access and Mobility Agreement was all but frozen, particularly as it related to the Karni crossing, Gaza’s main artery for trade. On average, only some 20 trucks crossed into and out of Gaza in 2006, about 5 percent of the volume targeted by the mobility accords. A year after the US sanctions took root, the World Bank had declared Karni’s operations as “unacceptable.” The Gazan economy continued to deteriorate and by mid-2007 the United Nations was warning of a humanitarian crisis.

Though few observers on the US side were expecting Hamas’s landslide win, the American Israel Political Affairs Committee was taking no chances. Well before the vote, the Washington-based lobbying group was circulating memos to lawmakers encouraging them to reject any Palestinian government in which Hamas had a role. (AIPAC keeps a meticulous record of how American lawmakers vote on Israel-related legislation. It regularly asks a friendly Senator or House member to demand a roll-call vote so it can “score” members for their voter loyalty, then publishes the results in AIPAC Insider, the group’s quarterly periodical.) On its website, AIPAC took credit for mid-wiving House Resolution 575, signed on November 18, 2005, which declares that “Hamas and other terrorist organizations should not participate in elections held by the Palestinian Authority.”

Within days of Hamas’s victory, and with AIPAC assiduously working the process, two draft resolutions were introduced from the House of Representatives and one from the Senate. Language from the bills was synthesized into a small provision and inserted into an emergency funding bill for the Iraq war, which was signed into law on June 15, 2006. The provision forbids “appropriations for foreign operations, export financing, and related programs … for assistance to the Palestinian Authority.” Unusually, the legislation denied the president a waiver authority.

With the stroke of a pen in Washington, all US-funded projects in Palestine were cut off. They included programs to make the Palestinian judiciary more transparent, to train and educate its police force, and to professionalize the Palestinian election commission. In a June 23 memo, USAID instructed its contractors in the West Bank and Gaza to “ensure no funds are expended which could be considered as assistance to the Palestinian Authority.” European donors largely followed suit.

For Keith Dayton, the legislation was a surprise attack on his efforts to upgrade the Karni crossing. Only a month or so before the Palestinian elections, the US Army lieutenant general and former Pentagon policy planner had been appointed by the State Department as its security coordinator on the project. Suddenly, he and his team of experts were prohibited from dealing directly with any member of the Palestinian government other than President Mahmoud Abbas. To compensate, a detail of Canadian military officers and engineers were brought in to act as proxies for the Americans.

Lacking the US funds he requested to strengthen security and to bolster economic activity on the Palestinian side of the crossing, Dayton was reduced to cobbling together non-US aid on a piecemeal basis. He and his team persuaded a Dutch NGO to help finance a flower farm, for example, and dollops of aid were cajoled from Turkey and Sweden. They managed to raise C$1.2 million from the Canadian government to buy security cameras, and a British aid agency agreed to train border guards and build a new mess hall.

For four weeks in January, Gaza erupted into an urban killing ground as gunmen from Fatah and Hamas, following months of tensions, engaged in running street battles. To avert a civil war, King Abdullah of Saudi Arabia invited leaders from the two sides to Mecca, where they hammered out a truce that became the foundation for a Hamas-led unity government. To shore up Abbas, and to preempt a wider conflict, the Bush administration in January 2007 announced it would provide the president’s office with some $86 million in aid, $16 million of which was to be invested in Karni. But when the aid package was submitted to Capitol Hill for approval, Congress blocked it. Nita Lowey, a legislator who chairs the State and Foreign Operations subcommittee of the House Appropriations Committee, said she placed a hold on the package out of fear that some of the money could find its way into the coffers of Hamas.

The freeze perplexed many observers in Washington. After all, they argued, the aid was to be distributed not in cash but in kind, as items and services like computers and training procured by the Dayton team. Capitol Hill sources say Lowey made her decision after meeting with Daniel Ayalon, Israel’s then- ambassador to Washington, “who makes no distinction between Hamas and Fatah,” according to a legislative aid who requested anonymity.

In mid-March, a few weeks after Lowey’s decision, Ephraim Sneh, who was managing Israel’s side of the AMA, traveled to Washington for the annual leadership conference of AIPAC. There, he admonished the group’s members for not supporting the Karni redevelopment as a cornerstone of the mobility agreement. He called on the offices of Lowey and the late Tom Lantos, the California representative who was a co-sponsor of the anti-Hamas bills, and emphasized the importance of Karni. He and an aid from the defense ministry also met with members and staff of the foreign relations and foreign appropriations committees. At every stop, Sneh delivered the same message: what’s good for the Gazan economy is good for the state of Israel.

Eventually, some funds were released for Dayton’s operations. But by then it was too late. In June, Hamas overran US-backed Fatah forces in a brief but bloody civil war. Soon after that, radical groups unleashed their rocket attacks on southern Israel.

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The lure of Lisbon

February 7, 2009 admin
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The National  2009-2-7 Lisbon, once a departure point for fearless explorers, is now a friendly port for curious souls. Take a wrong turn down the serpentine streets that radiate from Castelo de Sao Jorge, the ancient citadel that was first manned by fifth century Visigoths, and the wayward traveller suddenly finds himself in an arrangement of tightly clustered homes accompanied by hushed conversation, lines of laundry rustling in the wind, and dice clattering against a dominoes board.

Lisbon had beguiled me for years. In my favourite film, Casablanca, the Portuguese city is the staging point where refugees from the Second World War hope to flee to America (“The plane to Lisbon,” remarks Capt Louis Renault to the mysterious Rick Blaine as a twin-engined Lockheed Electra roars overhead, “You should like to be on it.”)

Later, after exiling myself to Hong Kong in the 1980s, I made my first visit to neighbouring Macao, a Portuguese colony charmingly gone to seed. In the mid-1990s, as a Tokyo-based reporter, I encountered the remnants of Portuguese imperium in Nagasaki, where Lisbonese explorers had made landfall in the 16th century.

On the map, Portugal is a narrow slab of terrain that occupies three-quarters of the Iberian coastline. How, I had often wondered, did such a small country manage to rule half of the known world? The only way to find out of course, was to take Insp Renault’s advice. So last spring, when my wife, Christina asked where I’d like to go for a holiday, I suggested Portugal.

Our journey, decades in the making, was well worth the wait. From one of the city’s iconic trams, the lovingly restored workhorses that obligingly shudder, squeal and groan as they round the rails, we surveyed glorious, quotidian Lisbon: flirting young lovers, bountiful markets, tiny cafés and wine shops, and elderly men chatting conspiratorially on park benches, their shadows shifting slowly under the late afternoon sun.

One of the world’s oldest cities, shaped by not one but two great civilisations, Lisbon has the lightly-worn charm of a matron that does not have to announce herself. Inhabited since the Paleolithic era, Portugal has hosted Phoenician traders, Greeks, Carthaginians, Celts and Goths. For six hundred years, beginning in the late third century BC, it was part of the Roman Empire, which endowed the city with roads, aqueducts, vineyards and legal systems – many of these structures remaining in place today.

But it was the Moors – the North African Muslims who drove out the Roman-usurping Visigoths in the eighth century – who defined Iberian culture. As they did in Andalusia and Sicily, the Muslims rebuilt Portuguese cities with intimate, narrow streets, vaulted ceilings, arched windows and edifices enamelled by colourful tiles. They nurtured close relations with Jews and Christians and embroidered local culture with Arabesque music, literature, ceramics, and cuisine.

Over the next millennium, Portugal would come to be occupied by Spaniards, Britons and Napoleonic Frenchmen. It would become the incubator for the Age of Discovery, boasting a cadre of steely-eyed navigators during the High Renaissance – Vasco de Gama and Ferdinand Magellan are to Lisbon what the Beatles are to Liverpool – and it endured 60 years of dictatorship in the last century before it finally settled down as a stable and stately republic. Today’s Lisbon, along with its smaller cousin to the north, Porto, boasts world-class museums, restaurants, bars and vibrant theatre and music scenes.

Though the country remains an underappreciated destination and is relatively inexpensive by European standards, that could soon change; The New York Times last year identified Lisbon as the second most desirable tourist spot (behind Laos), citing the city’s growing prominence as a cultural centre. In Restauradores, the city’s epicentre, there are four female allegories at the foot of the statue of Dom Pedro IV, the first emperor of an independent Brazil. They represent Wisdom, Strength, Justice and, in harmony with the city’s laid back vibe, Moderation.

Businessmen wear their suit coats jauntily over their shoulders the way university dons wear capes, elderly women dress in black as if in perpetual mourning, and young people, many of them tattooed and pierced, gather outdoors for espresso or beer at cafés like Casa Brasileira along Rua Augusta, a cobbled avenue lined with bars, boutiques, restaurants, and hotels.

Among the tables and chairs outside Casa Brasileira is a bronze statue of Fernando Pessoa, Portugal’s greatest 20th-century poet and a libertine habitué of this very street until he was claimed by cirrhosis in 1935. Pessoa’s cautionary example notwithstanding, Old Lisbon is a good place for lunch, holiday-gift shopping, and as a staging area for a do-it-yourself tour of the city.

Devastated by an earthquake in 1755, Old Lisbon consists of the adjacent Chiada, Baixa, Mouraria, and Alfama districts. They line the city’s southeastern coastal rim which, along with Belém, a 15-minute tram ride westward, is the best stretch Lisbon has to offer the first-time visitor. We began in Mouraria, with the castle at its apex. The walled fortress – which the Moors occupied in the 9th century after ejecting the Visigoths, only to be dispatched three centuries later by Christian reconquestas – served as a royal residence from the 1500s to 1700s, and as a prison, arms depot, and a theatre centuries after that. Seen in 360-degree splendour from between the castle’s ramparts, Lisbon appears as a sun-splashed canopy of red-tiled roofs and whitewashed chimneys enveloped by the Tejo River.

Castelo de Sao Jorge seems to hover like a nimbus above Lisbon’s old quarters. The air within its battlements is fragrant from lush gardens, with nothing but whispering pines and clouds to shade them. Then there is Alfama, the Moorish kasbah that clings to the citadel’s southeastern flank, which thrives in the shadows and dark romance of its own labyrinthine layout.

Once a well-to-do Muslim neighbourhood, Alfama was reduced by an earthquake into a working class port district. Earthquakes are as much a part of Portuguese identity as Christian relics and goat cheese: like Californians, the Lisbonese discuss memorable tremors – particularly the Big One, which levelled much of the city when it struck back in 1755 – the way other people discuss classic World Cup football matches. Economic modernity, a process accelerated by Portugal’s membership in the European Union, has leavened Alfama with hip bars and clubs, as well as boutiques, museums and some of the city’s best restaurants. A must-see is Casa do Fado e da Guitarra Portuguesa, a museum where visitors can learn about Lisbon’s finest art form, the musical genre known as fado. Often likened to American blues for its soulfulness and elegiac longing, fado is enjoying a renaissance among young Lisbonese in concert with Alfama’s economic rebirth.

Christina and I dined that night at House of Fado, a kind of theme park for the genre. We enjoyed servings of dried ham, olives, and goat cheese. There I met Mario Pacheco, one of Lisbon’s top fadista guitarists. Tall and urbane with a patrician brow and a tightly clipped moustache, Pacheco was gracious enough to chat with me between sets. “The tradition of fado runs deep,” he told me. “It is a timeless form of expression and its importance is increasing.”

Having indulged our senses with a night of torch music, we satisfied our spirits with a pilgrimage to Sedes Episcopalis– known locally as Sé – a cathedral built for the first bishop of Lisbon by King Afonso Henriques in 1150, three years after he vanquished the Moors.

Medieval, Romanesque, and forbiddingly monastic, Sé suggests a more restrained Christianity than the one that went global after Portuguese explorers found new lands full of both pagans to convert and profits to be made. With the Age of Discovery and the fortune it unlocked, Lisbon went from austere to baroque. For a taste of the city’s golden era – its imperial bling, if you will – visitors must take a short ride on the Number 14 tram to Belém at the mouth of the Tagus River.

Belém was the fountainhead of Portuguese empire. Under King Manuel I, who reigned for a quarter century beginning in 1495, the great caravels set forth from this now-lazy seaport in search of new lands to colonise and resources to plunder. Da Gama, Magellan, Juan Sebastián Elcano and their free-spirited brethren established trading hubs of Hormoz, Goa and Macau, “discovered” Brazil, claimed the Spice Islands, rounded the Cape of Good Hope and made landfall on both shores of Africa. In 1543 they became the first westerners to reach Japan; Nagasaki, which became an enclave for foreign legations, remains a Christian stronghold to this day.

The wily Manuel, who survived many a court intrigue and conspiracy, forged commercial treaties with China and Persia and emancipated the Jews imprisoned by his predecessor (they were later subject to forced conversions, however). The money came pouring in, and the king invested heavily in the accoutrement of empire.

The Mosteiro dos Jeronimos, a cathedral and monastery, is a jewel of Manueline architecture, with a soaring vaulted nave, an elegant refectory replete with a tiled mosaic of Christ feeding the multitudes, and a serene, if heavily embroidered cloister.

Both da Gama and Manuel, along with his wife, Dona Maria João III, are entombed here. The mosteiro, which was financed by a levy on the spices, precious stones, and gold harvested from Lisbon’s far-flung properties, is an imposing monument to the power of faith, trade, and imperial hubris.

We spent our last day in Belém, which, in addition to its museums, offers beautiful gardens and seaside strolls. We enjoyed a languid lunch of bacalhau – salty cod with roasted baby potatoes – at the Rosa dos Mares on Rua de Belém and noted that Lisbon, having spent much of its history exploring and colonising other lands, has settled into an easy old age, satisfied with being conquered by a world of inquisitive and appreciative passers-by.

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The Tomb of Queen Sesheshet

February 2, 2009 admin
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Smithsonian.com 2009-02-03 "Let's start from the beginning," Abdel Hakim Karar suggests as he scampers up the north side of an archaeological dig of sun-bleached pink stone and gravel.

When you make your living unearthing the royal riches of ancient Egypt, the beginning is a very distant place indeed – more than four millennia away, during the time of the 6th dynasty. We are standing on the rim of the necropolis of King Teti at Saqqara, where Karar and his team of archaeologists are excavating the tomb of Queen Sesheshet, Teti's mother. The tomb, and the once five-story-high pyramid that accommodates it, was until recently a dump for the sand and detritus of surrounding digs. But the intuitive power of Karar and his inimitable boss, Zahi Hawass, secretary general of Egypt's Supreme Council of Antiquities, rescued it from oblivion last November. It was a once-in-a-lifetime strike – how often does one "discover" a pyramid? – and it may shed light on a particularly notorious episode in a pharaonic tradition of court intrigue and murder most foul.

"We suspected this was the mother's pyramid," says Karar, as he gestures to a horizon line interrupted only by the iconic step pyramid of Saqqara, the Eiffel Tower of its time, built by the legendary 3rd dynasty ruler Imhotep. "Then we came across stones carved with the characters for 'Seshi' and we knew what it was."

The surrounding complex was discovered and unearthed by a fraternity of French and British archaeologists in the mid-19th century. Its centerpiece is the pyramid of Teti, the first ruler of the 6th dynasty, and the subsidiary pyramids of his two principal wives, queens Iput I and Khuit. Like many such digs in Egypt -- a country that, because of its strategically vital location, has played host to several great civilizations -- Saqqara offers a bounty of archaeological wealth beyond what was once the property of pharaohs. Enveloping the site is a containing wall of dung-colored mud bricks built in 330 B.C. by Ptolemy I, the Macedonian general who campaigned with Alexander the Great and who may have been mentored by Aristotle. The U-shaped wall contained a drawing of the funeral procession that followed the death of a sacred bull as ordained under Serapis, the Greek deity promoted by Ptolemy as a way to fuse Hellenist and Greek religions.

Hawass, who began working at the Saqqara necropolis in 1988, says Sesheshet's pyramid "might be the most complete subsidiary pyramid ever found" in the area. It is certainly one of the largest. The remains of its 72-square-foot base suggests a pitch of 51 degrees, a common feature of 5th and 6th century pyramidal design, and a height of 46 feet. Large, smoothly carved blocks of limestone around the southern end of its foundation is all that's left of the casing that gave Egyptian pyramids of the time their clean, elegant lines. The entire structure would have been built with bronze tools.

Beginning in the 4th dynasty, the kings of Egypt were careful to commemorate their wives and mothers with regal monuments. (In a monograph published in a 2000 edition of Archiv orientalni, a quarterly Czech archaeological journal, Hawass hinted at the possibility of a third subsidiary pyramid in honor of Teti's mother.) Yet the size and grandeur of Sesheshet's pyramid is as much a political statement as it is an expression of filial piety. Sesheshet came from a powerful family at a time of civil war within the royal clan and she protected Teti for much of his 20-year rule. Sadly for Teti, her talismanic powers did not extend from the grave; after her death, according to the Ptolemaic historian Manetho, Teti was murdered by his own bodyguards working in league with the treacherous Userkare. In testament to the hardboiled political culture of the time, Userkare himself was ousted by Pepy I, son of Queen Iput I, only a few years after he had seized the throne. While Manetho is vague as to Userkare's fate, there are few surviving monuments to his rule, the modern-day equivalent of being airbrushed out of the history books and a fate worse than death in edifice-obsessed ancient Egypt.

While Sesheshet's tomb is believed to have been plundered by thieves, like many Egyptian pyramids, the artifacts discovered in Iput I's burial chambers offer a glimpse of what might have been kept there: vessels and dishes made of alabaster and red clay, tools lacquered in gold, a sarcophagus carved from limestone and layered with gypsum, and canopic jars filled with the royal viscera in storage for the afterlife. The walls and pillars of the tomb may depict scenes of court life and religious rites and there will likely be granite stele with inscriptions identifying the royal matron as a "mother of the king of Upper and Lower Egypt."

Karar, who studied at Cairo University and has spent half of his 50 years digging up ancient relics, says he hopes the tomb will also yield new details about how the ancient Egyptians related to other such geopolitical powers as Rome, Nubia, Syria, Greece and Persia. The record of Sesheshet's era is particularly incomplete, he says, which is another reason why the discovery of her pyramid is so significant.

"It's never boring," says Karar of his profession. "Egyptians now appreciate what we do because of the attention it is getting in the media. They no longer take their heritage for granted." Sesheshet, whose name evokes a goddess of history and writing, would have approved.

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Barack Obama, Robert Gates, and the Rumsfeld Pentagon-State Relationship

January 6, 2009 admin
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US News & World Report 2009-01-07 19:10:08They used to make movies about men like Robert Gates, redemptive tales of the quiet hero who is called in to save a desperate situation and, through grit, cunning, and fair play, prevails against impossible odds. Fade to black; roll credits. But not yet for Citizen Gates. The U.S. secretary of defense, who has spent the past two years cleaning up after his inimical predecessor, Donald Rumsfeld, has been asked by President-elect Barack Obama to remain for the new administration's transition period. In many ways, it is an inspired choice. Since his appointment in 2006, Gates has worked assiduously to salve alliances estranged by Bush unilateralism. He has criticized the Pentagon's new weapons systems, including the $65 billion F-22 fighter program, as extravagant and outdated. Most admirably, he has called for a revival of American diplomacy with an expansion of the State Department's foreign service, which, he points out, has fewer diplomats than the Pentagon has lawyers. (With an annual budget of over $500 billion, the Defense Department spends more than 50 times as much as Foggy Bottom.) Beneath Gates's reaffirming Hollywood narrative, however, is a noir subtext. For the soft-spoken, gray-flanneled defense secretary has defined Pentagon authority more broadly and more aggressively than any of his predecessors. While warning against the militarization of U.S. foreign policy, as he did in a noteworthy July speech, Gates has done less to empower the State Department and more to entrench the concept of civilian-military partnerships in "stability operations"—Pentagon jargon for the rebuilding of failed states before they become incubators of radical Islam. If neglected civilian agencies cannot keep up with the abundantly resourced military, Gates has implied, the Pentagon will take the lead, and often in areas where it was once prohibited from going. A Rumsfeld legacy that Gates has pointedly not repealed is Pentagon Directive 3000.05. It declares that "U.S. military forces shall be prepared to perform all tasks necessary to establish or maintain order [in unstable or post-conflict areas] when civilians cannot do so." Such tasks, according to the directive, include the rebuilding of security forces, correctional facilities, and judicial systems, as well as reviving private enterprise, constructing or repairing critical infrastructure, and developing representative government. Lest there be any confusion about the chain of command in such operations, Directive 3000.05 states that the Defense Department "shall continue to lead and support the development of military-civilian teams." Such a sweeping interpretation of Pentagon authority has rattled civilian aid agencies like the United States Agency for International Development and its NGO partners, which are opposed to working closely with the U.S. military on practical grounds as well as moral ones. While the goal of civilian aid workers is to establish sustainable programs aimed at improving people's lives, the military is in the business of winning allies in the war against radical Islam. Civilian groups note how military officers, in an attempt to win over a prominent sheik or warlord in Afghanistan or Iraq, for example, have built schools and healthcare centers in remote areas that quickly fell into disrepair. They also point out that associating with U.S. soldiers and marines exposes their staffs to possible reprisal from hostile regimes. "If we become identified with the military, we become compromised," says George Rupp, president and CEO of the International Rescue Committee. "We should stay in our lane, and [the military] should stay in theirs." The money that supports the Pentagon's nonlethal activity comes largely from its so-called Global Train and Equip budget, another holdover from the Rumsfeld era that has been expanded under Gates. This $300 million fund, established under Section 1206 of the 2006 Defense Authorization Act, was set aside originally to finance counterterrorist activity in Iraq and Afghanistan. Today, 1206 programs flourish from Colombia to Pakistan. Since the launch of 1206, the U.S. military has effectively taken the lead in funding foreign armies, a responsibility that under the Foreign Assistance Act of 1961 belongs to the State Department. (A related provision under Section 1207 funds humanitarian work carried out in tandem with AID.) Outlays under Section 1206 require the concurrence of the secretary of state, which technically makes them compliant with the FAA. But legal experts in the NGO community and on Capitol Hill say the breadth of 1206 funding is beyond Congress's oversight capacity. Ordinarily pliant in response to Pentagon budget requests, Congress is drawing the line on 1206 spending. Lawmakers resisted Gates's demands in 2008 for a doubling of its budget, removal of oversight obligations, and exemption from legislation that prohibits U.S. support of regimes with poor human rights records. (The Defense Department had been working with Pakistan's autocratic Pervez Musharraf under a special exemption until his ouster in 2008.) Lawmakers also refused the secretary's request that 1206 authority be made a permanently budgeted item rather than a two-year revolving allocation. "Section 1206 is just one step in the growing migration of civilian work from the State Department to Defense," says George Withers, a senior fellow at the Washington Office on Latin America. "Clearly, Congress is concerned." However welcome Gates's vocal support for a more robust diplomatic corps, his demand for enhanced funding authority and the expansive language of Directive 3000.05 contributes to the very militarization of U.S. foreign policy he claims to abhor. (He has an enabler in Condoleezza Rice, who by submitting to Pentagon aggrandizement of what was once the work of diplomats has distinguished herself as the weakest secretary of state since Dean Rusk.) It is not enough to call for parity between America's military assets and its diplomatic ones. Until the State Department is restored to the pre-eminence it enjoyed immediately after World War II, the constitutional imperative of civilian-led foreign policy will become more pretense than reality. If that means shifting at least a portion of the Pentagon's procurement budget to Foggy Bottom—the F-22 would be a good place to start—then so be it.

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Desert Advance

December 31, 2008 admin
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Prism-Magazine 2009-01-01 21:11:40Full Article - PDF

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Exorcism By Half

November 12, 2008 admin
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Al-Sijill 2008-11-13 17:30:14Senator Barak Obama entered the 2008 presidential campaign with a full ledger, and the entries on either side more or less balanced out.

His liabilities were daunting: a black man with a Muslim heritage, young and with limited experience as a federal legislator. He opposed far more seasoned pretenders, including Hillary Clinton, his fellow senator and presumed heir apparent to the dynasty begun by her husband and rudely slashed by the Bush interregnum.

His assets were equally formidable. Not since John F. Kennedy’s 1960 presidential run have voters beheld so universally attractive a candidate: He was articulate in a society where oratory had become a rare artifact. He was at once cool, cunning, and fiercely intelligent, as elegant a public speaker as Ronald Reagan and as seductive a stage presence as Bill Clinton, minus the gluttony. Clearly a shrewd judge of character, he surrounded himself with men and women whose reserves of competence and discipline were at parity with his own.

Then there were the extraordinary items, which thankfully for Mr. Obama broke almost exclusively his way. He would campaign amid the rubble of an incumbent presidency that began sabotaging itself almost immediately after its re-election in 2004 with a disastrous plan to privatize Social Security. This was followed by Hurricane Katrina, the sectarian holocaust in Iraq, the indictment of a top White House aid for compromising a CIA operative, revelations of warrantless wiretapping, the politicalization of the country’s once-sacred Justice Department, and finally and decisively, the collapse of Wall Street and the onset of economic recession. When measured against the tragic-comic demise of the Bush presidency, Mr. Obama’s liabilities seem to deflate significantly.

That being the case, was the young Senator’s victory truly the historic, transcendent event it is held to be? Were Americans really converted by Mr. Obama’s accomplishments and his humanist appeals to tolerance and civility? Or did they simply rebel against eight years of Republican misrule, which clung to Republican challenger John McCain like the smell of death?

Certainly Mr. Obama’s election is historic and should be celebrated as such. His campaign was a testament to the power of restraint and reason at a time when citizens – in America and around the world – were weary of the arrogance, fear-mongering and labored hyperbole of the incumbent regime. Many voters, no doubt, saw in Mr. Obama deliverance from Mr. Bush who did more to undermine American interests at home and abroad than any foreign power or terrorist cell. In the aftermath of last week’s conclusive Democratic victory, America’s two-party political system is now in peril; thanks to Mr. Bush and his ghostly commissar, Vice President Dick Cheney, to say nothing of the creepy Sarah Palin and her anti-intellectual claque, the Republican Party – the party of Lincoln, the world’s oldest political movement – has been reduced to a gated community of aging, southern white people.

Voters were also impressed by the brilliance of the Obama campaign, which melded the internet with grass-roots intimacy to decisive effect. As the current administration consumed itself with its own incompetence, and as the field of candidates vying to replace it were felled by one gaffe after another, the flawlessness of the Obama bid became irresistible. As Mr. McCain graciously conceded on election night, his rival ran the superior race, and the voters decided appropriately. Presidential historians will no doubt study the Obama campaign the way military men dissect Wellington’s victory at Waterloo. (An imperfect analogy, actually, as Mr. McCain was no Bonaparte.)

And yet, in Mr. Obama’s triumph for the forces of light there was disturbingly dark subtext. Attempts by Mr. Obama’s enemies to identify him as a Muslim, though not so compelling as to derail his quest, were serious enough to keep him on the defensive. He was careful not to be photographed with Muslims anywhere, let alone in a mosque. His loyalty oath to Israel before the American-Israel Political Affairs Committee was as convincing a parody of a Beltway pol as was Tina Fey’s sendup of Sarah Palin, only without the laughs. During his tour of the Middle East, he kibbutzed heartily with Israelis but allocated a desultory 45 minutes with Palestinians. While touring the West Bank, he did not stand for photo opportunities nor did he give a press conference, pointedly shunning the very people who represent one half of a negotiated peace in that benighted region.

On the Republican side, a woman at a McCain rally told the candidate she could never vote for Mr. Obama because “he’s an Arab.” Mr. McCain’s response was an authentic, if unintentional measure of American Islamophobia.

“No,” Mr. McCain said. “He’s a decent family man.”

The editorial pages of America’s liberal heralds – the New York Times, the Washington Post, Newsweek – largely ignored Mr. McCain’s reply as well as Mr. Obama’s tactical snubbing of the country’s Muslim community. It took Colin Powell, America’s first black Secretary of State and apparently its sole statesman, to acknowledge the appalling bigotry of it all. His comments on CBS Television’s Meet the Press is worth quoting at length:

"I'm also troubled by, not what Senator McCain says, but what members of the [Republican] party say, and it is permitted to be said. Such things as 'Well you know that Mr. Obama is a Muslim.' Well the correct answer is 'He is not a Muslim, he's a Christian, he's always been a Christian.' But the really right answer is 'What if he is? Is there something wrong with being a Muslim in this country?' The answer is 'No. That's not America.' Is there something wrong with some 7-year old Muslim-American kid believing that he or she can be president? Yet I have heard senior members of my own party drop the suggestion he's a Muslim and he might be associated with terrorists. This is not the way we should be doing it in America.”

In politics there are always red lines. Mr. Obama can be forgiven for appeasing a largely anti-Muslim electorate while pandering to its Likudnik proxies, assuming he would sup with the devil today in exchange for a lasting and just Middle East peace tomorrow. But it says something about the character of a society where any serious attempt to relieve a long-suffering people would need to come calling the same way Mr. Obama’s forbearers did – through the back door.

The outcome of America’s 2008 presidential campaign was a welcome salve against two centuries of violent discrimination against black Americans. Yet however redemptive, it also sanctioned a new reality in the politics of ethnicity and religion: American Muslims, particularly Arab ones, are the new darkies.

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Free Market Will Rise Phoenix-Like

October 19, 2008 admin
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The National 2008-10-20 22:48:15Exactly 21 years ago yesterday, the Dow Jones Industrial Average lost 22 per cent of its value in the biggest single-day stock market sell-off in US history. Black Monday, as it was quickly dubbed, ended a five-year bull run that was fuelled largely by leveraged buyouts, heavily margined public listings and exotic derivatives that defied the comprehension of most investors. Black Monday was a milestone in America’s twilight as a global power, or so argued the British academic Paul Kennedy in his book The Rise and Fall of Great Powers, which was published just in time for the crash. The US, Kennedy wrote, was falling prey to “imperial overstretch” and would soon be replaced by Japan as the world’s pre-eminent democratic leader. Economists praised Japan’s emphasis on savings and export-led growth, particularly as the US asphyxiated itself on debt. Zaibatsu, the country’s massive industrial conglomerates, and the trade barriers that insulated them, were considered the way of the future. Vertical integration and mercantilism were hot, outsourcing and open markets were passé. Ten years later, emerging markets were in crisis, having built their economies around the by-then repudiated Japanese model. It took a series of emergency bailout packages administered by the International Monetary Fund (IMF) – conditioned, of course, on the recipients’ embrace of neoliberalism as proselytised by the Clinton administration – to save the day. Free-market capitalism was back. Another decade, another wrenching role reversal. Having righted its books under Mr Clinton – owing in part to the collapse of the Soviet Union, which neither Kennedy nor the CIA anticipated – as well as some old-fashioned fiscal restraint, the US went on another borrowing bender. The reckoning that is now upon us has once again revealed “democratic” capitalism as a viral agent of financial ruin. President George W Bush’s “ownership society”, the notion that the cornerstone to civilisation is a home mortgage – preferably a fixed-rate one – is in tatters. The question is: what will take its place? Until now, the failure of one economic model always made way for something else. It was the scandalous consumption of the Gilded Age, for example, that transformed Marxism from an abstract theory into a worldwide movement. Only the speculative excess that led to the Great Depression could have turned a wanton speculator like Joseph Kennedy, the father of former president John F Kennedy, into a New Deal regulator as head of the newly established Securities and Exchange Commission. What is so conspicuous about the exhaustion of laissez-faire economics – this time, at least – is the lack of a viable alternative. A wholesale repeal of the Reagan-Thatcher revolution is unlikely. European leaders last week seemed genuinely reluctant to re-nationalise their economies after nearly three decades of privatisation and deregulation, however mixed the results. Japan remains a couch potato, having failed to make the transition from top-heavy, highly regulated industrialised economy to a more nimble service-based one. The abrupt drop in oil prices has shown how vulnerable massively subsidised petro-economies like Russia and Venezuela are to fickle commodities markets. The IMF, which was so prolific during the currency crises of the past decade, has been largely absent amid the current one, in which its most powerful shareholders are complicit. That leaves China. Given its sustained growth and rising income levels against unprecedented demand for jobs, capital and energy, China should rank as one of the best-managed economies in the past quarter century. Its foreign exchange reserves have swollen to nearly US$2 trillion (Dh7.3 trillion) at a time when the rest of the world, the US first and foremost, is starved of liquidity. Despite complaints from its trading partners, Beijing has methodically and deliberately opened much of its domestic market to foreign goods and services while lifting foreign exchange controls to encourage investment outflow. China is also authoritarian, corrupt, polluted and opportunistic, having partnered with odious regimes in exchange for access to petroleum and natural gas reserves. The Chinese Communist Party, like any political machine, is little more than a dispenser of patronage. It can persuade and coerce, but it cannot inspire. Having vaulted from destitution to prosperity in such a short period of time, the Chinese seem to have bypassed the euphoria that often accompanies economic modernity for a dreary, collective cynicism. As an example of fiscal prudence and restraint, the Chinese growth model has merit, but it comes at too high a cost. Democratic capitalism may have been consigned to yet another stint in history’s dustbin, but there is a reason why it keeps popping up for a fresh turn. The system that can more efficiently indulge our best and worst instincts – innovation, ambition, greed, recklessness – has yet to be invented. One way or another, the free market, with its duelling capacities to build and destroy, will reappear for another wild ride.

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Death Notice

September 23, 2008 admin
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The National 2008-09-24 22:37:08GREED, of complications relating to over-leverage, under-regulation, and lax oversight, at its home in the Nether Reaches of Your Soul. Since the 16th century, when it played a key role in the Dutch tulip boom, Greed worked in tandem with alter-ego Fear as the driving force behind the global free-market system. (Asked for comment, Fear politely declined, citing a busy schedule that has it everywhere at once.) Greed was also complicit in the Long Depression of 1873, the Great Depression of 1929, the 1980s Black Monday stock market crash and Savings and Loan crisis, the imploded dot.com bubble in 2000, and most recently, the mortgage-backed security collapse. Much condemned throughout its life, Greed was rehabilitated during the Gilded Age as "good" by robber barons and railroad owners, and again in the 1980s by junk-bond traders, stock brokers, and investment bankers. But its prominence dimmed during the recent housing boom, when no one seemed to have noticed it at all. Greed is survived by its close relation, Rapacious Capitalism, cousin Irrational Exuberance, and siblings, the remaining five deadly sins: Lust, Sloth, Vanity, Pride, Wrath, and Envy. (Formerly a deadly sin, Gluttony was downgraded by the Bush administration as a healthy indulgence following the 9/11 terrorist attacks.) In lieu of flowers, friends of Greed requested donations be made to the Donald Trump Institute for Obscene Profits and Grooming Research.

* * *

We are all Keynesians now. George W Bush, who came into office with a bang, is going out with one. (Though not the kind many of us feared; a US attack on Iran is about as likely now as a Christmas bonus would be for Lehman Brothers CEO Richard Fuld) The same US president who was swept into office on the shoulders of government hating conservatives is ending his blighted second term with an ironic flourish, presiding over the biggest corporate bailout since the Great Depression. At least Franklin Roosevelt's New Deal was new, a bold response to an unprecedented financial crisis; Bush's legacy - in addition to an unnecessary war, warrantless wire-tapping, the foundation of a garrison state - will be a warmed-over serving of that free-market scourge, moral hazard. An administration that has largely evaded accountability for its own misdeeds is now extending a $700 billion (Dh2.6 trillion) "get out of jail free" card to Wall Street. By shifting the obligations of polluted assets from private accounts to the public one, the administration is sending a clear signal: capitalism is a racket. Since 1990, after the Reagan administration repealed New Deal-era regulations on Wall Street, America's credit market debt has risen from $2.3tn to last year's $13tn, roughly the size of America's gross domestic product and more than a third larger than its national debt. (The bail-out fund announced over the weekend by Treasury Secretary Henry Paulson would raise the country's legal debt limit to $11.3tn.) The age of Reagan begat the independent investment bank, which cut its teeth on junk bonds - low-rated corporate debt that promised high yields to compensate for higher risk. The junk bond frenzy led to the Oct 1987 stock market collapse, which was a bump in the road towards the much more lucrative margins offered by the tech bubble of the Clinton 1990s. From mid-1999 to mid-2000, Wall Street racked up $77bn in revenue for underwriting the share listings of hundreds of start-up companies, too many of which had no earnings history to go with their dazzling, if half-baked business plans. The dot.com bubble went bust to the tune of an estimated $1tn. But Wall Street quickly recovered, leveraging a red-hot property market by turning doughty home mortgages into bundled assets that could be moved off the books of commercial banks as quickly as investment bankers could sell them. This cleared the way for more home sales, which bankers hungrily enabled by writing mortgages to anyone with a pulse. The Potemkin start-up of the last decade had become the indigent home owner of the next one, with predictable results: a crescendo of riches on Wall Street, followed by a harrowing crash . Only this time the concussion is having a truly global reach. Not for nothing has the measured Paulson urged foreign governments to set up their own bailout funds. So what's wrong with this? Nothing, assuming the "buy at your own risk" free market standard still applies. Instead, Washington indulges Wall Street with an implicit safety net after having abetted its crimes; when Federal Reserve chairman and arch monetarist Alan Greenspan flooded the markets with cheap money in response to the collapsed tech bubble, he restored market stability but fueled a national addiction to debt with record-low interest rates. Regulators, meanwhile, did nothing to discipline Wall Street after the dot.com denouement and refused to intervene as housing prices reached perilous levels, even after it was clear that bankers were jobbing home loans to people who obviously couldn't afford them. Free markets are sustainable so long as risk-takers are as liable for the punts that go wrong as they are for the ones they get right. The events of the last several weeks have exposed not the bankruptcy of capitalism but the severity and depths of its abuse.

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All the President's Venom

July 30, 2008 admin
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The National 2008-07-31 18:09:56 Nixonland By Rick Perlstein Scribner, 896 pages (2008)

The subtext of Nixonland, Rick Perlstein's brilliant morality play about Richard Nixon and his times, is both unstated and immediately recognisable. Not less than 30 pages into the work, there is the man himself, winning a Congressional seat in his first bid for national office by declaring his opponent a communist. A few pages later, he wins a Senate seat by calling his rival "pink right down to her underwear". The inference is clear: Nixon as patriarch to the political rhetoric, culture and ecology of George W Bush's America, as if the old man had sired a litter of squealing albino Rotweillers as his political heirs. The end of the Second World War produced a new generation of Republicans - Richard Nixon and Ronald Reagan were most prominent among them, and Barry Goldwater was their patron saint - who bridled at the party's restrained, Brahmin establishment. Fear of communist infiltration was a wedge issue for the taking, and Nixon, who catalogued and cross-indexed grudges and calumnies like a prissy librarian does books, was the first to understood its full potential. He attacked Franklin D Roosevelt's inner circle as "appeasers" and kept a list of enemies that included academics, peace activists, homosexuals, civil rights leaders, the counter-culture movement, the press, and anyone else with the potential to provoke fear and loathing among malleable middle-class voters. Playing the victim, Nixon submerged his opponents under a slurry of raw innuendo, sly implication and dirty tricks. For those who think contemporary American politics are singularly vicious, Nixonland is a superbly written and healthy corrective. Relentless and uncompromising, Perlstein reanimates a mean and violent era when race riots gutted cities, assassins thinned the country's political ranks, racists occupied high office, hippies fouled the urban landscape, terrorists bombed government agencies and Southeast Asia was reduced to a charnel house. After detailing the brutal murder in 1965 of a 21-year-old women in her home in a leafy Chicago suburb, Perlstein quotes from an article that appeared later that year in the New York Times Magazine: "The policeman's inner world is bound by ‘us' and ‘them'." All a cop can swing in a milieu of marijuana smokers, interracial daters and homosexuals is a nightstick." (This from the grey lady of liberalism.) Confronting swastika-clad demonstrators while marching peacefully in Richard J Daley's Chicago in the early 1960s, Martin Luther King suggested "the people of Mississippi ought to come to Chicago to learn how to hate". Hate - tribal hate, blind hate, blood-feud hate - is Nixonland's leitmotif. But no one can accuse Perlstein of bias. His narrative, exhaustively researched and well annotated, is lousy with terrorists, brigands, liars and demagogues of all stripes, of which the principal character is merely the scoundrel-in-chief. There are no heroes here, only perpetrators in a nation gone mad with primal fear and those who would exploit it. This is what gives Nixonland resonance in our present-day renditions of "us" and "them". True, the levels of rancour, nativism, and constitutional subversion ran deeper under Nixon than they have under Bush. But the difference is of degree rather than kind. While the war in Vietnam destroyed many more American lives than has the war in Iraq, both conflicts were needless; Nixon spied on his enemies and expanded wars in secret, while Bush has been favoured with a supine Congress that enables his assault on civil liberties, as it did just this month by legalising warrantless surveillance. Nixon's crimes were caught on tape; Bush and his advisers were smart enough to purge entire databases of White House e-mail traffic. Both men obstructed justice, but (unlike Nixon) Bush has yet to pay a price proportionate to his transgressions. Perlstein resists overt comparisons between the ad hominem style of politics as practised by Nixon and Bush, though he is certainly winking at readers with recounts of how Nixon and his acolytes thrived in a nuance-free political culture. "Pat had the greys and Reagan had the black and whites," he quotes a Bobby Kennedy aide responding to Ronald Reagan's 1966 defeat of California incumbent governor Pat Brown. Nixon, warns George McGovern in his failed bid to unseat the incumbent president in 1971, "is out to destroy the Democratic Party" - a goal embraced openly by Karl Rove, Bush's attack dog. (Rove makes a brief cameo in the book as a young Nixon campaign operative.) "If we don't fight them over there, we'll have to fight them in San Francisco," the Labour boss and Nixon supporter George Meany said in 1965, anticipating by nearly 40 years the intellectual truss for Bush's "war on terror." Just as Bush leveraged post-September 11 fears for political coin, Nixon mined grass-roots anxiety, bigotry, and ignorance to sustain an endless struggle against a nebula of confected threats. At the crest of his investigation into Alger Hiss, the State Department official accused of treason and later indicted for perjury, Nixon warned that "communists are everywhere ... and each carries the germs of death for society". Defending his decision to continue fighting in Vietnam, he warned in an address to the nation that "if, when the chips are down, [we] act like a pitiful, helpless giant, the forces of totalitarianism and anarchy will threaten free nations". On the eve of voting in 1971, Nixon reminded voters how "the leaders in Hanoi will be watching" to see if they choose "peace with honour or peace with surrender". It was cheap, gratuitous hyperbole. And it worked conclusively against Democrats who could find no way to counter. "Republicans really believe that if they can make you afraid enough or angry enough, you can be tricked into voting against yourself", was the best presidential candidate Ed Muskie could do. Muskie lost badly in the primary elections to McGovern, who insisted on taking the high ground against Nixon. A Second World War bomber pilot from South Dakota, McGovern campaigned largely against the war in Vietnam, which was hugely unpopular with voters. He ended up losing to Nixon by one of the largest margins in US presidential election history. In that regard, Nixonland is as much a mediation on middle America as it is political biography. It is sadly instructive that Americans could abide as divisive a figure and as maladroit a campaigner as Nixon, let alone a white supremacist like George Wallace, whose sequential bids for the White House were so compelling that Nixon had to appeal to southern hardliners by promising to stall racial integration. Fans of The Daily Show and The Colbert Report will be amused to learn that a 1968 survey revealed most Americans got their news from humour columnists, and only one in four respondents said they trusted the national newscasts. A day after that year's riots at the Democratic convention in Chicago, during which Daley unleashed truncheon-welding police on peaceful protesters, a factory worker defended the violence. "Those hippies ... were wearing beards," he told Democratic Senator Abe Ribicoff, who had condemned the police attacks, "and anyone who wears a beard, he deserves to get beat up." Hippies then. Muslims now. Perlstein's conceit does stretch things a bit. Richard Nixon didn't "invent" the politics of hate and division any more than Ernest Hemingway invented the martini. But it's fair to suggest that Nixon - both "serpent and sage," as the author elegantly distils this most paradoxical of men - refined the black art of modern politics for a new generation of thugs and knee-cappers. Nixonland is not for the faint-hearted; it offers little to inspire and much to repulse. But it is an indispensable account of how vulnerable democracy is to demagogic pandering and how short are the memories of its benefactors.

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Bernanke and Zhou Are Playing Two Different Ball Games

July 14, 2008 admin
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The National 2008-07-15 10:00:38From equidistant cities separated as much by politics and culture as by oceans and land masses, Ben Bernanke and Zhou Xiaochuan work opposite ends of a labyrinthian street. As the heads of the world’s two most influential central banks – the US Federal Reserve and the People’s Bank of China – they must navigate their way through a jungle of vertiginous risk and forbidding uncertainty. They have been attacked as either too cautious or too aggressive, too corporatist or too populist. Both men are haunted by inflation, and in a measure of the shifting global economy, Mr Zhou is having better luck slaying his dragons than the besieged Mr Bernanke. In many ways the world’s largest and fourth-largest economies are mirror images of each other – high-growth China as yin to a languishing American yang. In America, rising prices are a by-product of a weak dollar; Chinese inflation, meanwhile, is largely demand-driven, a consequence of higher wages due to a tightening labour pool and the worker-friendly demands of a new labour law. Since peaking at nearly nine per cent in February, its highest level in 11 years, the country’s consumer price index has retreated slightly due to the steady appreciation of the Chinese yuan. Although nothing in China happens without thorough and quiet deliberation by Communist Party cadres – Beijing’s cult of personality was buried with Mao – no one is more closely associated with the yuan’s rise than Mr Zhou. A 60-year-old economist who assumed the helm at the central bank in 2002, Mr Zhou is as colourful as Chinese commissars get; he has barnstormed the countryside to promote everything from outbound retail investment – tens of billions of dollars in Chinese savings have been invested in foreign markets in the past year – to a reining in of currency speculation. He has been criticised for being too “Westernised” by Beijing’s old guard and he has antagonised exporters, a powerful constituency, with his support for a strong currency. As late as last autumn, Mr Zhou’s strong yuan policy was considered radical, if not heretical. Today, it is applauded for being a cooling agent for an overheated economy, without hurting export growth; in the first quarter of this year the value of Chinese-made goods sold abroad grew by 11 per cent while the economy grew by just more than 10 per cent. Things have not turned out so well for Mr Bernanke, who had his defining moment just under a year ago. In August, having outraged Wall Street by refusing to lower interest rates in the face of weak demand, the Fed chairman reversed course only a few days later by cutting the rate at which the Fed lends money to commercial banks. The move was welcomed by investors but condemned by arch monetarists, who believe expanding the money supply is inherently inflationary. Further interest rate cuts followed, and persistent inflation together with slow growth has raised the spectre of 1970s-style stagflation. The 54-year-old Mr Bernanke, who replaced the legendary Alan Greenspan as the Fed chairman in February 2006, holds a PhD in economics from MIT and has co-authored a highly praised macro-economic textbook. As a professor of economics at Princeton in 2000, he identified illiquidity as the prime culprit behind the Great Depression. (Somewhat ominously, Mr Bernanke describes himself as “a Great Depression buff, the way some people are [American] Civil War buffs”.) His easy credit policies may be vindicated, just as Keynesianism is widely credited with having reversed the depression of the 1930s, along with the industrial mobilisation that followed America’s entry into the Second World War. This seems unlikely, however, though not necessarily because of policies inspired by Mr Bernanke. Unlike Mr Zhou, who operates in a hugely liquid economy, with US$1.4 trillion (Dh5.1 trillion) in foreign exchange and a vast ocean of unreported household savings, prolific manufacturers and $83bn in annual direct foreign investment, Mr Bernanke has few cards to play. He inherited from Mr Greenspan a highly leveraged economy entering the twilight of an asset bubble that burst just as he was settling into the job. Had he resisted pressure to lower credit rates, demand would have shrivelled further and the economy may well have entered a recession. It might still. Having bailed out Wall Street with emergency credit along with the $29bn rescue of Bear Stearns, Mr Bernanke now faces the possible collapse of America’s two state-sponsored mortgage financiers. Share prices are at 2000 levels, the outlook for the dollar is bleak and the age of cheap oil, the drug of choice for the American consumer, is no longer on offer. As the Bush administration enters its own twilight, America faces a raft of “least bad” options, from the economy to the war on Iraq. Historians may record this era of American power as “The Denouement”.

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The New Silk Road

June 1, 2008 admin
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Forbes Asia 2008-06-02 00:10:12 Victor Chu was an elusive quarry. For years Sameer Al Ansari, the chief executive at Dubai International Capital, was trying to recruit the Hong Kong investor as a director on his board. But Chu, the chairman of First Eastern Investment Group and a prescient booster of Chinese-Arab trade, was always too busy sharing his expertise with other companies

Finally, between workshops at the 2005 World Economic Forum in Davos, Al Ansari won Chu over. It was just the kind of deal, consummated with a firm handshake over weak coffee, that one would expect from the rich and powerful who inhabit the forum's corridors. But economists may one day mark it as a historic convergence of guanxi and wasta--the ancient Chinese and Arabic terms for entrée--and a key milestone in the epic revival of the old Silk Road.

"Asia is just as it is here," Al Ansari says from his office at the Dubai International Financial Center, home to the city's ever ripening stock exchange. "It's important to have the right connections. Victor knows the languages of Asian markets. He's the partner I wanted."

Since then Sino-Arab commerce has evolved into the world's fastest-growing commercial relationship. While the developed world, led by the U.S., staggered through a global credit crunch, China's gross domestic product grew 11% in the first quarter, and the Gulf Cooperation Council--the oil-rich federation of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates--averaged nearly 7% growth in the same period. Last year trade between the two regions totaled $240 billion, double what it was in 2000. While Persian Gulf investment in China last year was estimated at $20 billion, a report by JL McGregor & Co., a Beijing consulting firm that advises U.S. hedge funds and other clients, estimates that Gulf investors will shift a third of their portfolios, or about $250 billion, to China over the next five years.

While Sino-Arab commerce began as very much a one-way affair, with the Gulf providing the capital and China the opportunities, deals are now flowing in both directions. Last year Beijing's Zhongon Construction Group set aside $100 million for the purchase of Dubai real estate, while Dalian's Dashang Group announced plans to invest $200 million in Dubai's retail industry. The problem, investors point out, is that neither side has well-developed capital markets. Without fixed-income securities the best way to put their riches to work is through acquisitions. Private-equity specialists are lacing the two regions ever closer, and Victor Chu, who launched First Eastern in 1988 and has more than $1.5 billion under management, has an impressive ball of string.

In April Chu, 50, redeemed his bullish talk about the future of Sino-Arab trade when he and Al Ansari, 44--a British-trained accountant who worked for consultant and financial-advisory firm BDO Seidman in London before moving to Ernst & Young in Dubai--launched China Dubai Capital. It's a $1 billion vehicle that aims to invest in Chinese companies with the potential to expand to the Gulf or go public on Arab stock markets, and it hopes to list the first outfit within two years. Al Ansari will take the lead in gathering funds from Gulf and Asian institutions and leading family investment offices, and Chu will harvest the companies. The plan is to purchase 20% to 40% stakes in Chinese companies looking for capital to expand. The fund's average investment in a company will be $20 million to $50 million.

It's a common strategy in the way private equity is practiced in both China and the Gulf. Unlike leveraged buyouts in the U.S., where firms take over mature assets with borrowed capital, Sino-Gulf investors eschew debt, limit themselves to minority stakes and target companies that are still in formation. "We do buy-ins rather than buyouts," Chu says in a phone interview from Shanghai, where he was spending a day on his way back to Hong Kong after a tour of the Gulf states. "Unlike the Carlyles of the world, we'll help companies develop their business before going public. It's more a venture-capital strategy than an lbo."

While neither Chu nor Al Ansari will reveal which companies they're looking at, they do say they favor the construction and health care sectors. The main objective, according to Al Ansari, is to use China's surplus of quality unlisted companies to boost the Gulf's capital markets. That's certainly fine by Dubai's securities regulators, who last fall entered into a $6.5 billion cross-shareholding agreement with Nasdaq, the London Stock Exchange and the Nordic exchange operator OMX Group in a bid to make the Arab boomtown a leading financial center. "We're working with [the Dubai exchange] to pave the way," says Al Ansari. "There are 800,000 Chinese companies looking to list."

For Chu, the Dubai China Fund is only the most recent expression of his faith in the Middle East as China's once and future primary market for its companies. After all, he likes to point out, Arab-Chinese commerce dates back to at least the 4th century, when Arab seafarers established settlements near Canton. "I've been talking about the new Silk Road for years," says Chu, whose clipped English accent is the legacy of British schooling in colonial Hong Kong and a university education in London. "China needs a secure energy source, and Gulf investors need a high-growth market to invest their capital. The two regions have had diplomatic relations dating back a thousand years. This is a very strategic relationship."

Chu's first business trip to the Middle East was more than 15 years ago. At a time when most Asian investors were focusing on high-growth markets close to home, he was nurturing contacts and making introductions between Chinese construction and engineering companies and Gulf contractors and officials. In 1998 he opened an office in Bahrain, where First Eastern has a banking license.

His timing couldn't have been better. A year later the U.S. would respond to the Sept. 11 terrorist attacks with regulations against suspect money flows, which annoyed and inconvenienced many Arabs. Over the next six years, turned off by America's sluggish economy as well as a perceived hostility to Arabs, Gulf investors would divest themselves of an estimated $200 billion in U.S. assets, according to a JL McGregor report on Middle East investment in China.

The U.S. loss would be China's gain, thanks in no small part to Chu's foresight. "We were always a few steps faster than the others," says First Eastern managing director Elizabeth Kan. "When our Arab partners wanted to diversify and started looking at Asia, we were ready."

A lot could happen to preempt a Silk Road revival. Oil prices could tank. China's double-digit growth could finally sputter. An attack on Iran could torpedo the Middle East and the global economy, given the effect it would have on energy prices. But even then, the indefatigable optimist Chu suggests, he'll be an early buyer among the rubble. "We'd be back to the drawing board, but only in the short term," he says. "Either way, this region will define history over the next quarter-century."

© 2008 Forbes

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The Modern Silk Road

May 17, 2008 admin
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Newsweek International
2008-05-17 01:21:23
The most hard-boiled forms of human enterprise tend to be the most prolific. Thus commerce along the legendary Silk Road flourished as it did for some 1,600 years because it was negotiated between merchants, not ministers or politicians. Having predated the nation-state and the borders that define them, the world's main commercial artery was lightly taxed and regulated, and free of the political set-asides and subsidies that weigh on today's free-trade agreements. For better or for worse, there were no labor unions demanding living wages for workers, no environmental groups clamoring for high emission standards and no human-rights organizations calling for boycotts of authoritarian regimes. History repeats itself. In just a few short years, a new generation of merchants have spontaneously revived the ancient spice trade and restored its centrality with a host of modern wares. As opportunities closed in the United States-its economy sluggish, its investment environment increasingly hostile to Arabs and Chinese-new ones have opened between Asia and the Gulf. Unlike China's emerging ties to Africa, which have been attacked as a form of resource imperialism, Beijing's renewed tie to the Middle East is a joining of equals-newly rich Chinese manufacturers cutting deals with flush petro-princes from a tradition of unfettered trade as rich and old as China's. The process began with the simple exchange of Arab oil for Chinese capital and it has since expanded into a web of two-way deals in banking, property development, industry and tourism. The world's two most liquid economies are creating a new commercial bloc that is rebalancing the global economy. With much of the world teetering on the brink of recession, China and the Middle East continue to expand and converge at a brisk pace. The transatlantic route is still the richest of the world's major trade channels (worth $1.5 trillion in trade and investment last year), and the European Union and the United States remain the largest export markets for both China and much of the oil-rich Middle East. But the new Silk Road is growing at a faster rate. Trade between China and the Middle East has doubled since 2000, to $240 billion, according to the Dubai International Financial Centre, and is estimated to grow by several times that amount over the next decade. To take just one example, the United Arab Emirates projects that its two-way trade with China will grow by a factor of seven by 2015, to $100 million from $14.2 billion in 2006. "We see the world economy as revolving around us," David Rubenstein, cofounder of the U.S.-based-Carlyle private-equity giant, said at an investment forum recently. "But the economic center of the world is beginning to shift from the U.S. and Europe to the Middle East and Asia." It's not only trade in goods and oil. Asia and the Middle East are home to the world's largest pools of surplus cash, much of which is managed by six of the top 10 sovereign wealth funds. That makes the new Silk Road a key nexus for the next generation of blockbuster financial deals. A report issued this month by JL McGregor & Co., a Beijing-based consultancy, estimates that the amount of Middle East money flowing into China could reach $250 billion over the next five years. The report compares that figure with the $200 billion it says Gulf investors have divested from the United States since 2003, a consequence of post-9/11 safeguards against suspect money flows and hostility to Arab investment. In a world where trade is getting the rap for everything from global warming to food shortages, the new Silk Road is largely free from nagging NGOs. Here only money talks. While U.S. President George W. Bush struggles to gain congressional approval for minor free-trade agreements with countries like Colombia and Venezuela-deals, he argues, that are vital for both democracy and U.S. national security-Arab and Chinese businessmen are building a formidable economic bloc one laissez-faire transaction at a time. In part, business gravitates to the most receptive market. And America's cultish obsession with national security has created a backlash against foreign-in particular Arab and Chinese-investment. Since 2006, two high-profile Chinese companies, Cnooc and Huawei telecommunications, have been forced to abandon plans to buy stakes in U.S. companies amid politically charged security concerns. Dubai Ports World was forced to divest itself of its U.S. assets in a similar dust-up. It's no surprise that all three companies have since found a more receptive business environment on the new Silk Road. Earlier this year Dubai Ports World announced a plan to co-develop a container port in Tianjin, China. Just last month, Cnooc and Huawei signed major deals in Qatar and the United Arab Emirates, respectively. "Ask any businessman on the street about doing business in the U.S.," says Ashraf Hamdi Fouad, an adviser to Mubadala, Abu Dhabi's state-owned investment arm, "and he'll tell you: 'It's not worth it. Let's wait for the Americans to get over all this'." In a striking vote of confidence in the future of Middle Eastern capital markets, Dubai International Capital and Hong Kong-based First Eastern Investment Group announced last month they were launching a $1 billion investment fund in part to prepare Chinese companies for listings on Arab stock markets. The fund-raising offers benefits for both sides: Gulf capital markets get new listings and liquidity, while Chinese companies, frustrated at the red tape that delays public offerings at home, have new sources of money in an equally dynamic economy. "There are about a half-million Chinese companies waiting to list their shares on local markets, and it's taking too much time," First Eastern managing director Elizabeth Kan said between sessions at a conference hosted at the opulent Emirates Palace in Abu Dhabi. "If we can list some of these companies in the Persian Gulf, we can get higher multiples." If developing countries are indeed maturing into a web of largely self-sustaining regional blocs, as some economists believe, then the epicenter of the process is the Sino-Arab convergence. While both sides have larger trading partners in Europe and the United States, the heat from those commercial links have given way to much lower rates of growth (two-way trade between the U.S and China is growing at its slowest rate since the late 1990s). Deals between China and Africa are robust and growing fast, but the money flows in one direction only. Resource rich Latin America is an increasingly important target for Beijing, but this trade channel is still minor, at $30 billion last year. It's possible, of course, that the renaissance of Sino-Middle East trade will collapse if oil prices do, cutting off the funds that are making the Gulf states a serious partner for China. Financial accounting in China and the Middle East is notoriously murky, so no one really knows how much money is sloshing about the New East, which still lacks adequate debt markets to harness it. Inflation is reaching perilous heights, fueled by high spending levels and a weak dollar, to which the Chinese and Gulf currencies are fixed. And while the Asian-Middle East combine continues to hum, it may yet feel the undertow of a sharp plunge in U.S. consumption, still the bunker oil for global growth. Fortunately for China and its partners in the Gulf, the emerging Sino-Arab bloc is largely protected from the global credit crunch because neither side is heavily in debt. Most private- and state-owned companies in China and the Arab world are debt-free, and the vast majority of consumers have no bank accounts, pension funds or stock positions, much less exposure to the exotic derivatives behind the credit crisis. A share-market crash in the GCC and China is harrowing for speculators: with relatively few players, price swings can be wild. Since 2006, Arab stock exchanges have plummeted from record highs to record lows-twice. But since the markets are small, they have had little impact on the real economy, which continues to grow strongly in both regions. The tendency in post-9/11 America is to regard anything it can't control as a threat. Already, the commercial integration of China and the Middle East, two regions with which Washington has complex relations at best, is being looked upon with alarm in Washington. If anything, the United States should welcome the addition of a spare growth engine for a global economy that has relied for generations on the once irrepressible, now fatigued American consumer.

© 2008 Newsweek, Inc

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Arabian Trade Retraces the Silk Road

April 21, 2008 admin
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The National 2008-04-22 09:26:57Here in The New Rome, where nothing is news until the Washington Post says it is, few have noted the recent procession of Gulf leaders calling on their Chinese counterparts in Beijing. It is one thing to ignore diplomatic ritual halfway around the world, however, and quite another to overlook the Leviathan that inspires it: a half-trillion dollar commercial nexus that is transforming the global economy. According to the Dubai International Financial Centre, Sino-Middle East trade has doubled since 2000 to US$240 billion (Dh881bn) annually. A recent report from the management consultants, McKinsey & Co, estimates that Gulf investors will sink about US$250bn into Asia over the next few years, and most of that money will end up in China The spark behind this emerging growth engine is, of course, China's enormous appetite for energy and the Gulf's abundant supply of it. But unlike Chinese dealings in Africa and Latin America, mere reprisals of Victorian-era resource plundering, the Sino-Gulf relationship is both sophisticated and diversified. Gulf companies are building multi-use property developments in China and Chinese retailers are investing a fortune in Dubai shopping centres. Chinese companies are building cement factories and metro lines in the Middle East while Arabs are buying shares in Chinese banks. Investors on both sides are teaming up to launch equity funds, some of which are Sharia-compliant. The flurry of diplomatic exchanges between China and the Middle East retraces the old Silk Road and will only intensify along with the pace of Sino-Arab commerce. Consider Beijing-based Zhongon Construction, which is investing US$100m in Dubai property, or the retail giant Dalian Dashang Group, which has earmarked US$200m for the Gulf's retail sector. Last year, Saudi Prince Alwaleed bin Talal led a consortium of Arab investors for the purchase of a 20 per cent stake in China's largest bank, Industrial & Commercial Bank of China. In Bahrain, Ithmaar Bank is joining forces with a major Chinese lender to set up a US$100m investment fund. Meanwhile, the Kuwait Investment Authority has invested an undisclosed sum in Jade Alternative Investment Advisors, a fund of funds that manages equity stakes in Chinese firms. If there is a whiff of schadenfreude to this, the lucrative pairing of the world's most liquid economies amid a US credit crunch, well, bring it on. At the very least, America impelled the Chinese-Arab embrace by making itself such an inhospitable place to do business. In 2005, when the Chinese energy giant, CNOOC, was forced by nativist US politicians to withdraw its bid for California-based Unocal, it found welcome partners in the Gulf. A year later, when Dubai Ports World was driven out of the US market, it turned to China, where it now manages six container terminals. In response to America's prohibitively rigid visa requirements imposed since 9/11, a generation of Chinese and Arab students and businessmen are finding warmer receptions from Shanghai to Damascus. But in fact, the flourishing Sino-Arab trade is as much a salvation of the US economy as it is a challenge to it. A recent report from JPMorgan called Arab-Chinese commerce a "virtuous circle" of trade and investment that will moderate the global downturn. Economists tout Sino-Gulf collaboration as the most dramatic example of the "decoupling" of the global economy, as developing countries mature into a web of largely self-sustaining regional blocs. While this may be difficult for fin-de-siècle Washington to accept, the evolution of a multipolar global economy is both inevitable and desirable as a weak dollar and chronic US indebtedness erode America's share of global consumption. Nonetheless, official Washington will most likely address Sino-Arab convergence in the same way it responds to everything else it cannot control: with alarm. Already in this election year, Beijing's ties to "rogues" Syria and Iran are getting enhanced scrutiny while the Congress is calling for regulations that would inhibit sovereign wealth funds - the largest of which happen to be managed by China and Arab countries - from investing in US assets. It would be a perversely hostile reaction from a country that, by its addiction to debt over savings, has already auctioned away its economic destiny to foreign investors, a growing share of which are wearing the new version of the Silk Road into a well-travelled path.

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The World's 'Engine of Growth' Stutters

April 14, 2008 admin
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The National 2008-04-15 15:12:26In the immediate aftermath of World War II, Dean Acheson, then-US secretary of state, declared famously – and with characteristic immodesty – that he was “present at the creation” of a new geopolitical order. It may not seem like it, given the cancer on Wall Street that threatens to morph worldwide, but we are on the crest of our own creationist moment, a tectonic inversion of the global marketplace. True, the near-term outlook is ominous. Some economists argue that the fallout from the subprime mortgage meltdown could cost the US economy trillions of dollars in vastly diminished home prices, household income and investments. Sustained dollar weakness will undermine the world’s largest market for manufactured goods and erode the value of foreign-exchange reserves. Shell-shocked foreign investors will be less inclined to buy US assets, including the sovereign debt that keeps Washington from insolvency. But the coming shakeout is long overdue. Only a secular re-pricing of the dollar can reconcile the contradiction of America – highly indebted with a personal savings rate of zero per cent – as the source of three-fifths of the world’s foreign exchange reserves. The positive legacy of the US credit crisis will be the end of the US as the world’s primary growth engine and the phasing out of the dollar as the world’s fiat currency in favor of a blend of major currencies. Already, central banks are adjusting or discarding altogether their dollar links or managed-float regimes. Kuwait presciently abandoned its peg to the dollar in May and pressure is mounting on other Gulf states – most dramatically in the UAE, where the weak dollar is fuelling labour unrest by eating into worker remittances – to untether their dirhams and dinars. In Asia too, creeping inflation has forced monetary authorities to shed the ballast of a weak dollar. Nowhere is that more clear than in China, where the yuan has appreciated by 15 per cent against the dollar since mid-2005 and is expected to rise further this year in response to that country’s highest inflation rate in 12 years. And as the yuan goes, so goes the Hong Kong dollar and its own rigid fix to its US counterpart. The weaker dollar is siphoning investment in emerging markets which have been showing clear signs of overheating. Over time, the strengthening of currencies in high-growth economies will emancipate their long-repressed consumers, the first step towards righting the global trade imbalances that stifle investment and stoke protectionist impulses among debtor states. The process has already begun in China, where currency deregulation has unleashed a torrent of retail investment in overseas stock markets. Poor timing, true, but the supremely risk-tolerant Chinese will pile back in once share prices stabilise. Personal consumption accounts for less than 40 per cent of China’s economy, compared with 70 per cent in the US, while its savings rate has actually grown since the 1990s, to a vertiginous 50 per cent of GDP. The unwinding of that massive reserve for the purchase of imported goods and foreign investment will have a sustained and seismic impact on global capital flows. And it will come about on China’s terms, not in response to pressure from a hectoring US Congress. Exchange rate flexibility will expedite the process, already underway, of weaning the developing world from the US as its primary consumer. Half of China’s exports are now destined for other emerging economies, for example, while South Korean exports to the US actually declined by 20 per cent in the year to February while its total exports rose by 20 per cent. Such “decoupling” as it is known, is neither a threat to globalisation nor insulation against a likely recession. It is, rather, the birth pangs of what could emerge as a more stable, multipolar global economy. The US, saddled with debt and the heavy toll of overindulgence, should welcome it.

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Rainmaker

April 6, 2008 admin
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Forbes Asia 2008-04-07 21:55:58The meeting was going nowhere. For months private equity specialist Kathy Xu had been tracking the success of Gao Mengzhong, the founder of China's leading staff-outsourcing firm. The first time she cold-called him to discuss a partnership, he had politely begged off. Last June, when Xu finally got her foot in the door of Gao's Suzhou office, he was stiff and uncommunicative. He didn't need investment capital, he told her. His company, Huishi Manpower, was profitable. It had no debt, and he was paying dividends each year. The pauses in the conversation seemed interminable.. Finally Xu had had enough. She told Gao that Huishi Manpower, though good, could be even better and she was prepared to write him a check for $10.5 million to prove it. Otherwise, she'd write one for Gao's closest competitor. That rival could then raise its salaries to $425 a month, compared with Huishi's base pay of $280, and incur losses as it expanded its market share. Eventually, she told Gao drily, it would overtake Huishi. After one more long pause, Gao asked Xu to lunch. It lasted five hours. Several months later a 20% share of Huishi Manpower became the latest asset in Xu's growing portfolio. Gao is in good company. Xu, the founder of Shanghai private equity firm Capital Today Group and a key interlocutor between official Beijing and China's cantonment of private equity specialists, is known informally as Tie Niangzi, the "iron lady" of rainmakers. Last year, she says, the 11 companies in her China fund generated an average revenue growth of 141% (she won't disclose the size of the fund). None of them is listed, and she doesn't expect her first initial public offering for another couple of years. That's roughly when the fund's five-year investment period ends, and backers--which include the International Finance Corp., the World Bank's investment arm; London's Caledonia Investments; and Switzerland's Partners Group--can begin expecting returns. The payoff for investors, she says, "is the big money from an IPO or sale." The 41-year-old Xu, who grew up in once sleepy Sichuan province, where the people are known to be as piquant as the peppery food for which they are famous, is playing the long game. In China intellectual property laws are so porous even the best products can get caught in an un-winnable price war with knockoffs. Success requires a strong brand, says Xu, and strong branding takes time. "A good brand gives you pricing power," she says during a recent visit to Beijing for a quick round of meetings with entrepreneurs and board members. "With a good brand you can expand your market share to the point where your competitor will never catch you." It's also a strategy that's vindicated by the current storm of market instability. Xu targets prospective assets by studying a market and its half-dozen or so leading companies for three to six months. By the time she makes her fateful cold call, Xu knows the business better than its top performers. Three-quarters of the calls yield at least a first meeting, she estimates. Once she buys a stake in the targeted company, usually putting up $10 million to $40 million, she helps it develop an upmarket brand name that no rival can afford to match. Capital Today companies tend to have little debt, and they withhold dividends in favor of capital investment. "It's a build-and-hold strategy," she says, "not a quick flip." Xu radiates a quiet intensity and has a flair for free-market sloganeering. Like a plant manager rallying laborers to meet production quotas, she dares clients and partners alike in meetings and memos to be "Audacious, Heroic and Visionary." In each asset added to her portfolio, she aims to cultivate a "wolf" culture--a killer instinct for meeting customer needs and exploiting market opportunities. It's a persona she honed as Baring Private Equity Partners' top Chinese rainmaker, crafting the group's debut mainland deals. Her departure in 2005 to launch Capital Today arched more than a few eyebrows. Until then few mainland Chinese had bolted a big foreign firm to set up their own shop. But Xu's timing was perfect: China's stock markets were primed to begin a lucrative ascent after trundling through a five-year funk. Today she has two partners and 20 employees. "It took vision and courage because no one knew you could raise money for independent firms," says Ludvig Nilsson, managing partner of Shanghai investment firm Jade Invest. Until recently it seemed that China's private equity industry would thrive indefinitely as a small but lucrative subculture in an otherwise highly regulated financial sector. The business was developed in the 1990s by the big Western players--Goldman Sachs, Morgan Stanley--and a number of homegrown firms operating from Hong Kong and buying and selling in U.S. dollars. Back then firms could freely transfer the ownership of Chinese assets to Cayman Islands-registered holding companies and then sell them or list them on a market of their choice, a process known as "round-tripping." Many of the top dealmakers were arrivistes--second- and even third-generation members of the Chinese diaspora who leveraged their heritage and M.B.A.s for a share of a virgin market. Nearly all of them were men who knew more about the exotica of high finance than they did about the business culture of mainland China. That made Xu--she claimed her English first name from a character in Noble House, James Clavell's novel about Hong Kong--exceptional as much for her ethnicity as for her sex. "Kathy has credibility because of her background and because she's clear in her intentions," says Robert Woll, head of the Asia corporate practice and a comanaging partner of the Beijing office of law firm WilmerHale, which has worked with Xu on some of her biggest deals. "She's not perceived as a returnee who's here to make [U.S. private equity firm] Carlyle rich in China." It was such authenticity that made Xu a natural spokeswoman for her industry once it got too big for Chinese regulators to ignore. In 2005 the government restricted round-tripping in order to promote capital markets at home. A deluge of new and often contradictory regulations followed--and the volume of private equity deals in 2006 dropped to just under half its 2005 level. As governor of the China Venture Capital Association, Xu worked with regulators to liberalize the investment laws. She and a group of negotiators managed to win some limited concessions only to see the Ministry of Commerce and other agencies repeal them last year. Last November, at a conference of private equity investors and venture capitalists in Beijing, Xu stood before a panel of senior regulators and asked if they would ease restrictions on technology-centric Chinese companies listing on Nasdaq, where such mainland powerhouses as Baidu and Focus Media had gone public when round-tripping was still tolerated. But the regulators declared that the restrictions would remain. In any event, fundraising and dealmaking rebounded last year, according to the Zero2IPO Group in Beijing. Some 64 new private equity funds in China--60% more than in 2006--raised $35.6 billion, a 151% increase. At the same time, $12.8 billion was invested in 177 deals, a jump of 37%. Xu, who has dealt with controlling communists most of her life, rolls with such mulishness the way an expert parachutist breaks a landing. "The government says we need to build a domestic market and we believe that is a reasonable proposition," she says, sipping a cup of green tea between meetings at Beijing's China World Hotel. "So for now we're focusing on onshore deals." It is a respectful, composed response from an authentic daughter of the revolution, both the communist one she was born into and the capitalist one that has grown up with her. Xu was raised in Dazu, near Sichuan's provincial capital of Chengdu. Her father was the general manager of a state-owned auto factory who regularly hosted visitors from the plant to discuss business while Xu poured tea for the guests. "When your father is a GM you always have people over talking about product quality, sales and salaries," says Xu, who easily disarms strangers with a combination of candor, enthusiasm and fierce eye contact. "I listened and learned." At Nanjing University Xu studied English, a language she knew well having spent so much of her childhood listening to language records on a gramophone her father bought her in the waning days of the Cultural Revolution. She credits her British and American instructors for her cosmopolitan outlook and self-esteem. One of them, an American woman, made a particularly deep impression. On the first day of class, says Xu, "she walked into the room and said aloud to the students: 'You are unique, you are a marvel. There has been no person like you in the last 500 years and there will be no person like you in the next 500 years.' It was an eye-opening experience for a Chinese student from Sichuan." After graduating in 1988 Xu was hired as a clerk at the Bank of China's headquarters in Beijing. Merit pay hadn't yet arrived at the state-owned bank--she was paid 78 yuan a month, about $10, as were the rest of her colleagues. Enthusiastic and diligent, she became a leader of the Communist Youth League and spent tea breaks teaching English to colleagues. Within 18 months Xu was named the bank's best female employee--the honor translates roughly into "Woman Banner Holder"--out of a field of 2,000. She was awarded a certificate and a bed sheet. In 1992, eager to see the world outside mainland China and ambitious to succeed in business, Xu applied for an entry-level auditor's position at Price Waterhouse's Hong Kong office. Applicants had to take an exam in accounting, a discipline she knew nothing about. Fortunately for Xu, the test was in English, which few of the other applicants understood. After spending several nights reading an entire accounting textbook, she passed the test and was offered the job. It was a tough transition for a Sichuan girl who had never stepped foot outside China. Back home, bank employees rarely worked past 5 p.m.; in the corporate corridors of Hong Kong, eating dinner at your desk was considered a badge of honor. To make matters worse, Xu was a mainlander from the provinces, in Hong Kong the equivalent of a hayseed. Staff condescended to her as "little cousin," a reference to the lead role in Hello Cousin, a hit film at the time about a mainland girl who gets overwhelmed by the chaos and glamour of Hong Kong. "There was a bias against mainlanders in Hong Kong," says Xu. "We didn't even speak Cantonese." Having worked so hard to get out of Sichuan, Xu found herself with little to do. So she adopted Price Waterhouse's Japanese clients, an orphaned portfolio of small-business owners who spoke reasonably good English. Her time sheet quickly filled up. After three years Xu joined Peregrine Direct Investment, the private equity arm of the upstart investment bank. Chinese capital markets had sprung to life, and Xu was dividing her time between Peregrine's Hong Kong headquarters and the mainland. After Peregrine fell victim to the 1997--98 Asian currency collapse, she was hired by Baring, where she became a formidable turnaround artist. Following the collapse of the global dot-com bubble, Xu helped revive Guangzhou Internet service provider NetEase, a Baring portfolio company that was listed on Nasdaq in 1999. Working with NetEase's 28-year-old founder, William Ding Lei, Xu retooled the company into one of China's leading online gaming and advertising vehicles. Within two years its stock was trading above $80 a share, up from its low of 60 cents. In 2003 forbes named Ding the richest man in China. By then Xu had delivered Baring an eightfold return on its investment. Next Xu homed in on Chinahr, an online recruiter dogged by leadership problems and stagnant revenue growth. She overhauled the company's management and in 2004 tapped Jason Zhang, then a 41-year-old vice president of human resources at telecom giant Huawei Technologies, as its chief executive. Her offer to Zhang was more a dare than an enticement. "I told him he'd have to put his own money in the company and live off the equity because he'd have a low salary," she says. "So he sold his house and went to work." As an indication of the premium Xu places on marketing, she paid ChinaHR's marketing manager more than she did Zhang. She boosted its capital with the help of a few rich "angel" investors. The company eventually caught the eye of Monster.com's Andrew McKelvey, who was eager for his jobs site in the U.S. to get a foothold in China. During a conference call in the fall of 2004 Xu and McKelvey immediately clicked. Within six weeks McKelvey agreed to buy a 40% stake in ChinaHR for $50 million--$35 million of which went directly to the angel shareholders--despite the company's meager earnings and the absence of a big investment bank in Xu's corner. The deal inked, a very pregnant Xu went straight to the nearest HSBC branch to ensure that the wire transfer to each of the angel investors was handled properly. The next day she checked into a hospital and delivered her second son. In each of the last three years, according to Xu, ChinaHR's revenue has doubled. Zhang remains at the company helm, where he's presided over a staff increase from 5 employees to 1,400. Xu is now training her sights on China's retail sector, a growth market in a country where private consumption accounts for only 38% of gross domestic product, compared with 70% in the U.S. She recently invested $11 million in Xiangyi, a $14-million-a-year herbal cosmetics seller. Her first step was to have the sales teams report their revenue figures every 24 hours instead of every month, with the top gainers identified each day by e-mail. Xu has also sunk $11 million into Kung Fu, a fast-food company with 245 outlets, no debt and ambitions to replace KFC as China's most popular food-and-beverage chain within the next decade. Kung Fu University, where new hires will be trained and senior employees will learn new management skills, is under construction next to the company's headquarters in Guangdong province. Xu expects to take Kung Fu public in 2010 in what could be her first IPO. "A lot of investment bankers are chasing it," she says. "But what's the rush? We're in no hurry."

© 2008 Forbes

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Giving Until It Hurts

March 8, 2008 admin
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Washington Post Magazine 2008-03-09 23:12:46  

STEPHEN LINTON IS BEING HUSTLED THROUGH THE DARKENING CORRIDORS of Hadan Tuberculosis Hospital in western North Korea. It took him three hours to get here from Pyongyang, the capital, which is linked tenuously to Hadan by 50 miles of deeply rutted and washed-out roads. A diminutive man with a craggy face and patrician silhouette, Linton has just finished unloading a cache of medical supplies, and now the hospital director, who wears a white lab coat and a head covering that could double for a baker's hat, wants him to observe a surgery. But they'll have to hurry: It's already late in the November day and, in a country where electricity is tightly rationed, a surgery's outcome can hinge on how much sunlight is pouring through operating room windows.

With orderlies and aides struggling to keep up, the two men canter through the hospital's drafty administrative building, with its faux-Palladian facade and faded, royal-blue window shutters, and across the dry empty fields that envelop the compound. The operating room is a two-story concrete blockhouse; to get to its main entrance, visitors must pick their way through spent oxygen tanks strewn along the pathway.

The patient is a young woman whose lower spine has been corroded by tuberculosis. She is lying on her side on the operating table, and an orderly is coating her lumbar region with disinfectant iodine. The surgeons will try to repair the damaged vertebra by grafting onto it a slice of bone taken from the patient's pelvis. There is no heat. Barring complications, the operation should take two hours, which would be plenty of time during the summer months, but could be a close call this late in the year.

Linton, 57, stops to peer through a window from the operating room's antechamber.

"I've seen doctors who tried to capture sunlight by reflecting it from a mirror," he says.

By North Korean standards, the patient is fortunate. She's been given a local anesthetic, which is rare in a country where surgeons routinely etherize patients, strap them down and try to finish the operation before they come to. The operating table is less than a year old, as are the surgeon's instruments and the handcarts on which they're arrayed. Also new are the hospital's X-ray machines, electrocardiogram, oxygen tanks and wheelchairs. All this is courtesy of Linton's Eugene Bell Foundation, a Maryland-based nongovernmental organization that has spent the past decade battling a raging tuberculosis epidemic in areas of North Korea where few foreigners have been allowed to travel.

It's not easy work. Of the 36 NGOs that began operations in North Korea as famine gutted the rural population in the mid-1990s, all but a handful have left in frustration. And Linton is particularly demanding: He insists on delivering his supplies personally, lest they be diverted to another facility or end up on the black market. When government officials balk, Linton refuses to resupply the site. So each of his two resupply visits annually is preceded by lengthy and sometimes rancorous negotiations. "Our donors feel very passionate about where their money goes," Linton says. "A lot of them are part of the Korean diaspora, and some are even from North Korea, and they know exactly what kind of facilities they want to help."

It has taken Linton years of resupply missions to build a redeemable store of trust with the North Korean government. On this visit, he has brought with him the first cycle of medicine for tuberculosis victims who have become resistant to the drugs most commonly prescribed for the disease -- a condition known as multidrug resistance, or MDR. Success hinges on Linton's direct access to the patients -- including ones at care centers near remote military bases and other sensitive areas. Without that, he'll take the MDR kits back with him to Seoul.

"What strikes me about Steve is his ability to persevere in a system that does not work well and maintain the integrity to say, 'No,'" says Charles "Jack" Pritchard, who, as a former special envoy for negotiations with North Korea and a member of the National Security Council, has known Linton for years. "He's had problems from Day One, but he's overcome."

The progeny of several generations of Christian missionaries, Linton spent most of his youth in South Korea. He speaks flawless Korean, marshaling it to shame obstructive bureaucrats in Pyongyang, charm hospital staffs in Kosong and bring assemblies of donors in Seoul to tears. He has insinuated himself into one of the world's most forbidding and totalitarian regimes with strategic gifts: tuberculosis drugs for the elites (in Pyongyang, the disease carries a social stigma that can ruin a career) and, say, rebuilt carburetors for parts-starved truck drivers.

South Korean sources suggest that tuberculosis has affected as much as 5 percent of North Korea's population of 23 million. Linton estimates the Eugene Bell Foundation has treated up to 250,000 patients, 70 percent of whom might have otherwise died. The foundation has a staff of seven full-time and three part-time employees, and it raises $2 million to $3 million annually. But for him, personally, the work has come with some costs: estrangement from his family, a divorce.

Health risks are ever-present. At each site, Linton interviews tuberculosis victims for a videotaped log that will be featured in his next presentation to potential donors. He's frequently warned by his North Korean minders, physicians who accompany him from site to site, to wear a mask, but he refuses.

"I can't raise money wearing a mask," he says.

LINTON'S FOUNDATION IS NAMED AFTER ONE OF HIS GREAT-GRANDFATHERS. A farmer's son and Presbyterian missionary from Kentucky, Eugene Bell went to Korea with his family in the 1890s as part of a post-bellum onslaught to Christianize the East. The connection has endured through generations: Eugene's son William founded what is now Hannam University in Taejon, South Korea; his son Hugh, Stephen's father, brought his wife and children over in 1954, after serving in South Korea during the war. Stephen attended schools there and obtained graduate and postgraduate degrees in Seoul and the United States, including a PhD in Korean history at Columbia University. In the early '90s, while Linton was working at Columbia, the late evangelist Billy Graham tapped him as an interpreter on two visits to North Korea.

In 1997, with North Korea nearly extinguished by famine, Linton left Columbia to help the country's ministry of public health organize international aid efforts. It was a formative experience. While in the city of Sinuiju on the North Korea-China border, Linton leased a freight car and loaded it with packages of instant meals meant for famine-relief centers. But bureaucratic snarls meant he had to wait two weeks to distribute the cargo. "I still have nightmares from watching children picking out kernels of corn from railroad ties," he says.

Linton has been battling North Korea's health crisis and its commissars ever since.

"THIS IS A NASTY BUSINESS," LINTON SAYS, grimly spooning mocha mix into his morning coffee on the first day of the fall mission. His eyes are bleary. He spent much of the night before negotiating with health ministry officials over rounds of soju, the potent Korean liquor. "They say they want to save wear and tear on the vehicles, so they need to cut our sites by a third. Fine. I'll cut theirs as well. Mary, I'll need a red marker."

Linton and his six-person delegation have settled in at the Kobangsan Guest House in Pyongyang, where they were installed by government minders after flying in from Beijing the day before. The Kobangsan, a four-story villa perched regally on the banks of a man-made lake, once accommodated visiting heads of state. The ministry of foreign affairs now runs it as a lodge for NGOs and deep-pocketed VIPs. The building affords sweeping views of Pyongyang's stark rural outskirts and boasts a bowling alley, a banquet hall, a billiards room, a karaoke lounge and a lavishly appointed VIP suite with an eight-track stereo player in the bed's headboard.

Linton's delegation breakfasts in a well-lit dining area, served by female attendants in red dresses. (When not seeing to guests -- which is often, as the Kobangsan appears to be otherwise vacant -- staff members occupy themselves by watching old films on a television in the lobby.) Linton is fatigued and agitated. The previous evening, the ministry of public health, the agency responsible for Eugene Bell's work in North Korea, had suddenly announced that a banquet honoring Linton and his delegates would begin an hour early.

"They knew what was coming," Linton says. "We were up until 1:30 a.m., negotiating. They thought if they got me liquored up I'd let things pass. But I told them I wasn't drinking because I was so concerned about the scheduling."

Most of the cancellations involve small sanatoriums in rural areas -- the very sites his donors are so keen to support. Linton suspects his hosts want to avoid those facilities because, relative to the urban care centers, their poor sanitation makes them legitimately hazardous. And the wear-and-tear issue isn't just a red herring. Spending days crisscrossing the countryside on unpaved roads takes a huge toll on the delegation's fleet of SUVs -- vehicles that, between Linton's visits, the ministry is allowed to use for its own purposes. In resource-starved North Korea, even government officials must barter to replace broken fan belts and transmissions. The last thing the bureaucrats want is to risk losing a precious automobile.

Whatever the reason for the recalcitrance, Linton decides to meet his hosts head-on by matching each canceled visit with a cancellation of his own -- mostly at the expense of hospitals the ministry appears to favor. This choice comes with real consequences for both sides: Some patients will die without the fresh supply of drugs. And some of Linton's donors will be angry that the care unit or hospital wings they gave money to support ended up being passed over.

Linton has requested an afternoon meeting with health ministry officials in a bid to get back at least some of the canceled visits.

"This is a nasty business," he repeats. "But we'll get through it."

THE MEETING CONVENES PROMPTLY AT 2 p.m. in the Kobangsan's imposing conference room. Surveying the proceedings from just below the 16-foot ceiling are five-foot-tall portraits of North Korea's late founder, Kim Il Sung, and his son and current strongman, Kim Jong Il. On another wall is a vast mural of a snarling tiger set against a range of snow-swept mountains.

Linton, in coat and tie, unveils his schedule revisions. He produces a Eugene Bell "memento book" -- a binder with profiles of each center and the donor or donor group that supports it -- and slashes through five separate pages with a pink highlighter. (Mary Lyso, his able assistant, was unable to find the requested red marker, but the point is made.) He asks that the directors of care centers that the health ministry struck from the original schedule be gathered in Pyongyang so they can obtain their MDR kits from him.

Linton's three Korean counterparts are seated beside him in midnight-blue tukinyubus -- closed-collared tunics and matching trousers that resemble Mao suits. They take notes feverishly, and the meeting concludes with awkward handshakes and forced smiles. Linton later explains that the North Koreans agreed to restore only one care unit to the list. They said they'd consider his request about the MDR kits but couldn't make a decision yet. Thin gruel, but Linton claims a tactical victory. "Fewer visits means we'll be able to spend more time with the care centers and their staff," he says. And things may still change. "It's only a matter of time before the ministry starts getting angry calls from physicians demanding to know what happened to their shipments. Hopefully that will persuade the ministry that we must have access to those sites next year."

After dinner that evening, Linton brings the Bell delegates to his room to show them the MDR formulas. Drug resistance among tuberculosis patients is a problem anywhere treatment regimens are either improperly administered or simply not completed. Often a patient will ask to be discharged, thinking himself cured, only to return home and spread the disease to his family. Even in Pyongyang, where tuberculosis is not nearly the prolific killer it is in the countryside, the disease is frequently misdiagnosed as a persistent cold.

When patients show obvious symptoms but do not respond to medicine taken orally, doctors inject isoniazid and ethambutol, part of a common four-drug tuberculosis regimen, directly into their lungs. It is a painful process: In North Korea, the needles required are often so dulled by repeated use that they can only be inserted with pliers. And the more of the regimen the patient receives, the stronger his or her resistance becomes.

The MDR kits are stacked in a corner of Linton's room, which is cluttered with everything from stethoscopes to auto parts. There are 20 kits in all, sealed in boxes about a foot square, each costing about $1,000 and bearing the name of the patient whom, based on sputum samples Linton collected during his previous visit, it was designed to treat. If distributed, the kits will supply patients with the first third of an 18-month treatment.

Snaking out from the Kobangsan grounds the next morning, the Eugene Bell convoy -- two Mitsubishi Pajeros, a Kia sedan and a cargo truck -- prompts curious looks from ordinary North Koreans and salutes from soldiers. First stop is a warehouse district on the outskirts of Pyongyang, where international aid agencies store their goods. The road there leads past a coal mine district, where laborers draped in mantles of black dust squat not far from the roadside, scooping rice out of a bucket with cupped fingers. Nearer to the city, farmhouses give way to residential complexes -- warrens for the proletariat, many with ground-floor windows protected by security bars.

The warehouse district is located near a bus terminal and surrounded by housing blocks with corrugated steel roofs. Clustered together are Quonset huts identified by the logos of the NGOs that use them. Linton is encouraged to see Eugene Bell goods stacked neatly with the foundation's logo facing outward. He takes inventory and then distributes gifts of spare auto parts and a bicycle to the warehouse staff.

The Eugene Bell logo, a schematic image of two people in a rowboat, is a reference to a Korean folk tale about two brothers who feud with each other over an ingot of gold. When the dispute threatens to destroy their family, the siblings row out to sea and toss the gold overboard. It is a metaphor for Korea's geopolitical divide, but it could also stand for the Linton family's own breach.

In the late 1990s, as Linton was making the transition from academia to full-time aid work, two of his siblings and a close friend quit Eugene Bell in a dispute over donor solicitations. Linton was left with $10,000 and a Rolodex of donors. For a while he lived off his savings. Then his wife of 20 years left him for someone else. "All of this took place on a stage," he says, "where everyone is watching in horror and fascination and you can't just disappear."

Today, Linton lives in a Victorian-era house in the Howard County town of Clarksville spending most of his free time renovating a guesthouse on the small estate. He has since remarried.

EUGENE BELL'S FALL RESUPPLY CIRCUIT covers hospitals and care centers from the west-central part of the country north to the border with China. The group averages two resupply visits a day, and much of the time is spent on the road. The convoy passes collectives of farmers busy wrapping cornstalks into enormous hourglass-shaped bundles and storing them for fuel, and army units gathering the remains of the cabbage crop.

The roads are lined with the ligaments of a sclerotic state: laborers shouldering homemade shovels and pickaxes, youth-brigade members, soldiers, students, oxen-drawn carts, swarms of bicyclists. Vehicular traffic consists of military convoys, the occasional passenger car smuggled in from China and a contraption known as a moktan cha, or "charcoal truck," which is powered by cornstalks converted into carbon monoxide by a retrofitted burner. A similar technology was employed by taxis in postwar Japan, according to Linton, who is something of a gearhead.

Despite its poverty, the North Korean countryside displays a tidy bucolic tableau: rows of squat farmhouses with whitewashed plaster walls trimmed in apricot or blue, and dried cornhusks suspended above the entryway. Children attempt to ice-skate across frozen rice paddies. Thrust among these delicate vignettes are imposing billboards and monuments, usually superimposed with portraits of Kim Il Sung, imploring citizens to struggle, to resist, to endure, to work hard, to observe clean work habits, to smile.

The site visits assume a familiar rhythm. Fresh supplies are stacked neatly in front of the administration offices with the Eugene Bell logo clearly visible. Unboxed goods, such as wheelbarrows and tractors, are lined up nearby. Aside from international inspections of Pyongyang's nuclear facilities, the Eugene Bell resupply tour could be North Korea's most thoroughly documented event. Once the Bell delegation arrives, Linton performs what he calls a "hello-how-are-you" shot, a brief videotaped exchange with the facility's director and a quick explanation of what supplies are being delivered and who donated them. Staff members are summoned to hold banners with the donor's name in front of the shipment, or attach stickers with the proper logos onto each box. When the cargo is funded by several donors, teams of staff members are rotated before the cameras with the appropriate banners. Every delivered item is accounted for on a manifest that is signed on camera by the site director. It is an exhausting archive of data and images that over the next several months will be edited and collated to create both a report for each donor and a memento book that Linton will present to the hospital or sanatorium on his next visit, complete with extra photos for the staff.

On the fourth day of the tour, Linton and his delegates stop at the Kosong People's Hospital, a whitewashed building with rounded corners and neatly painted gray windowpanes. A team of physicians in threadbare, stain-spattered scrubs escorts them into the head office and sits down at a long table that extends perpendicularly from the director's desk, which is set parallel to the wall opposite the doorway. Above the desk are framed photos of the elder and younger Kims. On the desktop are two phones from the Sputnik-era East Bloc and a day-per-page datebook made of coarse recycled paper. (During the two-week tour, the delegates are received by 12 directors, and each office is identical to the other. The telephones rarely ring, and the daybooks are blank.)

The Bell delegates are treated to helpings of sweet potatoes and whole chestnuts, peanuts in their shells, apples and tea. Like the rest of the facility, the office is unheated, so coats stay on. Linton sits closest to the director as, for about an hour, the two men discuss the hospital's future needs. The meeting could be wrapped up in less time, but Linton doesn't want to risk appearing rude. By the end of the discussion, two small pyramids of potato peels and chestnut skins have accumulated on the desk before him.

The director then escorts the delegation on a tour of the hospital and its equipment, much of which predates the Cuban missile crisis. Like most hospitals and care centers in North Korea, the facility employs a direct-fluoroscopy machine, an X-ray device that irradiates the patient from behind while the doctor examines an image projected on a fluoroscopic plate of glass between them. "The negative is the doctor's retina," says Linton, who frequently admonishes physicians for submitting themselves to the machines' potentially fatal doses of radiation. Most physicians in North Korea use them regularly, and suffer the consequences. The radiologist at Kosong, for example, has receding gums and low hemoglobin, common signs of radiation sickness. Three of his colleagues have died over the years -- one from radiation overdose, another from cancer and a third from tuberculosis.

Like their counterparts throughout a country isolated by international sanctions, the physicians at Kosong have become expert scavengers and foragers. They fashion their own surgical instruments with the help of local blacksmiths. The hospital's tuberculosis wards -- long, narrow dormitories warmed by wood stoves -- share space with thickets of cotton plants that provide the fibers needed for gauze or bandages. A common Eugene Bell donor item is plastic sheeting for greenhouses to nurture fresh vegetables and other produce for the patients' nutritional needs. Physicians even harvest one another: Earlier, the director and three of his colleagues had lowered their trousers to reveal fresh scars on their inner thighs where patches of flesh had been sliced away to be used in skin grafts.

One thing North Korea's medical community cannot jury-rig, however, are medical textbooks. When Linton opens a carton of South Korean books, Kosong staff members set upon them hungrily. Forty minutes later, when orderlies are asked to gather the books for registration with the health ministry, a nurse holds hers tight to her chest, clearly loath to relinquish it.

Before saying goodbye, Linton inspects the hospital's emergency vehicles, bantering with the maintenance crew as he distributes fresh shock absorbers and air filters. In mock reproach, he scolds a mechanic for having dirty fingernails, then rewards him with a wristwatch for keeping detailed service records. The damaged auto parts have already been removed and sorted on a burlap sack, like freshly removed organs.

Linton will take these back with him to Seoul. "Otherwise," he says, "they'll end up in some black-market stall."

THE IMAGES THAT MELT LINTON'S DONORS' HEARTS is footage of him interviewing tuberculosis patients in their wards. With a practiced hand, he pins a microphone on the patient's clothing -- more often than not Eugene Bell-issued pajamas -- and begins a short interview. At a sanatorium in Dongdaewon on the eighth day of the tour, Linton meets a 27-year-old woman who contracted tuberculosis after her discharge from the military. She was diagnosed in a city hospital and sent to the care unit after she failed to respond to treatment, which suggests MDR.

"I took my medicine just like everyone else, but I was the only one who didn't get well," she tells Linton almost apologetically, her eyes darting nervously from one corner of the room to the other.

Linton addresses her in his light South Korean drawl. "You're my model today," he says soothingly, and she manages a weak smile.

The quiet is perforated by the sound of patients in the corridors hawking up expectorant for sputum samples. The woman has already given hers, which is stored along with the others in a cooler that Linton will take with him to South Korea for testing. With luck, he'll bring a treatment kit to her in the spring.

THE TWO-WEEK TOUR ENDS WITH A VISIT TO A TUBERCULOSIS FACILITY NEAR SADONG, a district in a distant part of the Pyongyang municipality. Like other care centers on the capital's periphery, this one is near an army base and a cemetery. Linton and his team are welcomed warmly by the director, a tall man with facial fluoroscopy burns that give him a perpetual blush.

While inspecting the wards, Linton enters a cell crowded with five men of varying ages. They have three cots among them and give in to fits of deep, gravelly coughs. Most wear ragged army fatigues. The sun is setting, and the atmosphere is sepulchral. Linton manages to get a few wan laughs but shakes his head as he steps back into the receding daylight.

"It's the end of the line in there," he says. "I doubt if any of 'em will make it, save one or two." Nevertheless, the men's sputum samples are collected and deposited with the others.

It is getting late. The delegates will have to hurry back to Pyongyang to beat curfew. They hastily say goodbye to the staff and board their SUVs.

On the road back, no lamps illuminate the highway, and many of the vehicles on the road have no working headlights. The Bell convoy sweeps past the relentless procession of workers, students and soldiers, going from daylight into night, stopping only for the occasional military checkpoint.

That evening, from a room now eerily vacant of MDR kits and spare car parts, Linton will begin preparations for the spring tour.

Stephen Glain is a contributing editor for Newsweek International based in Washington.

© 2008 The Washington Post Company

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Quiet Christianity

January 21, 2008 admin
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Newsweek Web Exclusive2008-01-22 23:32:35

Pastor Douglas Shin has learned the cost of good intentions-especially in North Korea. Every time the Seoul-based Protestant missionary goes in with another shipment of food for the hungry, the regime's officials grab much if not all of it for themselves, he says. Once, when he tried to negotiate a visit to the capital, Pyongyang, they demanded that he bring a whole rail car loaded with 60 tons of flour and supplies. He finally bargained them down to a 10-ton food shipment, delivered just inside the border by truck from China. At least they let him hand out some of it to people on the streets.

Shin says every relief group encounters the same problem in North Korea. Regime officials demand more and more kickbacks from humanitarian agencies-and South Korea's church groups are particularly easy marks. "Northerners know how to take advantage of zealous southerners," Shin says. "But in some way both sides use each other."

That willingness to cut deals is making North Korea increasingly dependent on Christians from the peninsula's southern end. While nongovernmental agencies like World Vision and Save the Children, fed up with the North's rampant corruption and lack of transparency, have closed down or sharply reduced their activities there, South Koreans are racing into the void. Lighthouse Foundation, a Seoul-based Presbyterian group that works with handicapped children, is working with the North to build a center for disabled kids in Pyongyang. The Rev. Kim Jin Gyung, a Korean-American protestant, will soon open a $30 million science and technology university in Pyongyang financed by donations from South Korean Christians.

North Korea's few churches-Potemkin temples to give the illusion of religious freedom, critics say-are getting costly makeovers courtesy of religious groups on the far side of the DMZ. Seoul's Presbyterians are spending nearly $3 million to rebuild Bongsu Church in Pyongyang, while Baptist groups are planning to invest a similar sum in nearby Chilgol Church, which was once attended by the mother of North Korean founder Kim Il Sung.

The southerners aren't competing for converts; proselytizing remains strictly forbidden in the atheist North. The real prizes (for now, at least) are trophy assets-the kind that look good on church Web sites and help fill the collection plates.

By that measure it's tough to beat the Rev. Yonggi Cho of Seoul's Full Gospel Church, the world's largest single house of worship, with 780,000 congregants. Early last month Cho and 250 fellow South Koreans attended the groundbreaking ceremony for the Full Gospel's $22 million cardiac center on the banks of Pyongyang's Daedong River. A month earlier the church had sent 23 trucks loaded with heavy equipment, such as cranes and cement mixers, across the DMZ. Construction of the seven-story, 260-bed heart clinic will be financed with individual donations and Cho's own retirement pay, which he says he'll transfer after stepping down next year.

There was one snag: the facility's name. Cho's first choice-Pyongyang Gospel Heart Hospital-sounded a bit too liturgical for the regime's tastes, so the preacher backed down. The Rev. Cho Yonggi Heart Hospital is scheduled to open in 2010.

Anything is an improvement on North Korea's present health-care system. Even in privileged Pyongyang hospitals lack electricity and running water as well as basic equipment and supplies. And the facilities outside the capital are far worse. At the People's Hospital in Kusong, some 30 miles north of Pyongyang, patients are X-rayed by a 40-year-old Hungarian-built fluoroscopy machine that emits dangerous levels of radiation. Orderlies fashion bandages from cotton grown on the hospital grounds, and intravenous drugs are administered with upended soda bottles. Conditions at Kusong would be even more desperate without donor groups like the Maryland-based Eugene Bell Foundation, which insists on delivering aid directly its final destination. If North Korean officials refuse, the foundation warehouses its aid until permission is given.

Regular site visits by donor representatives are basic to responsible NGO work, not only in North Korea but everywhere else, says Eugene Bell director Stephen Linton. "People who think otherwise are kidding themselves."

Lack of oversight, however, hasn't stopped some South Korean religious groups from planting their flags-both spiritual and humanitarian-throughout the north. In 2005 a South Korean Christian denomination authorized construction of a church with $1 million in donations. But the building doesn't even have a cross, say defectors interviewed in Seoul, and there's nothing the group can do about it.

The South's Jogye Buddhist denomination recently spent $8 million to rebuild a temple on Mount Kumkang that was bombed during the Korean War. After the new temple was dedicated in October, however, the southern monks' northern partners seized control of it, prompting a public expression of regret from the Jogye leader who oversaw the three-and-a-half-year project.

Two years ago representatives of Seoul's Youngnak Presbyterian Church were in advanced negotiations to build a children's health center in the North Korean city of Sinuiju, which is on the Chinese border. Blueprints were drawn up and approved, and delegations from the church met with senior officials in Sinuiju's North Pyongan province. But negotiations came to a halt when the North Koreans demanded that the facility be built in the capital instead. Youngnak says it's holding firm.

The South Korean government is discouraging such ambitious projects, at least by example, because of the difficulties in supplying such facilities once they've been completed. The health ministry in Seoul, smarting from unsuccessful attempts in the past to stock North Korean hospitals directly, now provides a modest $1 million worth of medical materials to the north annually. Two years ago it began supporting a hospital on Mount Kumkang, a popular destination for South Korean tourists. Doctors from the South regularly visit the hospital to treat patients alongside local physicians, who can then benefit from their southern counterparts' expertise. "We focus on treating patients, not building hospitals," says an official involved in the Mount Kumkang program.

What the north really needs, say officials in Seoul, is small-scale clinics and medicine for needy people, both in and outside Pyongyang, rather than big hospitals that can benefit only the elites. The average surgery at the Rev. Cho's hospital, they point out, will cost $3,000 in a country with a per capita income of $760. But given how hard it is to operate outside Pyongyang, South Korean aid groups seem quite content to busy themselves in the big city.

© 2008 Newsweek, Inc

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The U.S. and China: Back to Bludgeoning Each Other

December 19, 2007 admin
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Newsweek Blog 2007-12-20 23:45:56The War on Terror has burned through America’s human and financial resources and empowered radical Islam. But for China, it’s been a lucrative reprieve.

However weakened are Sino-US ties – and they’ve taken a beating this year – the most important trans-Pacific relationship would be a lot worse if not for the Bush administration’s pre-occupation with the Middle East. His predecessor will likely declare a victory of sorts in Iraq and Afghanistan and slowly draw down the US military presence there. The White House will focus on domestic concerns like health care, immigration, and trade. Media interest in the terrorist threat will wane. (If there is a clash of civilizations and no one around to videotape it, does it get posted on YouTube?)

And with that, imperial America and once-and-future imperial China can get on with the serious business of bludgeoning each other. The two nations’ shared interests, of which there are many, will be subverted by cheap politicking on both sides. For a glimpse at how this will play out, consider the sagging trajectory of the Strategic Economic Dialogue, the launch vehicle that was to propel Sino-American ties from a feeding frenzy into a high-brow affair.

The SED, as it is called, is a biannual round of meetings between senior officials from Washington and Beijing. It was conceived by investment banker Henry Paulson as a pre-condition for his appointment as US Treasury Secretary. Paulson was an inspired choice for the job. At Goldman Sachs, he arranged the public listings of some of China’s top state-owned companies, which placed him on intimate terms with the country’s senior officials and businessmen. Paulson knew the Chinese and enjoyed the rarest coin in a realm awash in liquidity: respect.

The SED’s charter was to engage China in a sustained, workmanlike way. Paulson’s experience and expertise, it was assumed, would buy him enough credibility from Congress to vouchsafe the round from partisan politics. In return, he would negotiate “deliverables” from Beijing on such controversial issues as market access and the dollar-yuan exchange rate. But his enthusiasm was never matched on the Chinese side. From the outset, Paulson’s expectations for diplomatic parity with Premier Wen Jiabao were dashed. When the new Treasury Secretary hand-delivered a letter to Wen requesting he represent China’s side in the dialogue, Wen gave it a quick read and passed it to Vice Premier Wu Yi. (“Too bad, you get me,” she told Paulson jokingly, according to someone close to Paulson’s office.)

The first session of the SED was held a year ago in Beijing. It yielded nothing but understandings on procedural matters, despite a US delegation that included 13 US cabinet members and Federal Reserve Chairman Ben Bernanke.

Since then, China has come under growing criticism in the US. Lawmakers have passed bills that would impose punitive tariffs on Chinese-made goods in retaliation for Beijing’s manipulation of its currency, the yuan. Pundits like CNN’s Lou Dobbs have intensified their already high-decibel attacks on China for “stealing” American jobs and menacing US interests abroad. Most Democratic presidents campaigning for the Fall ’08 election, and even a few Republican ones, talk about the need to “deal” with China. American nativism, never far from the surface since 9/11, has assumed a decidedly Sino-phobic veneer.

By the time SED III came and went – the three-day event was held in Beijing last week – the US-China relationship had been damaged further by the controversy over tainted and defective Chinese exports, the Dali Lama’s reception in Washington, and Beijing’s decision to block a US aircraft carrier from entering Hong Kong harbor. A week prior to the round, Vice Premier Wu betrayed symptoms of dialogue fatigue when she berated a visiting EU delegation for constantly nagging Beijing about its undervalued currency. No one was surprised when the concessions made by both sides at the most recent SED were largely symbolic. The round is now hobbling alongside the lame duck president who bought into it and Paulson is preoccupied with America’s credit crisis.

In retrospect, the SED was doomed from the start, led as it was by a man who knows China and Wall Street better than he does Congress, and compromised by legislators who know little about anything beyond Washington and Main Street.

Historians may note the SED as the last such diplomatic initiative of the unipolar world. China’s emergence as a regional hegemon is inevitable and it will require bold leadership in Washington to accept this. America has built an empire – its far-flung garrisons and deep-water fleets – on the pretense that it alone should be entrusted as custodian of the world’s natural resources. It markets this not so much as a burden but as an obligation, one that obviates the need for other powers to challenge US access to oil fields and gas terminals. But China is not coming along. It is building a strategic waterway linking its ports to the Persian Gulf while sewing up excavation rights to energy-rich, and mostly authoritarian states in Africa. The Pentagon characterizes this as an ominous “Eastern Way” of energy security: controlling fuel supplies rather than the “Western Way” of buying them in the open market. (Saudi Aramco was a beneficent mentor, apparently.)

The Chinese respond by condemning the US for wanting to deny it the resources it needs to become a power in its own right. Washington deploys long-range F-22 fighter-bombers to Japan and flirts with the idea of selling them to Tokyo. Beijing accelerates the modernization of its military by privatizing its once state-run defense sector. Soon, China will have its own military-industrial complex which, should it bear any resemblance to its US counterpart, will be an empire in itself.

Under the Bush administration, American “engagement” with the world has become as debased as the dollar. The next US president would be wise to refresh it. For all its faults, the SED was at least a good try. It would be sad and possibly tragic if it turns out to be the last one.

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Yuan Power

December 18, 2007 admin
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Newsweek Blog 2007-12-18 23:49:42The “China price” is heading North -- at least when it comes to specialized hosiery. According to press reports, Wal-Mart is once again buying from Langsha, a top athletic-sock maker based in Zhejiang province, after refusing to pay the higher prices the footwear giant was demanding in August. (Langsha would not comment; a Wal-Mart spokesman said he was unaware of the Langsha contract which he says may have been negotiated with a sub-contractor.) It was Wal-Mart that so effectively used its vast market share to squeeze suppliers in the first place. So if the uber-retailer is backing off, dirt-cheap Chinese goods – a key factor in keeping inflation at bay worldwide - may be a thing of the past. Or not. Market leaders like Langsha may be able to demand modest price increases, but most Chinese manufacturers are still at the mercy of overseas buyers and a growing number of them are relocating their production facilities abroad to escape withering inflation at home. China’s economy is growing so fast that even its abundant labor force isn’t large enough to keep up with demand. Wages are rising along with inflation – October’s 6.5 percent increase in China’s consumer price index was the largest monthly hike since 1997 – a byproduct of speculative funds infiltrating the economy in anticipation of a further appreciation of the Chinese yuan. Beijing has already allowed its currency to rise against the US dollar by 6 percent or so over the last year. Further increases would benefit Chinese companies which import raw materials and finished goods – airlines, for example, which buy foreign-made aircraft, or utilities companies, which import fuel. A more valuable currency would also make US assets, already cheap due to the weak dollar, look increasingly appetizing to cash-rich Chinese corporations and investors. But an upward adjustment in the yuan’s value would hurt most of China’s exporters, which rely on exchange rates that make their products affordable abroad, and nearly all its farmers, who fear a stronger currency would enable local consumers to import more agricultural goods at their expense. And as the rump of China’s economic growth is still generated by export sales, it is politically unpalatable for most of the country’s leaders to promote a stronger yuan. Anyone who openly supports yuan appreciation,” says Teng Binsheng, a professor at Beijing’s Cheung Kong Graduate School of Business, “would be public enemy No. 1. Not everyone is mute, however. In the December 3rd edition of The Economic Observer, economist Zhou Qiren argued that because so much of the country’s inflation is generated by speculative investment in local assets, the government should give the punters what they want in one sharp adjustment and get it over with. A strong yuan, he wrote, would also reorient the Chinese economy away from exports while encouraging investors and businesses to develop neglected markets at home. It was a surge in exports of cereal products, argues Zhao, that contributed to this year’s spike in pork prices. “So long as private individuals or government officials see an undervalued yuan, they will focus on exports,” Zhou wrote. “And that means a widening trade surplus, over-liquidity and spiraling inflation.” Zhou has an ally in US Treasury Secretary Henry Paulson, who was in Beijing last week to lead the US side in the Strategic Economic Dialogue, a biannual round of Sino-US discussions. Paulson, Washington’s point man in its relationship with Beijing, has been urging China to let the yuan strengthen, both to ease inflationary pressure in China and to ease its trade friction with the US. He returned to the US with only symbolic concessions and no movement at all on foreign exchange issues. While neither Zhou nor Paulson may get what they want anytime soon, the increasingly complex debate over the yuan’s fate illustrates how quickly the world’s fastest growing economy is evolving. Not long ago, China was known for importing jobs from the developed world and exporting capital to the debt-laden US economy by purchasing its sovereign debt. Now the country is exporting low-margin work to developing countries in Southeast Asia and Africa while importing a torrent of hot money – much of it from American hedge funds and private equity specialists betting on a stronger yuan. Given the extraordinary pressures now squeezing the world’s fastest growing economy, it’s looking more and more like the smart wager.

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Why America's Point Man on China Is Running into a Wall

December 15, 2007 admin
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Newsweek International 2007-12-16 23:52:19Is Henry Paulson's big China offensive dead in the water? As the U.S. Treasury secretary preps for the next meeting of his widely hyped Strategic Economic Dialogue in Beijing this week, some China watchers are heralding its demise. Paulson left as CEO of Goldman Sachs and took the Treasury post on condition that he'd be America's point man on China, yet so far he's not even meeting the right people. Prime Minister Wen Jiabao declined to lead China's side, shunting the job off to Wu Yi, who will be a lame duck when she meets Paulson this week. Worse, her likely successor is thought to be Zhang Jiang, a provincial party chief who learned his economics at Kim Il Sung University in Pyongyang, hardly a bastion of free-market liberalism. Treasury officials hope Paulson will end up working with Li Keqiang, a highly regarded reformer and rising star in the Communist Party. But it's unlikely anyone on the Chinese side will give much more anyway. The dialogue was supposed to work like this: Beijing would make concessions on hot issues like piracy and the value of the yuan, and Paulson would dampen China bashing from Washington. It hasn't happened, because China was never going to make real concessions to relieve protectionist pressure, which has been rising in Congress and from U.S. presidential candidates anyway. It's not easy to manage a relationship with China when both Democrats and Republicans in the United States are "screaming" about alleged Chinese misdeeds, notes Charles Freeman, a former senior trade official in the Bush administration. Both sides sold each other a phony premise for the talks. A senior U.S. official not cleared to speak by name insists the dialogue has produced major achievements, including a recent air-service agreement and U.S. support for China's membership in the Financial Activity Task Force, an anti-money-laundering agency. Thin gruel, most analysts agree, compared with the expectations for what Paulson, an old China hand, could get done. The United States, burdened by its trade deficit, needs this dialogue more than China does. Paulson's vision that it would become a permanent framework for U.S.-China relations lies in ruins. China is in a strong position, not in a mood to grant favors to itinerant foreigners. (A delegation from the European Union, which went to Beijing last week also seeking a higher price for the yuan, left empty-handed.) It now looks likely that this effort to regulate Sino-American affairs will fade away when Bush leaves office in 2009—just one more misguided effort to "hustle" the East, as Kipling put it.

© 2007 Newsweek, Inc.

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