Land of hope


FRANK CHING

Nov 05, 2008           
     
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Beijing has announced major reforms in rural policy that are meant to give farmers more control over their land without full privatisation. While the land will still belong to a collective, such as a village, farmers will be able to subcontract, lease, swap or transfer land-use rights. The measures are meant to achieve a number of goals, including ensuring political stability by offering greater protection from rapacious local officials, preservation of the nation's arable land to ensure food sufficiency and raising per-unit grain yield through technological advancement and by gradually moving away from small, family-farmed plots.

A key purpose of the reforms is to prevent rural unrest when farmers demonstrate against the expropriation of their land, with little or no compensation, by local officials in cahoots with developers. This results in thousands of protests each year.

Beijing has issued regulations to protect farmers' land interests, but these have been circumvented by local officials. Now, the party is warning such officials that evaluations of their performance will include "grain production, farmers' income increase, farmland protection, environment protection and regional stability".

Another goal of the state is to ensure that 120 million hectares remains earmarked for farmland, regardless of urban development. In recent years, much farmland has been abandoned as young people flock to cities to work in factories. Allowing farmers to lease or otherwise transfer their land-use rights could result in more productive farmland and, hopefully, bigger and more efficient farms.

These reforms come three decades after Deng Xiaoping scrapped the commune system instituted by Mao Zedong and replaced it with the so-called household responsibility system. Production immediately rose but, 30 years later, there is a need for further steps to improve farmers' livelihoods as well as to modernise agriculture. While the standard of living in the countryside has risen steadily, there is a widening gap between rural and urban income, and standards of living. It's hoped these measures will help narrow the gap.

Although the reforms are the most significant in 30 years, they do not go as far as some scholars advocate. Farmers will only have the right to use the land rather than own it, and they will not be allowed to sell or mortgage the land. President Hu Jintao recently visited Xiaogang village, in Anhui province, and assured farmers that "the current contracted land system will be continued and will not change for a long time". He added: "Farmers will be granted more rights to use and manage their land."

The visit was significant as, 30 years ago, 18 farmers in Xiaogang reached a pact to divide the land and grow their own crops. Fortunately, the party agreed and instigated the same thing across the country, in what is known as a contract responsibility system.

The finance magazine Caijing interviewed one farmer, Yan Junchang, who said he was encouraged by Mr Hu's remarks. But Caijing said Mr Yan and other farmers wanted to know "whether they will receive protection from land grabbers, and an end to a system that has allowed local governments to profit, often illegally, by expropriating rural property for commercial development".

"Farmers will care about their land and have a long-term plan for growing only when the land actually becomes their own property," Mr Yan was quoted as saying. "Without ownership, farmers are worried their land may be taken back or be expropriated for commercial development."

Although the reforms are a step forward, many farmers would like to see "a long time" become "permanent".

It remains to be seen how the new reforms are implemented. If Beijing wants to close the gap between the countryside and the cities, farmers must have the same land-use rights as city dwellers. They would then be able to buy, sell, mortgage and inherit land. But the central government is, no doubt, worried about the return of big landlords, with tens of millions of landless farmers.

Frank Ching is a Hong Kong-based writer and commentator. frank.ching@scmp.com


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Obama's challenge
The US president-elect must make good on his pledge to bring change to America and the world

Peter Singer
Nov 07, 2008           
     
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The astonishing story of Barack Obama's election as president has already done much to restore America's global image. In place of a president whose only qualification for the office was his father's name, we now have one whose intelligence and vision overcame the formidable obstacle of being the exotically named son of an African Muslim. Who would have believed, after the last two elections, that the American public was capable of electing such a candidate?

Senator Obama's achievement raises the stakes for his first term in office. He campaigned on the theme that he is different from other politicians and will deliver real change. That appeal drew large and enthusiastic crowds, which, together with astute use of the internet, gained him an unprecedented 4 million donors, and induced a huge number of African-Americans and young people to vote.

This is the chance of a lifetime to break through the cynicism that has pervaded American politics for decades. But if Senator Obama fails to make good on his promise of change, it will be decades before the electorate again places its trust in a candidate who claims to be different from the usual run of politicians.

Many Americans will judge the new administration by what it does at home. That includes raising taxes on those earning more than US$250,000 a year, and using the money to extend health insurance to the tens of millions of Americans who - uniquely for an industrialised nation - do not have it. He has also pledged tax cuts for medium- and lower-paid workers, and improvements to America's education system. Keeping those promises, despite America's gloomy economic prospects, will not be easy.

The biggest impact that Senator Obama can make, however, is beyond America's borders. Last year, when speaking to the Chicago Council on Global Affairs, he called for a president who can speak directly to everyone in the world who longs for dignity and security, and can say: "You matter to us. Your future is our future. And our moment is now."

Indeed, it is now. If Senator Obama is to be that president, he should begin by keeping his promises to close the prison camp at Cuba's Guantanamo Bay and to end the Bush administration's practice of locking people away without ever telling them why or what they are charged with. He must also begin the process of withdrawing combat troops from Iraq, a task he said would be completed in 16 months. Keeping these promises will be significant steps towards restoring America's image around the world. Playing a constructive role in bringing about reform at the United Nations is also vital. The structure of the Security Council is 60 years old. It still gives the victors of the second world war permanent membership of the council, and a veto over its decisions. To change that will inevitably dilute the privileges of those nations, including the US. But if any US president can overcome that historical shadow hanging over the UN, Senator Obama can.

Given that he has a Kenyan father and has spent time in the African villages where his kin still live, it is no surprise that he understands the need for rich nations to assist developing nations. Last year, he pledged to double US foreign aid by 2012, raising it to US$50 billion a year. (That still leaves the US lagging behind many European nations in the percentage of its national income that it gives in aid.)

US aid must also be better targeted toward helping those living in extreme poverty. Regrettably, when Joe Biden, now vice-president-elect, was asked what spending an Obama administration might have to curtail because of the financial crisis, he mentioned the pledge to increase foreign aid. But doubling US foreign aid involves a modest amount of money, compared to what will be saved by pulling out of Iraq.

Perhaps the most difficult aspect of turning the US into a good global citizen is cutting back on its grossly excessive greenhouse gas emissions - roughly five times the global per capita average. On this issue, the Bush administration wasted eight precious years during which we have got perilously close to the point at which an irreversible chain of events could occur that leads to catastrophe.

Ugandan President Yoweri Museveni last year accused the industrialised countries of committing aggression against Africa by causing global warming. That may sound like hyperbole, but raising the temperature and reducing the rainfall of a predominantly agricultural nation can be as devastating to its people as dropping bombs on it. Senator Obama needs to make the US a leader in reducing emissions. Then, having demonstrated his good faith, he and European leaders should be able to work out a deal that will bring China and India into whatever agreement replaces the Kyoto Protocol when it expires in 2012.

This may be the greatest ethical challenge of his presidency, but, because so much hangs on it, the way in which he responds is likely to play a decisive role in how his presidency will be judged.

Peter Singer is professor of bioethics at Princeton University. Copyright: Project Syndicate


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Let Bush wrap up his loose ends in Asia


Ralph Cossa
Nov 17, 2008           
     
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Foreign-policy bloggers and pundits are already gushing forth with advice for US president-elect Barack Obama. Allow me to add some of my own, at least on Asia policy.

The first bit of more general advice is to remember that the United States only has one president at a time and, like it or not, that president is George W. Bush until January 20. It is vital that Mr Obama does nothing between now and that date to undermine Mr Bush's ability to conduct foreign policy.

One case in point is the suggestion by several no doubt well-intentioned security specialists that Mr Obama should immediately send a high-level emissary to North Korea to lay out his views on moving forward with Korean peninsula denuclearisation.

Some have nominated former defence secretary William Perry for that task; others suggest a bipartisan team including Mr Perry and either Henry Kissinger or Colin Powell. If sending an emissary was a good idea, any combination of the above three would be a dream team.

But, sending such an emissary now would be an extremely bad idea, as it would undercut the very sensitive efforts that are under way to get Pyongyang to agree in writing to the nuclear verification protocol it has reportedly agreed upon in principle.

Given this reality, sending a bipartisan delegation to Pyongyang shortly after Mr Obama's inauguration is probably a very good idea.

But, for now, what he really needs to do is voice his strong support for the current negotiating process, while calling on North Korea both to spell out and sign the verification protocol and to outline and agree upon the next phase in the denuclearisation process with the current negotiating team.

The Koreans whom Mr Obama most needs to talk to before his inauguration reside in the South, not the North. US-South Korea policy vis-a-vis the North has been out of synch for much of the past decade. The two allies need to get back on the same page in order to effectively deal with Pyongyang.

Mr Obama also needs to send some early signals of reassurance to Japan. Making sure a few well-known Japan-hands are in senior positions at the State Department and National Security Council will help in this regard.

Ironically, China also worries about having a Democrat in the Oval Office, more due to trade and human rights policies than how it affects US-Japan relations.

Here Mr Obama can send a very important signal just by repeating the "responsible stakeholder" phrase that has come to symbolise US-China relations during Mr Bush's second term.

While Beijing was initially suspicious of the term, it has now become widely accepted and symbolic of a mutually responsible and co-operative relationship.

Using this time-tested phrase would provide a welcome sign of continuity in US-China relations that would be well-received not only in Beijing, but also in Tokyo and throughout Asia.

Ralph A. Cossa is president of the Pacific Forum CSIS. Distributed by Pacific Forum CSIS


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Spend at any cost


LAURENCE BRAHM

Nov 18, 2008           
     
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While global leaders are discussing a new Bretton Woods order, Premier Wen Jiabao is busy figuring out how to boost growth in China amid the global financial chaos. Growth forecasts have all dropped. and China is particularly sensitive to this. It has been accepted for some time that if gross domestic product growth dropped below 8 per cent a year, jobless figures would rise and, with them, social unrest.

Forecasts for next year show GDP growth dipping below 8 per cent. Some forecast 6 per cent, while some pessimists within the government put it as low as 5 per cent. With factories closing across southern China and workers being laid off, the government is concerned about social stability.

Bao zengjiang, or "safeguard growth", has been a slogan but it is now evolving into a potential political movement. Last month, the State Council approved its own rescue plan - a blind copy of the one US Treasury Secretary Henry Paulson proposed.

It is the old formula from premier Zhu Rongji's era - spend money on infrastructure and get people back in work. He was, after all, Mr Wen's mentor. The difference is that when Mr Zhu put the programme into action, in the 1990s, China desperately needed the infrastructure. Now, it is in oversupply. This is where part of the problem lies; China is reinvesting in the same type of projects that were built more than a decade ago.

From 2003, the central government put in place macro controls to cap growth. Large infrastructure project approvals were put on hold by the National Development and Reform Commission (NDRC). Now, these controls are being rolled back to maintain growth. So will this hyperspending on infrastructure lift China out of potential financial chaos, or throw the nation into turmoil?

Much of the 4 trillion yuan (HK$4.54 trillion) rescue package will be spent on infrastructure. But, unlike the good old socialist days, when provinces had to apply to the central government for financing, in this case they are applying to receive permission to spend their own money.

Chaos will ensue. This is a vast amount of money to spend within a relatively short period. So, officials are scrambling to come up with "beauty-show projects". Those who have drawers stuffed with rejected hare-brained projects are pulling out anything requiring an injection of fixed-asset investment. All this is a blank cheque for excess construction.

However, insiders estimate that governments' actual spending power under this new plan is as high as 10 trillion yuan, because the rescue package has been added to the existing budget for the 11th five-year plan. This is a shocking amount to spend over the next few years.

How were the funds raised? Each province committed funds. For instance, Jiangsu province put forward 600 billion yuan for 180 projects to be build between now and 2012. Each province is guaranteeing that it will carry out so many projects in a year. Most projects, however, are unnecessary, so the government is simply committing to spending vast amounts of money. The substantial risk is that China is probably about to fuel its biggest-ever surge in corruption.

In major developed cities such as Beijing, Shanghai and Guangzhou, many projects have been submitted to the NDRC, which is just blindly approving anything. The money is going towards roads, railways and port projects - not new hospitals or schools, which are desperately needed, or into environmental protection and the development of less-polluting fuel sources.

Given a platform for unprecedented corruption, we should remember that so many children died in the Sichuan earthquake in May due to the poor construction of schools, with claims that officials and contractors pocketed the money they had saved on building quality. In private, some people say this kind of spending reflects the mood of the Great Leap Forward, when everyone blindly melted steel. Alas, the results may be the same.

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala. laurence@shambhala-ngo.org


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Suspect intentions


FRANK CHING

Nov 19, 2008           
     
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The big news from Taiwan is the handcuffing and detention of former president Chen Shui-bian, who is being held in a money-laundering investigation. He immediately began a hunger strike and was taken to hospital after five days. Mr Chen's detention followed that of a series of top people in his administration. These arrests have prompted concern over the political neutrality of the judicial system, as well as procedures followed by the prosecutor's office, in the wake of the return to power of the Kuomintang after eight years' rule by the Democratic Progressive Party.

Twenty legal scholars from the US, Canada, Europe and Australia have published an open letter warning that Taiwan's hard-earned democracy was in jeopardy. They identified half a dozen people under detention and said that "while one or two of the accused have been formally charged, the majority is being held incommunicado without being charged".

Two years ago, when Mr Chen was still president, the Taipei district attorney charged Mr Chen's wife, Wu Shu-chen, with corruption over the handling of secret presidential funds. She fainted at the opening session of the trial and has since been absent from court 17 times, on the grounds of poor health.

At the time, prosecutors said they had enough evidence to indict Mr Chen but could not do so because of presidential immunity. But, on May 20, after he stepped down and was succeeded by Ma Ying-jeou, prosecutors announced that they had "formally started the investigation of the special expenses case concerning former president Chen."

While he was in office, prosecutors could not access certain classified documents. The new president declassified them - mostly receipts and records of the use of special expenses - and was accused by Mr Chen's lawyers of being "politically motivated".

The Taipei district court ordered his detention after an 11-hour hearing. Under Taiwanese law, suspects can be detained for up to four months without an indictment.

In August, Mr Chen publicly admitted misstating election finance expenses and said his wife had sent millions of dollars overseas without his knowledge. "My conscience has told me that I cannot continue to lie to myself or to others," he said. "I have, in the past, committed deeds that are against the law and I am willing ... to apologise to the people." However, the claims against him go beyond election financing. They relate to alleged money laundering, corruption and abuse of power.

Mr Chen's allegations of political persecution have not been sympathetically received. Former president Lee Teng-hui defended the detention and said that Mr Chen "cannot blame the world for his own wrongs". And Shih Ming-teh, a former DPP chairman, said that Mr Chen had "trampled the dignity of the Taiwanese people and betrayed their expectations", adding that a hunger strike would not make him a political prisoner.

Nonetheless, the detention of other former DPP officials has clearly stirred concern. An American legal scholar, Jerome Cohen, has suggested that Mr Ma appoint a commission of impartial experts to review recent cases of prosecutions.

Mr Cohen, Mr Ma's mentor while he was a student at Harvard Law School, said he had not seen evidence to justify criticism that Taiwan's government was using its authority to unfairly single out opposition leaders. But he felt the president should appoint a blue-ribbon independent commission of experts in criminal justice whose integrity and impartiality could not be questioned.

It is unclear whether Mr Ma will respond positively to this proposal. However, the best way forward is to either release or charge those under detention. One detainee, Su Chih-fen, a magistrate of Yunlin county, was released on Friday after she was charged with accepting US$640,000 in bribes.

While it is lawful in Taiwan to detain suspects for long periods without indicting them, it is not good to do this too frequently. In fact, for the good of Taiwan's international image, prosecutors should charge those being detained as soon as possible.

Frank Ching is a Hong Kong-based writer and commentator

frank.ching@scmp.com


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US is guarding China's nuclear 'secrets'


OBSERVER
Alex Lo
Nov 20, 2008           
     
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It is frequently asserted without proof or evidence by top Pentagon officials and senior US politicians that China maintains extreme secrecy with its military development. The media then duly reports their complaints as if they were facts. The latest criticism comes from an interview with Rear Admiral Richard Wren, commander of the Japan-based USS George Washington carrier strike group. If you repeat the same thing over and over, and the media duly reports it, it must be true.

Again, Admiral Wren claimed China's military is opaque with its intentions and capabilities. "We all encourage China to become a responsible global participant. But the way they are growing their military is confusing," he said. "Why do you need a missile that can go thousands and thousands of kilometres if you are a defensive force? The total number of submarines they have, and their capabilities, sure doesn't point to a defensive or even an `active defence force', as they like to call it."

But, it remains unclear whether the Chinese military is any more secretive than, say, the US Defence Department. It may be safe to assume that a nation's nuclear arsenals and weapons development programmes are among its best-kept military secrets. But, on this, China has been remarkably open - to the US government.

A reader brought to my attention the September edition of the journal Physics Today. It contained an account of the history of China's nuclear weapons programme by Tom Reed, a US nuclear weapons engineer and former secretary of the air force. He knows this because, in 1990, his associate, Danny Stillman, was given two full tours of China's key thermonuclear weapons research, development and testing facilities across the country. Dr Stillman made seven more visits between 1991 and 1999.

Dr Stillman was, at the time, director of the technical intelligence division at Los Alamos National Laboratory, where the world's first atom bombs were developed and subsequently dropped on Japan. The Chinese knew exactly who Dr Stillman was and what he was after. He asked for the tours and he was promptly granted them.

He was taken to research centres at Fudan University in Shanghai, a prime component of the Chinese nuclear weapons complex; Science City, the intellectual capital of the Chinese nuclear empire on the outskirts of Mianyang , in Sichuan province; and several hard-to-reach test sites. He was shown weapons designs, testing equipment and records of China's nuclear tests up to that time.

Why did the Chinese do it? "For one thing," Mr Reed wrote in the article, "the Chinese probably sought deterrence. An American awareness of Chinese nuclear capabilities should lead to a more cautious American military posture around Taiwan and in the Pacific Ocean."

Beijing has defined its national interests as nation-building; its domestic agenda requires a peaceful international environment. Its military is defensive by policy and design. By contrast, the US defines its national interests as global, which at times require military action to defend them. It is militarily the most offensive of all nations.

But why did Mr Reed publish the article now? I suspect it was because his friend, Dr Stillman, was having trouble publishing his book, Inside China's Nuclear Weapons Programme, based on his experiences in China.

The US government banned it in 2000 because it contained classified material. He has unsuccessfully launched several lawsuits over the years. Last year, Dr Stillman lost another suit against the CIA, which allegedly kept delaying its review of the book, thereby preventing its publication.

So get this: the CIA and the Pentagon have successfully prevented the public from learning about Chinese nuclear weapons development from one of its foremost US experts. The US is guarding military secrets for the Chinese who have been perfectly happy to divulge them.

Alex Lo is a senior writer at the Post


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The other depression


PETER KAMMERER

Nov 21, 2008           
     
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In times of uncertainty, turning to the pages of history can be useful to find ways to weather a storm. Amid the present financial turmoil, it is natural to search for clues as to what we can expect or should do by looking to the last known global economic calamity, the Great Depression of the 1930s. Parents and grandparents have told of the hardships they endured; from this, it could be assumed we have a handy reference point from which to draw up appropriate battle plans. But, as neat as such thinking may be, we would do much better to follow the advice of American historian Scott Nelson and read up on a far more relevant meltdown: The Panic of 1873.

Professor Nelson specialises in 19th-century history and teaches at America's second-oldest university, the College of William and Mary in Williamsburg, Virginia. He told me this week how his 97-year-old grandmother knows the depression years well, but also recalls how her grandparents spoke of an even worse financial downturn six decades earlier. His research, being turned into a book, has unearthed startling similarities between that crisis and the one the world is now experiencing.

The last depression was grounded in Germany being unable to pay debts hanging over from the first world war, factory inventories being overly large and Wall Street crashing in 1929, which, when combined, resulted in excessive strain on British gold reserves. This does not sound like the excessive lending, risky investments, housing crash and bank collapses of our troubles.

Startlingly similar, though, are the events leading to The Panic of 1873. What Professor Nelson's grandmother calls "the real great depression" started in Europe as a crisis brought on by banks with bad mortgages. Amid optimism in France, the newly formed Austro-Hungarian Empire, and the states unified by Prussia into the German Empire, lending institutions sprouted and flourished. The mortgages they issued for municipal and residential construction were liberally approved, and a building boom centred on Berlin, Paris and Vienna began in about 1870. There was perhaps even more buoyancy in the post-civil-war US, with a railway construction frenzy leading the economic charge. In the rush to lay tracks, rail companies borrowed heavily and crafted complex financial instruments guaranteeing generous returns to raise capital. On both continents, land values soared.

But the economic fundamentals were not as they seemed. Much as China has today become the world's manufacturing hub, the US was surging forward with agricultural and industrial innovation; by the early 1870s, its cheap produce and goods, loaded into giant steam ships, were flooding European markets. Flour, meat and rape oil seed prices collapsed. The crash began in central Europe, in May 1873, as it became clear that growth projections were too optimistic. Banks, unsure of who was holding bad debts, raised inter-bank lending rates, causing tightness in credit. Stock market crashes in Vienna, Berlin and the US followed. American railway firms quickly started going under and it became apparent the promises made to investors were false.

Professor Nelson said the depression lasted for more than four years in the US, six in Europe; the ramifications were decades-long. Hundreds of banks shut their doors, tens of thousands of companies closed, and more than a quarter of the workforce was unemployed - similar to during the Great Depression.

The ways companies went about doing business was radically changed. Governments imposed trade tariffs to protect their economies. Empire-building in Asia and Africa gathered pace.

Governments too often ignore history in making decisions. That is not the case with the present meltdown but, as Professor Nelson points out, many officials seem to have opened their history books at the wrong page. They fear inflation, the scourge of the 1930s, but a just-as-damaging phenomenon, deflation, endured during the 1870s. He worries that focusing on 1929 will lead to a flawed diagnosis and an inappropriate remedy. Given what the depression of 1873 led to, I hope his message is heard.

Peter Kammerer is the Post's foreign editor. peter.kamm@scmp.com


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Fool's gold


REGINA IP

Nov 24, 2008           
     
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Globalisation probably has as many detractors as supporters. Not only does it spread financial contagion and other economic woes far and in real time, critics say, but it also compresses the life cycles of ideas, lexicon and labels. Not so long ago, journalists and local officials were crowing about Hong Kong's arrival as part of "Nylonkong" - the pantheon of world financial centres New York, London and Hong Kong, which exemplify globalisation at its best.

With the global financial system now teetering under the weight of excessive debt, "Nylonkong" has become the byword for a sorry tale of three cities in misery. How could experienced journalists have got it so wrong?

At its zenith, "Nylonkong" evokes phenomenal wealth, power and glamour. Our propagandists never tire of citing "Nylonkong" as testimony to our financial strength. Yet, if you look more objectively at our achievements as a financial centre - by consulting the City of London's Global Financial Centres Index - you will notice that Hong Kong has yet to earn its title as a global financial centre.

This honour is reserved for those which "have sufficient critical mass of financial services institutions to dispense with intermediaries and to connect international, national and regional financial services participants directly".

Thanks to its large volume of cross-border transactions and involvement in a significant proportion of Asian financial transactions, Hong Kong is comfortably classified as an international and national financial centre. Experts will tell you, however, that claims of being a global financial centre remain quite wide of the mark.

Hong Kong follows the leaders in more ways than one. Apart from critical mass and connectivity, it definitely trails New York and London in innovation. Two prominent examples testify to Hong Kong's laggard position and the pernicious consequences of being a copycat. Take, for example, The Link Reit (SEHK: 0823, announcements, news) , one of the world's largest real estate investment trusts, which was spun off from Hong Kong's Housing Authority in November 2005. When the initial public offer was derailed by the judicial review application of a public housing tenant - who argued that it would deprive tenants of public amenities and that The Link Reit would raise rents without considering the public good - keen investors were so furious that condemnations of the application flew thick and fast. Hong Kong was 40 years behind the US in introducing reits, but the relentless ways in which The Link Reit has squeezed out the small guys and increased rents have vindicated those opposed to the IPO.

The way Hong Kong's financiers copied the leaders' structured financial products spelled even greater and far more immediate disaster. According to a report in Next magazine, the sale of the minibonds now under investigation was masterminded in about 2002 by the chief executive officer of a local fund management company. Hong Kong is at least 20 years behind in mass-producing structured financial products; collateralised debt obligations and credit default swaps have been around in the US since 1987 and 1995, respectively. Local retail banks sold at least HK$20 billion worth of minibonds - high-risk credit-linked derivatives - to more than 40,000 investors, many of whom mistook them for low-risk, fixed-income products.

What lessons can be learned? Judge not the success of a financial centre by the market capitalisation of its stock markets, its stratospheric property prices or the density of designer stores, luxurious limousines and expensive restaurants that line its streets and financial towers. Judge them on the fundamentals: the integrity of the people selling the products, the sophistication of those buying them and the quality of the regulatory framework.

Only then will you realise how few understand the relationship between risk, reward and responsibility, and how much havoc is wreaked by greed. Then you realise all that glitters is not gold.

Regina Ip Lau Suk-yee is a legislator and chairwoman of the Savantas Policy Institute


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Creating a bigger pie with a delta metropolis


Anthony Wu
Nov 25, 2008           
     
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Like other parts of the world, Hong Kong has started to feel the damaging impact of the global financial crisis - rising unemployment, economic downturn and a sharp fall in property and stock prices.

Given its global scale, no one can say for sure how long the crisis will last and when Hong Kong will bounce back. The only consensus seems to be the worst is yet to come.

Indeed, the government has acted promptly in rolling out a number of fiscal measures to help relieve the economic pain. But other than fiscal means, which tend to be most effective for the short term, what else can we do to re-engineer Hong Kong's sustained growth in the long run? Can we look beyond our domestic market of more than 7 million people to target a wider market in the Pearl River Delta (PRD), with its population of 51 million and steadily growing purchasing power?

This is what we at the Bauhinia Foundation Research Centre have advocated in our latest study, "Creating a World-class PRD Metropolis". Simply put, the key is to make the pie bigger by pooling our resources with those of the surrounding economies. This, we believe, will benefit all the delta cities, including Guangzhou, Hong Kong and Macau.

We forecast that the development of the PRD metropolis will spur growth in the entire region's gross domestic product, trade and investment in the next three decades. GDP will grow by an extra HK$30 billion and trade volume by HK$54 billion in Hong Kong and Macau alone. In terms of purchasing power parity, the metropolis' per capita GDP will be about HK$780,000 by 2038, which will exceed the average of New York, Tokyo and London.

These figures, although based on economic modelling, suggest that the creation of a PRD metropolis will not be a zero-sum game. This is a rebuttal to the presumption that, if Guangdong develops more, Hong Kong will lose out.

There are also fears that Hong Kong will gradually lose its uniqueness and become just "another city in China". While such opinions caution us against letting go of Hong Kong's characteristics, they should not stop us from better connecting Hong Kong to Guangdong - a step more likely to accentuate, rather than dilute, Hong Kong's cosmopolitanism and multiculturalism.

Has the Eurostar, the high-speed train that crosses beneath the English Channel, taken away the uniqueness of the British, French and Belgians? Better links between Hong Kong and other parts of the delta will bring more tourists, businesses and spice to the lives of Hongkongers.

The concept of the PRD metropolis is recognition of the fact that no single economy can stand alone in today's highly globalised and turbulent economic environment. Enlarging the pie will lead to greater demand for services and goods, better economies of scales, and broader exchanges of people in terms of livelihood and consumption.

The PRD metropolis is more than just a concept or vision. For those who reside and work in the delta, it would mean better connectivity and greater convenience. Imagine having a teleconference with overseas clients in your office in Central, meeting mainland suppliers in Zhuhai after lunch, having an evening out watching Sting or Eric Clapton live in Macau and returning home for a good sleep, all on the same day.

This will happen, sooner or later, in the PRD metropolis which will be seamlessly linked by extensive road and rail networks.

What is needed is the speeding up cross-city infrastructural projects, such as the Hong Kong-Zhuhai- Macau bridge and an integrated regional railway system.

Equally important is the formulation of regional environmental protection blueprints and ecological development plans. For Hong Kong, now is the time to take advantage of the enormous opportunities being presented to us.

Anthony Wu Ting-yuk is chairman of the Bauhinia Foundation Research Centre


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January 20 is starting to look a long way off


Eugene Robinson
Nov 26, 2008           
     
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Having two US presidents is starting to feel like having no president, and that's the situation Americans will face until Inauguration Day.

President George W. Bush spent the weekend in Lima, Peru, at a meeting of the Asia-Pacific Economic Co-operation forum, conferring with Pacific Rim leaders who had no reason to pay attention to anything he said. Mr Bush did, however, cut a dashing figure in a traditional Peruvian poncho. By Monday morning, he was back at home lending his imprimatur to Treasury Secretary Henry Paulson's latest diving catch to save the global economy from utter ruin - this time, the massive bailout of Citigroup.

A couple of hours later, the other president, Barack Obama, presented his new high-powered economic team. Mr Obama made a point of saying that the prospective officials - led by Timothy Geithner, his pick to head the Treasury - would start working immediately. Mr Obama also made it clear there's very little they can do except monitor the situation, study possible solutions and develop a plan to be enacted after January 20. We can't afford another month or more of drift, Mr Obama said. But I fear that's just what we're going to get.

The problem is that no one is prepared to orchestrate a decisive package to stabilise the US financial system, put a floor under housing prices and keep the economy from sinking into a punishing recession.

Mr Bush could do it - he is still president, and avoiding economic collapse is in the job description. But he won't. It's ironic that, after being so aggressive and proactive in other areas, "the Decider" is so indecisive and passive about the economy. He has limited his role to signing off on whatever Mr Paulson says is necessary - most recently, US$20 billion in cash and US$306 billion in guarantees for Citigroup.

In part, Mr Bush's inaction stems from ideology. If the free market is always right, then it ought to correct itself and get back on course. All the government really needs to do is take care of a few emergencies such as Bear Stearns, Freddie Mac, Fannie Mae, IndyMac, AIG, Wachovia, Citigroup ... and, of course, whatever comes next.

Ideology doesn't explain it all, though. Even if he wanted to make a real run at righting the economy, Mr Bush has neither the energy nor the credibility to make it happen.

That leaves the other president, who has plenty of energy and credibility - but no authority. Mr Bush said he called Mr Obama to inform him of the Citigroup bailout, but informing isn't the same as consulting. Mr Obama said his new economic team will monitor the situation and give him daily reports on where things stand.

He says a huge economic stimulus is needed "right away". But he knows it's unlikely that anything big enough will get through the outgoing Congress. Mr Obama said that "we cannot hesitate and we cannot delay", but he knows full well that hesitation and delay are all but inevitable. And he knows full well that, by the time he gets the power to shape events, the economic situation might be much worse than it is now.

Eugene Robinson is a Washington Post columnist


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Rebuilding trust
Calls are growing for the mainland and Taiwan to establish independent investigative commissions

Jerome Cohen
Nov 27, 2008           
     
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Both the mainland and Taiwan are governed by outmoded constitutions. On the mainland, despite the conservative climate, reformers continue to advocate progress in local elections, government transparency and judicial autonomy. In Taiwan, despite significant political reforms of the past two decades, issues such as relations between the president and the Executive Yuan, tensions between the Supreme Court and the Constitutional Court, and optimal resort to referendums are unresolved.

One institutional question that has received too little attention on both sides of the Taiwan Strait is the role of independent investigative commissions. Yet, events may be moving it up the agenda in each place. Last week, the United Nations Committee Against Torture, in evaluating Beijing's compliance with the Convention Against Torture, repeatedly stressed the mainland's "lack of an effective mechanism for investigating allegations of torture as required by the Convention".

The committee recommended that Beijing establish an "independent oversight mechanism to ensure prompt, impartial and effective investigation" into all such allegations. Of course, the mainland already has institutions, including the procuracy, people's congresses and Communist Party discipline inspection commissions, to investigate abuses of the criminal process.

In practice, however, they have not been impartial, independent and effective in exposing the pervasive torture problems. Nor can non-governmental organisations effectively inquire into criminal procedures, and the media and legal profession are not consistently allowed to support such efforts.

The past two weeks in Taiwan have witnessed a flurry of discussion concerning the feasibility of establishing a temporary commission to impartially investigate issues of public protest, police control and criminal prosecution that arose during the contentious visit of mainland official Chen Yunlin . My previous column, published on November 13, suggested that Taiwan's president, Ma Ying-jeou, appoint an ad hoc independent commission of experts to examine claims that corruption prosecutions of present and former officials during the Chen Shui-bian and Ma Ying-jeou administrations may have been politically inspired or "selective".

This stimulated a range of responses in public and private. Some Taiwan experts in criminal justice favoured the idea as a way to boost popular understanding and confidence in the integrity of the prosecutorial system, and create momentum for reforms.

Some leaders of the opposition Democratic Progressive Party were also enthusiastic about the proposal. But other DPP supporters denounced it as "naive" because no commission appointed by the again-dominant Kuomintang had ever been independent.

Last Thursday, Freedom House, an influential Washington-based NGO, urged "Taiwan's government to create an independent commission to thoroughly investigate clashes between police and activists protesting [against] ... Chen Yunlin's historic visit and recommend needed reforms". It also urged a re-examination of Taiwan's Assembly and Parade Law. The same day, the Paris-based International Federation for Human Rights, in a stern letter to Taiwan's leaders, denounced the police for arrests and violence it said were grave violations of human rights against peaceful protesters, under the pretext of national security. It demanded impartial investigations by both the Judicial Yuan and the Control Yuan.

On Saturday, the presidential spokesman, Wang Yu-chi, dismissed suggestions for an ad hoc impartial commission as unnecessary and implied that they would raise constitutional questions.

Yet it is difficult to believe that the Council of Grand Justices, Taiwan's constitutional court, would deny the Executive Yuan, or the Control Yuan, the power to appoint a temporary commission of independent experts to assist its investigation of police and prosecution conduct. Also, despite the council's ruling that limited the legislature's investigative power into the March 19, 2004 attempted assassination of Taiwan's president and vice-president, the legislature, too, may be able to authorise a carefully confined independent commission.

The Grand Justices, many of whom are familiar with comparative law, surely know that, in the United States, the Warren Commission inquiry into president John F. Kennedy's assassination and the 9/11 Commission, as well as numerous royal commissions in Britain, have made useful contributions to democracy.

Unlike on the mainland, in Taiwan there are no obstacles to the creation of a civil society investigation group of independent and impartial criminal justice experts. Any government department that failed to co-operate with such a commission would be roasted in Taiwan's free media and free political process.

On Monday, civil society groups and academics pressured the Control Yuan to launch a probe into alleged police misconduct during Chen Yunlin's visit. If doubts persist about the fairness of corruption prosecutions, the Control Yuan can extend its inquiry into that aspect of government integrity as well. If the Control Yuan fails to exercise its responsibilities, civil society groups and academics can launch their own investigation.

Jerome A. Cohen is co-director of NYU's US-Asia Law Institute and adjunct senior fellow at the Council on Foreign Relations in New York


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Some giants' shoulders for Obama to stand on


Dominique Moisi
Nov 28, 2008           
     
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Exceptional circumstances - namely, the depth and urgency of the financial and economic crisis - have contributed to bringing an exceptional man, Barack Obama, to the American presidency. But will they also prevent him from succeeding? Will the spirit of hope that brought Mr Obama to power triumph over the winds of economic and social despair, or will fear in the west of the looming global recession spread to Asia and destabilise China and India?

These are the major questions standing before us as the president-elect prepares the American people for what will be a rough ride ahead.

The same Americans who cried with joy on the night of November 4 are now seized with apprehension as economic hardship becomes more real by the day. Faced with the urgent necessity of alleviating so many Americans' suffering, Mr Obama knows only too well that the "audacity of hope" will not be sufficient to the immensity of the challenges confronting him.

As the world moves from elation to sober realism, it is important to maintain a balanced view of what's happening and avoid the dual risks of underestimating the truly revolutionary nature of what took place and overestimating the ability of the Obama team to find miracle solutions.

On the positive side, the "colour wall" has fallen nearly 20 years after the collapse of the wall that divided Germany and Europe. The pride that Americans - and Africans - have felt since Mr Obama's election is important and, one hopes, will bring long-term benefits.

America has not only reconsolidated at least part of its "soft power" abroad; it has done so at home, as well. Unemployment and the housing crisis are affecting Americans without regard to their colour or origins. Dignity may not provide you with a roof or a job, but it helps maintain hope in hard times.

We are also witnessing the establishment of a new balance between state and market. But this should not go too far, for there are limits to what the state can do, and the strength of private initiative constitutes one key aspect of America, which became the world's leading nation thanks to its dynamism, flexibility and individual inventiveness. More importantly, beyond the decline of the market and the re-legitimising of the state, we may be seeing a rehabilitation of politics and politicians, if not idealism.

For the first time in America since John F. Kennedy's presidency, politics is seen as a potentially noble venture. The idea that you can make a difference not only for yourself but for your country and the world, that self-interest and personal enrichment are not the only possible goals in life for the "best and the brightest," has irresistibly been gaining ground in the Obama generation. On the night of November 4, countless Americans and non-Americans felt that ideals could indeed become fact.

But this renewal of idealism is as much a product of hope as of fear. The moment young people became tempted to join Mr Obama's quiet revolution was also the moment the doors of Wall Street began closing on them. There are no new openings in a world of banking and finance brought low by the greed and hubris of some of its key members. Wall Street is now facing one of the worst contractions in history. Mr Obama has a unique combination of intellect, character, and - so far - luck, but can he prove able to channel Abraham Lincoln, Franklin Roosevelt and Winston Churchill at the same time? It may be too much to ask from one man.

Yet the cards Mr Obama is holding should not be underrated. Unlike Roosevelt, he has a perfect understanding of the nature of the economic challenges facing him, and, like Churchill, he benefits from the support of a population ready to follow him in a climate of national unity, at least in the short term.

Dominique Moisi, a founder and senior adviser at Ifri (the French Institute for International Relations), is a professor at the College of Europe in Natolin, Warsaw. Copyright: Project Syndicate


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Saving the world


LAURENCE BRAHM

Dec 02, 2008           
     
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When President Hu Jintao convened the Communist Party Central Committee's economic working conference last week, he warned that the effects of the global financial crisis could hit China's economy hard next year. Many Chinese economists have claimed that "Chinese characteristics" make the economy immune to global economic effects. Such head-in-the-sand thinking may soon be coming to an end. As China 's gross domestic product growth begins falling below the 8 per cent required to keep angry citizens off the streets, the party is beginning to feel nervous, especially as the number of riots increases throughout the country.

The party's slogan for fighting the global financial crisis, "save ourselves to save the world", is a reminder of the type of perpetual irresponsibility that most of Europe and North America fear from China's leadership. The formula proposed to achieve the party's objective is equally predicable - spend as much government money on the same kind of infrastructural development as possible to give workers jobs, while lining the pockets of corrupt cadres, thus keeping everyone happy. Certainly, the corrupt cadres will purchase luxury goods with the money they pocket, keeping the high-end side of China 's economy stable. But the world may benefit, too.

China's 4 trillion yuan (HK$4.55 trillion) stimulus package, spread over the next two years, is expected to increase GDP by 1 percentage point or more. Economists looking at the deluge of factory closures in the southern provinces - effectively foreign disinvestment - in the wake of the global financial meltdown have estimated that GDP growth for next year might reach only 6 per cent. However, when the stimulus package kicks in, the economy may be closer to the 8 per cent threshold necessary to allow Mr Hu to sleep soundly without having to worry about a peasant uprising like the one that brought down the Ming dynasty.

For China, the stimulus package is affordable; it proudly estimates that its fiscal income will easily cover the package. But it is estimated that only 1.18 trillion yuan will come from fiscal earnings - with the rest covered by local governments and business, and the issuance of 500 billion yuan of state treasury bonds per year over the next two years. Half of the bonds will be bought by China's state-owned banks, which makes everything terribly convenient. Most banks are technically insolvent anyway, given their range of bad loans, dodgy property projects and state-owned enterprise get-rich-quick schemes, so nobody is worrying too much about that.

Many fear the stimulus package will result in white elephant projects, corruption and embezzlement. The State Council has announced that 24 inspection groups, each led by an official of vice-ministerial rank, will scour the country to prevent unnecessary projects and keep corruption in check. A similar approach was adopted when the then premier, Zhu Rongji, sent vice-minister-led inspection teams to prevent waste and corruption during his own infrastructure spending programme. It seemed to work then, but times have changed: fiscal spending then pales in comparison with that of today.

So there is some truth in the idea that, by saving itself first, China will save the world. Expect a massive number of imports to be used in the projects. Despite Europe's stimulus packages, there is little chance for growth in infrastructure. Expect multinationals to be knocking on China's door, selling their services.

In turn, expect Chinese delegations to visit many countries on official tour packages to inspect projects and products needed for import under the stimulus package. Nightclubs from Hamburg to Las Vegas will flourish! This is good news. China's own global trade relations will develop in a new direction. Foreign investors will be back occupying China's massive five-star hotels, maybe this time without money to invest, but with lots of infrastructure gadgets and maybe some get-rich-quick schemes to sell, as well.

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala. laurence@shambhala-ngo.org


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Moderate and mature, Obama renews hope


Michael Gerson
Dec 03, 2008           
     
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It is a lineup generous in its moderation, astonishing for its continuity, startling for its stability.
A secretary of defence, Robert Gates, who once headed the George Bush School of Government and Public Service at Texas A&M University. A secretary of state, Hillary Rodham Clinton, who supported the invasion of Iraq, voted to label the Iranian Revolutionary Guard a terrorist organisation and called direct, unconditional talks with Iran "irresponsible and frankly naive".

A national security adviser, retired general James Jones, most recently employed at the US Chamber of Commerce, who served as a special adviser to the Bush administration on the Middle East. A secretary of the Treasury, Timothy Geithner, who is one of Henry Paulson's closest allies outside the administration. A head of the Council of Economic Advisers, Christina Romer, whose writings and research seem to favour low tax rates, stable money and free trade.

It is tempting for conservatives to crow - or liberals to lament - that Mr Obama's victory has somehow produced John McCain's administration. But this reaction trivialises some developments that, while early and tentative, are significant.

First, these appointments add evidence to a debate about the political character of the president-elect himself. Conservatives have generally feared that Mr Obama is a closet radical. He has uniformly voted with liberal interests and done nothing to justify a reputation for centrism.

Until now. Mr Obama's appointments reveal not just moderation but maturity - magnanimity to past opponents, a concern for continuity in a time of war and economic crisis, a self-confidence that allows him to fill gaps in his own experience with outsized personalities, and a commitment to incarnate his talk of unity.

All the normal caveats apply. It is still early. All his pretensions of moderation could be quickly undermined by a liberal Congress. And Mr Obama's social liberalism could still turn Washington into a culture-war battlefield. But honesty requires this recognition: so far, Mr Obama has the instincts and ambitions of a large political figure.

Second, Mr Obama's appointments reveal something important about current Bush policies. Though Mr Obama's campaign savaged the administration as incompetent and radical, Mr Obama's personnel decisions have effectively ratified Mr Bush's defence and economic approaches during the past few years.

This continuity does not make Mr Obama an ideological traitor. It indicates that Mr Bush has been pursuing centrist, bipartisan policies - without getting much bipartisan support. The transition between Mr Bush and Mr Obama is smoother than some expected, not merely because Mr Obama has moderate instincts but because Mr Bush does as well.

The candidate of "change" is discovering what many presidents before him have found: on many issues, the range of responsible policy options is narrow. And, the closer you come to the Oval Office, the wiser your predecessors appear.

Third, Mr Obama is finding the limits of leading a "movement" that never had much ideological content. His transition has seen the return of a pack of "Clintonistas" - Lawrence Summers, Eric Holder, Rahm Emanuel - prompting talk of Bill Clinton's third term. Some of this is unavoidable. Governing experience generally gathers in the stagnant pools of past administrations.

But the resurrection of Clintonism is more pronounced because Obamaism is so wispy and indistinct. Mr Obama brings no cadre of passionate reformers with him to Washington. Instead, he has turned to experience and competence. Mr Obama will eventually need to define Obamaism - and cultivate allies in his own administration who will fight for his interests.

Whatever the caveats, Mr Obama is doing something right: he is disappointing the ideologues. This is more than many of us had hoped.

Michael Gerson is a Washington Post columnist


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A dirty day's pay
A rural employment scheme in India is encouraging villagers to carry out 'social audits'. But corrupt officials are one step ahead

INDIA
Daniel Pepper
Dec 04, 2008           
     
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On a recent morning in India's eastern state of Jharkhand, hundreds of villagers - many barefoot and illiterate - crowded together under a large red and white tent to deliver complaints of endemic corruption to well-heeled state bureaucrats. Across rural India, chauffeur-driven officials of state and central governments have long listened to the woes of the subcontinent's poor. But this was different.
The officials endured seven hours' criticism thanks to an employment programme that has empowered the most marginalised low-caste rural workers to speak the truth, and empower themselves.

The US$5.5 billion National Rural Employment Guarantee Act, rolled out two years ago, is described by its supporters as one of the largest job-creation programmes in history. It guarantees the head of each rural household employment at state minimum wage levels (typically US$2 a day) for 100 days every year. The goal of the effort is to give India's 700 million rural residents the tools to question their leaders and demand accountability and transparency, a rarity on the plains of India's poor, feudal countryside. It has already provided jobs to 90 million people.

While the jury is still out on whether the programme is a countrywide success, almost everyone agrees it has the potential to upend centuries of class-based discrimination while giving a hand up - not just a handout - to India's poor.

"It's not the end of poverty," said Jean Dreze, a Belgian-born, naturalised Indian citizen, and one of India's best known social activists. "But it means the kind of extreme insecurity that people live in today is basically not there anymore because you can get work for up to 100 days and at the minimum wage, which is not at all bad."

The lynchpin of the programme are public hearings, or "social audits", in which villagers review work job orders, engineers' reports, payment records, work sheets and other official documents. For those who are illiterate, the records are read aloud.

The jobs are typically in construction - of roads, wells or drainage ditches - but the community can pursue any project it deems important, as long as no more than 40 per cent of the central government funds are spent on materials. The remainder must go on wages. The projects must be on public land, except in cases involving "scheduled castes" or "scheduled tribes" - people at the bottom of India's social order. A third of the employees must be women.

Despite its success in employing millions, participants like Hirya Devi say the programme has fallen far short. Ms Devi worked on a well construction project for two months but was never paid. She said her foreman pocketed her salary, bought a motorcycle with the money and dared her to file a grievance.

"I'm an old woman. I don't have money to go run after government officials," said Ms Devi, who despite being only 45 looks closer to 60.

Corrupt officials are often villagers from higher castes, Dr Dreze said. They have created a feudal-style system of patronage and indebtedness with landless peasants like Ms Devi who often work for them or their relatives.

Ms Devi is representative of the many villagers who are enthusiastic about signing up for jobs but know nothing about their rights to demand copies of the documentation the programme requires. Critics of the programme allege that a greater investment must be made at the village level - India's more than 600,000 villages constitute the basic unit of local government - in order to drive the beneficiaries to demand accountability.

And, with the economic downturn more politicians, public intellectuals and community leaders are calling daily for the programme to be beefed up. They want to make sure there is an employment safety net for the masses. But the architects of the act don't want to upend the marketplace for labour.

Rohit Singh, a young man who grows spices, rice and other crops on 20 hectares he owns in Jharkhand, complains that the price of labour has doubled to US$2 since the act was introduced. "Earlier, we were getting cheap labour," Mr Singh said. "It's not justified - they are not skilled."

India has long wrestled with what to do with its largely uneducated population. In places like the district of Deogarh, the problem is that villagers - although aware the act is aimed at creating jobs - are ignorant of its safeguards to ensure transparency. Poverty rates there are some of the worst in the country, and people are content to get any work at all. Social audits are rare, so corrupt officials can get away with ignoring the law.

In the wealthier, more developed states, where community participation in the democratic process is strong, a common complaint might be that a medical kit - a requisite at every worksite under the act- is missing a particular medicine or antiseptic. For labourers in places like Jharkhand, that is the least of their concerns.

A frail 65-year-old woman, Bidya Marande, clad in a yellow sari, her arms and chest covered in deep blue tribal tattoos, and Manchand Rajwar, a 25-year-old man with severe polio, each said they were surprised to find their names listed as employees of a well project.

They complained of being listed on worker rolls but never employed at the site. Others said they had to pay bribes for jobs, or that they did not get paid what they were owed.

When Dr Dreze and his colleagues, many of whom travelled the 1,400km from New Delhi, recently organised a social audit in Jharkhand, villager after villager recited stories about corruption, intimidation and embezzlement.

Standing up and accusing corrupt officials of malfeasance doesn't come without certain risks. In May, a day before a social audit in Jharkhand, the body of a social activist, Lalit Mehta, was found in a shallow grave, his body badly beaten. A federal investigation is ongoing. After that, many Indians began questioning the act's effectiveness.

Amita Sharma, the head of the programme at New Delhi's Ministry of Rural Development, wants online records for each project's workers, bank deposits and spending by the central government. Of the 90 million job cards, some 50 million have already been registered in an online database.

"If an outside person wants to do a check - all they have to do is pull out the data," Ms Sharma said. "It creates a system of checks and balances."

Such scrutiny functions well in richer states, but for labourers in poorer regions like Jharkhand, where internet penetration and computer literacy is in the low single digits, it is much more difficult.

In Deogarh, for example, most homes lack electricity. Over the years, the central government has divested many responsibilities to the village governments.

But, because of illiteracy, discrimination and a lack of education, villagers go begging to higher authorities who hold the purse strings to government programmes.

"The whole nexus between the politicians and the contractors and the corrupt bureaucrats is very strong," said Dr Dreze. Together with a team of other economists, college students and farmers, he spent a week before the public meeting combing through files and visiting villages to confirm names listed on worksheets and that people were being paid what they were owed.

The idea isn't to bring justice to the workers who have been cheated. That would entail going through the court system, which many regard as so clogged up and slow that it's virtually useless. Rather, the act is aimed at creating a critical mass of pressure on government officials to prevent the problems affecting rural communities from occurring again.

Fake names on worksheets mean money for project leaders, as long as there is someone at the bank willing to collude with them.

"This is the root of all the ills and woes afflicting rural governance in India and the execution of the act," said Parshuram Rai, director of the New Delhi-based Centre for Environment and Food Security. "There is a lot of hype about the empowerment of [elected village administrations] but the truth on the ground is very disappointing."


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Taking their queue
In times of crisis, leaders need to step out of their comfort zones to see how the rest of us live

Stephen Vines
Dec 05, 2008           
     
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Has anyone in the upper echelons of the Hong Kong government given a moment's consideration to the idea of making some gesture to show that, not only do they understand the pain likely to be suffered as the economic recession tightens its grip, but that they intend to share some of it?

This thought is prompted by the somewhat desperate offer from the bosses of two of America's largest carmakers to accept a US$1 salary in the coming year as part of a rescue package to keep their businesses afloat.

This is very much a gesture and goes nowhere close to solving the underlying financial problems of America's deeply troubled car industry. But gestures are important, as these men learned to their cost when they flew into Washington on private jets with a begging bowl for public funds. The distasteful image of corporate chiefs sipping champagne up in the sky while expecting Joe Public to help finance their lifestyle did more damage than their mournful explanations of the state of play in car land. Something had to be done to remedy this public relations disaster and so they came up with the US$1 idea which, at the very least, has the merit of suggesting that the big bosses have learned a lesson.

No one is suggesting that Hong Kong's chief executive and his senior ministers should be making a gesture quite this dramatic. But, have they learned the lesson that personal example and some sign of self-awareness goes a long way to providing public reassurance in a crisis?

As matters stand, our senior bureaucrats, presiding over a population of no more than 7 million people, rank among the highest-paid public officials in the world. They earn far more than counterparts in the US and their perks amount to more than the salaries of senior officials presiding over the world's largest population across the border.

Moreover, they enjoy a lifestyle entirely removed from the experience of most people in Hong Kong as they glide from spacious homes, provided at public expense, into chauffeur-driven limousines, financed by the public, safe in the knowledge that the public will pick up the entire tab for their health care and children's education, and so on.

Their remoteness from the lives of practically everyone else in Hong Kong is underlined by the fact that, unless accompanied by a bevy of clipboard-wielding bureaucrats on an official mission, they are unlikely to set foot on public transport, they never have to wait in line at a government office for one of the many forms mere mortals are expected to fill in and, of course, they have a type of job security entirely denied to the average person in these unsettled times.

In these circumstances, some gesture of sharing the pain seems to be more than appropriate. At the very least, they might like to consider a pay cut or show they are prepared to help reduce their carbon footprint by occasionally abandoning their limousines. Maybe they would even consider joining a queue at, say, the post office where long lines form as people wait to pay a variety of bills for utility services.

Were they to do so, they would not be solving the problems caused by the economic crisis, but they could go some way to demonstrating awareness of the hardships it will produce for the majority of families.

It may be argued that gestures are cheap and detract from the serious business of formulating policies to tackle the crisis. However, it could also be argued with equal vigour that a real understanding of the problems and, hence, a better appreciation of how to tackle them, comes from a better appreciation of what it's like to share the pain.

Leadership is all about setting examples and demonstrating that those at the helm really understand how their policies affect ordinary people.

In times of crisis, the need to lead by example becomes more urgent. Indeed, was it not Hong Kong's chief executive who said he intended to run a "people-based" administration? Maybe joining the people would be a start.

Stephen Vines is a Hong Kong-based journalist and entrepreneur


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Economic benefits of a green stimulus


OBSERVER
Peter Gordon
Dec 09, 2008           
     
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Iam not going to hazard a guess on the path of Hong Kong's economy over the next couple of years but, with US president-elect Barack Obama's new economic team gearing up for seriously bad times, one would be foolish - especially with recent reports of local job losses - not to make at least some preparations of our own.

One suggestion mooted locally seems to be on hardly anyone else's agenda: just handing out money or coupons to consumers. Most of such a handout would go to those in no immediate need, and much of it would, at this point, surely and prudently be saved rather than spent.

Ideas currently being kicked around in the US include a jobs-creation stimulus through upgrading America's crumbling infrastructure, the establishment of a "national infrastructure bank" to evaluate and finance major projects and, finally, the idea of "greening the bailout" by moving America towards new energy technologies.

These ideas are perhaps not, at first glance, immediately applicable here. Hong Kong does not in general suffer from America's collapsing bridges, potholed highways and often poor public transport. And Hong Kong is a not a leader in technology of the green or any other variety, and is unlikely to become one: our economic future will have to be found elsewhere.

Nevertheless, if any local stimulus isn't to be merely about make-work jobs, the positions created should accomplish something that needs doing and is worth the expenditure. Furthermore, given that costs for both materials and labour will be lower in the immediate future, the dollars spent now - on the right projects - will not only provide an economic stimulus, they will also go further.

Although Hong Kong may not be in a position to profit from green hi-tech per se, there is considerable room for the savings and increased competitiveness that comes from energy conservation. And, according to Building Energy Efficiency, published by the Asia Business Council, buildings are one area where there is "an enormous, largely untapped, opportunity to save money and cut growth in greenhouse gas emissions by taking measures to increase energy efficiency", a fact not lost on the government. Indeed, the last policy address pointed out that "in Hong Kong, buildings account for 89 per cent of total power consumption".

Implementing energy efficiency is admittedly somewhat easier in new construction than buildings already standing, but there are of course rather more of the latter. Retrofitting buildings for energy efficiency is a labour-intensive exercise, and includes double-gazing windows, insulating elsewhere, checking and maintaining air conditioners and replacing lighting. These activities could put a lot of people to work and can be ramped up quickly.

So, if such improvements offer a competitive return on investment, why don't they happen on their own more often? The reasons are complicated and many, from the hassle of the retrofitting to the fact that savings are harder to recognise than revenues. Government incentives, such as providing the initial funding, perhaps leveraged by some judicious taxes on energy use, might overcome the current inertia.

A local version of an "infrastructure bank" might fund energy-efficiency improvements and would be paid back from the energy savings realised, while also providing some structure and accountability to the programme, and minimising the eventual effect on the public purse.

Of course, these principles might also be applied elsewhere, for example to catalysing alternative energy or financing other labour-intensive activities with long-term benefits, such as cleaning up older neighbourhoods and refurbishing our parks.

While many overseas policies may not be immediately and directly applicable here, they might nevertheless inspire local consideration of the economic benefits of "greening the stimulus".

Peter Gordon is a Hong Kong-based businessman, writer, editor and publisher


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Time has come to fix failing bird flu defences


LEADER

Dec 10, 2008           
     
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Our city's elaborate defences against bird flu have, once again, been breached. This time, dead chickens at a farm in Yuen Long have been confirmed to be infected by the H5 virus. The government must move swiftly to discover the source of the infection and review the system. It is clearly not working as well as it should do.

Most worrying is the discovery that chickens which had been vaccinated against the potentially deadly virus are among those infected. This would seem to confirm warnings sounded earlier in the year that the effectiveness of the vaccine, such an important component in our defences, is fading. Steps must be taken to ensure that, as far as possible, vaccines provide adequate protection.

There is a disturbing sense of deja vu about the return of the bird flu virus. It was only in June that poultry at four wet markets were found to be infected, leading to the culling of thousands of birds. The latest outbreak is a reminder that we remain vulnerable, despite all the efforts that have been made to guard against the virus.

About 80,000 chickens at the affected farm and 10,000 more it had sent to a wholesale market will have been culled by today. The import and export of live chickens will be banned for three weeks. Retail and wholesale markets have been shut as workers start disinfecting facilities. These are necessary measures, but not long-term solutions.

It is too early to determine the extent of the outbreak. Inspectors are collecting and testing samples from other farms and markets. Hopefully, the latest incident is confined to the single farm known to be affected so far. Its owner is to be commended for speedily reporting the incident to the authorities. But, if it had involved a less responsible owner, detection would have taken much longer, and the virus would have had more time to spread.

The infection of vaccinated birds raises fresh concerns. Scientists who monitor the vaccination programme have been warning about its declining effectiveness. The government introduced vaccination at all local farms in 2003. University of Hong Kong microbiologists say we are not far from the day when the vaccines will become useless. Worse, they warn that some vaccinated chickens may not show symptoms and so spread the virus as "silent carriers". Hong Kong has been using the same vaccine for years. It is time to consider whether a change would improve prevention.

Bird flu is a deadly threat to public health. The surest way to contain it is to end the live poultry trade. Yet, despite the September buyout deadline the government imposed on traders, a significant minority of retailers, wholesalers and farmers have refused to trade in their licences. They will continue in business until the government introduces central slaughtering. Now that the government is pushing for more public works to create new jobs in this economic downturn, it should make building a central slaughtering facility a priority. The latest outbreak shows there is no time to waste.


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One U-turn too many
To err is human, but repeated policy reversals suggest something is amiss with the government - and raise doubts about its credibility

POLITICS
Daniel Sin
Dec 11, 2008           
     
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It is somewhat ironic that the latest trouble to strike Donald Tsang Yam-kuen's government should have been caused by protests against another administration. On December 1, the government reversed its decision not to send charter flights to pick up Hong Kong residents stranded in Thailand by protests against the Thai government of Somchai Wongsawat which had closed Bangkok's international airport.

The U-turn came after it emerged that Hong Kong traveller David Yick Hok-ying had died in a road accident when rushing to Phuket to catch a flight home. By itself, it might have been seen as a policy change driven by circumstances and quickly forgotten.

However, the incident was the latest in a series of policy U-turns under strong public pressure which, taken together, have critics questioning the government's credibility and even its competence.

"The government has not thought through the implications and consequences before promulgating changes," said former chief secretary and lawmaker Anson Chan Fang On-sang. "Such knee-jerk reactions suggest a vacuum in leadership and dysfunctional government machinery."

The government's latest problems can be traced to May and the decision to appoint eight undersecretaries and nine political assistants as part of the process of augmenting the political appointment system.

When it was reported in the media that some of the appointees held foreign passports or had been given quantum leaps in salary, there was a public outcry and many lawmakers demanded full exposure of their nationality status and remuneration packages.

The government's initial response was that such personal information would not be disclosed. But, following public pressure, it changed tack, announcing on June 22 that all future political appointments would have their pay made public. A week later it said that nationality status would be disclosed as well.

Within weeks, Mr Tsang had stumbled into a row over the suspension of the levy on foreign domestic helpers. The two-year suspension, announced on July 16 as part of an HK$11 billion package of handouts, was to apply from September, but the start date was advanced to August 1, to reduce the burden on the middle class. When lawmakers pushed for the levy to be abolished altogether, the government was at first firm in resisting the proposal. Then, on November 11, it took a new course of action, extending the suspension for a further three years to July 31, 2013.

More trouble followed on August 1, when former buildings chief Leung Chin-man was appointed executive director and deputy chairman of New World China Land (SEHK: 0917), a mainland subsidiary of New World Development. The appointment immediately raised questions about a possible conflict of interest because Mr Leung had been involved in the sale of the Hung Hom Peninsula housing estate to New World Development in 2004. The controversy sparked debate over the system for safeguarding against conflicts of interest in post-retirement employment.

The Civil Service Bureau at first refused to reopen the case, nor would it review the system. But, on August 15, following a chorus of criticism, Mr Tsang instructed Secretary for the Civil Service Denise Yue Chung-yee to re-examine the case. The government followed up by setting up a committee headed by Ronald Arculli to review the system for approving post-service employment.

A month later, on October 15, Mr Tsang told the Legislative Council that the government planned to review whether it should raise the old-age allowance or "fruit money" to HK$1,000 a month on a means-tested basis. Following strong public criticism, Mr Tsang aborted the review and increased the allowance to HK$1,000 for all eligible people, using the existing system.

Then there was Thailand.

Two weeks ago, Hong Kong travellers were reported to be stranded in Thailand after anti-government demonstrators succeeded in closing Bangkok international airport. On November 30, Deputy Secretary for Security Ngai Wing-chit ruled out sending charter flights to pick them up. The position was reversed over the weekend. Chief Secretary Henry Tang Ying-yen later explained that it had been "a collective decision and it [was] also the responsibility of the whole governing team".

Radical lawmaker Wong Yuk-man, of the League of Social Democrats, said: "[It is undesirable that] the government announces a policy in the morning and changes it at night. What is worse is that the policies made were wrong in the first place. The government said that its decisions were made according to established procedure. From the effects of what happened, it was clear that the procedures were too rigid and inflexible."

Chinese University political scientist Ivan Choy Chi-keung said the government's policy reversals show it lacked public support. "The government can only keep shifting its ground because it cannot secure enough votes in Legco to avoid defeat," he said.

Mr Choy said the policy U-turns demonstrated to opponents that, if they were prepared to put sufficient pressure on the government, it would eventually give way.

For Mrs Chan, repeated policy changes reflected badly on the accountability system. "The so-called `accountability system' is clearly not working. No one is at the helm and it seems from the chief secretary's recent puzzling reference to `collective decision and collective responsibility' that, at the end of the day, no political officer need be held responsible at all," she said.

Mrs Chan also questioned why the government should ask the permanent secretary for security - a civil servant supposed to be politically neutral - to publicly defend a political decision.

"The government owes the public an explanation on who is in charge when the responsible policy secretary is away from Hong Kong - and I don't mean just responsible for answering questions in the Legislative Council - and what is the role of the chief secretary in co-ordinating and defending the government's action?"

Lawmaker Tam Yiu-chung, chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, said there were objective reasons for the government to have made drastic changes in the past few months, and, in general, policy changes might be necessary at times.

"It is necessary for the government to adjust its policies to respond to public opinion. That is quite normal. I would find it unacceptable if the government insisted on something that the public strongly objected to," he said.

Mr Tam said the best strategy for avoiding damaging U-turns was by being more careful in assessing the public reaction before introducing a policy. The art of damage control lay in the ability to be frank and honest, he said.

"In the traditional policymaking process, civil servants stress continuity and rely heavily on precedents. But such practice may make it difficult for the government to respond to the rapidly changing social environment and public expectations," he said. "When the government has to backtrack, it should admit publicly that it has failed to assess the situation accurately, and should be prepared to go along with the public demand."

City University professor Joseph Cheng Yu-shek said it was not uncommon for politicians or governments elsewhere to reverse decisions and, in many cases, they were effected without too much public outcry.

"To err is human. Governments can make mistakes. In cases like the decision on whether to send charter flights to Thailand, it should be acceptable for the government to admit that it could not master the situation on the ground. Very few people in Hong Kong would be competent enough to tell what was going on in Thailand," said Professor Cheng.

"Just look at how the US government shifted policies in handling the financial meltdown. It was adamant at first that public funds would not be used to rescue certain corporations yet, shortly after, it committed to helping them."

Professor Cheng said policy  U-turns hurt the government's credibility, but there were certain basic techniques to minimise damage.

"Honesty is the best policy. If the government decides to reverse its decision, it must come clean and admit that it had made a wrong decision and convince the public why a change of policy is necessary, and what a reasonable compromise solution should be," he said. "On the other hand, if the government has a strong ideological conviction, and has an important value to defend, it may have to stand firm."

Professor Cheng said the government should already have the skills and means to avoid such policy embarrassments.

"The government has a good system and practice. There are mechanisms that ensure that all the stakeholders are consulted, evaluations are made on public reaction, and assessments are made on whether majority support can be obtained in Legco. There are tools and means where the government can gauge the public pulse," he said.

"In the cases such as the suspension of the foreign maid levy, the government should have kept an inventory of measures which could be implemented when it had the resources and which could be cut when it was in deficit. This would enable the government to churn out sound proposals within a short time."

Mr Choy said that one way the government might consider avoiding policy shifts was by expanding its base.

"The government could consider incorporating pan-democrats into the Executive Council. There is no need to exclude them," he said.


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Turmoil could spark the unravelling of 'Chimerica'


Michael Richardson
Dec 12, 2008           
     
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In his book, The Ascent of Money,  historian Niall Ferguson describes the emergence of a new post-cold-war superstate, Chimerica, a fictional combination of China and the US. "For a time, it seemed like a marriage made in heaven," he writes. "The east Chimericans did the saving, the west Chimericans did the spending." Chinese benefited from export-oriented economic growth and rising living standards; the Americans from cheap imports and low inflation.

Will the bond of mutual interest survive the global financial turmoil and deepening recession? A few weeks ago, David McCormick, US Treasury undersecretary for international affairs, said that Beijing had been "a responsible participant and ally" in dealing with the crisis. Treasury Secretary Henry Paulson was in Beijing last week heading a cabinet-level team of US officials in talks with their Chinese counterparts on how to continue bilateral co-operation.

But, with president-elect Barack Obama due to take over next month, there is no assurance that the twice-yearly US-China Strategic Economic Dialogue, established by the Bush administration in 2006, will remain in place. During his election campaign, Mr Obama accused China of keeping the yuan weak and using other unfair means to expand exports and dampen imports.

At about the same time that Mr McCormick praised China, Russian Prime Minister Vladimir Putin urged Beijing to jettison the US dollar in favour of national currencies in bilateral trade. The appeal appeared to leave his visiting Chinese counterpart, Wen Jiabao , unmoved. Sino-Russian trade was worth US$43 billion in the first nine months of this year. It was dwarfed by the US$305 billion in trade that China did with the US in the same period.

China's accumulated trade surpluses, particularly with the US and Europe, have helped it amass the world's largest foreign exchange reserves, some US$2 trillion. Analysts say China has invested up to US$1.5 trillion of that in US debt, including that issued by the now government-controlled mortgage finance giants Fannie Mae and Freddie Mac.

China's prominent role as creditor to an increasingly indebted US was underlined by US Treasury figures released last month showing that, in September, China overtook Japan to become the largest owner of Treasury bonds, bills and notes, with US$585 billion of these securities.

The unwritten compact between Beijing and Washington is: Chinese credit in exchange for access to the US market. China needs to export to earn foreign exchange and for US consumers to keep buying its goods. So mutually dependent are the two economies that, if the US slowed by 1 per cent, China would slow by 1.3 per cent, Citigroup researchers estimate.

Derek Scissors, a research fellow in Asia economic policy at the Heritage Foundation in Washington, casts this mutual dependence in even more dramatic terms. "Our trade deficit with China was the equivalent of 6.5 per cent of China's gross domestic product through September," he said. "China is helping us try to avoid a 2 to 3 per cent decline in GDP in 2009 and 2010; we are enabling them to avoid a 6 to 7 per cent decline every year."

China and the US are like conjoined twins. They can only be separated by complex surgery that may result in death or severe disablement.

Chinese officials and analysts suggest that China will retain, and probably increase, its holding of US Treasury securities for the foreseeable future, provided it is confident America will recover from the credit crunch and recession. But the crisis has prompted Beijing to rethink how to manage its economy in future.

Expanding domestic demand and reducing reliance on exports are likely to be hallmarks of any new regime. Shocked by the sudden storm of adversity, China will not want to be so heavily dependent for economic health on any one country again.

Michael Richardson is an energy and security specialist at the Institute of Southeast Asian Studies in Singapore. mriht@pacific.net.sg


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Time is running out
The economic crisis calls for aggressive government action to avoid a lengthy period of 'stag-deflation'

Nouriel Roubini
Dec 16, 2008           
     
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The latest macroeconomic news from the United States, other advanced economies and emerging markets confirms that the global economy will face a severe recession next year. In the US, recession started in December last year, and will last at least until December 2009 - the longest and deepest US recession since the second world war, with the cumulative fall in gross domestic product possibly over 5 per cent.
The recession in other advanced economies - the euro zone, Britain, European Union, Canada, Japan, Australia and New Zealand - started in the second quarter of this year, before the financial turmoil in September and October further aggravated the global credit crunch. This contraction has become even more
There is now also the beginning of a "hard landing" in emerging markets as the recession in advanced economies, falling commodity prices and capital flight take their toll on growth. Indeed, the world should expect a near-recession in Russia and Brazil next year owing to low commodity prices, and a sharp slowdown in China and India that will be the equivalent of a hard landing - growth well below potential - for these countries.

Other emerging markets in Asia, Africa, Latin America and Europe will not fare any better, and some may experience fully fledged financial crises. Indeed, more than a dozen emerging-market economies now face severe financial pressures: Belarus, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Romania, Turkey and Ukraine in Europe; Indonesia, South Korea and Pakistan in Asia; and Argentina, Ecuador and Venezuela in Latin America. Most of these economies can avoid the worst if they implement the appropriate policy adjustments and if the international financial institutions - including the International Monetary Fund - provide enough lending to cover their external financing needs.

With a global recession a near certainty, deflation rather than inflation will become the main concern for policymakers. The fall in aggregate demand, while potential aggregate supply has been rising because of overinvestment by China and other emerging markets, will sharply reduce inflation. Slack labour markets with rising unemployment rates will cap wage and labour costs. Further falls in commodity prices - already down 30 per cent from their summer peak - will add to these deflationary pressures.

Policymakers will have to worry about a strange beast called "stag-deflation", a combination of economic stagnation/recession and deflation; about liquidity traps, when official interest rates become so close to zero that traditional monetary policy loses effectiveness; and about debt deflation - the rise in the real value of nominal debts, increasing the risk of bankruptcy for distressed households, firms, financial institutions and governments.

With traditional monetary policy becoming less effective, non-traditional policy tools aimed at generating greater liquidity and credit - via quantitative easing and direct central bank purchases of private illiquid assets - will become necessary. And, while traditional fiscal policies, such as government spending and tax cuts, will be pursued aggressively, non-traditional fiscal policy, such as expenditures to bail out financial institutions, lenders and borrowers, will also become increasingly important.

In the process, the role of states and governments in economic activity will be vastly expanded. Traditionally, central banks have been the lenders of last resort, but now they are becoming the lenders of first and only resort. As banks curtail lending to each other, to other financial institutions and to the corporate sector, central banks are becoming the only lenders around.

Likewise, with household consumption and business investment collapsing, governments will soon become the spenders of first and only resort, stimulating demand and rescuing banks, firms and households. The long-term consequences of the resulting surge in fiscal deficits are serious. If the deficits are monetised by central banks, inflation will follow the short-term deflationary pressures; if they are financed by debt, the long-term solvency of some governments may be at stake unless medium-term fiscal discipline is restored.

Nevertheless, in the short run, very aggressive monetary and fiscal policy actions - both traditional and non-traditional - must be undertaken to ensure that the inevitable stag-deflation of next year does not persist into 2010 and beyond. So far, the US response appears to be more aggressive than that of the euro zone, as the European Central Bank falls behind the curve on interest rates and the EU's fiscal stance remains weak.

Given the severity of this economic and financial crisis, financial markets will not mend for a while. The downside risks to the prices of a wide variety of risky assets, such as equities, corporate bonds, commodities, housing and emerging-market asset classes, will remain until there are true signs, towards the end of next year, that the global economy may recover in 2010.

Nouriel Roubini is professor of economics at the Stern School of Business, New York University. Copyright: Project Syndicate


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Easing the burden
A key review of how the government plans and funds social welfare could finally offer a fix for the 'ad hoc' system

WELFARE
Sarah Monks
Dec 17, 2008           
     
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Is Hong Kong finally going to fix chronic problems in how it plans and funds social welfare, a system often criticised as "ad hoc", "short term" and hostage to "whoever shouts loudest"? Wilfred Wong Ying-wai believes so. He is confident that another page will be turned for a welfare system under increasing stress from rapid economic and social change.

Mr Wong, a senior civil-servant-turned-businessman, recently stood down after six years as chairman of the government's 22-member Social Welfare Advisory Committee (SWAC). It was asked last year to produce a blueprint for Hong Kong's future social welfare system, along with "strategic principles" to guide future planning, a process expected to take another year.

Separately, Mr Wong will soon complete an independent review for the government of its problematic "lump sum grant" system, introduced in 2000 as a mechanism for dispensing funds to some 160 non-governmental organisations providing welfare services. He said the committee he chaired would recommend many changes.

A key issue is how to reconcile the fact that many NGOs need to plan for the longer term in light of changing welfare demands while the government only commits funds year by year, with amounts varying according to the state of the public coffers.

It wasn't always like this. The welfare system used to be based on rolling five-year plans that implemented policy objectives set out in white papers after comprehensive reviews. That approach was scrapped after 1999 because it was considered rigid and bureaucratic. Now, the government consults the welfare sector "from time to time" on service priorities and broad strategies.

Few lament the passing of the five-year-plan era, with its micromanagement by government and constant tugs of war with NGOs over money. But many in the sector think welfare planning has suffered since the last white paper was issued, 17 years ago. They are concerned that the system is unable to respond quickly enough to emerging needs.

"Hong Kong has changed so much. But we really haven't had a very comprehensive review of the strategy or direction of our social welfare policy," said Chua Hoi-wai, business director at the Hong Kong Council of Social Services. He cited social trends, such as a doubling of the number of single-parent families in the past decade.

He said there was a lack of integration in efforts to address many of today's welfare issues. One example was how the system responded to the problem of "night drifters" - teenagers staying out on the streets all night.

"The government's way was only to fix the problem, just to find somebody to take care of them," Mr Chua said. "Our thinking would be that we should lay out all the issues then try to work out a more cohesive, coherent way of dealing with them." This would mean "joining up" day and night services for such teenagers and adopting a "developmental" approach to help them "find the meaning of life and get back into school".

University of Hong Kong professor of social work Nelson Chow Wing-sun, a veteran observer of social welfare development in Hong Kong, said that while the government had spent more on people's livelihoods since the handover, its approach had become more politicised.

"It has nothing to do with social welfare development planning. Rather, the purpose of all these short-term measures is to gain popularity," said Professor Chow. "There are certain problems or outcries; certain groups of people urge the government to do more in certain areas, so the government has agreed to spend more. I think people are fed up with these piecemeal, ad hoc things."

Spending on social welfare has risen 123 per cent since the handover - from HK$17 billion in 1996-97 to HK$38 billion this year - second only to education spending.

One reason is the surge in the number of able-bodied, working-age people receiving Comprehensive Social Security Assistance, up from about 112,000 a decade ago to some 209,000 now. This is largely due to the disappearance of hundreds of thousands of blue-collar jobs in Hong Kong since the 1980s, which has left many working poor with no option but welfare.

"The trouble is that we have 1 million workers with very little education and who have worked in one occupation, such as construction or restaurants, for 30 or so years. They're still only in their late 40s," said Professor Chow.

"For this group of people, who have the capacity to work, we should not just give them support for basic living but get them back to work."

Professor Chow said there should be a separate category of CSSA offering the unemployed a more generous amount for a short period so they could dress better for, and have enough money to travel to, job interviews. That should be combined with more effective retraining, he said.

Unionist legislator Lee Cheuk-yan said Hong Kong's social welfare system did not offer enough protection for the working poor. Nor was it geared to middle-class families going through a crisis because of job losses. He said the government's only answer to poverty was the CSSA.

"It doesn't fit the so-called white collar unemployed, who may have their own housing and a mortgage to pay. They don't qualify as CSSA recipients. So there is no safety net in the sense that, when there are accidents in life, like unemployment or sudden reduction of wages, there is nothing to cushion them."

Mr Lee noted that the middle class had been hit hard twice in a decade, with the Asian financial crisis 10 years ago and the outbreak of severe acute respiratory syndrome five years ago. Now Hong Kong was facing another "white-collar recession" brought on by the global financial slump.

"We're in uncharted waters because, in the past, there was ample opportunity for the children of a poor family to have social mobility," he said. "Now we see a downward trend. Even the middle class is going down the ladder because of the latest financial crisis we're going through."

Mr Lee estimated there were about 300,000 "lower-middle class" families, who were vulnerable to layoffs and wage reduction if they were not in relatively secure jobs like teaching or the civil service.

Creating jobs with infrastructure projects during the downturn would have a limited ripple effect, he said. "We need more jobs in the white-collar or service areas. How about investing more in child care and elderly care? It can create jobs and also tackle social needs."

Mr Lee said social welfare spending should be seen as social investment rather than "pouring out money" for the poor and needy. "We should change our language," he said. "Social investment has a return. If people have more security and confidence in the future, it's also good for the economy. This [change] needs to start from government. They need to have a new way to look into social needs and social welfare."

Professor Chow said he would support the introduction of a guideline setting out the government's social welfare aims, policy and priorities, rather than a plan that tries to pin down specifics. Children should come first in social welfare, the family should be strengthened and the community used for delivery of services, he said.

Mr Wong believes the NGOs and government together are doing a good job on social welfare. "Let's not belittle them. I think it's a matter of how we cope with the rapidly changing social and economic environment."

The government had already reorganised, he said, to bring welfare and labour together in one bureau for better policy co-ordination. It was now aware of what was missing in its social welfare approach.

"That's why they've asked us to do the lump sum grant review and asked SWAC to do the welfare planning. It's really in the hope we could get all the inputs so that a clearer direction can be decided." The first round of consultation for the SWAC review ended recently, receiving 26 written submissions.

Mr Wong said social welfare in Hong Kong should have a mechanism that was a timely reflection of changing community needs. It also needed more policy research by academics into problems and needs stemming from changing social patterns. "The government should put more funding into this cross-border situation, with cross-border marriages and old people retiring and going back to [mainland] China."

Mr Wong pinpointed contradictions in the current system, compounded by "some mistrust" between the government and NGOs. "The government is probably still exercising too much control," he said. "They're not allowing all the flexibility that has been promised, whereas the welfare sector is not doing enough thinking on what it should be doing under that system, for example by re-engineering [their services]."

As the government saw it, he said, for the past eight years, NGOs had been given money and it had been left up to them to decide how to spend it, as long as they delivered the required services. As the welfare sector saw it, needs were changing so quickly that they barely had the resources to deliver old services, let alone introduce new ones.

"If the lump sum system operates well and the planning system comes into place, then I think the missing links are going to be there," said Mr Wong.

He noted that what the government was thinking and doing on social welfare was seldom articulated. By the same token, neither the media nor the public had been very interested in the technicalities of the system.

"The social welfare system in Hong Kong has evolved into a very complex system," said Mr Wong. "I've been the chairman of SWAC for six years. I've now spent almost a year on the lump sum grant. And, God, I'm still learning. I'm unearthing things every day."


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American conservatives have lost the plot


Doug Bandow
Dec 18, 2008           
     
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Although Barack Obama will be setting the policy agenda in the United States next year, John McCain's defeat has set off a scramble to control the Republican Party's ideological soul. Republicans must learn from their mistakes, which seem to grow more obvious every day.

For instance, the embrace by both the Bush administration and Senator McCain of Georgia's unstable president, Mikheil Saakashvili, was especially foolish, as evidence continues to accumulate that Georgia was the aggressor.

Georgia has a convoluted history typical of Central Asia. There was no obvious reason to support either side when war with Russia erupted in August. True, Mr Saakashvili is American-educated and took power with US support. But he has exhibited a brutal edge.

Today Georgia is a "semi-authoritarian" state, argues professor Lincoln Mitchell, of Columbia University. After being accused of murder in September 2007 by his former chief prosecutor (and later interior minister and defence minister) Irakli Okruashvili, Mr Saakashvili had Mr Okruashvili arrested and, many think, tortured, after which the latter recanted his charges. The Saakashvili government also targeted journalists, shutting down critical broadcasters.

Then came the war. It has become increasingly obvious that Georgia struck first in August, lighting "a match in a roomful of gas fumes", as former secretary of state Colin Powell put it. The German publication Spiegel Online recently reported that Nato officers "thought that the Georgians had started the conflict and that their actions were more calculated than pure self-defence or a response to Russian provocation". Georgia's assault on Tskhinvali, the capital of South Ossetia, had long been planned, admitted Mr Okruashvili. The attack would have been criminally irresponsible even if Mr Saakashvili had been truthful in claiming that Georgia acted only after separatists shelled Georgian villages.

While Mr Saakashvili was the most culpable party, his American backers were no less irresponsible. Yet they continue to press for Georgia's membership in Nato, which would commit the US to defend Georgia from Russia in any renewed conflict.

If Mr Saakashvili was willing to start a war in the hope that the west would rescue him, imagine what the impetuous, irresponsible demagogue would do if he thought he could count on Nato support.

The American conservative movement has gone badly astray over the past eight years. It's not just the idea of preventive war and nation-building in Iraq. In countries like Georgia, Bush/McCain conservatives have exhibited the sort of arrogant delusions so characteristic of Wilsonian liberalism. As the US conservative movement regroups from its well-deserved defeat, it needs to rediscover America's more restrained foreign policy tradition.

Doug Bandow is the Robert A. Taft fellow at the American Conservative Defence Alliance, and a former special assistant to president Ronald Reaga

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Out of luck
Given the epic annus horribilis, it seems we have used up all the good fortune in the number '8'

Andy Xie
Dec 19, 2008           
     
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A fung shui master told me: "We have offended '8', always putting so much pressure on it to deliver. It's fed up and is taking revenge on us. This is why 2008 is so bad." This must be the most creative explanation for this annus horribilis. It will be remembered as the year that rich people become poor, en masse; US$50 trillion of paper wealth has vanished, often in unusually creative ways.

With the benefit of hindsight, it seemed that the rich and famous were competing to see who could lose money faster. A bewildering array of derivatives exploded violently before investment banks could make margin calls, to turn billionaires into negative billionaires.

Take the accumulator - also known as the "I'll kill you later" - financial derivative. It is merely a long volatility contract. So many poured borrowed money into the product that the volatility price collapsed - that is, buyers were sucked into a bubble of their own. Most of the Hong Kong upper crust may have lost big bucks in this folly. They are known for being stingy and not trusting even blood relatives with their money. So why did they fall for accumulators? Maybe they felt lucky in 2008.

The performance of shares lately appears to have an inverse correlation to the number of eights in the tickers. Last year's initial public offerings tried to squeeze as many eights into their tickers as possible. They were marketed like Prada bags. With famous chief executives and other big-name financial figures backing them, the IPOs came with an aura that one "couldn't lose". Unfortunately, if you bought into them, your wealth will be smaller now. The stock offerings made only the chief executives and their financial backers rich. And yes, their bankers got bonuses, too.

You may think cheating investors is the most immoral path to wealth. Actually, bribing government officials, not repaying bank loans or selling poisonous food seem equally bad. I am sure there are many eights in the amounts of bribes and loans. Even the prices of poisonous milk products may have had a few eights in them. But the lucky numbers didn't stop children dying.

Casinos are more honourable: they at least give better odds. Macau blasted past Las Vegas in gambling revenue last year. The market capitalisation of one casino was bigger than the gross domestic product of Macau itself. The good times kept rolling - until 2008 hit.

Casinos have used the number eight most liberally; it is plastered on walls and gaming tables. Maybe eight is especially angry with them. But at least Macau had it good for a while. Poor Singapore is stuck with unfinished casinos; all cost and no revenue. Even so, the unfinished casinos are still there, and they may pay something back, in the next bubble, better than shares in investment banks.

Now 2008 is going out with a big bang in the form of the Bernard Madoff US$50 billion scam. It seems the best and the brightest are among the victims, as are some of the most august financial institutions. This is more spectacular than the failures of Bear Sterns, Lehman Brothers and the like. Those eminent financial institutions needed elaborate theories, models, whizz kids and tens of thousands of MBAs. Mr Madoff did it all by himself, and he's an old man, too. Indeed, he outsmarted the Wall Street whizz kids who conned people all over the world to get their bonuses; Mr Madoff got their bonuses. But, in the end, eight got him.

A big shadow was once cast by US Federal Reserve chairman Alan Greenspan - so big that many crooks thrived under it. After he walked away, they have been busy finding new shade. But they ran out of time in 2008; eight got them, too. Well, not all of them: I still see many struggling to hold on, waiting for government bailouts.

But there is a silver lining here, too: all the eights at the Beijing Olympics paid off. China won the most gold medals. That is a huge thing, and it gives China a lot of face. If the nation doesn't win as many golds in the next Games, it's OK - we will always have 2008. Maybe eight shouldn't retire, after all.

What about nine? Will 2009 bring better luck? Historically, the number nine carries an unusual significance in Chinese culture. Lucky eight is a Cantonese fixation that has gone national and overwhelmed nine. Maybe nine can stage a comeback. Heaven, they say, has nine levels. But hell is supposed to have 18 levels - or nine times two - which takes some steam out of it. I suppose nine needs to be tested.

If 2009 turns out to be a good year, nine will gain prominence: Macau's casinos may plaster the number all over their walls and gaming tables, replacing eight.

I think the first quarter of 2009 will be very chilly. Companies will report horrific earnings for the fourth quarter of 2008. The current euphoria over the effectiveness of government stimulus packages may cool, and the second quarter may not be much better. The global economy will still be contracting in the first quarter, and the news then won't be that good.

It may feel much better by the middle of next year. The impact of government stimulus, especially in China and the United States, will be felt palpably. Inflation is not yet a serious issue. Central banks could still keep their super-low interest rates. The euphoria may return, but only temporarily. By late 2009, we will be worrying about inflation and rising interest rates in a still-weak global economy. Pessimism will return.

The world has caught a chronic disease. It feels better from time to time after taking medicine, but lapses back into pain soon after. The real recovery will occur only when all the excesses have been washed away with time, and structural reforms have established a new growth model for the global economy. That won't happen in 2009. If nine doesn't succeed, which number will volunteer to try next?

Andy Xie is an independent economist


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Vicious employers, weak laws throw maids into 'new slavery'


LEBANON
Yara Bayoumy
Dec 22, 2008           
     
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An Ethiopian housemaid lies bandaged in a government hospital after falling from a 12th floor balcony. She says her Lebanese employer pushed her off.

"Madam asked me to hang the clothes. Then she came and pushed me from behind," the 25-year-old woman said. Too frightened to let her name be published, she said her employer had frequently threatened and abused her.

"Madam would tell me, `I will spill hot oil on you', so I hid the oil. She would take a knife and threaten to kill me. She would beat me with shoes, pull my hair to the floor," the injured woman said, her face still bruised a month later.

According to the New York-based Human Rights Watch (HRW), nearly every week one of an estimated 200,000 migrant domestic workers in Lebanon dies. Suicide, falling while trying to escape their employer and untreated illness are the main causes of death. The employers are rarely prosecuted.

HRW says maids in Lebanon, as elsewhere in the Middle East and Asia, are vulnerable to beatings, rape and even murder for lack of national laws to protect them from abusive employers.

Live-in housemaids have been a fixture among well-off Lebanese families for years. They often do everything from heavy housework to nannying and helping with children's homework. Many get no days off, work for up to 18 hours and are locked indoors. Others leave the house only to shop or walk a dog.

Employers, who routinely confiscate their passports to deter them from running away, promise to pay maids US$150 to US$250 a month depending on their nationalities. But many employers don't pay as agreed. Some verbally and physically abuse their workers.

They often deduct the first three month's wages to pay a fee to the agencies that import the maids.

"We've definitely seen a lot of cases where the employer would beat, slap [a worker] when she makes a `mistake' - that could be breaking a plate, badly ironing a shirt or burning some food on the stove," added HRW senior researcher Nadim Houry.

When domestic workers get into distress, they may ask their embassies to help, but staff are often overwhelmed. The Sri Lankan embassy, for example, has two people to handle some 80,000 Sri Lankan workers in Lebanon.

The issues are laid bare in a recent documentary, Maid in Lebanon II: Voices from Home, directed by Carol Mansour in co-ordination with the International Labour Organisation (ILO).

The 40-minute film, narrated by a Lebanese woman awaiting the arrival of a maid from the Philippines, provides information about the rights and obligations of employers and workers, the full costs of hiring maids and how they should be treated. "It's so obvious that there is a problem here," Mansour said at her office in Beirut's Hamra district.

"The concept of having somebody at home whose language you don't speak, whom you don't trust, you don't know, who comes from a different culture ... it's a bit weird."

The ILO and other groups have helped set up a committee at the Labour Ministry to try to improve conditions for domestic workers.

One proposal is to approve a standard contract stipulating the rights and obligations of employers and workers, and to add specific legal provisions to guarantee workers' rights.

Abdallah Razzouk, the head of the committee, said he expected the contract to be approved and the draft law sent to parliament "in the immediate future", provisionally early next year.

Now, workers have little recourse if they are not paid. They come to Lebanon under a sponsorship system that ties them to employers. They forfeit any legal status if they run away from abusive employers.

Maids often go unpaid because their employers miscalculate the true expense of employing them. They often think a maid will cost only her US$150 monthly wage, but fail to factor in agency fees, food, clothes, medicine and return tickets.

"That's the biggest problem; people who cannot afford these workers are bringing them in," says Simel Esim, an ILO official.

Indrani, a 27-year-old Sri Lankan, lived for 18 months in a shelter run by the Christian charity group Caritas after running away from an abusive employer.

"I was paid the first year and a half. But then I wasn't paid for the next eight years. When I asked for money, Madam would swear at me, break glasses against the wall. She spoke to me like a donkey," she said recently at the Beirut shelter.

"I was only given some bread and rice to eat. Fruit was forbidden. I woke up at 9am and slept at 4.30 or 5am. I was not allowed to speak to my parents. They thought I had died," she said, tears welling up.

Indrani has since returned home. But, every day, countless other maids are physically and emotionally abused by employers across the Middle East and in Asia, where laws protecting their rights are flimsy, and abusive employers are rarely punished for their crimes.

Even if rights groups persuade the Lebanese government to improve the legal framework for domestic workers, they face a tougher task in changing attitudes among many Lebanese who refer to their maids openly in conversation as "slaves" or "liars and thieves".

"The way a large number of Lebanese deal with them is like a new slavery," Mr Houry said.

Reuters


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