Toe the Party Line

http://www.arabnews.com/?page=7§ion=0&article=98040&d=30&m=6&y=2007

Tariq A. Al-Maeena, talmaeena@aol.com

US politics makes definite impressions upon those of us who follow its meanderings nowadays. A case in point is the vote by the US House of Representatives a week ago to deny all aid to Saudi Arabia. This in spite of assurances from the Bush administration that the Saudis are their partners in the war on terror.

The primary dynamo behind this bill, New York Democratic Rep. Anthony Weiner from the exclusive conclave of Forest Hills and a fervent supporter of Israel, stated, “None of the funds appropriated or otherwise made available shall be obligated or expended to finance any assistance to Saudi Arabia” or “used to execute a waiver.”

For the past three years, Weiner has been pushing forth legislation that would ban US aid to Saudi Arabia, but President Bush has disregarded the legislation and sent aid to the Saudis in 2005 and 2006.

Trying a different approach this year, Weiner, joined by another New York Congressman Joseph Crowley, introduced a bill, which closes the loophole that allowed the president to override Congress. That loophole was a waiver provision in the Foreign Assistance Act of 1961. The Weiner-Crowley amendment sealed that loophole by adding a clause to trump the Foreign Assistance Act provision.

Aid from the United States in the past constituted an amount of just $2.5 million to the Saudis in 2005 and 2006. To a country whose natural resources bring in anywhere from $100 million to $500 million daily to the national treasury, that amount is deemed very insignificant. And although the total aid bill pushed through stood at $34.2 billion, we heard very little of how much of it was appropriated toward Israel.

So here we have a New York congressman whose clear loyalty is to Israel and its interests and who steers US politics toward a noticeable Israeli position. And those congressmen and women who jumped on the bandwagon with him with their votes obviously were convinced by his arguments that the Saudis were not toeing their line of endorsing everything Israel does in occupied territories.

Why is it that Israeli interests are so often placed above that of US by American lawmakers? Other than powerful lobbies like AIPAC who promote an Israeli agenda, there are Americans in disguise who cross their own lines based on their religious convictions. And to them it is Israeli interests that dominate the party agenda.

Such actions obviously are very transparent to those of us who live in the region and witness them. Why the US is no longer considered an honest broker is primarily because of its lawmakers’ blind allegiance to Israel. And if one dares not to follow the party line then they are either not elected or allowed to complete their terms because of some scandal or the other.

We in this part of the world know how the same lawmakers denied Dubai World the opportunity of managing US seaports. Cries of national security and threats of terrorism quickly put an end to that deal. Now they are targeting our sympathies toward the people of Palestine facing Israeli bullets. Why are we supporting those who resist Israeli aggression, they want to know. And they aim to punish us with this message.

The few Congress people I have personally met have not impressed me with their knowledge of history or politics of the Middle East. Most have provincial backgrounds and their education is what their media touts. That is why at the height of the invasion of Iraq by the US, there was strong support for Bush’s policies. It was only later when the reality of body bags rather than garlands of flowers hit them, that some US lawmakers began to educate themselves about the true nature of their country’s disastrous adventure into the region.

The collective ignorance of US lawmakers cunningly channeled into a full-blown support of Israel, right or wrong, by those with strong religious ties to Israel has demeaned long-valued American ideals such as “democracy,” “justice” and “human rights.”

We see all those values continuously violated by the Israelis while America stays mum.

And until America wakes up and frees itself from such control from within, we shall expect more of the same.

China Isn't a Manipulator, U.S. Congress Is: Caroline Baum

By Caroline Baum

June 18 (Bloomberg) -- China may not qualify as a currency manipulator, according to the terms set out in Section 304 of the Omnibus Trade and Competitiveness Act of 1988. Not to worry: The U.S. Congress is happy to fill those shoes.

In its semiannual report on International and Exchange Rate Policies last week, the U.S. Treasury declined to tag China, which manages its currency, the yuan, to the dollar, with a scarlet ``M.''

``Treasury was unable to determine that China's exchange rate policy was carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade,'' according to the report.

Was unable to determine or didn't see the point?

On the same day that Treasury was punting on name calling -- preferring, instead, a Strategic Economic Dialogue between the two countries -- four U.S. senators picked up the ball, introducing legislation that would make it easier for American companies to seek redress under anti-dumping laws.

``For too long our currency policy has left American workers and businesses unprotected from foreign governments seeking an unfair financial advantage,'' said Senate Finance Committee Chairman Max Baucus, Democrat of Montana, one of the bill's sponsors.

In case the good senator hasn't noticed in his 32 years in Congress, the U.S. has no currency policy. And as for getting China to adopt a more flexible exchange rate, anything Congress does will probably be counterproductive. Sovereign nations don't like to be seen caving in to pressure from other countries.

Win-Win Situation

``What country has changed as much as China in the last 30 years in terms of opening its markets?'' said Dan Griswold, director of the Cato Institute's Center for Trade Policy Studies in Washington. ``And how much has the U.S. benefited? The whole debate is based on a false notion of mercantilism. You can't realize real gains through currency manipulation.''

In the Asian financial crisis in 1997, ``some currencies practically dropped 40 percent overnight,'' Griswold said. ``It didn't create prosperity.''

China was singled out and praised for maintaining its peg to the U.S. dollar.

Two of the other sponsors of the Currency Exchange Rate Oversight bill, Republican Lindsey Graham of South Carolina and Democrat Chuck Schumer of New York, are back for their second China go-round. Last year, the duo sponsored legislation that would have slapped tariffs of 27.5 percent on Chinese imports. They withdrew the bill when it became clear that it wasn't compliant with World Trade Organization rules.

Strong-Arm Tactics

``Our previous legislation got China's attention,'' Schumer boasted at a June 13 press conference. ``The purpose of this legislation is to require them to change.''

Schumer's ``elegant solution'' to the China conundrum involves identifying ``fundamentally misaligned currencies'' for ``priority action'' in 180 and 360 days if the misaligned country fails to adopt ``appropriate policies'' to realign itself. The final step would require the Treasury and Federal Reserve Board to consult with other central banks and consider ``remedial intervention in currency markets.''

As a practical matter, how would that work? Schumer's elegant solution seems to have some inelegant operational difficulties. For example, how exactly would the Fed sell dollars and buy yuan, a currency that isn't freely traded in the open market?

Policy or Politics?

Graham's protectionist motivations derive from the fact that South Carolina competes, so to speak, with China in textile and apparel manufacturing. At the top echelons of that competition is billionaire Roger Milliken, head of a multinational textile empire based in Spartanburg and a major Graham supporter. It wouldn't be a huge leap to assume a connection between Milliken's contributions and Graham's trade positions.

Critics of China's currency-management policy claim the yuan is undervalued by as much as 40 percent, giving the country's exports a competitive advantage.

You never hear much about the disadvantages, about China paying artificially inflated prices for the capital goods and intermediate materials it imports. It overpays for vast amounts of raw materials, everything from oil to copper to steel.

At the same time, do American consumers want to pay 40 percent more for underwear and other low-end apparel from China? (China's lost market share would be other emerging countries' gain, but it would still mean higher import prices for Americans.)

League of Its Own

China still has a long way to go to reform its domestic financial system and move from a managed to a flexible exchange rate. Because it lacks developed capital markets and a monetary policy of its own, China has to resort to various administrative measures to manage its booming economy.

The People's Bank of China raised its one-year benchmark rate by 100 basis points in the last two years, hardly an onerous increase in an economy that continues to barrel ahead at 11 percent. It increased reserve requirements five times this year.

In addition, China cut tax breaks for exporters, imposed limits on real-estate investment and land use, implemented environmental controls and tripled the stock transfer tax.

Change doesn't happen overnight, especially in a country impoverished by decades of state control of the economy. Congress seems to have run out of time.

Schumer said there's broad bipartisan support for the currency bill in the House and the Senate, and he expects it to pass with a veto-proof majority.

``A large number of people in both parties got the China issue wrong,'' Griswold said. ``To intentionally weaken the dollar to gain some illusory trade advantage is a fool's errand.''

Now there's a challenge Congress won't be able to resist.

(Caroline Baum, author of ``Just What I Said,'' is a columnist for Bloomberg News. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .

Last Updated: June 18, 2007 00:12 EDT

UN was pummelled into submission, says outgoing Middle East special envoy

· Negotiators 'lost impartiality' says report· Palestinians also criticised over violenceRead Alvaro de Soto's end of mission report
Rory McCarthy in Jerusalem and Ian Williams in New York
Wednesday June 13 2007
The Guardian


American support for Israel has hindered international efforts to broker a peace deal in the Middle East, according to a hard-hitting confidential report from the outgoing UN Middle East envoy.

Alvaro de Soto, who stepped down last month after 25 years at the UN, has exposed the American pressure that he argues has damaged the impartiality of the UN's peace making efforts.

In Mr de Soto's "End of Mission Report", which the Guardian has obtained, he delivers a devastating criticism of both Israelis and Palestinians, as well as the international community.

The Quartet of Middle East negotiators - the UN, the US, the EU and Russia - has often failed to hold Israel to its obligations under the Road Map, the current framework for peace talks, he argues.

Over the past two years, the Quartet has gradually lost its impartiality. "The fact is that even-handedness has been pummelled into submission in an unprecedented way since the beginning of 2007," he writes.

He blames overwhelming influence exerted by the US and an "ensuing tendency toward self-censorship" within the UN when it comes to criticism of Israel.

"At almost every juncture a premium is put on good relations with the US and improving the UN's relationship with Israel. I have no problem with either goal but I do have a problem with self-delusion," he writes. "Forgetting our ability to influence the Palestinian scene in the hope that it keeps open doors to Israel is to trade our Ace for a Joker."

Mr de Soto reveals that after Hamas won elections last year it wanted to form a broad coalition government with its more moderate rivals, including Fatah, run by the Palestinian President Mahmoud Abbas. But the US discouraged other Palestinian politicians from joining. "We were told that the US was against any 'blurring' of the line dividing Hamas from those Palestinian political forces committed to the two-state solution," Mr de Soto writes. It was a year before a coalition government was finally formed.

The US also supported the Israeli decision to freeze Palestinian tax revenues. "The Quartet has been prevented from pronouncing on this because the US, as its representatives have intimated to us, does not wish Israel to transfer these funds to the PA [Palestinian Authority]," he writes. "There is a seeming reflex, in any given situation where the UN is to take a position, to ask first how Israel or Washington will react rather than what is the right position to take."

Mr de Soto opposed the international boycott placed on the Palestinian government after Hamas won elections last year. He argued that it was wrong to use pressure and isolation alone, and proposed retaining dialogue with Hamas. He wanted tougher criticism of Israel as well, but came up against a "heavy barrage" from US officials.

The effect of the boycott was to seriously damage the Palestinian economy and promote radicalism. It also lifted pressure from Israel. "With all focus on the failings of Hamas, the Israeli settlement enterprise and barrier construction has continued unabated," he writes.

The US, he argues, was clearly pushing for a confrontation between Fatah and Hamas but Washington misjudged Mr Abbas, who he argues had wanted to co-opt rather than defeat Hamas. Fighting between Fatah and Hamas has intensified in recent months. He quotes an unnamed US official as saying earlier this year: "I like this violence ... It means that other Palestinians are resisting Hamas." Since December at least 600 Palestinians have been killed in factional battles.

The report criticises the Palestinians for their violence, and Israel for extending its settlements and barrier in the West Bank. But he also argues that Israeli policies have encouraged continued Palestinian militancy. "I wonder if the Israeli authorities realise that, season after season, they are reaping what they sow, and are systematically pushing along the violence/repression cycle to the point where it is self-propelling," he writes.

Mr de Soto speaks of his frustration in the job, not least that he was refused permission to meet the Hamas and Syrian governments in Damascus. "At best I have been the UN special coordinator for the Middle East peace process in name only, and since the election of Hamas, I have been the secretary-general's personal representative to the Palestinian Authority for about 10 minutes in two phone calls and one handshake," he writes.

He stepped down in May at the end of his two-year contract and left the UN. The "tipping-point" for his departure came after the new UN secretary general Ban Ki-moon said future meetings with a Palestinian prime minister would depend on the actions of his government.

Michele Montas, spokesperson for Mr Ban, said: "It is deeply regrettable that this report has been leaked. The whole point of an end-of-mission report is for our envoys and special representatives to be as candid as possible ... the views in the report should not be considered official UN policy."

Copyright Guardian News and Media Limited

Debt-Shy Asian Companies Are Like Cash Machines: Andy Mukherjee

By Andy Mukherjee

June 7 (Bloomberg) -- The world's richest Indian recently lost an opportunity to get even richer.

Lakshmi Mittal, who was in the race for Mitsui & Co.'s controlling stake in Indian exporter Sesa Goa Ltd., was beaten by compatriot Anil Agarwal.

Agarwal's Vedanta Resources Plc picked up Mitsui's shares and announced a plan to buy a further 20 percent from the public. The total cost is $1.37 billion, most of it funded by a loan.

Sesa Goa is an iron-ore mining company. Arcelor Mittal's steel plants could have used that stuff. Vedanta produces non- ferrous metals. Analysts speculated that Agarwal probably wanted to lower his commercial risk by adding iron ore to the copper and zinc businesses he already owns.

That's probably true. Yet, Sesa Goa's real appeal isn't in the company's mining projects, but in its financial statements.

It's virtually an automated teller machine.

Take a crude measure of the company's surplus cash flow: the money it made from mining last year minus what it invested. Divide that by long-term borrowings. You get a figure of, hold your breath, 885. Only one company in the Standard & Poor's 500 Index -- McGraw-Hill Cos. -- is more tempting, if you exclude those that have no debt and need to be judged by other investing yardsticks.

Buyout firms, on the prowl for underleveraged companies, love targets that can service loans costing 150 basis points above the London Interbank Offer Rate with their own cash flows.

Company boards in Asia should pay attention to cash.

Buyout funds are bound to come calling soon, if they haven't already. If control is important, manager-owners should follow the lead of Malaysian billionaire T. Ananda Krishnan, who is buying out minority shareholders in Maxis Communications Bhd., the country's biggest mobile-phone operator, possibly by raising funds in the bond market.

Taiwan's Appeal

Among companies in Asia, excluding Japan, with at least $1 billion in market value and some long-term debt, Sesa Goa's ``LBO attractiveness'' is only exceeded by Taiwan's Inventec Co., one of the world's top manufacturers of notebook PCs, and Bursa Malaysia, operator of the country's stock exchange.

Loans raised for Asian buyouts surged to $28 billion in 2006, from just $7.5 billion in the previous year. Almost 45 percent of the activity, however, was concentrated in Australia.

The base may now broaden. From a Taiwanese maker of golf- club heads to an Egyptian fertilizer company, all kinds of emerging-market assets are now in play.

Within Asia, Taiwan has an added advantage.

Not only are its technology companies generating dollops of cash, stock-market valuations are cheap. The price-to-earnings ratio of Taiwanese stocks is about 19 now, compared with a 10- year average of 29.

Asian ATMs

Getting acquired is, of course, one of several options. The other is to go out and invest in new assets or return the excess cash to investors.

J.T. Wang, chairman of Taipei-based personal-computer maker Acer Inc., said in April that he would do both.

The companies that follow Sesa Goa closely on my ``Asian ATM'' list are PT Tambang Batubara Bukit Asam, a state-run Indonesian coalminer; and KT&G Corp., South Korea's biggest tobacco company. Both are underleveraged: They can pay their long-term debt with the free cash they generate in half a day.

Bukit Asam said last month it will use its growing pile of cash -- and take loans -- to acquire rivals.

KT&G ended up on investor Carl Icahn's radar last year. Together with U.S. hedge-fund manager Warren Lichtenstein, Icahn bought stock in the company and threatened a takeover unless shareholders got a better deal.

Icahn and Lichtenstein ended their alliance after KT&G announced plans to buy back shares and pay higher dividends.

Reluctant Spenders

The strategy of Asian managements in the past few years has been to make the best possible use of existing assets. They have made the wheels of business turn faster.

In many instances that strategy fetched ample returns for investors. But it hasn't always worked. Hindustan Lever Ltd., the Indian consumer-products company controlled by Unilever Plc, has sold at least half a dozen businesses in the past five years and yet managed to boost both sales and return on equity even with pretax margins that are narrower than in 2002.

Cash is coming in by the truckload, and the company is returning more of it to shareholders than it is investing in its future. The markets are unimpressed. Shares of Hindustan Lever have given a total return of 30 percent over the past five years even as the benchmark Sensitive Index has returned 410 percent.

`Lingering Cautiousness'

In December, Patrick Cescau, the Unilever chief executive officer, said the Indian unit will seek new acquisitions in India. Investors are waiting.

Why are companies in the developing economies of Asia not investing more boldly?

``This reluctance to invest may reflect some lingering cautiousness stemming from the excess capacity and overzealous investment of the late 1990s and the high hurdle rates used by companies in assessing new investments,'' the International Monetary Fund noted in its latest Global Financial Stability Report.

With strong global economic growth and easy financing conditions, the corporate under-confidence is puzzling. It's time Asian managements stopped gloating over their earnings graph and paid closer attention to cash. Too much of it can be as bad for shareholders as too little.

(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)

A Day of Many Almost

It's been a day of almost, almost events. Thought I was going to meet with Grid to tie up our financial details about the GE job but it did not happen. Then I thought I was going to discuss several projects but it turned out that I didn not and ended up looking at what could be a load of crisis management activties - oh, ar, wah.

The hot event of the day was the fact that Han Li was nearly not allowed to come into Singapore after a month back home. The girl has her issues with immigration and I guess she's used to dealing with the guys at ICA. For me, it was getting ready to psychologically prepare for the fact that she might not have been prancing around in the background to make my life a bit more interesting.

I guess it could be something to do with the fact that its now half way through the year. Its not been as dramatically as good as it was last year, but then again that much is to be expected. However, I do wish certain things were better and I suppose I could be doing better. Health issues have also cropped up. I'm off for an MRI next week - back is making life uncomfortable when I do too much sitting in front of the computer - which is pretty ironic because I need to sit in front of a computer to make a living. - Eech.

Anyway, will have something deeper and happier to write in the next few moments.