Houstonian Corner (V14-I1)

December 29, 2011 by · Leave a Comment 

Lone Star State’s Economy Rebounding Faster than United States as Whole

As 2011 comes to an end, a variety of economic indicators point to the fact that Texas may be pulling itself up by its bootstraps and, despite a national recession, watching the state economy rebound.

Texas State Comptroller Susan Combs reports Texas unemployment is down and sales tax collections from retail businesses are up. Both point to a state economy whose health is improving even faster than the country as a whole. And looking ahead, innovative government solutions and new revenue sources such as gas production from Eagle Ford Shale could move the state out of the economic downturn even faster.

Earlier this month, Combs distributed $478.3 million in sales tax allocation to cities, counties, transit systems and special districts. Sales tax revenue for November totaled $2.7 billion, up 12.2 percent over the same month last year. But more importantly, the November distribution marked the 20th consecutive month for increases in Texas sales tax revenues.

Along with increased consumer spending, the state also is benefitting from employment gains. The Texas unemployment rate has been at or below the national rate for 58 consecutive months.

Local government subdivisions are dealing with budget shortfalls with innovative ideas aimed at saving money and making government more efficient. To avoid tax increases and cuts in services, some are sharing services – from public safety and 9-1-1 operations to human resources personnel and city/county equipment. Many are exploring bringing private sector entities into the picture to help fund necessary infrastructure and construction projects through public-private partnerships. Still others are looking at ways to cut costs by being more energy efficient, with energy audits, retrofits and installation of more energy-efficient products to trim skyrocketing energy costs. Installation of solar panels and wind turbines to generate their own power has become the norm.

The state and some local governments also will be keeping a close eye on the Eagle Ford Formation, dubbed “Eagle Ford Shale.” This rock formation is rich in oil and natural gas and runs approximately 400 miles from along the Texas-Mexico border in South Texas toward East Texas. Some officials estimate oil reserves at 3 billion barrels with an output that could be up to 420,000 barrels a day. Although controversial because of concerns about hydraulic fracturing (fracking) as the means of producing oil and gas from it, the potential of Eagle Ford Shale could be a boon to both the state and to local governments in the areas in which it lies. State and local tax revenues could skyrocket.

DeWitt County already is making money off the formation, as that county is charging an $8,000-per-well fee from drilling companies seeking to tap Eagle Ford Shale inside their county lines.

A University of Texas at San Antonio study suggested that tax revenue tied to the formation may reach $1.65 billion a year by 2020, up from $108.5 million this year.

With the drilling come jobs. And with the jobs come people. And those people earn paychecks and spend their money locally, boosting both the state and local tax receipts. At the local level, that means improvements in transportation infrastructure, water and wastewater, construction of new schools and government facilities and other amenities.

With increased employment and more retail sales at the state level, 2011 will end on a high note for the Texas economy. And with the state and local government entities looking for efficiencies in government and new sources of revenue such as Eagle Ford Shale, it appears that economic uptick will continue into 2012.

Fervent Election Campaign in PCC-USA

Elections of PCC-USA
Elections of PCC-USA

Khalid Kazi is President-Elect

Houston, Texas (Staff Report): Pakistan Chamber of Commerce USA (PCC-USA) is a leading association of Pakistani entrepreneurs in USA, with Chapters in Houston, San Diego, and New York. Fifty founding members Advisory Council, under the leadership of Dr. Ashraf Abbasi, established PCC-USA as a premier business organization in Houston, Texas, on August 14th, 1997 to coincide with the Golden Jubilee of Pakistan Independence Day.

This Year 2011 became the first time, when some of the office bearers of PCC-USA got elected after actual voting. In the past, usually all the executive council positions used to be filled with only one nominating person per position; and as such getting elected unopposed.

PCC-USA runs on the basis of President-Elect system, where the president elected in these past December 2011 elections will be President in 2013, while will be called President-Elect in 2012; and Waseem Rahim, who was elected unopposed in December 2010 & was President-Elect for 2011, will be President for 2012. This way President-Elect gets to work side by side with the President (P. J. Khan Swati in 2011) and gets trained by the time his or her time comes to be President.

While talking to the candidates, who had insisted on participating in actual elections, despite being asked by many to withdraw their names, our correspondent learned that their idea to participate in the elections was not to win, but inspiration was to instill new life in this important association of the community. Near them organizations, where there is no culture of actual elections and no tolerance of listening to opposing but sincere ideas, such associations become dormant over a period of time (we have such examples in our own city of Houston). They pointed out that several inactive senior members of the community were seen coming out to vote and participate in this decision making process, plus the paid membership of the association has gone to some sort of records level. The new office bearers that have brought all these people out to vote and made new members, will now need to keep all of them involved with healthy activities and use their strength to develop programs for common business persons of the community & improve trade ties between USA & Pakistan.

According to Rashid Khokhar, Chairman PCC-USA Election Commission (other members being GulFaraz Khan and Zubair Ashraf), elections results were like this:

President-Elect: Khalid Kazi (Won) Vs Zafar Mansuri;
Senior Vice President: Sheikh Muhammad Awais Vs Pervez Iqbal (Won);
Director Finance: Ch. Mahmood Ahmed (Won) Vs Asif Ehsan;
Vice President – Administration: Nargis F. Ahmed (Unopposed);
Vice President – Liaison: Mian Aziz (Unopposed);
Vice President – Marketing: Zaki Mohammed Mirza (Unopposed);
Vice President – Media Relations: Mumtaz Khan (Unopposed);
General Secretary: Abdur Rauf Khan (Unopposed);
Joint Secretary: Iqbal Akhtar (Unopposed)…

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Clogged Reforms a Speed Bump for Indonesia’s Economy

November 23, 2011 by · Leave a Comment 

By Neil Chatterjee

2011-11-22T075418Z_373471803_GM1E7BM180L01_RTRMADP_3_-ECONOMY-INDONESIA-REFORM

Commuters standing in the doorways of a train and sitting on its roof, are seen as they travel to work in the capital Jakarta November 10, 2011. Indonesia’s economy has shown strong growth this year, but failure to improve a stifling bureaucracy, to end wasteful subsidies and to systematically curb graft, could derail a growth story that has made resource-rich Indonesia into Southeast Asian’s sweet spot. Doubts are growing that President Susilo Bambang Yudhoyono can deliver on promised reforms that improve creaky infrastructure and creating higher-value jobs for the young in the world’s fourth most populous country. Picture taken November 10, 2011.        

REUTERS/Supri

JAKARTA, Nov 22 (Reuters) – At a time when many countries are slipping off investors’ radar screens, Indonesia is a beacon with stable finances and the fastest growth rate in Asia outside China and India.

Yet its failure to improve a stifling bureaucracy, to end wasteful subsidies and to systematically curb graft could derail a growth story that has made resource-rich Indonesia into Southeast Asian’s sweet spot.

Doubts are growing that President Susilo Bambang Yudhoyono, who’s been in office seven years and has three left, can deliver on promised reforms that would improve creaky infrastructure and creating higher-value jobs for the young in the world’s fourth most populous country.

While Indonesia has had solid growth rates during Yudhoyono’s tenure, much of that is rooted in demand from overseas for the country’s coal and other commodities.

If there’s a major global slump that depresses demand, Indonesia could fail to get needed investment because it remains a difficult place to do business and one where personalities matter, not process.

There has been no real reform of the inefficient civil service – where bribery remains rife — and no sustained progress in building institutions that enhance the business climate such as credible courts.
“The political elite in the parliament and the government are busy with politicking, ignoring an urgent and important economic agenda that needs to be dealt with,” said Syamsudin Haris, senior political analyst at the government-funded Science Research Institute.

After getting improved grades in recent years as a place for business, Indonesia’s position has slipped. In the World Bank’s 2012 rankings for ease of doing business, Indonesia was 129 out of 183 countries, down from 126 a year earlier.

Re-elected by a landslide in 2009, Yudhoyono has so far squandered a mandate to drive reforms and, according to polls, has lost popularity. His long-awaited cabinet reshuffle last month reflected a desire to shore up political support more than to initiate real change before a presidential election in 2014 which he cannot contest.

“We haven’t seen any headline reforms done, which has led to some market disappointment and also to disappointment among voters,” said Prakriti Sofat, an economist at Barclays Capital in Singapore.

“If Yudhoyono and company don’t put things in order, and there’s not a good candidate coming through in 2014, then the risk will go up.”

Having solid GDP growth by itself does not mean trends are good. Just look at India: Although growth is still relatively strong, its image as an emerging market star is losing its shine as corruption scandals, high inflation and a flagging reform agenda have dented investor confidence. Business leaders openly fret that the government may be squandering India’s chance at the big time.

Azim Premji, billionaire chairman of outsourcing giant Wipro , summed up a sense of policy paralysis in India when he recently attacked a “complete absence of decision-making among leaders in government.”

The result has been investors fleeing from Mumbai stocks , making it one of the world’s worst performing major markets in 2011.

While Indonesia has been drawing investors, “long-term, if there are better opportunities elsewhere, money will go somewhere else,” said Sofat.

Yudhoyono’s government has been often commended for good macroeconomic policies. It has maintained fiscal discipline, steadily cutting the debt-to-GDP ratio and boosting foreign reserves, while lifting its budget for infrastructure by 28 percent this year.

But the government’s administrative mechanism is often clogged. Lifting budgets is not translating into spending in the real economy. Overall, government spending grew just 2.5 percent in the third quarter from a year earlier, a slower pace than in the second quarter.

“The government has never shown any reliable track record of efficient budget spending and I don’t think that will change in the foreseeable future,” said Lanang Trihardian, investment analyst at Jakarta-based Syailendra Capital, which manages around $460 million. “The impact of that is I don’t believe Indonesia can grow above the 8 percent level as seen in China and India.”

Officials often rush to spend some of a budget overhang in the fourth quarter. A much-needed project to improve woeful drainage in Jakarta recently started on the main thoroughfare — just as the torrential rainy season began, causing gridlock terrible even by the capital’s traffic standards.

“You know what the bureaucracy is like for government projects — long and complicated,” the head of Jakarta’s public works office, Ery Basworo, told a press conference called to address complaints. “For us to even get the project started in September was an achievement.”

At one time, many Indonesians felt Yudhoyono was making good gains to combat the old, damaging problem of graft, but it remains entrenched. To some citizens, corruption has worsened, in part because of decentralisation since the era of strongman Suharto.

In the remote provinces of the scattered archipelago, greater regional autonomy has sometimes resulted in corrupt local authorities to siphon off resource wealth meant for development.

Yudhoyono has declared eradicating corruption a top priority and said no official is above the law. But his recent cabinet shuffle did not signal a tougher or more effective approach. Two ministers whom the Indonesian media alleged to be tainted retained their seats.

Meanwhile, political squabbles led to a demotion of the trade minister and the narrow survival of the finance minister, both well-respected internationally.

The reshuffle “was an opportunity for Yudhoyono to have a stronger team and he missed it,” said Erman Rahman, director of economic programs in Indonesia at The Asia Foundation, a San-Francisco-headquartered nongovernmental organisation.

Another longtime impediment to business, the bloated and inefficient bureaucracy, remains a source of big frustration. “It will take more than very strong leadership to change this,” Rahman said.
So far, there are no signs of planned reforms for the police department or justice system, which are often the source of complaints.

TRACKING SPENDING FLOWS

Polls show that many Indonesians, used to Suharto’s 32-year rule, want another military man to run the country from 2014. Yudhoyono, the first directly elected president, is a retired army general but is seen by many as unable to make bold decisions to promote institutional change.

Analysts say Vice-President Boediono, a former central bank governor, is trying to improve efficiency and governance by steps such as putting into ministries computer systems that track spending flows.

In the important area of infrastructure, investors have been waiting for a long-mooted land reform bill that would speed up the acquisition of land for state-backed projects, such as $150 billion of public-private partnerships the government wants to see.

But as the end of another year approaches, it has still not been passed by a cantankerous parliament, and Yudhoyono has been silent on the issue.

Another issue that needs addressing is subsidies. With inflation significantly easing this year, the government has missed an opportunity to phase out fuel subsidies for private cars, backtracking on a planned April move and delaying it indefinitely.

The government fears hiking gasoline costing just half the price of the market rate could dampen the domestic economy or spur the kind of riots that contributed to Suharto’s fall in 1998.

Yet not ending subsidies only stores up inflationary problems for the longer-term. The “ruinous middle-class subsidies”, as one economist has dubbed them, could instead go to building roads and ports, argue economists and rating agencies who see weak infrastructure and high inflation as key risks.

“Progress on structural reforms appears to have slowed in the past year. In particular, there has been limited progress in reforming the composition of spending,” said Andrew Colquhoun, head of Asia-Pacific sovereign ratings at Fitch.

($1 = 9050 Rupiah)

(Additional reporting by Andjarsari Paramaditha in JAKARTA and Matthias Williams in NEW DELHI; Editing by Richard Borsuk)

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Revisiting A Cultural Heritage

November 17, 2011 by · Leave a Comment 

By Sumayyah Meehan, TMO

sadu3The cultural heritage of Kuwait has a rich history of arts and handicrafts dating back centuries. The Bedouin Kuwaitis were famous for their brightly woven rugs, tapestries and calligraphy. However, with the discovery of oil in the late 1930’s the reliance upon handicrafts began to fade as the country morphed into an oil rich nation with newfound revenue to import products from all over the world. Today, the vast majority of Kuwaiti society is more interested in the latest fashions straight off the runways of New York and Milan than crafting.

World-renowned Kuwaits artists like Thuraya Al-Baqsami and Khazaal Al Qaffas have kept a flicker of hope for the Kuwaiti art scene burning brightly for decades. However, over the past few years a veritable art revival has been quietly taking place. A minority of Kuwaitis are increasingly becoming more interested in art and handicrafts. Over the past couple of years, hobby shops and art supply stores have started opening up at record pace. And business is booming.

The renewed interested in arts and handicrafts in Kuwait remains a mystery. In the USA and Europe, for example, a surge in interest for homemade handicrafts is often tied to a problematic economy as people try to save money by making things at home or even selling their wares to earn an income. The Kuwaiti economy has not only survived the years long economic turndown, but it has also flourished. The only discernable reason for the revival of arts and handicrafts is that many Kuwaitis are looking to get back to their creative roots.

Not only are there an abundance of arts and crafts suppliers in Kuwait, but there is also a wealth of handicraft classes complete with instructors now available to teach everything from jewelry making to painting. One of the most recent handicraft supply shops, LB o J’zazz – Beads and Things, also offers between 40-60 handicraft classes per year. Owners Lubna Seif Abbas and Bettina Al-Bakhit offer workshops complete with all the materials necessary to complete the crafting project from start to finish. In a recent interview, Abbas shared, “Each class is project-based. I think that everybody has creativity, it is just they need somebody to show them the basics, they need good tools, and time, and we have lots of time here in Kuwait. If anybody is bored, just let them come here. We will fill time with something useful and joyful to do at the same time. There is so much that we can do. People now seek to perform arts and crafts, and they look for some
thing deeper while enjoy doing it.”

The future looks bright for the handmade revolution in Kuwait as even members of the expatriate community are even getting in on the crafting. Abbas revealed that an increasing number of non-Kuwaitis are expressing interest in her courses and several are taking part.

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Tunisia’s Ennahda May Back Open Economy

October 27, 2011 by · Leave a Comment 

By Andrew Hammond

2011-10-25T195752Z_357696695_GM1E7AQ0B4401_RTRMADP_3_TUNISIA

Soumaya Ghannouch (C), daughter of Rached Ghannouchi, leader of the Islamist Ennahda movement, celebrates outside Ennahda’s headquarters in Tunis October 25, 2011. The party said on Tuesday it had won more than 40 percent of seats in Sunday’s election, pledging to continue democracy after the first vote that resulted from the "Arab Spring" revolts sweeping the Middle East and North Africa.

REUTERS/Zohra Bensemra

TUNIS, Oct 26 (Reuters) – Tunisian Islamists who won a historic election victory this week are expected to promote business-friendly economic policies but Europe’s economic woes could favour Gulf investors in the short term, analysts say.

Ennahda has tried hard to assuage the concerns of Western powers and secular elites which have long had the upper hand in the North African country that it will not alter laws that guarantee women equal rights to men in divorce, marriage and inheritance.

But it has also been keen to argue it will not cause any ruptures in Tunisia’s economic life. The two are linked since Western tourism, with its expectations of sun, sand and drinking, has been an economic driver for Tunisia.

Ennahda secretary general Hamadi Jbeli singled out on Tuesday wine and bikinis as elements in attracting tourism that the party had no intention to touch. He also said Ennahda had no plans to make changes to the banking sector, where Sharia-compliant services are so far minimal.

“We will pay close attention to what they implement but on the economic side we have no cause for concern. Our biggest concern is long delays in government formation,” said one Western diplomat in Tunis.

“A lot of their backers are from the merchant class who are keen on the idea of a liberal economic policy and they don’t have serious plans to change the economic policy of previous governments.”
Tunisia is under pressure to reinvigorate an economy that was hailed in recent years as a “miracle” by Western governments and financial institutions for its privatisations and deregulation but which has ground to a halt since the uprising that brought down Zine al-Abidine Ben Ali in January.

Unemployment was at 14 percent before Ben Ali fell, and one third of the jobless had higher education. The figure is thought to have worsened in recent months.

The biggest problem facing the country is resource distribution. It is no accident that the revolt started in Sidi Bouzid, a depressed provincial town in the semi-arid zone of the Tunisian interior where resentment against the affluent coastal cities is strong.

“Economically, they are not radicals. Ennahda is quite conservative economically,” said Jean-Baptiste Gallopin of Control Risks. “They favour free enterprise.”

Ennahda leader Rachid Ghannouchi assured a delegation of bourse officials on Tuesday that he favoured more flotations on a stock market. Share prices fell in October on apparent fear of an Ennahda win, though Tunisia’s Eurobonds did not react negatively to its victory.

An initial public offering in state operator Tunisie Telecom had been held up partly by the leftists who gained in influence after the revolution. Jbeli, who is tipped to be Ennahda’s prime minister, met employers’ federation leaders on Tuesday.

About 80 percent of Tunisia’s trade is with the European Union, but with Europe in a financial crisis Ennahda could draw money from the conservative Gulf Arab region.

“Qatar in particular may feel encouraged to resume exploring investment opportunities in the country as the political situation stabilises,” said Dubai-based analyst Ghanem Nuseibeh, founder of Cornerstone Global Associates.

“Although it did not proactively support the Tunisian revolution like it did in Libya, many Tunisians, including Ennahda feel indebted to Qatar for the moral support it gave to their cause,” he said.

Saudi Arabia is not thought to have close ties to Ennahda, but Qatar’s leading Arab broadcaster Al-Jazeera has heavily promoted the group. Qatar was a major Arab backer of the NATO operation to back Libyan rebels who succeeded in ending the rule of Muammar Gaddafi.

Sama Dubai, a government-owned company in the emirate, had plans in the Ben Ali era to develop a residential and commercial district in Tunis but the future of the project is now not clear and the land sits empty.

Hardliners among Ennahda’s rank-and-file could still rock the boat, despite Ghannouchi’s attempts to offer reassurances on social and economic policy.

“The danger is that Ennahda members or influential independents foment fears among investors with unguarded comments that do not really reflect the party’s intentions,” said Crispin Hawes of the Eurasia Group.

“The net result is that we believe that investor sentiment over Tunisia will remain nervous and trending towards the negative in the aftermath of the election.” (Additional reporting by Christian Lowe and Tarek Amara; Editing by David Stamp)

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End in Sight to Lebanon’s Crippling Internet Problem

October 6, 2011 by · Leave a Comment 

By Oliver Holmes

2011-10-05T172718Z_162890397_GM1E7A6045E01_RTRMADP_3_LEBANON-INTERNET

An engineer is seen working on Microwave seamless connectivity equipment, at the rooftop of TerraNet heaquarters, an Internet Service Provider (ISP), in Beirut October 5, 2011. On Saturday, the Ministry of Telecommunications introduced a new, high-speed and cheaper Internet plan for private Internet Service Providers (ISP) to sell on to customers. The plan aims to reduce end-user prices for digital subscriber lines (DSL) by 80 percent, while raising speeds up to eight times. 

REUTERS/Jamal Saidi

BEIRUT, Oct 5 (Reuters) – For Sara Darwiche, it has been more than problematic running her fast-paced Internet company out of Lebanon, a country with Internet access that is among the worst in the world.

The “invite only” website ChouChic.com gives its members the opportunity to buy surplus stocks of fashionable clothes at discounted prices. It works on the idea that the scarcity of the clothes coupled with the time limit on sales — 48 hours to a week — will nurture impulse buying and push up sales. The strategy is called flash selling.

But for ChouChic’s main customers, who are Lebanese, there is nothing flashy about buying online here.

“Sometimes the website cuts and people think the sale is over. It really affects the quality,” she told Reuters. “We open our sales everyday at noon and for some reason the Internet usually cuts out then for five minutes.”

For a company aiming to sell the majority of stock in the first ten minutes of a sale opening, connectivity issues can be devastating.

“We needed a lot of modifications to compensate for the slow Internet,” she said, adding that the website was now hosted in the United States. “For luxury fashion, it needs to look like the goods are in front of you so the resolution of the photos needs to be high. But we had to lower the resolution as upload speeds were too slow.”

Lebanon is regarded as a fortress of Arab entrepreneurship, with a vibrant services sector and a business community that is famed for its unyielding tenacity even during the depths of war. But sluggish and expensive Internet has been an embarrassing blot on the economy, and Internet-based companies such as ChouChic are rare.

On Saturday, the Ministry of Telecommunications introduced a new, high-speed and cheaper Internet plan for private Internet Service Providers (ISP) to sell on to customers. The plan aims to reduce end-user prices for digital subscriber lines (DSL) by 80 percent, while raising speeds up to eight times.

If it is implemented smoothly, the plan will provide relief to hundreds of thousands of Lebanese Internet users and could boost economic growth. But for years to come, the economy may bear the scars of the political bickering, vested financial interests and negligence that kept Lebanon in the slow lanes of the information superhighway.

MISSED OPPORTUNITIES

“While other countries in the region have capitalised on (the Internet), we have missed it,” said Nassib Ghobril, chief economist of the Byblos Bank Group.

“They have moved ahead of us and now have a comparative advantage. A lot of companies that rely on the Internet look elsewhere to base themselves.”

Ookla, a company that tests Internet speeds around the world, has often ranked Lebanon last on its global Net Index, and the country has generally been lower down than many less developed nations such as Afghanistan and Burkina Faso.

“Lebanon is a services economy and society. Not having Internet is like not having foreign languages,” Khaldoun Farhat, CEO of private ISP provider Terranet, said at his offices opposite Beirut’s port.

Farhat has repeatedly tried to bypass what he calls a “narrow view” of the Internet by the Ministry of Telecommunications. He bought Internet capacity from satellites, made failed requests to buy bandwidth from nearby Cyprus, and tried to import his own Internet equipment which got stuck at customs, he says, for over a year.

“When I wake up, the first thing I think about is, will we get increased capacity today?” he said.

Businessman Mark Daou spent the last few months campaigning for faster internet through a Facebook group titled “Lebanese Want Fast Internet”, which has almost 50,000 supporters.

“Slow speeds affect me in the advertising business as all our resources are on the Internet. Especially now as many of our clients are asking for a lot of online advertising,” he said.

“I have to wait for Saturday night, when Internet usage is low, to upload files to Saudi and Dubai.”

Lebanon has long had the physical capacity to supply cheap, high-speed Internet; in December 2010 a 13,000 km (8,000 mile) submarine fiber optic cable linking the country to India, the Middle East and Western Europe began operating. But access to the cable was delayed until July by bickering between the Ministry of Telecommunications and Ogero, the government’s land-line provider, over usage rights.

The dispute was considered politically motivated as the ministry and Ogero are controlled by opposing sides of Lebanon’s political spectrum, which is deeply divided by religion, sect and economic ideology.

“In the telecoms sector, everyone wants a piece of the pie. It’s a cash cow,” Daou said. “The sector is almost completely controlled by the government. It has 80 percent of the market and the private sector cannot buy fixed licences. Private companies have to renew their Internet licence every year.”

A lack of revenue sources in other economic sectors, Daou said, has made the government see the Internet as an important source of funds. “The government was the only supplier. They needed the money to finance the treasury. It was generating money and nobody was complaining,” he said.

Lebanese Minister of Telecommunications Nicolas Sehnawi told Reuters that successive governments were unable to push through laws to cheapen and speed up connectivity.

“Other (fiber optic) cables in the region were connected before. In those countries, the internal governments have more manoeuverability. We have had big periods of paralysis.”

Last week, a 1 megabit per second (Mbps) connection, the second-fastest option at the time, cost around $76 per month. Under the new pricing plan, a 1 Mbps connection will be the slowest option available and cost around $16.

Economists and business leaders say the economic benefits could be considerable. They quote a 2008 report commissioned by the Ministry of Finance which estimated 10 percent growth in broadband penetration would increase gross domestic product by as much as 1.5 percent.

ChouChic’s Darwiche said she was looking forward to upgrading her website. “We are going to add many functions and the images are going to be a lot clearer.”

Two major ISPs which rely on Ogero for bandwidth supply, Terranet and IDM, have already upgraded their Internet services to comply with the new plan.

Even now, however, there is still concern among some private ISPs that Ogero, which controls around 80 percent of Lebanon’s Internet cables, will delay further in providing the upgraded service.

“There is not a single person in the country that can obstruct the decision. It will be implemented in a matter of hours and days,” Sehnawi said on Saturday in response to such allegations.

But a poll conducted by the “Lebanese Want Fast Internet” Facebook group found only 11 percent of the 1,631 people who replied said they had their DSL packages upgraded to higher speeds over the weekend.

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The Fatal Distraction

September 8, 2011 by · Leave a Comment 

By Paul Krugman

Friday brought two numbers that should have everyone in Washington saying, “My God, what have we done?”

One of these numbers was zero — the number of jobs created in August.

The other was two — the interest rate on 10-year U.S. bonds, almost as low as this rate has ever gone. Taken together, these numbers almost scream that the inside-the-Beltway crowd has been worrying about the wrong things, and inflicting grievous harm as a result.

Ever since the acute phase of the financial crisis ended, policy discussion in Washington has been dominated not by unemployment, but by the alleged dangers posed by budget deficits. Pundits and media organizations insisted that the biggest risk facing America was the threat that investors would pull the plug on U.S. debt. For example, in May 2009 The Wall Street Journal declared that the “bond vigilantes” were “returning with a vengeance,” telling readers that the Obama administration’s “epic spending spree” would send interest rates soaring.

The interest rate when that editorial was published was 3.7 percent. As of Friday, as I’ve already mentioned, it was only 2 percent.

I don’t mean to dismiss concerns about the long-run U.S. budget picture. If you look at fiscal prospects over, say, the next 20 years, they are indeed deeply worrying, largely because of rising health-care costs. But the experience of the past two years has overwhelmingly confirmed what some of us tried to argue from the beginning: The deficits we’re running right now — deficits we should be running, because deficit spending helps support a depressed economy — are no threat at all.

And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.

Although you’d never know it listening to the ranters, the past year has actually been a pretty good test of the theory that slashing government spending actually creates jobs. The deficit obsession has blocked a much-needed second round of federal stimulus, and with stimulus spending, such as it was, fading out, we’re experiencing de facto fiscal austerity. State and local governments, in particular, faced with the loss of federal aid, have been sharply cutting many programs and have been laying off a lot of workers, mostly schoolteachers.

And somehow the private sector hasn’t responded to these layoffs by rejoicing at the sight of a shrinking government and embarking on a hiring spree.

O.K., I know what the usual suspects will say — namely, that fears of regulation and higher taxes are holding businesses back. But this is just a right-wing fantasy. Multiple surveys have shown that lack of demand — a lack that is being exacerbated by government cutbacks — is the overwhelming problem businesses face, with regulation and taxes barely even in the picture.

For example, when McClatchy Newspapers recently canvassed a random selection of small-business owners to find out what was hurting them, not a single one complained about regulation of his or her industry, and few complained much about taxes. And did I mention that profits after taxes, as a share of national income, are at record levels?

So short-run deficits aren’t a problem; lack of demand is, and spending cuts are making things much worse. Maybe it’s time to change course?

Which brings me to President Obama’s planned speech on the economy.

I find it useful to think in terms of three questions: What should we be doing to create jobs? What will Republicans in Congress agree to?

And given that political reality, what should the president propose?

The answer to the first question is that we should have a lot of job-creating spending on the part of the federal government, largely in the form of much-needed spending to repair and upgrade the nation’s infrastructure. Oh, and we need more aid to state and local governments, so that they can stop laying off schoolteachers.

But what will Republicans agree to? That’s easy: nothing. They will oppose anything Mr. Obama proposes, even if it would clearly help the economy — or maybe I should say, especially if it would help the economy, since high unemployment helps them politically.

This reality makes the third question — what the president should propose — hard to answer, since nothing he proposes will actually happen anytime soon. So I’m personally prepared to cut Mr. Obama a lot of slack on the specifics of his proposal, as long as it’s big and bold. For what he mostly needs to do now is to change the conversation — to get Washington talking again about jobs and how the government can help create them.

For the sake of the nation, and especially for millions of unemployed Americans who see little prospect of finding another job, I hope he pulls it off.

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Ahmadinejad’s Economic Savvy

September 1, 2011 by · Leave a Comment 

‘He’s giving back half of the 60 billion dollars in savings directly to the people in monthly deposits. So every Iranian, man woman and child, is eligible to receive the equivalent of 40 dollars a month.’

By Fareed Zakaria, CNN

2011-08-26T105634Z_682489454_GM1E78Q1GTX01_RTRMADP_3_IRAN-PALESTINIANS-AHMADINEJAD

Iranian President Mahmoud Ahmadinejad waves to worshippers before speaking at Friday prayers on Jerusalem Day in Tehran August 26, 2011.

REUTERS/Morteza Nikoubazl

From the White House to London’s House of Commons and beyond…few Westerners have anything nice to say about Mahmoud Ahmadinejad.

But there’s one group that has glowing words of praise for Iran’s President – and it’s based not in Tehran, but in Washington.

The International Monetary Fund’s latest report paints a pretty picture of Iran’s economy.

It says growth has hit 3.2%, and will accelerate still further.

Inflation has dropped from 25% to 12% in just two years.

And Tehran has managed to do what every major oil exporter can only dream of accomplishing: It’s slashed subsidies on gas to recoup 60 billion dollars in annual revenue. That one-sixth of Iran’s entire GDP.

Why is this happening? And how can it be despite years of economic sanctions?

What in the world is going on?

Some say the IMF’s numbers can’t be right.

But we have no reason to doubt their work. The fund reasserted this week that its projections were independent of the government.

The real story here is that Iran has actually begun implementing some economic reforms. For decades now, Iranian leaders have tried to wean its people off cheap oil – oil that is subsidized by the government.

Cheap oil that has no connection to real market prices is not sustainable. Iran knows it, and so does every country from Saudi Arabia to Venezuela. But in the same way that any talk of tax increases here in America is considered heresy, people in oil-rich countries believe as an article of faith that they deserve cheap oil.

So how did Iran finally cut out the freebies?

The backstory is a complex game of chess between Ahmadinejad and someone much more powerful – the Supreme Leader Ayatollah Khamenei.

One theory goes like this: The Ayatollah thought cutting subsidies would make Ahmadinejad deeply unpopular. An ensuing revolt would then remove the one man who’s come to challenge the Supreme Leader’s power.

Another theory is that Ahmadinejad felt confident enough to go ahead with the reforms because he’s crushed the opposition Green Movement.

Either way, he’s played a smart hand. He’s giving back half of the 60 billion dollars in savings directly to the people in monthly deposits.

So every Iranian, man woman and child, is eligible to receive the equivalent of 40 dollars a month.

That kind of money won’t make any difference to Tehran’s upper classes.

But that’s not Ahmadinejad’s constituency.

On the other hand if you’re poor, if you have many children, and if you make sure the whole family signs up for the deposits, you’ll probably be saying “Thanks, Mr. President”.

The key thing to note here is that President Ahmadinejad had no choice, and neither did the Ayatollah.

Iran could not afford the subsidies anymore. Its economy is highly dysfunctional with many massive distortions and subsidies. And Washington’s recent targeted sanctions are beginning to bite.

It is now harder than ever before for Iran to do business with the world. Most of the major international traders of refined petroleum have stopped dealing with Iran. Tehran now has to rely on much costlier overland shipments for its exports.

And it is now almost impossible to conduct dollar-denominated transactions with Iran. So we were left with the bizarre case last month of China resorting to the barter system to pay Iran for 20 billion dollars worth of oil.

The IMF has a point. Iran is implementing some needed reforms and as a result its economy is doing better. The irony is that it’s happening – in some part – because of our sanctions. Talk about unintended consequences.

13-36

The Enemy is Washington: An Economy Destroyed

July 28, 2011 by · Leave a Comment 

By Paul Craig Roberts

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase.  The downgrade threat is not credible, and neither is the default threat.  Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt.  If Goldman Sachs is too big to fail, then so is the US government.

There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70 per cent -75 per cent of the federal budget deficit.

In contrast, Social Security is solvent.  Medicare expenditures are coming close to exceeding the 2.3 per cent payroll tax that funds Medicare, but it is dishonest for politicians and pundits to blame the US budget deficit on “entitlement programs.”

Entitlements are funded with a payroll tax.  Wars are not funded. The criminal Bush regime lied to Americans and claimed that the Iraq war would only cost $70 billion at the most and would be paid for with Iraq oil revenues. When Bush’s chief economic advisor, Larry Lindsay, said the Iraq invasion would cost $200 billion, Bush fired him. In fact, Lindsay was off by a factor of 20. Economic and budget experts have calculated that the Iraq and Afghanistan wars have consumed $4,000 billion in out-of-pocket and already incurred future costs.  In other words, the ongoing wars and occupations have already eaten up the $4 trillion by which Obama hopes to cut federal spending over the next ten years. Bomb now, pay later.

As taxing the rich is not part of the political solution, the focus is on rewarding the insurance companies by privatizing Medicare at some future date with government subsidized insurance premiums, by capping Medicaid, and by loading the diminishing middle class with additional Social Security tax.

Washington’s priorities and those of its presstitutes could not be clearer. President Obama, like George W. Bush before him, both parties in Congress, the print and TV media, and National Public Radio have made it clear that war is a far more important priority than health care and old age pensions for Americans.

The American people and their wants and needs are not represented in Washington. Washington serves powerful interest groups, such as the military/security complex, Wall Street and the banksters, agribusiness, the oil companies, the insurance companies, pharmaceuticals, and the mining and timber industries. 

Washington endows these interests with excess profits by committing war crimes and terrorizing foreign populations with bombs, drones, and invasions, by deregulating the financial sector and bailing it out of its greed-driven mistakes after it has stolen Americans’ pensions, homes, and jobs, by refusing to protect the land, air, water, oceans and wildlife from polluters and despoilers, and by constructing a health care system with the highest costs and highest profits in the world.

The way to reduce health care costs is to take out gobs of costs and profits with a single payer system.  A private health care system can continue to operate alongside for those who can afford it.
The way to get the budget under control is to stop the gratuitous hegemonic wars, wars that will end in a nuclear confrontation.

The US economy is in a deepening recession from which recovery is not possible, because American middle class jobs in manufacturing and professional services have been offshored and given to foreigners.  US GDP, consumer purchasing power, and tax base have been handed over to China, India, and Indonesia in order that Wall Street, shareholders, and corporate CEOs can earn more.
When the goods and services produced offshore come back into America, they arrive as imports. The trade balance worsens, the US dollar declines further in exchange value, and prices rise for Americans, whose incomes are stagnant or falling.

This is economic destruction. It always occurs when an oligarchy seizes control of a government. The short-run profits of the powerful are maximized at the expense of the viability of the economy.
The US economy is driven by consumer demand, but with 22.3 per cent unemployment, stagnant and declining wages and salaries, and consumer debt burdens so high that consumers cannot borrow to spend, there is nothing to drive the economy.

Washington’s response to this dilemma is to increase the austerity! 

Cutting back Medicare, Medicaid, and Social Security, forcing down wages by destroying unions and offshoring jobs (which results in a labor surplus and lower wages), and driving up the prices of food and energy by depreciating the dollar further erodes consumer purchasing power.  The Federal Reserve can print money to rescue the crooked financial institutions, but it cannot rescue the American consumer.

As a final point, confront the fact that you are even lied to about “deficit reduction.”  Even if Obama gets his $4 trillion “deficit reduction” over the next decade, it does not mean that the current national debt will be $4 trillion less than it currently is.  The “reduction” merely means that the growth in the national debt will be $4 trillion less than otherwise.  Regardless of any “deficit reduction,” the national debt ten years from now will be much higher than it presently is.

Paul Craig Roberts was Assistant Secretary of the US Treasury, Associate Editor of the Wall Street Journal, and professor of economics in six universities. His latest book, HOW THE ECONOMY WAS LOST, was published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com/Counter punch.

13-31

Why the 21st Century Will Not Belong to China

July 14, 2011 by · Leave a Comment 

Editor’s Note: The following is an edited transcript of Fareed Zakaria’s opening and closing statements at the Munk Debate where he joined Henry Kissinger in arguing against the proposition: “The 21st Century will belong to China.”

By Fareed Zakaria, CNN

China is not going to be the dominant power of the 21st century for three reasons: economic, political and geo-political.

Economic

One thing we’ve realized over recent years is that nothing goes up in a straight line forever. China looks like it is about to inherit the world, but Japan looked like that for a while. Japan was the second largest economy in the world. We were told that one day the world would be run by Japan. It didn’t turn out that way.

Most Asian Tigers have grown at about 9% a year for 20-25 years and then shifted downward to 6% or 5% growth. I’m not predicting any kind of Chinese crash. I am simply saying that China will follow that law of large numbers and regress at some point to a slower growth rate – perhaps a little bit later than the others because it is a much larger country.

But it is also worth pointing out that there are massive inefficiencies built into the Chinese economic system. They have a huge property bubble. Their growth is highly inefficient. In terms of foreign direct investment, China attracts every month what India takes in every year.

Still China only grows two percentage points faster than India.

In other words, if you think about the quality of Chinese growth, it’s not as impressive as it appears. They are undertaking massive investments – huge numbers of airports, eight-lane highways and high-speed rail. But if you look at what you are getting in terms of the return on investment it is not as impressive.

China has another huge problem. The UN just came out with a report that pointed out that China is going to have a demographic collapse over the next 25 years. It is going to lose 400 million people.

There is no point in human history in which you have had a dominant power in the world that is also declining demographically. It simply doesn’t happen. And if you want to look at what a country in demographic decline looks like, look at Japan.

Political

Let’s say that China does become the largest economy in the world: Does it have the political capacity to exercise the kind of leadership you need?

Remember, Japan was the second largest economy in the world for decades and I didn’t see any kind of grand, hegemonic design. You need to have the political capacity to be able to exercise that kind of leadership.

China is a country ruled by a political system that is in crisis.

It is unclear whether the next succession that China goes through will look anything like this current one. China has not solved the basic problem of what it is going to do when it creates a middle class and how it will respond to the aspirations of those people.

When Taiwan went through a similar process, what you saw was a transition to democracy; when South Korea went through it, you saw a transition to democracy. These were not easy periods. They were fairly bloody and chaotic.

Geopolitics

People like to talk about the rise of Asia. But there is no such thing as Asia. There’s China; there’s Japan; there’s India. And they don’t much like each other.

You are going to find that as China rises there is going to be a spirited response in India, Japan, Indonesia, Vietnam, South Korea and others. You already have begun to see the stirrings of this. China is not rising in a vacuum. It is rising on a continent in which there are many, many competitors.

Bet on Freedom

We are going through a crisis of confidence in the Western world. This has been true often when we have faced these kinds of new and different challenges and when we have faced nations that seem on the rise and on the march.

George Kennan, the great American statesman, used to write routinely about how he thought the United States would never be able to withstand the Soviet challenge because we were weak and fickle and we changed our minds and they were far-sighted and strategic. We were tactical and stupid. But somehow it worked out all right.

I think there is a tendency to think the same of China – that they have this incredible long-term vision and we are bumbling idiots. There is a wonderful story that encapsulates this:

When asked, “What do you think of the French Revolution?” Chinese Premier Zhou Enlai is supposed to have answered, “It’s too soon to tell.”

Everyone thought, “Oh, my goodness, he’s such a genius; he thinks so long-term – in centuries.”

Well it turns out that in 1973, Zhou Enlai meant the French revolution of 1968 – a student revolution. It was perfectly rational at that point to say: “It’s too soon to tell.”

So don’t believe that the Chinese are these strategic masterminds and we are bumbling. We have managed to bumble our way to a rather advanced position despite the challenges from the Kaiser’s Germany, from the Soviet Union and from Nazi Germany.

In fact, I think what you will find is that the United States and North America are creating an extraordinary model in this new world.

We are becoming the first universal nation, a country that draws people  from all parts of the world – people of all colors, creeds and religions and finds a way to harness their talent and build a kind of universal dream. It happens over here and it draws together people from all over the world.

Don’t lose faith in free and open societies.

13-29

Financial Problems in America

June 30, 2011 by · Leave a Comment 

By Justin Webb

Is America in denial about the extent of its financial problems, and therefore incapable of dealing with the gravest crisis the country has ever faced?

This is a story of debt, delusion and – potentially – disaster. For America and, if you happen to think that American influence is broadly a good thing, for the world.

The debt and the delusion are both all-American: $14 trillion (£8.75tn) of debt has been amassed and there is no cogent plan to reduce it.

The figure is impossible to comprehend: easier to focus on the fact that it grows at $40,000 (£25,000) a second. Getting out of Afghanistan will help but actually only at the margins. The problem is much bigger than any one area of expenditure.

The economist Jeffrey Sachs, director of Columbia University’s Earth Institute, is no rabid fiscal conservative but on the debt he is a hawk:

“I’m worried. The debt is large. It should be brought under control.

The longer we wait, the longer we suffer this kind of paralysis; the more America boxes itself into a corner and the more America’s constructive leadership in the world diminishes.”

The author and economist Diane Coyle agrees. And she makes the rather alarming point that the acknowledged deficit is not the whole story.

The current $14tn debt is bad enough, she argues, but the future commitments to the baby boomers, commitments for health care and for pensions, suggest that the debt burden is part of the fabric of society:

“You have promises implicit in the structure of welfare states and aging populations that mean there is an unacknowledged debt that will have to be paid for by future taxpayers, and that could double the published figures.”

Richard Haass of the Council on Foreign Relations acknowledges that this structural commitment to future debt is not unique to the United States. All advanced democracies have more or less the same problem, he says, “but in the case of the States the figures are absolutely enormous”.

Mr Haass, a former senior US diplomat, is leading an academic push for America’s debt to be taken seriously by Americans and noticed as well by the rest of the world.
He uses the analogy of Suez and the pressure that was put on the UK by the US to withdraw from that adventure. The pressure was not, of course, military. It was economic.

Britain needed US economic help. In the future, if China chooses to flex its muscles abroad, it may not be Chinese admirals who pose the real threat, Mr Haass tells us. “Chinese bankers could do the job.”

Because of course Chinese bankers, if they withdrew their support for the US economy and their willingness to finance America’s spending, could have an almost overnight impact on every American life, forcing interest rates to sky high levels and torpedoing the world’s largest economy.

Not everyone accepts the debt-as-disaster thesis.

David Frum is a Republican intellectual and a former speech writer to President George W Bush.

He told me the problem, and the solution, were actually rather simple:

“If I tell you you have a disease that will absolutely prostrate you and it could be prevented by taking a couple of aspirin and going for a walk, well I guess the situation isn’t apocalyptic is it?

“The things that America has to do to put its fiscal house in order are not anywhere near as extreme as what Europe has to do. The debt is not a financial problem, it is a political problem.”

Mr Frum believes that a future agreement to cut spending – he thinks America spends much too big a proportion of its GDP on health – and raise taxes, could very quickly bring the debt problem down to the level of quotidian normality.

‘Organised hypocrisy’

I am not so sure. What is the root cause of America’s failure to get to grips with its debt? It can be argued that the problem is not really economic or even political; it is a cultural inability to face up to hard choices, even to acknowledge that the choices are there.

I should make it clear that my reporting of the United States, in the years I was based there for the BBC, was governed by a sense that too much foreign media coverage of America is negative and jaundiced.

The nation is staggeringly successful and gloriously attractive. But it is also deeply dysfunctional in some respects.

Take Alaska. The author and serious student of America, Anne Applebaum makes the point that, as she puts it, “Alaska is a myth!”

People who live in Alaska – and people who aspire to live in Alaska – imagine it is the last frontier, she says, “the place where rugged individuals go out and dig for oil and shoot caribou, and make money the way people did 100 years ago”.

But in reality, Alaska is the most heavily subsidised state in the union. There is more social spending in Alaska than anywhere else.

To make it a place where decent lives can be lived, there is a huge transfer of money to Alaska from the US federal government which means of course from taxpayers in New York and Los Angeles and other places where less rugged folk live. Alaska is an organised hypocrisy.

Too many Americans behave like the Alaskans: they think of themselves as rugged individualists in no need of state help, but they take the money anyway in health care and pensions and all the other areas of American life where the federal government spends its cash.

The Tea Party movement talks of cuts in spending but when it comes to it, Americans always seem to be talking about cuts in spending that affect someone else, not them – and taxes that are levied on others too.

And nobody talks about raising taxes. Jeffrey Sachs has a theory about why this is.

America’s two main political parties are so desperate to raise money for the nation’s constant elections – remember the House of Representatives is elected every two years – that they can do nothing that upsets wealthy people and wealthy companies.

So they cannot touch taxes.

In all honesty, I am torn about the conclusions to be drawn. I find it difficult to believe that a nation historically so nimble and clever and open could succumb to disaster in this way.

But America, as well as being a place of hard work and ingenuity, is also no stranger to eating competitions in which gluttony is celebrated, and wilful ignorance, for instance regarding (as many Americans do) evolution as controversial.

The debt crisis is a fascinating crisis because it is about so much more than money. It is a test of a culture.

It is about waking up, as the Americans say, and smelling the coffee.

And – I am thinking Texas here – saddling up too, and riding out with purpose.

BBC News

13-27

Bernanke Glum on Growth–But No stimulus Hints

June 9, 2011 by · Leave a Comment 

By Matt Bigg (Reuters) –

Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged the economy has slowed but offered no hint the U.S. central bank is considering any more stimulus to accelerate growth.

He also warned members of Congress who might be planning aggressive budget cuts that they have the potential to derail the recovery if cuts in government spending take hold too soon.

A recent spate of weak economic data, capped by Friday’s report showing anemic job creation last month, had renewed speculation the Fed might again come to the economy’s aid.

Bernanke gave no such indication but did say the recovery was fragile enough to warrant keeping in place the extraordinary monetary support the Fed has already provided.

Speaking to a banking conference, the Fed chairman said that while he expects the economy to strengthen in the second half of the year, the job market bears close monitoring.

“The economy is still producing at levels well below its potential,” he said. “Consequently, accommodative monetary policies are still needed.”

Richard Gilhooly, an interest rate strategist at TD Securities in New York, called the speech “pretty downbeat.”

“It means that the Fed’s on hold for longer,” he said.

Stocks closed lower after Bernanke’s sober assessment, while longer-term bonds erased losses.

Bernanke repeated his view that a spike in U.S. inflation, while worrisome, should prove fleeting as commodity prices moderate. In addition, weak wage growth and stable inflation expectations should help keep prices down, he said.

On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path but warned politicians against massive short-term cuts in spending.
“A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery,” he said.

“By taking decisions today that lead to fiscal consolidation over a longer horizon, policymakers can avoid a sudden fiscal contraction that could put the recovery at risk,” he said.

All Tapped Out

The central bank has already slashed overnight interest rates to near zero and purchased more than $2 trillion in government bonds to pull the economy from a deep recession and spur a recovery.

With the central bank’s balance sheet already bloated, officials have suggested there would be a high bar for any further Fed easing. The Fed’s current $600 billion round of government bond buying, known as QE2, is due to end this month.

Sharp criticism in the wake of QE2 is one factor likely to make policymakers reluctant to push the limits of unconventional policy.

“QE3 is still not an option right now, more because of the political ramifications,” said Kathy Lien, director of currency research at GFT in New York. “We need to see much more significant deterioration in the economy and consistent weakness in non-farm payrolls before that can happen.”

In a Reuters poll of U.S. primary dealer banks conducted after the employment data, analysts saw only a 10 percent chance for more government bond purchases by the Fed. They also pushed back the timing of an eventual rate hike further into 2012.

Hurdles to better economic health have emerged overseas as well. Europe is struggling with a debt crisis, while Japan still reels from the effects of the earthquake and tsunami.

In emerging markets, China is trying to rein in red-hot growth to prevent inflation.

Fed policymakers have admitted to being surprised by how weak the economy appears, but none have yet called for more stimulus.

In an interview with the Wall Street Journal, Chicago Federal Reserve Bank President Charles Evans, a noted policy dove, said he was not yet ready to support a third round of so-called quantitative easing. His counterpart in Atlanta, Dennis Lockhart, also said the economy was not weak enough to warrant further support.

While Boston Fed President Eric Rosengren told CNBC on Monday the economy’s weakness might delay the timing of an eventual monetary tightening, the head of the Dallas Federal Reserve Bank, Richard Fisher, said the Fed may have already done too much.

Evans and Fisher have a policy vote on the Fed this year while Rosengren and Lockhart do not.

13-24

ANALYSIS-India Eyes Diplomacy and Private Sector to Woo Africa

June 9, 2011 by · Leave a Comment 

By Henry Foy and Aaron Maasho

NEW DELHI/ADDIS ABABA, May 27 (Reuters) – Bereft of China’s riches, India is banking on diplomacy, development and its entrepreneurial private sector to woo African nations to open markets and natural resources to Asia’s third-largest economy

New Delhi has promised billions of dollars in development support, financing for infrastructure projects and the building of educational and training institutes as it positions itself as the alternative to Beijing.

India enjoys historical ties with some African countries, but became a mere observer when China came calling for resources and energy, with financial riches New Delhi could not match.

China boasts foreign exchange reserves of more than $3 trillion, 10 times India’s $307 billion, and has aggressively used state-owned development banks to invest heavily in oil, gas and other resources across the continent.

But after being caught cold by China, and losing a series of bids for oil rights and infrastructure projects to its Asian rival, India is banking on a new approach to Africa that blends trade and investment with development economics.

“India’s approach is reciprocal, expecting access to resources in exchange for developing technology and training Africa’s human resources. That’s how India is different to other foreign powers,” said Suresh Kumar, head of the Department of African Studies, University of Delhi.

“In providing education, technology, development and security, India is a complete partner.”

Like China, India has posted high economic growth rates since 1990 and the economy in a country of 1.2 billion people is now expanding at more than 8 percent a year. Resources from Africa are seen as crucial to help sustain growth.

Total trade between India and African countries stood at $46 billion last year, still less than half of China’s $108 billion in 2008, but a huge increase on $3 billion in 2000-1. India says it will reach $70 billion by 2015.

Beijing also leads the way in diplomatic terms, with 42 embassies across sub-Saharan Africa, double India’s diplomatic presence of only 21 embassies, a report from the London-based Chatham House think-tank said.

Indian is keen to trumpet its cultural links with African countries, citing a shared history of imperialism and trade routes established hundreds of years ago.

The Indian diaspora in Africa tops 2 million people, but it is mainly concentrated in South Africa, the Indian Ocean and some countries along the Eastern seaboard such as Kenya.

“The private sector is pushing the Indian government to engage on Africa more consistently and to expand its network,” said Alex Vines, head of Chatham House’s Africa Programme.

Prime Minister Manmohan Singh, on a six-day trip to Ethiopia and Tanzania this week, pledged $5 billion over three years in development support, $700 million for new institutions and training programmes and $300 million for an Ethiopia-Djibouti railway line.

“India can be blamed for waking up late to the African opportunity, but can make up for lost time by projecting itself as a more humane investor than its northern neighbour,” wrote India’s Hindustan Times newspaper in an editorial.

While India, and other emerging economies, see Africa as an important supplier and customer to drive growth, it is a sign of New Delhi’s growing global economic and political clout, that it is seeking to play a leading role in Africa’s development.

“Africa is determined to partner in India’s economic resurgence as India is committed to be a close partner in Africa’s renaissance,” said the declaration after the second Africa-India summit in Ethiopia this week.

India’s state-run oil firms are beginning to invest in countries including Nigeria and Kenya, coal and diamond firms have invested across the continent, and new embassies in Niger and Malawi have been opened to assist firms with securing uranium for India’s fast-growing nuclear power industry.

India is also keen to leverage its global expertise in the information technology, agriculture and human resource sectors in helping African countries, many of which face similar developmental hurdles that India itself is grappling with.

While China has snapped up resources through governmental agreements, India’s government wants the private sector to spearhead the push to secure investments across the continent.

“India’s engagement with Africa is completely different with that of China. With China its state-to-state, even if the investors are private companies,” said Zemedeneh Negatu, Ernst & Young’s Managing Partner for Ethiopia.

Indian telecoms firm Bharti Airtel spent $9 billion acquiring Zain’s African assets last year, with a view to implementing strategies in Africa that were developed in the world’s fastest-growing mobile market.

Largely thanks to the Bharti deal, India was the most acquisitive nation in Africa in 2010.

With African consumer spending set to nearly double to $1.4 trillion by 2020, according to McKinsey and Co., Indian consumer goods makers are also pushing hard across the continent.

Godrej Consumer has bought personal care products makers in Nigeria and South Africa, while Dabur India, Marico and Emami have also bought assets.

“India’s engagement with Africa in the economic sense will be driven by the private sector,” said H.H. Viswanathan of the New Delhi-based Observer Research Foundation.

“The majority of the top 10 Indian companies in Africa are private firms, not state-run like the Chinese firms.”

Development assistance aside, as the Indian private sector expands in Africa, the continent is also destined to benefit from job creation as companies seek lower production costs.

“Labour costs have become more and more expensive in China and India. Chinese and Indian companies are starting look at destinations where they can do their things cost-competitively,” said Ernst & Young’s Zemedeneh.

“That’s where Africa benefits.” (Editing by David Clarke)

13-24

Islam in the Bahamas

April 1, 2010 by · 4 Comments 

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Jama’at Ahlus Sunnah Bahamas, Carmichael Road, Nassau

Introduction

Vacationing in the Bahamas, who would have thought that there are Muslims living in nice neighborhoods with a beautiful mosque. There are more than 300 Muslims in Nassau, Bahamas who are organized and have five daily prayers. Islam has come to the Bahamas more than 40 years ago via United States.

History

Which country is closest to Miami?  It is the Bahamas, only 40 miles from Miami to the east while Cuba is 80 miles to the south.  The Bahamas consists of more than 700 islands, well known for their gorgeous beaches, sea of colors, vivid flamingoes, and Poinciana trees that line the edge of roads and tantalize the senses with their fragrant aromas. Christopher Columbus discovered it on October 12, 1492 and named it Bahamas (low water or sea).  The British have controlled it until the Bahamians achieved their independence on July 10, 1973.  The thirteen colonies fought the British and won the island for few years but at the treaty of Versailles in 1783, the British traded Florida for the Bahamas.

Economy

Nassau, the capital, is the queen of archipelago, most densely populated consisting of two thirds of total population of 342,000. Eighty five percent of people are of African descent with literacy rate of 95 percent. City of Nassau is decorated with architecture of British, Spanish, Indian, Chinese and flavor of southern US. In 2008, 4.6 million people visited Bahamas, 85 percent from the USA.  Its economy thrives on four areas for income:  tourism, fishing, banking, and farming.  The Bahamas, because of it strict secrecy laws, is called the “Switzerland of the West.” It has no income tax, sales tax, capital gain tax, estate tax, or inheritance tax. The nation’s stable government and economy as well as its proximity to the U.S. make it one of the most attractive areas for investors all over the world. There are 110 US affiliated businesses operating in the Bahamas, mostly in tourism and banking.

Coming of Islam

According to the old records, some of the early Muslims were brought as slaves from North Africa. In the 1960’s a Bahamian called Bashan Saladin (formerly Charles Cleare) preached Islam and converted his home into Mosque. In 1974, Dr. Munir Ahmad who returned from US as Dental Specialist and Mr. Mustafa khalil Khalfani joined hand to establish Islam. They were later joined by Br. Faisal AbdurRahmaan Hepburn. There is only one central college in Nassau and no large university.  For all higher education, the Bahamians must travel to the United States.  After independence, many Bahamians converted to Islam while studying in the US.  Everyone you meet has connection to the US.  There are many South Asian Muslims from India, Bangladesh, and Pakistan, as well as Turkey and Guyana totaling to 20-30 people working as doctors, businessmen and teachers that visit the mosque.

Community Development

There are many Muslims from India, Pakistan and other countries that have helped develop this community. In 1978 when Jamaat-Ul-Islam, the Revolutionary Islamic Movement, was formed and Br. Mustapha Khalil Khalafani was chosen as its leader. The Muslims established Jamaat- Ul-Islam Mosque in Nassau runned  by Jamaat Management Consultancy Limited owned by Brother Faisal Abdurrahman Hepburn.

The Mosque

The Mosque rests on two acres of land, white in color with three domes (one large and two small) and one tall minaret.  It is surrounded by newly planted trees, a colorful courtyard and a parking lot.  Women area is separated by a perforated wooden partisan. The five daily prayers are performed punctually in congregation. Over 60 people attend the Friday sermon and prayer.  Other activities include brothers and sisters study circle as well as children’s Sunday school.

Conclusion

Islam in Nassau is growing with strong foundation for increasing the Dawa work in the area. Muslims are being ignored or marginalized in many ways, because of being a very small minority(less than 1% of the population). For example, the media refuse to air positive Islamic program and local newspapers are reluctant to cover events relating to Islam and Muslims. They are still facing problems in carrying on their activities. They could use some help and attention from US Muslims in order to energize their work. Muslims in the U. S. including doctors, engineers etc. can contribute by devoting their 1-2 week of vacation per year while doing seminars on Islam or having free medical clinics while still enjoying the scenery. The entire area is conducive to Dawa work due to high literacy, good command of English language, respect for people from US in general and religious background. The US national organizations of Muslims have special obligation to reach out and extend a helping hand. Any cooperation and coordinated activity will go a long way in establishing Islam in this part of the world. For more information about the mosque or the Islamic organization in the Bahamas, contact them at email: faisalhepburn@yahoo.com or visit their website: http:// www.jamaahlus-sunnah.com/.

Anis Ansari, MD,
Clinton, IA
Dr. Ansari is President of Islamic Society of Clinton County in Clinton, IA  and Board Certified Nephrologists. He can be reached at a.ansari@mchsi.com.

Dubai Babylon: The glitz, the Glamour – and Now the Gloom

December 3, 2009 by · Leave a Comment 

Property of TVS, Inc. Dubai, the Arabian city state that tried to turn itself into Manhattan-on-the-Gulf inside a decade, looks this weekend as if it may end up more like an expensive imitation of Sodom and Gomorrah. No brimstone, no vengeful God, but still an awful lot of wreckage after an orgy of hedonistic excess.

This, until last week, was the world capital of greed, a Legoland of lolly, where flashy malls, artificial islands, and preposterous skyscrapers were run up in no time; where monied chancers booked into £4,000-a-night hotel rooms; and where celebrities who didn’t know better were lured into a place that was even gaudier than their own homes. People said it was all built on sand, but, after the businesses at the core of the Dubai empire revealed a black hole of $80bn, we now know it was actually built on debt, semi-slave labour and the glossiest puffery that borrowed money can buy.

This, before we get down to the juicy details, is not how Gordon Brown saw it. The Dubai dream was largely the creation of the late Sheikh Maktoum and his successor, the current ruler Sheikh Mohammed. The day before Dubai’s shock debt announcement, the sheikh was in London. According to UAE’s national news service, Gordon Brown said he was “impressed with the quick recovery made by the UAE economy and the measures made by the leadership and government there that led to minimal impact of that crisis on the country’s economy.”

Once upon a recent time, this was true. At the height of Dubai’s property bubble, developers competed to outdo each other and impress the sheikh with more and more outlandish projects at the city’s annual property show Cityscape. Ski fields in the desert and the world’s largest shopping mall of 1,200 shops, complete with an aquarium housing 400 sharks, are among the projects already built, and plans for an underwater hotel.

Prospective buyers would queue for hours for the chance to purchase off-plan property. Ten minutes later they would sell on to someone at the back of the queue for a £10,000 profit.

While the economy boomed, the city partied hard. Dubai quickly became a favourite playground for Russian gangsters, Bollywood movie stars, and British footballers and their WAGs. David Beckham and Michael Owen were among those splashing out on multimillion-pound properties on the Palm, while Brad Pitt and Denzel Washington were also rumoured to have homes there.

Paris Hilton made a version of her reality show in the bars and malls of city this year. On any given night, parked out front the Grosvenor Hotel, with its popular bars, would be an eye-popping collection of the most expensive sports cars. “Soon,” one sheik was quoted as saying, “every Count of Monte Cristo will be in Dubai. In 10 years, only rich and famous people will live here.” And the servants? “I would hope robots or clones will do all that by then.”

With Western cash came Western cultural norms. Though foreign residents need a liquor licence to drink in their own homes, alcohol is widely available in hotel bars. All-you-can-drink brunches where expatriates got sloshed on champagne became the favoured way of passing Friday afternoons. While the Muslim community spent the holy day at the mosque, Westerners drank themselves legless.

It was at one of these infamous brunches that two Britons fell foul of the strict laws that govern the state. Michelle Palmer, 36, and Vince Acors, 34, who had met for the first time that day, were sentenced to three months in prison in July 2008 after being arrested for having sex on the beach. Not long after, British women Marnie Pearce and Sally Antia were jailed for adultery after their husbands told the police they were having affairs. Yet Arab men will drink openly in hotel bars and prostitution is rife.

The Burj Dubai, the world’s tallest skyscraper at 818m, disappears into the clouds high above this emirate of contradictions. Dubai is an architectural odyssey, yet an urban planner’s worst nightmare which employed, until recently, 50 per cent of the world’s largest cranes. The people of the more sedate and richer emirate of Abu Dhabi 70 miles down the road have often been said to shake their heads at the money its neighbour has wasted. Abu Dhabi’s developments such as the breathtaking Yas Marina Circuit used in this year’s Formula One championship have been carefully planned.

Dubai has simply built bigger and bigger with little thought given to planning. It was bound to fail: no city or region could sustain such growth – particularly as the oil that drove that expansion has been slowly running out. The financial crisis simply exacerbated the long-term structural problems of its economy. Last week’s announcement that Dubai World, the developer of the famous man-made Palm Jumeirah island development that can be seen from space, wanted a standstill on its repayments on a chunk of its $60bn indebtedness shocked the financial markets. Banks in London and Edinburgh, such as HSBC and the Royal Bank of Scotland, had lent Dubai World billions of pounds. Now there is the very real possibility that they will lose much of this as Dubai World defaults.

On the Palm, on the Persian Gulf’s man-made coastline, is the Atlantis Hotel, an imposing construction of two towers linked by a bridge. Kylie Minogue sang at its star-studded opening last year, with spectacular fireworks visible for miles a one-night jamboree that cost £20m. Dubai World could not have chosen a worse time to open the seven-star hotel.

Attracting Western tourists has been one of the pillars of Dubai’s gross domestic product growth, but as Westerners tighten the purse strings so Dubai’s tourism industry has started to wobble. The fear now is that the dreams of Sheikh Mohammed could turn into an economic nightmare for both the emirate and the rest of the world. Economists are analysing whether this is the disaster that will create a so-called W-shaped recession – that is, two collapses rather than just the one of a V-shape.

It might seem extraordinary that a tiny emirate of about 1.5 million people could cause such global turmoil, but Dubai is intertwined with some of the most everyday parts of the UK economy alone. Dubai World owns P&O, the ferry operator, while Dubai International Capital (DIC), the state’s international investment arm, has a 20 per cent stake in the company that runs Madame Tussauds, the London Eye and the Sea Life Centres.

The reciprocal nature of the UK and Dubai economies means that British firms are now coming to the rescue. The Independent on Sunday can reveal that Dubai World’s big lenders, led by the UK-based institutions, have lined up the London-based financial restructuring team a accountants KMPG to salvage the $30bn-plus they are owed. A formal appointment is expected this week.

They will have their hands full.

Gulf state’s holdings: Small sample of Dubai’s global reach

Millions of dollars have been invested in Sheikh Mohammed’s passion: thoroughbred racehorses. In Newmarket, he owns Dalham Hall stud farm and Godolphin stables. The sheikh’s 4,000 acres in Ireland make him the largest farmer in the country. He also owns 7,000 acres of paddocks in Britain and 5,000 acres of farmland. Other assets owned by Dubai investors include:

* The QE2, currently moored in Cape Town
* The Adelphi on the Strand and the Grand Buildings in Trafalgar Square
* A 20 per cent stake in Cirque du Soleil, the Canadian circus troupe
* Budget hotel chain Travelodge
* A stake in Merlin Entertainments, which runs Alton Towers, Madame Tussauds and the London Eye
* Scottish golf course Turnberry
* Chris Evert tennis clubs in the US
* A ski resort in Aspen, Colorado
* A 21 per cent stake in the London Stock Exchange
* Ports and ferries group P&O

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Gold in the Limelight

November 25, 2009 by · Leave a Comment 

www.adenforecast.com

Gold is soaring, hitting new record highs almost daily. This C rise is going strong. Our initial $1200 target level for this year’s rise has nearly been reached, but gold could go higher.

This is good news for all of us who have been invested in gold for the past eight years. But even for those of you who invested in more recent times, gold has been a good and profitable investment.

We feel strongly that this will continue in the months and years ahead. And there are many valid reasons why.

Most important, the unprecedented monetary policy currently in force is inflationary. The same is true of the weak U.S. dollar, negative interest rates, rising oil and commodities. Gold buying by central banks is also boosting the gold price higher.

Even though gold is still relatively unknown in mainstream investment circles, it’s starting to attract some attention. As this interest grows, momentum buying will pick up and the exchange traded funds are another big positive, simply because they make it easy to buy gold. The improving economy is another positive factor.

Yes, there are problems…. serious problems.  But that doesn’t mean the world is going to fall apart next month or next year.

Pessimists are always going to paint the worst case scenario. Optimists will forever present the best case scenario. The reality is usually somewhere in between. But the markets and the facts always tell the story and that’s what we try to focus on. So what are they currently telling us?

First, despite all that’s happening, it’s important to put things into perspective… and looking back, the overall situation was a lot worse last year compared to how it is now.

Remember, the entire financial world was on the verge of collapse last year as one huge company after another failed, or came close to it. Economies worldwide were dropping and so were all of the global stock markets. Fear and panic were rampant, and with reason. The crisis wiped out a greater chunk of household wealth than during the Great Depression. No one knew what to do…

Now fast forward to today…

For starters, nearly every economy in the world is growing, some obviously more than others. But the point is, they’re all up. Stocks around the globe have also been rising this year and confidence is returning.

In the U.S., for instance, the economy grew 3½% in the third quarter. The leading economic indicator has been up for seven consecutive months and stocks, which lead the economy, have been rising for eight months. Manufacturing is on the mend, along with other important economic signs, all showing that the recession ended in June and the economy is now on its way up, albeit slowly.

In other countries, growth has been far more robust. In China, for example, the economy is growing at a 9% rate. So Korea is growing at the fastest pace in seven years. India is going strong, the same is true in most of Asia, Brazil, and to a lesser extent, Europe is improving too.

2009: Great gains

So far, based on 18 of the world’s major stock markets, the gains this year have ranged between 11% and 92%. The average has been 31%. So even though the Dow Industrials is only up about 14%, the global stock markets are all telling us that ongoing growth lies ahead.

Since the markets look to the future, if that were not the case, these markets would be falling, not rising.

Okay, but what about commodities? The CRB commodity index has gained 24% this year. More impressive, copper has soared 101% and it’s known as the global economic market barometer.

Oil has also surged. It’s gained 75%. Very simply, if these two key commodities were not in big demand due to improving world economies, they wouldn’t be rising the way they are. Instead, they too would be falling.

The main point is… these are not signs of recession and they’re certainly not signaling a depression. In fact, they’re telling us that deflation is not currently a concern.

On the contrary, these rising prices are more indicative of inflation downstream. That’s especially true considering the weak dollar.

Again and very simply, in a healthy economy annual deficits shouldn’t be more than 3% of GDP. Once this percentage exceeds 5-6%, the currency of the country involved historically falls sharply.

Currently, this percentage has soared to about 10% in the U.S. and unfortunately, that pretty much puts the nails in the dollar’s coffin. This alone will propel gold much higher.

These are the key reasons why we continue to recommend buying and holding gold. Whatever the ultimate, longer-term outcome, it’s pretty clear that the situation is going to intensify and as it does, gold is going to be the main beneficiary and its bull market will endure well into the years ahead. That’s been the case for thousands of years during times of economic uncertainty and gross imbalances, and it’s now happening again.

Note that gold rose 56% and 58%, respectively, in the last two C rises (see Chart).  So far, gold has risen 32% in the current C rise.  Plus, its leading indicator still has room to rise further before it reaches the temporarily “too high” area.  Since this rise is powerful, the gains this time around could be similar to those in 2006 and 2008.  And if they are, gold could continue up to near the $1350 level before this C rise is over.

We’ll be watching closely but for now, hold on to all of your metals related investments.  Silver and gold shares are also surging, and so are most of the other metals.  Silver is at a new 16 month high and it too is approaching our first target area.  Gold and silver will both remain super strong above $1070 and $17.20. 

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Interview–Pakistan Wants Trade, not Aid

November 19, 2009 by · Leave a Comment 

By Amena Bakr

DUBAI, Nov 1 (Reuters) – Pakistan plans to send an official delegation to the United States in mid-November to attract investment in a bid to revive its economy following a series of militant attacks, a senior official said on Sunday.

Last month, suicide bomb blasts targeted the United Nations, army headquarters, police and general public, killing more than 150 people.

“The recent attacks did have a negative impact on the perception (of the country), but at the same time Pakistan is a growing country and investors have to be in it for the long term,” Waqar Ahmed Khan, Pakistan’s minister of investment, told Reuters during a visit to Dubai.

A delegation headed by Khan, along with businessmen from Pakistan, will head to Washington on Nov. 18, he said.

“From the United States we are seeking trade, not aid, because that’s what’s going to really help stimulate our economy,” he said, adding that opening up trade between the two countries would support political stability.

“The growth of the economy and fighting terrorism go hand-in-hand and the government is committed to protecting investors’ interests.”

U.S. President Barack Obama has also said increased aid and trade will be tools to fight Islamic extremism both in Afghanistan and neighboring Pakistan.

Congress has just approved a bill tripling aid to Pakistan to $1.5 billion a year for the next five years, but with conditions attached that have unleashed a storm of protest from Pakistanis who say the country is being humiliated.

Investment Interest

Last month, a delegation headed by the Turkish prime minister was in Islamabad to discuss investment opportunities, said Khan.

“The Turkish investors are now in talks to establish textile factories, lease land for agriculture projects and are also looking at the livestock and dairy industries,” he said.

Pakistan’s GDP growth is expected to be between 2.5 and 3.5 percent in the fiscal year 2009/10, up from 2.0 percent in the previous year, the central bank said in its annual report released on Thursday.

“Despite all the recent attacks I think that the GDP will remain on the positive side this year, and I also expect foreign investment to increase during the forth quarter,” said Khan, without giving further details.

Net foreign investment in Pakistan fell 28.9 percent to $671.1 million in the first three months of the 2009/10 fiscal year, beginning on July 1, compared with $943.4 million in the same period a year earlier.

(Reporting by Amena Bakr; Editing by Nick Macfie)

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INTERVIEW-Pakistan seeks US trade, not aid, says minister

November 12, 2009 by · Leave a Comment 

By Amena Bakr, Reuters

DUBAI, Nov 1-Pakistan plans to send an official delegation to the United States in mid-November to attract investment in a bid to revive its economy following a series of militant attacks, a senior official said on Sunday.

Last month, suicide bomb blasts targeted the United Nations, army headquarters, police and general public, killing more than 150 people.

“The recent attacks did have a negative impact on the perception (of the country), but at the same time Pakistan is a growing country and investors have to be in it for the long term,” Waqar Ahmed Khan, Pakistan’s minister of investment, told Reuters during a visit to Dubai.

A delegation headed by Khan, along with businessmen from Pakistan, will head to Washington on Nov. 18, he said.

“From the United States we are seeking trade, not aid, because that’s what’s going to really help stimulate our economy,” he said, adding that opening up trade between the two countries would support political stability.

“The growth of the economy and fighting terrorism go hand-in-hand and the government is committed to protecting investors’ interests.”

U.S. President Barack Obama has also said increased aid and trade will be tools to fight Islamic extremism both in Afghanistan and neighboring Pakistan.

Congress has just approved a bill tripling aid to Pakistan to $1.5 billion a year for the next five years, but with conditions attached that have unleashed a storm of protest from Pakistanis who say the country is being humiliated.

Investment Interest

Last month, a delegation headed by the Turkish prime minister was in Islamabad to discuss investment opportunities, said Khan.

“The Turkish investors are now in talks to establish textile factories, lease land for agriculture projects and are also looking at the livestock and dairy industries,” he said.

Pakistan’s GDP growth is expected to be between 2.5 and 3.5 percent in the fiscal year 2009/10, up from 2.0 percent in the previous year, the central bank said in its annual report released on Thursday.

“Despite all the recent attacks I think that the GDP will remain on the positive side this year, and I also expect foreign investment to increase during the forth quarter,” said Khan, without giving further details.

Net foreign investment in Pakistan fell 28.9 percent to $671.1 million in the first three months of the 2009/10 fiscal year, beginning on July 1, compared with $943.4 million in the same period a year earlier.

(Reporting by Amena Bakr; Editing by Nick Macfie)

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Buffett: US Debt Threatens Economy

August 20, 2009 by · Leave a Comment 

WASHINGTON–Investor Warren Buffett said the US economy has avoided a meltdown and appears on a slow path to recovery, but Congress must deal with enormous debt that might erode US purchasing power.

In an opinion column published Wednesday by the New York Times, Buffett wrote that he “resoundingly applauds” actions by the Federal Reserve and the Bush and Obama administrations to pump trillions of dollars into the financial system.

But the “gusher of federal money” has run up a high level of debt that could fuel inflation, he said.

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery,” Buffett wrote.

“But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

Buffett, who runs insurance and investment company Berkshire Hathaway Inc, likened the economic threat of “greenback emissions” to the environmental threat of greenhouse gas emissions, leaving the United States with a deficit of $1.8 trillion or 13 percent of gross domestic product this year.

In July, the government posted a $180.68 billion monthly budget deficit, a record for July, marking only the third time in the past 30 years that the government ran a deficit for 11 months in a row.

Buffett said a revived economy will not be able to generate enough revenues to bridge the gap between outlays and receipts, so changes in taxes and spending will be required.

Politicians will not likely have the will to raise taxes or slow spending, so they may opt to quietly let inflation increase, a move that will “confiscate” wealth and allow the United States to evolve into a “banana republic economy”, he said.

“Our immediate problem is to get our country back on its feet and flourishing — ‘whatever it takes’ still makes sense,” Buffet said in the paper.

But once recovery is gained, Congress must end the rise in the debt-to-GDP ratio and keep its growth in obligations in line with its growth in resources, he wrote.

“Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress,” he said.

Last month, in a newspaper column of his own, Federal Reserve chairman Ben Bernanke, said the huge amounts of money the U.S. central bank has pumped into the economy will not undercut its ability to push borrowing costs higher when the time is ripe.

Stressing that the weak U.S. economy will likely warrant exceptionally easy monetary policies for a long time to come, Bernanke outlined in a Wall Street Journal opinion article how the Fed could raise interest rates even with cash flooding the financial system.

“At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke wrote.

The outline of the Fed’s “exit strategy” from the extraordinary monetary policy easing it has undertaken in the past two years to deal with the global financial crisis was the subject of testimony to Congress by Bernanke in his twice-a-year economic report on July 21.

Reuters

California Dodges Bullet with Budget Deal–for Now

July 23, 2009 by · Leave a Comment 

By Peter Henderson and Jim Christie

SAN FRANCISCO (Reuters) – California’s state budget deal is a bet its economy, the world’s eighth-largest, will rebound — but that’s not likely to happen soon.

Governor Arnold Schwarzenegger and top lawmakers agreed Monday to close a $26 billion budget gap, largely with $15 billion in spending cuts, with many pushed into future years.

“They are waiting for the economy to bail them out,” said Chris Ryon, a fund manager at Thornburg Investment who sees “a lot of risk” for investors in California debt.

The budget deal would let the state start traditional borrowing again, although state officials were waiting for the legislature to pass the deal before saying when they will tap the debt market.

Meanwhile, the state is still paying its way with IOUs and must contend with the financial effects of double-digit unemployment and foreclosures dominating its housing market.

“Unemployment, unfortunately, probably hasn’t peaked yet,” said Nuveen Investments fund manager Paul Brennan, who views the budget as a bet that better times are around the corner.

California’s revenues rely heavily on personal income taxes and tend to swing strongly. Google Inc’s initial public offering helped fuel a bumper year for taxes, so if the state economy recovers, revenue could grow quickly.

But economist Steve Levy says California’s economy likely will remain weak for some time and the state government’s main problem will persist — that its citizens and government can not agree on the level of public services to provide.

“We are a state in gridlock, in disagreement,” said Levy, director of the Center for the Continuing Study of the California Economy.

Lawsuits Ready

Around the state, uncertainty greeted the budget agreement. Its details were sparse while rank-and-file lawmakers reviewed the deal for potential votes in the state Assembly and Senate by Thursday.

But opposition formed quickly to some of the plan’s proposals, such as taking roughly $4 billion from cities and counties for state needs. The Los Angeles County Board of Supervisors, for instance, voted Tuesday to sue the state to stop proposed cuts to the county’s share of the state highway tax and community redevelopment funds.

The California State Association of Counties said it would mull a lawsuit as well and San Jose Mayor Chuck Reed told Reuters that his city, the 10th-largest in the nation, also is “committed to participating in a lawsuit” to keep the state from grabbing its money.

“They are probably in violation of the (state) Constitution in taking our redevelopment funds, in violation of the law in taking our highway users tax,” Reed said.

In addition to concerns about losing money to the state, county officials fear losing state aid for health and human service programs they must provide.

“Make no mistake, under this budget scenario counties cannot uniformly ensure the delivery of critical health, public safety and other vital local services,” said Paul McIntosh, executive director of the California State Association of Counties.

To Buy or Not

Once a budget is signed, state finance officials will decide on the kind of short-term debt the state will need to sell to raise money for cash-flow purposes.

Until then, plans for selling either revenue anticipation notes or revenue anticipation warrants are on hold, said State Treasurer Bill Lockyer.

Nevertheless, the budget deal came just in time, Lockyer told Reuters, and he sees lawmakers endorsing it. “Most of them understand we’re getting real close to the edge of the cliff here and we’d better wrap it up quickly.”

Standard & Poor’s analyst Gabriel Petek said the deal averted a certain downgrade next month by his rating agency, which has the state’s general obligation debt at A and CreditWatch with negative implications. “That was the trajectory it was on,” Petek said.

Investment analysts were split over the budget agreement and whether to buy California’s existing or new debt.

Dick Larkin, director of credit rating analysis at Herbert J. Sims Co Inc, said he suspects the agreement will end up deferring hard decisions about the state’s finances and a budget deficit will reemerge. “This is a pretty crappy budget to try to make the case to borrow billions of dollars over the next three months,” Larkin said.

Tom Tarabicos, a financial adviser at Wells Fargo Financial Advisors, said the deal failed to sway him from his dim view of California’s finances and their effect on the state’s bonds.

“This appears to me to be just a short-term reprieve,” Tarabicos said. “We’re going to maintain our distance.”

By contrast, Ken Naehu, head of fixed income at Bel Air Investment Advisors in Los Angeles, said the agreement should end speculation over whether California would not make payments on its debt service to bondholders.

Naehu said debt service payments were never in doubt as they are the state’s No. 2 payment priority as required by law and because the state’s revenues, albeit weak compared with a year earlier, were strong enough to support them.

“Why in the world would you cut your arm off and not make debt service payment when it’s such a small part of the budget?” Naehu said.

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Arab Americans are a Political and Economic Powerhouse

July 23, 2009 by · Leave a Comment 

By Access

A recent report published by the Immigration Policy Center has determined that immigrants, including Arab Americans, not only wield sizable political power in Michigan, but are also an integral part of the state’s economy and tax base. As workers, taxpayers, consumers, and entrepreneurs, immigrants and their children are an economic powerhouse and as voters, they are a potent political force.    

As Michigan’s economy begins to recover, immigrants and their children will continue to play a key role in the shaping and growing the economic and political landscape of the Great Lakes State.

“Immigrants have always been vital to Michigan’s economy and society,” said Nadia Tonova, Advocacy and Policy Supervisor at ACCESS. “The IPC’s report confirms that Michigan still benefits tremendously from the contributions of immigrants and their families.  We are all enriched, culturally and materially, by immigrants.”

Highlights of the report include:

  • Immigrants make up more than 6% of Michigan’s total population (roughly equal to the total population of Boston, MA) and nearly half of them are naturalized citizens who are eligible to vote.
  • Arab Americans accounted for $7.7 billion in total earnings in the four counties of the Detroit metropolitan area, generating an estimated $544 million in state tax revenue and supporting an estimated 141,541 jobs.

To read the full report, please click here.

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