Energy security requires a technological revolution


Fatih Birol
Jul 27, 2009           
     
  |   

  



Humanity's future, to say nothing of its prosperity (SEHK: 0803, announcements, news) , will depend on how the world tackles two central energy challenges: securing reliable supplies of affordable energy and switching to efficient low-carbon energy.

The Reference Scenario - in which no new policies are introduced - in the International Energy Agency's "2008 World Energy Outlook" sees annual global primary energy demand growing by 1.6 per cent on average up to 2030, from 11,730 million tonnes of oil equivalent to just over 17,010 - an increase of 45 per cent in just over 20 years.

China and India account for half of this increase, with Middle East countries contributing a further 11 per cent. Non-OECD countries account for 87 per cent of the increase, so their share of world primary energy demand will rise from 51 per cent to 62 per cent. Most oil production increases are expected to come from just a few countries - mainly in the Middle East, but also Canada with its vast oil-sands reserves, the Caspian region and Brazil. Gas production in the Middle East will triple, and more than double in Africa.

The trend by which consuming countries grow steadily more reliant on energy from a small number of producing countries threatens to exacerbate energy-security worries.

Increasing import dependence does not necessarily mean less energy security, any more than self-sufficiency guarantees uninterrupted supply. Yet greater short-term insecurity seems inevitable as the diversity of supply is reduced and reliance on vulnerable supply routes grows.

Longer-term energy-security risks are also set to grow. As a small group of countries increasingly accounts for the world's remaining oil reserves, their market dominance may threaten the pace of investment. The greater the demand for oil and gas from these regions, the more likely these regions are to seek higher prices, by deferring investment and limiting production.

Unfettered growth in energy demand will clearly have serious consequences for the climate. Under the Reference Scenario, which represents "business as usual", carbon dioxide emissions are projected to rise 45 per cent by 2030, with other greenhouse gases contributing to an eventual average temperature increase of up to 6 degrees Celsius.

Three-quarters of the extra carbon dioxide will come from China, India and the Middle East, and up to 97 per cent from non-Organisation for Economic Co-operation and Development countries as a whole -  although non-OECD per capita emissions will still be far lower on average than in the OECD. Bucking the global trend, only the European Union and Japan will see lower emissions in 2030 than today.

Two IEA climate-policy scenarios show how we could stabilise the concentration of greenhouse gases at 550 or 450 parts per million (ppm) of carbon dioxide equivalent. The 550ppm scenario equates to an increase in global temperature of about 3 degrees, while the 450ppm scenario implies an increase of around 2 degrees.

In the 550ppm scenario, energy demand up to 2030 rises by about 32 per cent, with the share of fossil fuels falling markedly, and average demand up 1.2 per cent yearly, compared to 1.6 per cent in the Reference Scenario. Energy-related carbon dioxide emissions would peak in 2025 and decline slightly by 2030.

The 450ppm scenario presents an immense challenge. The 2030 emissions level for the entire world would be less than the emissions projected for non-OECD countries alone in the Reference Scenario. In other words, even if OECD countries reduce their emissions to zero, they alone could not put the world onto the 450ppm trajectory. To do so would require an unprecedented technology shift.

Fortunately, we already know many of the policies and technologies that can deliver such savings in energy consumption and emissions. But those decisions must be made and implemented now.

Fatih Birol is the chief economist of the Paris-based International Energy Agency. Copyright: Project Syndicate


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Sum of the parts
The growing complexity of the Sino-US relationship signals a new level of maturity

Shen Dingli
Jul 28, 2009           
     
  |   

  



Seven months after the election of a new US president, China and the US are launching their first Strategic and Economic Dialogue. Tough words spoken about China's "currency manipulation" and predatory trading during, and in the aftermath of, the election are now a distant memory. The reality of the global economic crisis and the emerging issue of global climate change have added new impetus to closer co-operation between the world's two leading countries.

During the George W. Bush era, Beijing and Washington initiated two high-level talks - a Senior Dialogue (also called Strategic Dialogue) and another Strategic Economic Dialogue. They played an important role in addressing timely security and economic issues at national, regional and global levels, and co-ordinated their positions through adjusting their respective policies.

Some two months after being sworn in, US President Barack Obama agreed with President Hu Jintao to combine the aforementioned two talks and lift them to a higher level - to further their relations through the Strategic and Economic Dialogue platform.

Indeed, it is impressive that the two countries have set the tone of their relationship so soon under the new US president. It is more important to note, however, that the two countries will address security and economic issues - either pressing or long-range matters - at such a crucial time.

This is a critical time when the US has a new leadership with great challenges and new priorities. The financial crisis has wreaked one of the gravest economic recessions on the US since the end of the second world war. With unemployment near 10 per cent, the downturn is affecting many aspects of American life and much of society. It is likely that Mr Obama would list this as the most pressing national security threat if the White House were to draft a new National Security Strategy Report.

In a highly interdependent world, no one can be immune to such a global challenge. China has been affected already: gross domestic product growth in the fourth quarter of 2008 fell by nearly half from the prior year, although in the second quarter this year it grew 7.9 per cent. Tens of millions of Chinese migrant workers have felt the threat of America's lost interest and ability to consume. China's competitiveness in exports, for decades, has suddenly become a vulnerability, making its currency appreciation more difficult.

As China and the US are highly dependent on each other, they have to address this crisis collaboratively. Both need to stimulate their respective economies while creating opportunities for each other.

Given Mr Obama's progressive policy on international co-operation on global issues, China and the US are seeing increasing chances to co-operate, as well as to collide. On co-operation, Beijing and Washington are now more inclined to consult each other at international forums before making major decisions.

The incidents at sea involving US reconnaissance and survey ships and Chinese vessels in China's economic zone in March, however, have underlined the growing tension over the control of waters and seabed resources.

The Bush administration was deaf to global efforts to stem global warming and withdrew from the Kyoto Protocol. But Mr Obama is committed to reducing carbon emissions and has thus presented a challenge to Beijing. China and the US could develop a type of new confrontation - the need to commit to the reduction of greenhouse gases, with specific time-bound obligations. As a signatory to Kyoto, China has been supporting this regime, taking voluntary measures to reduce the increase of carbon dioxide, without being under a quota compulsion to do so. However, with the Obama administration recommitting America to climate change - which is certainly commendable - China feels unfair pressure to follow suit.

These issues - fixing the economic recession and climate change - will be tackled at the Strategic and Economic Dialogue. Remedies for both issues, by nature, involve co-operation and competition. It is obvious that China-US relations are increasingly more mature and complex: while those areas of collaboration are ever expanding, the focus of their competition, based more on interests than ideology, is also shifting. Apparently, those "traditional" areas of tension - Taiwan, human rights, non-proliferation and trade imbalances - have not disappeared, but newly emerging issues - a fair economic and trade relationship, currency conversion, carbon emissions and the like - are defining how the two countries will nurture their partnership.

Again, China and the US are going to handle their relations through talks and negotiation. They already know that they share stakes too vast to risk with serious confrontation. Also, they are experts in conducting negotiations to balance respective interests. At such a vital time, the Strategic and Economic Dialogue should serve not only to exchange strategic perspectives and test strategic intentions, but also to settle emerging disputes and strengthen co-operation.

China and the US are both experiencing a significant transformation. America is at a crossroads between further decline and transcendence. China could emerge as the world's second-biggest economy, and expects to assume more responsibilities commensurate with its added capacity. While a G2 between the two is quite out of the picture, their closer partnership is surely both a necessity and a reality.

Shen Dingli is a professor and director of the Centre for American Studies and executive dean of the Institute of International Studies at Fudan University in Shanghai. Reprinted with permission from YaleGlobal Online. http://yaleglobal.yale.edu


http://www.scmp.com/portal/site/ ... ss=China&s=News

The correct way to use government intervention


J. Bradford DeLong
Jul 30, 2009           
     
  |   

  



At this stage in the worldwide fight against depression, it is useful to stop and consider just how conservative the policies implemented by the world's central banks, treasuries and government budget offices have been. Almost everything they have done has followed a policy path that is nearly 200 years old, dating back to the earliest days of the Industrial Revolution, and thus to the first stirrings of the business cycle.

The place to start is 1825, when panicked investors wanted their money in safe cash rather than risky enterprises. Robert Banks Jenkinson, second earl of Liverpool and first lord of the Treasury for King George IV, begged Cornelius Buller, governor of the Bank of England, to act to prevent financial-asset prices from collapsing. "We believe in a market economy," Lord Liverpool's reasoning went, "but not when the prices a market economy produces lead to mass unemployment on the streets of  London, Bristol, Liverpool and Manchester."

The Bank of England acted: it intervened in the market and bought bonds for cash, pushing up the prices of financial assets and expanding the money supply. It loaned on little collateral to shaky banks. It announced its intention to stabilise the market - and that speculators should beware.

Ever since, whenever governments largely stepped back and let financial markets work their way out of a panic by themselves - 1873 and 1929 in the US come to mind - things turned out badly. But whenever government stepped in or deputised a private investment bank to support the market, things appear to have gone far less badly. For example, the US government essentially authorised J.P. Morgan to act as the country's central bank in the aftermath of the 1893 and 1907 panics, created the Resolution Trust Corporation at the start of the 1990s, and, together with the International Monetary Fund, intervened to support Mexico in 1995 and the East Asian economies in 1997-98.

At the very least, few modern governments are now willing to let financial markets heal themselves. To do so would be truly radical. The Obama administration and other central banks around the globe are, in a sense, acting very conservatively, even as they embrace deficit-spending programmes, boost the volume of government bonds, guarantee risky private debt and buy carmakers. I understand what they are trying to do, and am reluctant to second-guess them. They are all doing their best.

Nevertheless, I do have one big question. The US government especially, but other governments too, have got themselves deeply involved in industrial and financial policy during this crisis. They have done this without constructing technocratic institutions like the Reconstruction Finance Corporation of the 1930s and the Resolution Trust Corporation, which played major roles in allowing earlier episodes of extraordinary government intervention into the industrial and financial guts of the economy to turn out relatively well, without an overwhelming degree of corruption and rent seeking.

The discretionary power of executives, in past crises, was curbed by new interventionist institutions constructed on the fly. That is how America's founders envisioned that things would work. They were suspicious of executive power, and thought that the president should have rather less discretionary power than the various King Georges of the time. Yet, today's crisis has led to the establishment of such financial institutions.

So, why didn't the US Congress follow the Reconstruction Finance Corporation and Resolution Trust Corporation model when authorising George W. Bush's and Barack Obama's industrial and financial policies? Why haven't the technocratic institutions been given a broader role in this crisis? And what can we do to rebuild international financial-management institutions on the fly to make them the best possible?

J. Bradford DeLong is professor of economics at the University of California at Berkeley. Copyright: Project Syndicate


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Socialist-market virus threatens US and China


James Dorn
Jul 31, 2009           
     
  |   

  



The Sino-US Strategic and Economic Dialogue sought to find areas of mutual interest so that both countries could co-operate on economic, security, environmental and foreign-policy issues. Nothing of substance came out of the meeting, but a "Memorandum of Understanding" was signed to further consider environmental and energy policy, and participants discussed steps needed to rebalance the two economies in the interest of global prosperity (SEHK: 0803, announcements, news) and to avoid destructive protectionism.

Economic policy issues dominated, especially China's concern over the impact of US fiscal deficits and the Federal Reserve's ballooning balance sheet on the future value of the US dollar as the world's key reserve currency. One of China's biggest fears is that the massive increase in US debt obligations over the next decade, and accommodative Fed policy, will undermine the dollar as an international reserve currency.

As the largest holder of US debt, China would suffer large losses if the Fed engineered a policy of inflation to reduce the real value of US debt. Although there is no immediate threat, China is already talking about a new "super-sovereign" reserve currency to replace the dollar.

While leaders of both nations discussed conventional issues, they did not acknowledge the significant policy mistakes on both sides that helped bring about the most serious recession since the 1930s.

Rather than allowing market forces to rebalance their respective economies, both Beijing and Washington are engaging in the very politicisation of investment decisions that is the hallmark of a socialist economy. Unfortunately, little mention was made of that fact during the dialogue. No one seemed concerned about the drift from market principles toward state planning - with the consequent socialisation of risk.

Vice-Premier Wang Qishan did lecture US officials on the need to reduce the growth of government debt and to "balance and properly handle the impact of the dollar's supply" - that is, to avoid inflation. Both sides agreed that any move towards protectionism would severely damage the global economy and should be avoided, and both agreed to work to restore global balances: the US by increasing saving and China by increasing consumption.

The irony is that China's own policies - pegging the yuan to the dollar at an artificially low rate, spurring exports and accumulating large foreign exchange reserves - have allowed the US to live beyond its means and fuelled US federal spending, thus spreading the socialist-market virus.

China's own stimulus programme is creating asset bubbles in the stock and housing markets. Current money and credit growth are not sustainable and could well increase inflationary expectations. The People's Bank of China, like the Fed, needs an "exit" strategy.

Beijing's overriding desire to maintain growth at any cost could end up spoiling the Communist Party's 60th anniversary. There are considerable distortions in China's financial markets. The government-led stimulus programme may lead to short-term growth, but only at the expense of further distorting capital markets and slowing down real reform. The danger is that the dynamic non-state sector will recede while the state sector gains ground.

Non-performing loans at state-owned banks could mushroom, corruption associated with the political allocation of capital could worsen, and inflation could lead to wage and price controls that impede economic and personal freedom. Such setbacks would shift the balance of power further in favour of the party, just as it has shifted to Washington during the current financial crisis.

Indeed, the legacy of the global financial crisis, which was due in large part to government failure, may be the permanent increase in the size and scope of government - both in China and the US.

James A. Dorn is vice-president for academic affairs and a China specialist at the Cato Institute in Washington


http://www.scmp.com/portal/site/ ... a0a0/?s=idx_Opinion

An opportunity to get creative on Iran policy


David Ignatius
Aug 03, 2009           
     
  |   

  



Thinking about Iran policy these days can make you dizzy, so let's try a simple analogy: the neighbourhood troublemaker has driven his car off the road and is stuck in a ditch. He is gunning his engine but just spinning his wheels. How should we respond?

Personally, I would wait for the dust to settle. I would want that cocky driver to ask for help before throwing him a rescue line. If he needs a tow, he should offer an attractive deal - starting with a promise that he will stop terrorising the neighbourhood.

There's noise from inside the stranded car, too, suggesting a quarrel: maybe someone else - a less reckless driver - will take the wheel. Maybe the cocky driver's friends will abandon him. It's hard to predict what will happen, so the police should be on call, just in case.

What I'm arguing for is an Iran policy of "creative opportunism". The United States should take advantage of the fact that our biggest adversary in the Middle East has just had a political breakdown. President Mahmoud Ahmadinejad's vote-rigging putsch has backfired. Supreme leader Ayatollah Ali Khamenei's attempt to squash protest has only revealed his weakness. In the turmoil, even Mr Ahmadinejad and Ayatollah Khamenei have been squabbling.

If this crisis of legitimacy encourages Iranian leaders to start serious negotiations on curbing their nuclear programme, fine. Ahlan wa sahlan, as the Arabs say: you are most welcome and make us an offer, please. But if, as is more likely, they are too preoccupied for serious bargaining, then we should watch and wait - and, where possible, take advantage. How can the US use this moment of opportunity? Well, let's start with Iran's joyriding passengers, Syria and Hamas. Neither has any natural, abiding affinity with Tehran. Syria is a secular Arab regime whose alliance with the Shiite clerics is a matter of mutual convenience. Hamas' leaders are fundamentalist Sunnis who regard the Iranian mullahs as apostates.

Syria and Hamas have certainly profited from Iran's largesse. But Tehran's reliability as a patron is now open to question, and its friends may want to hedge their bets. It's an ideal time for the US to explore alternatives - through a diplomatic opening with Syria and secret contacts (using Saudi, Egyptian and Syrian channels) with Hamas. Even Hezbollah may be ripe for quiet contact. We are at one of those hinge moments, such as after the 1973 Arab-Israeli war, when bold diplomacy can pay big dividends.

What other opportunities might the West seize? Surely, the best way to weaken Tehran's hardliners would be a breakthrough on a Palestinian state, depriving them of their ideological trump card. And there's the oil card: if the Saudis would agree to increase production and push down prices, Iran would face an economic squeeze that might force political change. Our allies should be creative opportunists, too.

US President Barack Obama has said that if Iran is serious about negotiations, it should respond by the end of September to his overtures for talks. That's fine, but he shouldn't go further. If the Iranians want talks, let them chase the West this time.

There's a lot of talk these days about ticking clocks. But the truth is that, for a change, time is working against the Iranian regime. Every day, its internal political contradictions become more acute.

Ayatollah Khamenei's attempts to put the pieces back together haven't succeeded. Jostling for influence in the Iranian cockpit are Mir Hossein Mousavi, the former prime minister and opposition leader; Ali Akbar Hashemi Rafsanjani, the former president and would-be unifier; and Mohammad Baqer Ghalibaf, the charismatic mayor of Tehran. All have signalled unhappiness with Mr Ahmadinejad and the crackdown.

Iran remains in tumultuous transition - to what, we can't yet say. Meddling on behalf of the opposition would be a mistake, but it would be a worse error, surely, to throw the Iranian regime a lifeline before it has agreed to behave more responsibly.

David Ignatius is a Washington Post columnist


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Fertile present
The world avoided starvation and embraced obesity, thanks to two German scientists

Thomas Hager
Aug 04, 2009           
     
  |   

  



The recent news that two-thirds of US adults are overweight or obese - and the number continues to grow - brings to mind a question that has bothered me since the 1970s: why aren't we all starving?

It was not that long ago that experts were predicting that our skyrocketing human population would outstrip its food supply, leading directly to mass famine. By now, millions were supposed to be perishing from hunger every year. It was the old doom-and-gloom mathematics of Thomas Malthus at work: population shoots up geometrically while food production lags behind. It makes eminent sense. I grew up with Malthus' ideas, brought up-to-date in apocalyptic books like Paul Ehrlich's The Population Bomb.

But someone appears to have defused the bomb. Instead of mass starvation, we seem to be awash in food. And it's not just the US. Obesity is on the increase in Mexico. Fat-related diabetes is becoming epidemic in India. One in four people in China is overweight, more than 60 million are obese, and the rate of overweight children has increased thirtyfold since 1985. Everywhere you look, from Buffalo to Beijing, you can see ballooning bellies.

Instead of going hungry, humans around the world, on a per capita basis, are eating more calories than ever before.

If you're looking for reasons behind today's obesity epidemic, don't stop with the usual suspects being trotted out by the press: fast food, trans fat, high sugar, low exercise, computer games, strange intestinal bacteria, weird molecules in your blood. They are only bits of the puzzle.

The underlying answer is this: There's a lot of cheap food around. Yes, walk into your local mega-grocery-emporium or just about any food-selling area anywhere in the world and stare the problem in the face. There's inexpensive, high-calorie food piled all over the place.

Somehow we outsmarted Malthus. Food production has not only kept up with population growth but has managed somehow to outstrip it. There are ups and downs from year to year because of the weather, and there are pockets of starvation around the world (due not to a global lack of food, but to a lack of ways to transport it where it's needed). In general, silos are bursting. Tonnes of food gets plowed under the ground because there's so much of it farmers can't get the prices they want. Lots of food means lots of overweight people.

If you like the idea of avoiding mass starvation - and I certainly do - you owe thanks to two groups of scientists: one that gave us the Green Revolution back around the 1980s via strains of hardy, high-yielding grains, and another that figured out how to make bread out of air.

If you're looking for someone to blame for today's era of plenty, look to a couple of German scientists who lived a century ago. They understood that the problem was not a lack of food per se, but a lack of fertiliser - then they figured out how to make endless amounts of fertiliser.

The first component of any fertiliser is nitrogen, and the first of the two German researchers, Fritz Haber, discovered how to work the dangerous, complex chemistry needed to pull nitrogen out of the atmosphere - where it is abundant but useless for fertiliser - and turn it into a substance that can grow plants.

A first demonstration was made 100 years ago. Carl Bosch, a young genius working for a chemical company, quickly ramped up Haber's process to industrial levels. They both won Nobel Prizes.

It ranks among the great ironies of history that these two brilliant men, credited with saving millions from starvation, are also infamous for other work done later: Haber, a German Jew, was a central force in developing poison gas in the first world war (and also performed research that led to the Zyklon B poison gas later used in concentration camps); Bosch, an ardent anti-Nazi, founded the giant chemical company I.G. Farben, which Hitler took over and used to make supplies for the second world war.

Today, huge Haber-Bosch plants around the world pump out hundreds of thousands of tonnes of fertilisers that enrich fields that grow the crops that become the sugars and oils and cattle that are cooked into the noodles and chips, pizza, burritos, snacks and cakes that make us fat.

If you don't think this work important, consider that half the nitrogen in your body is synthetic, a product of a Haber-Bosch factory. Or that without the added food made possible by their discovery, the earth could only support about 4 billion people - at least 2 billion less than today.

Even with a world population that continues to add tens of millions of new mouths every year, given continuing growth in Haber-Bosch fertiliser and a surprising trend towards a worldwide decline in birth rates (if you live about 50 years longer, according to the best estimates, you'll see humanity reach zero population growth), it might be within our grasp to avoid mass starvation forever.

Thomas Hager is author of The Alchemy of Air, a history of the Haber-Bosch discovery. Copyright: Project Syndicate

http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=a418356f670e2210VgnVCM100000360a0a0aRCRD&ss=Asia+%26+World&s=News

Credibility of China's statistics is crucial


LEADER

Aug 06, 2009           
     
  |   

  



A planned economy can make a truism of the expression "lies, damn lies and statistics". National growth targets tend to become local commands. Ambitious officials are tempted to tweak the figures to make themselves look good. Higher-ups may want to adjust them to arrive at a national figure that reflects a desired rate of growth. Add all these changes together, and the result is national statistics for China that are more a guide to the ebb and flow of economic activity, but not necessarily an accurate snapshot of the facts on the ground.

To be sure, all national statistics include an element of guesswork. China's statisticians would be hard-pressed to keep up with sustained expansion in a complex economy of 1.3 billion people. And economists and analysts who study China have long learned to live with differences between provincial and municipal growth figures and the national gross domestic product. A bit of homework on local mismatches between power inputs and production outputs, and incomes and revenues can throw some light on it.

Arguably, it is not a serious flaw that has detracted from belief in China's phenomenal growth story. But statistics do matter more now in the wake of the global financial meltdown. The world is looking to China's seemingly unstoppable growth momentum to lead economic recovery. As a result, its GDP figures are watched more closely than before, because they have the power to move markets and shape expectations of a global recovery. The credibility of its figures has therefore become very important. This accounts for concern about the wide discrepancy between local government figures showing economic output for the first half of the year of 15.38 trillion yuan (HK$17.45 trillion), and the National Statistics Bureau figure of 13.99 trillion. Flaws in data collection alone are an unlikely explanation and economists do not doubt there has been faking.

This raises a 4 trillion yuan question - how much bang for the yuan is China really getting from a massive stimulus package aimed at reversing its economic slowdown? Is it being spent judiciously and productively to create genuine demand and jobs, given that much of it has been lavished on inefficient state enterprises? The Guangdong party chief is worried that local governments are making repetitive, inefficient fixed-asset investments to artificially inflate GDP. Has the stimulus spending been audited to see that none finds its way into speculation in equities and properties? Reports that educational institutions have had to fake graduate job figures to meet targets do not inspire confidence in positive GDP statistics.

This matters most of all to China itself. The country is in transition from growth for growth's sake, as evidenced by greater emphasis on sustainable development that respects the environment and conserves resources. This makes greater demands on economic management, of which reliable statistics are a vital tool. Even good statistics do not always tell the whole story, or need interpretation. But without them, policymakers are more likely to make flawed assumptions and wrong calls. That is not good either for China's stable economic progress, or for a world in which it now ranks as the third-biggest economy. It is time that Beijing gave the statistics bureau the resources and political support it needs to erase doubts over the credibility of key economic figures.


http://www.scmp.com/portal/site/ ... ss=China&s=News

Wishful thinking
A year after the Lehman Brothers collapse, policymakers appear still to be in denial

Kenneth Rogoff
Aug 07, 2009           
     
  |   

  



Next month marks the one year anniversary of the collapse of the venerable American investment bank Lehman Brothers. The fall of Lehman marked the onset of a global recession and financial crisis the likes of which the world has not seen since the Great Depression of the 1930s. After one year, trillions of dollars in public funds, and much soul searching in the world's policy community, have we learned the right lessons? I fear not.

The overwhelming consensus in the policy community is that if only the US government had bailed out Lehman, the whole thing would have been a hiccup and not a heart attack. Famous investors and leading policymakers alike have opined that in our ultra-interconnected global economy, a big financial institution like Lehman can never be allowed to fail. No matter how badly it mismanages its business - Lehman essentially became a real estate holding company totally dependent on a continuing US housing bubble - the creditors of a big financial institution should always be repaid. Otherwise, confidence in the system will collapse, and chaos will follow.

Having reached the epiphany that financial restructuring must be avoided at all costs, the governments of the world have in turn cast a huge safety net over banks (and whole countries in Eastern Europe), woven from taxpayer dollars.

But, the conventional post-mortem on Lehman is wishful thinking. It basically says that no matter how huge the housing bubble, how deep a credit hole the United States (and many other countries) had dug, and how convoluted the global financial system, we could have just grown our way out of trouble. Patch up Lehman, move on, keep drafting off of China's energy, and nothing bad ever need have happened.

The fact is global imbalances in debt and asset prices had been building up to a crescendo for years, and had reached the point where there was no easy way out. The US was showing all the warning signs of a deep financial crisis long in advance of Lehman, as Carmen Reinhart and I document in our forthcoming book This Time is Different: Eight Centuries of Financial Folly.

Housing prices had doubled in a short period, spurring American consumers to drop any thought of saving money. Policymakers had simply let the growth party go on for too long. Drunk with profits, the banking and insurance industry had leveraged itself to the sky. Investment banks had transformed their business in ways their managers and boards clearly did not understand.

It was not just Lehman Brothers. The entire financial system was totally unprepared to deal with the inevitable collapse of the housing and credit bubbles. The system had reached a point where it had to be bailed out and restructured. And there is no realistic political or legal scenario where such a bailout could have been executed without some blood on the streets. Hence, the fall of a large bank or investment bank was inevitable as a catalyst to action.

The problem with letting Lehman go under was not the concept but the execution. The US government should have moved in aggressively to cushion the workout of Lehman's complex derivative book, even if this meant creative legal interpretations or pushing through new laws governing the financial system.

So what is the game plan now? There is talk of regulating the financial sector, but governments fear shaking confidence. There is recognition that the housing bubble collapse has to be absorbed, but no stomach for accepting the years of slow growth in consumption that this will imply.

There is acknowledgement that the US-China trade relationship needs to be rebalanced, but little imagination on how to proceed. Our leaders and policymakers have convinced themselves that for all its flaws, the old system was better than anything we are going to think of, and that simply restoring confidence will fix it all. The right lesson from Lehman should be that the global financial system needs major changes in regulation and governance. The current safety net approach may work in the short term but will ultimately lead to ballooning and unsustainable government debts, particularly in the US and Europe.

Asia may be willing to sponsor the West for now, but not in perpetuity. Eventually Asia will find alternatives, in part by deepening its own debt markets.

Within a few years, Western governments will have to sharply raise taxes, inflate, partially default, or some combination of all three. As painful as it may seem, it would be far better to start bringing fundamentals in line now. Restoring confidence has been helpful and important. But ultimately we need a system of global financial regulation and governance that merits our faith.

Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF. Copyright: Project Syndicate


http://www.scmp.com

Water bomb
China controls the source of most major rivers in water-scarce Asia

Brahma Chellaney
Aug 10, 2009           
     
  |   

  



As China and India gain economic heft, they are drawing ever more international attention at the time of an ongoing global shift of power to Asia. Their underlying strategic dissonance and rivalry, however, usually attracts less notice.

As its power grows, China seems determined to choke off Asian competitors, a tendency reflected in its hardening stance towards India. This includes aggressive patrolling of the disputed Himalayan frontier by the People's Liberation Army, many violations of the line of control separating the two giants, new assertiveness concerning India's northeastern Arunachal Pradesh state - which China claims as its own - and vituperative attacks on India in the state-controlled Chinese media.

The issues that divide India and China, however, extend beyond territorial disputes. Water is becoming a key security issue in Sino-Indian relations and a potential source of enduring discord.

China and India already are water-stressed economies. The spread of irrigated farming and water-intensive industries, together with the demands of a rising middle class, have led to a severe struggle for more water. Indeed, both countries have entered an era of perennial water scarcity, which before long is likely to equal, in terms of per capita availability, the water shortages found in the Middle East.

Rapid economic growth could slow in the face of acute scarcity if demand for water continues to grow at its current frantic pace, turning China and India - both food-exporting countries - into major importers, a development that would accentuate the global food crisis.

Even though India has more arable land than China - 160.5 million hectares compared to 137.1 million hectares - Tibet is the source of most major Indian rivers. The Tibetan plateau's vast glaciers, huge underground springs and high altitude make Tibet the world's largest freshwater repository after the polar icecaps. Indeed, all of Asia's major rivers, except the Ganges, originate in the Tibetan plateau. Even the Ganges' two main tributaries flow in from Tibet.

But China is now pursuing major inter-basin and inter-river water transfer projects on the Tibetan plateau that threaten to reduce international river flows into India and other co-riparian states. Before such projects sow the seeds of water conflict, China ought to build institutionalised, co-operative river-basin arrangements with downstream states.

Upstream dams and irrigation systems help turn water into a political weapon that can be wielded overtly in a war, or subtly in peacetime to show dissatisfaction in with a co-riparian state. Even denial of hydrological data in a critically important season amounts to using water as a political tool.

India's government has been pressing China for transparency, greater hydrological data-sharing, and a commitment not to redirect the natural flow of any river or diminish cross-border water flows. But even a joint expert-level mechanism - set up in 2007 merely for "interaction and co-operation" on hydrological data - has proven of little value.

The most dangerous idea China is contemplating is the northward rerouting of the Brahmaputra river, known as Yarlung Tsangpo to Tibetans, but which China has renamed Yaluzangbu. It is the world's highest river, and also one of the fastest-flowing. Diversion of the Brahmaputra's water to the parched Yellow River is an idea that China does not discuss in public, because the project implies environmental devastation of India's northeastern plains and eastern Bangladesh, and would be akin to a declaration of water war on India and Bangladesh.

Nevertheless, an officially sanctioned book published in 2005, Tibet's Waters Will Save China, championed the northward rerouting of the Brahmaputra. Moreover, the Chinese desire to divert the Brahmaputra by employing "peaceful nuclear explosions" to build an underground tunnel through the Himalayas found expression in the international negotiations in Geneva in the mid-1990s on the Comprehensive Test-Ban Treaty (CTBT). China sought unsuccessfully to exempt peaceful nuclear explosions from the treaty.

The issue now is not whether China will reroute the Brahmaputra, but when. Once authorities complete their feasibility studies and the diversion scheme begins, the project will be presented as a fait accompli. China has identified the bend where the Brahmaputra forms the world's longest and deepest canyon - just before entering India - as the diversion point.

China's ambitions to channel Tibetan waters northward have been whetted by two factors: the completion of the Three Gorges Dam, which, despite the project's glaring environmental pitfalls, China trumpets as the greatest engineering feat since the construction of the Great Wall; and the power of President Hu Jintao , whose background fuses two key elements - water and Tibet. Hu, a hydrologist by training, owes his swift rise in the Communist Party hierarchy to the brutal martial-law crackdown he carried out in Tibet in 1989.

China's hydro-engineering projects and plans are a reminder that Tibet is at the heart of the India-China divide. Although Tibet ceased to be a political buffer when China annexed it nearly six decades ago, it can still become a political bridge between the two nations.

But first, water has to be a source of co-operation, not conflict.

Brahma Chellaney is professor of strategic studies at the Centre for Policy Research in New Delhi. Copyright: Project Syndicate


http://www.scmp.com/portal/site/ ... ss=China&s=News

How world averted Great Depression II


Paul Krugman
Aug 11, 2009           
     
  |   

  



So it seems that we aren't going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

Just to be clear: The economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find jobs for a growing working-age population, we're probably around 9 million jobs short of where we should be.

And the job market still hasn't turned around - that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven't yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.

But for all that, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.

A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late last year was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators - world trade, world industrial production, even stock prices - were falling as fast as or faster than they did in 1929-30.

But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government. Probably the most important aspect of its role in this crisis isn't what it has done, but what it hasn't done: unlike the private sector, the federal government has not cut spending as income fell.

All of this has helped support the economy in its time of need, in a way that didn't happen back in 1930. As well as having this "automatic" stabilising effect, the government stepped in to rescue the financial sector. You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it's possible to be unhappy, even angry, about the way the financial bailouts have worked while acknowledging that without them, things would have been far worse.

The point is that this time, unlike in the 1930s, the government didn't take a hands-off attitude while much of the banking system collapsed. And that's another reason we're not living through Great Depression II.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. Still, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan - a number that will grow over time - and that the stimulus has played a significant role in pulling the economy out of its free fall.

I still worry about the economy. Unemployment could remain high for a very long time. But utter catastrophe no longer seems likely. Big Government, run by people who know its virtues, is the reason why.

Paul Krugman is a New York Times columnist


http://www.scmp.com/portal/site/ ... sight&s=Opinion

An opportunity missed for real economic reform


Larry Elliott
Aug 13, 2009           
     
  |   

  



House prices are rising. The stock market is bullish. Bonuses are back. An investment vehicle domiciled in the Channel Islands for tax purposes has agreed to take over Friends Provident. Two years to the week since the dawn of the worst slump in 80 years, there is talk of imminent recovery. It was all just a bad dream, and we can now hand the country back to the real estate agents and investment banks because - apart from a million more people unemployed and a further decimation of a shrivelled industrial base - nothing has changed. Normal service can be resumed.

Forgive me, but the euphoria seems a touch premature. Evidence of a return to growth is patchy and tentative. Transactions in the housing market are running at half their normal levels, even after the pick-up of recent months. The Bank of England said last week that it will pump a further £50 billion (HK$638.4 billion) into the economy over the coming months to help persuade banks to raise lending. Companies reporting better-than-expected earnings are only doing so by cutting wage costs; good news for the individual firm, bad news for the economy.

Bank of England governor Mervyn King certainly seems to be taking talk of green shoots with a pinch of salt, which was why the bank topped up its quantitative easing (QE) programme last week. Make no mistake, this is a big gamble by the bank since QE is only effective if an increase in the money supply feeds through into real activity in the economy - through companies staying in business or consumers bringing forward spending. If it doesn't manage that, all QE does is create inflation. The speculative rally in oil and other commodities is a clear warning of what could happen to prices more generally should QE go wrong.

The bank's judgment, though, is that the length and depth of the recession has created so much spare capacity in the economy that the risk of deflation is greater than that of inflation. Without the stimulus provided by ultra-low interest rates and QE, the fear is that rising unemployment, the squeeze of earnings and the loss of wealth from falling house prices would intensify recessionary forces.

The banks are hoarding cash and rebuilding profits decimated by ill-judged investments in fancy derivative products by gouging their customers. Over the last two years, the bank rate has come down from 5.25 per cent to 0.5 per cent, but a two-year fixed mortgage has come down by 1.6 percentage points and a five-year fixed home loan by just 0.5 points. Unsecured loans are more expensive than before the crunch.

But there is a deeper issue here. Even assuming the Bank of England gets it right, all that happens is that we return to a fundamentally flawed model. It is evidence of a deluded nation determined to learn nothing and forget everything from the crisis.

The events of the last two years were a godsend for those who considered Britain to be a structurally dysfunctional economy. It was all there: an over-mighty financial sector that was too big to fail; a manufacturing sector in desperate need of some tender loving care; consumers borrowing against the rising value of their homes because their real incomes were growing only modestly.

The failure of the banks created the perfect conditions for fundamental reform. Instead of an arm's length approach to the failed institutions brought under state control, the government should have used its position as majority shareholder to direct investment, utilising cheap money to end the economy's over-reliance on the City of London by rebuilding the industrial base. When the banks were ready for a return to the private sector, they should have been cut to size so they were not too big to fail.

The preconditions are in place for another global crisis, since the failure to reform the British economy has been mirrored in the US and China. Nothing has been done to tackle the imbalances that led to overproduction in Asia and over-consumption in the Anglo-Saxon countries.

Larry Elliott is the Guardian's economics editor


http://www.scmp.com/portal/site/ ... sight&s=Opinion

A right to schooling, but not to education


Swaminathan S. Anklesaria Aiyar
Aug 14, 2009           
     
  |   

  



India has just enacted a Right to Education Act, guaranteeing every child in the six to 14 age group the right to free, compulsory education. The new law is essentially socialist: it seeks to ensure that, as far as possible, state governments provide free government schooling to all children. But it also obliges private schools to reserve a quarter of their seats for poor and low-caste children. This could, almost by accident, create the biggest school choice programme in the world, covering 30 million children.

The new law has several flaws. Government teachers cannot be fired, one reason why teacher absenteeism in government schools is chronically high. In one survey by a Harvard economist, a quarter of government teachers were absent on any given day, and only half were teaching. The law does not address teacher accountability. Teacher unions are too powerful, so politicians dare not discipline them.

Currently, millions of children complete school without being able to read simple paragraphs or do simple sums. Yet the act talks only of access to schools. It is concerned wholly with educational inputs, not outcomes. It provides a right to schooling, but not to education.

Children from richer families perform better because they get private tuition in the evening, sometimes from the very teacher who was absent at school in the morning. The new law prohibits government teachers from giving private tuition. This is supposed to induce them to take teaching in school more seriously. Alas, teachers will break this rule with impunity.

The law mandates quality standards and official certification for all private schools, but none for government schools. Government teachers are armed with the appropriate degrees, while many private school teachers are not.

Yet, in the absence of motivation or accountability, teaching in government schools is so pathetic that many poor parents in urban slums send their children to fee-charging private schools rather than free government schools. Often these private slum schools are of low quality, yet poor people find government schools worse.

The new law says all private schools must reserve a quarter of their seats from first grade onwards for neighbourhood children from "socially and educationally disadvantaged classes" - lower Hindu castes and poor people, who are well over half the population. For these children, the government will reimburse private schools.

This will not be the standard voucher system found in other countries. Indeed, many politicians hate the very word "voucher", and view the 25 per cent reservation as a way of hammering elite schools rather than empowering students through school choice.

Elite private schools fear the system will impose a huge and unwarranted tax on them because the voucher will not cover their actual costs. They will probably appeal to the courts against the new law's reimbursement provisions, and it remains to be seen what view the courts take.

The author is a research fellow at The Cato Institute's Centre for Global Liberty and Prosperity (SEHK: 0803, announcements, news)

http://www.scmp.com/portal/site/ ... sight&s=Opinion

Nuclear supply crunch bodes ill for cancer fight


Michael Richardson
Aug 17, 2009           
     
  |   

  



Leading cancer control experts met in Vienna recently to discuss strategies for fighting the growing cancer burden in Asia and the Pacific.

Cancer, once considered to be mainly an affliction of the rich, is fast becoming a major global health problem. Specialists estimate that by 2020 there will be about 15 million new cancer cases a year, the majority of them in developing countries. Asia alone can expect up to 5 million cancer deaths annually by then.

The Vienna meeting was organised by two UN agencies - the International Atomic Energy Agency (which is responsible for all forms of nuclear energy, including its use in medicine) and the World Health Organisation. The aim was to enable cancer experts to share their knowledge with health professionals developing and implementing cancer management strategies in low and middle-income nations in Asia.

Yet even as methods for fighting cancer improve, a global shortage in the supply of the main medical radioisotope is threatening this success, forcing doctors to ration supplies and prioritise patient care by delaying treatment of less urgent cases.

Radioisotopes, tiny radioactive particles that can be injected or ingested, are the backbone of nuclear medicine. More than 100,000 hospitals and specialised cancer clinics worldwide, including those in Hong Kong and other parts of China, routinely use them.

Radiotherapy treats some conditions, especially virulent forms of cancer, using radiation to weaken or destroy targeted cells. But about 90 per cent of nuclear medical procedures involve diagnoses of illnesses such as heart disease and cancer with radioactive tracers that emit gamma rays. These rays can be detected and "photographed" by imaging equipment, providing far more information than X-rays or ultrasound.

The low energy gamma rays easily escape the body, keeping the radiation dose to a safe level. The most common radioisotope used in diagnosis is technetium-99m, with some 30 million procedures per year, or about 80 per cent of the total. The technetium is itself derived from the decay of another isotope, molybdenum-99. The latter is produced most efficiently and cheaply in nuclear research reactors. There are 280 of these reactors around the world. But most are designed to do other things and cannot be easily adapted to make molybdenum.

At present, just four reactors - in Canada, the Netherlands, France and South Africa - produce 95 per cent of the world's molybdenum-99 for technetium generators supplied to hospitals and clinics. All the reactors are more than 40 years old, nearing the end of their lives and vulnerable to unplanned shutdowns. One of the oldest, at Chalk River near Ottawa, closed abruptly for repairs in May. The reactor, the source of 40 per cent of the world's molybdenum-99, is not expected to return to service before the end of the year.

The second biggest source (about 25 per cent) is a research reactor at Petten in the Netherlands. It is also in need of major repair. Shutdowns of reactors producing molybdenum have become all too frequent. Continuous supply is vital since it is impossible to stockpile the molybdenum or technetium isotopes. They have a so-called half-life of only 67 hours, meaning that they lose half their radioactive energy in less than three days - and half of what's left in another 67 hours. As a result, these medical isotopes have to be delivered by express air and land transport.

Early this year, the IAEA met to discuss the fragility in the global technetium supply chain. But high capital costs, low profit margins and exacting licensing processes make it hard to establish new facilities without incentives or subsidies - which many governments are reluctant to approve as they battle recession.

Human ingenuity may find a way around this modern medical conundrum. But no solution is in sight and without it, patient care will suffer.

Michael Richardson is a visiting senior research fellow at the Institute of Southeast Asian Studies


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Failing the nine steps to effective policymaking


Joseph Wong
Aug 19, 2009           
     
  |   

  



The government has made it clear that the pilot scheme to conduct drug tests on secondary-school students in Tai Po will proceed in December, despite the concerns of various groups. But something must have gone wrong in the policymaking process when those who expressed concern included Bishop John Tong Hon, of the Catholic Church in Hong Kong, which is a large school sponsor, and the privacy commissioner for personal data, Roderick Woo Bun.

As the chief executive has likened the fight against youth drug abuse to an all-out war involving the whole community, this is a timely reminder that the government should get its act together and do a better job. Our government can learn some useful lessons from Britain.

As part of its Modernising Government initiative, launched in 1999, the British government developed a professional policymaking model for officials that features nine key principles. According to the model, a policy under development:


clearly defines outcomes, taking into account the likely effect and impact of the policy in the future five to 10 years and beyond;

takes full account of the national and international situation;

takes a holistic view looking beyond institutional boundaries to the government's strategic objectives;

is flexible and innovative, willing to question established ways of dealing with things and encourage new and creative ideas;

uses the best available evidence from a wide range of sources;

constantly reviews existing policy to ensure it is really dealing with problems it was designed to solve without having unintended detrimental effects elsewhere;

is fair to all people directly or indirectly affected by it and takes account of its impact more generally;

involves all key stakeholders at an early stage and throughout its development; and

learns from experience what works and what doesn't through systematic evaluation.
If we apply the above model to the school drug testing scheme, there are some glaring omissions. For example, has the government clearly defined the outcomes of the pilot scheme? Why did it not involve the privacy commissioner, an important stakeholder, in the early consultation? Some international schools in Hong Kong have been conducting drug tests on students for many years. Why did the government not study their experience more closely and solicit their help?

As the chief executive has said, drug testing is only one aspect of the war against drugs. Other areas include mobilising the whole community, garnering support of various stakeholders in the districts, enforcement against drug traffickers, and rehabilitation of drug takers. The adverse public reaction towards school drug testing will be a blessing in disguise if it helps officials improve and fine-tune the details of the Tai Po scheme.

As a former civil servant and minister, I readily accept that, in policymaking, the government faces many constraints. Hence, the British model remains a reference. But increasing globalisation and civil engagement demand that governments adopt a more systematic and professional approach in policymaking to win public support and achieve the desired results.

Based on overseas experience, our war against youth drug abuse will have to be fought on many fronts with the full support of the community. Innovative ideas, systematic evaluations and continuous improvements should become an integral part of the strategy that may stretch on for years.

When the chief executive delivers his next policy address, in October, he should lay out a comprehensive plan with specific proposals and clearly defined outcomes that have taken into account the views and aspirations of all stakeholders.

Joseph Wong Wing-ping, formerly secretary for the civil service, is an honorary professor at the University of Hong Kong


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Law for the times
Imposing artificial 'stability' at the expense of justice can no longer work for a changing China

Jerome A. Cohen
Aug 20, 2009           
     
  |   

  



Only enlightened leadership will move China towards a rule of law. Bottom-up cries for justice and independent courts increase daily. Will the top eventually respond with structural reform rather than dictatorial repression? Can China's deeply conservative political elite, so determined to impose artificial "stability" on a dynamic nation, produce leaders with the vision and vigour to press for a legal system in keeping with the country's economic and social progress and its world stature?

The Communist Party's current attack on human rights lawyers and law-reforming non-governmental organisations exemplifies the problem. Lawyers lead the battle to implement the constitutional rights and statutory protections that the party has promulgated in its quest for legitimacy. The battle has become increasingly intense as the party seeks to preserve its monopoly of power against multiple challengers who have been disappointed by their inability to obtain relief from the truncated, authoritarian and inadequate legal system established by Deng Xiaoping after the Cultural Revolution.

Activist lawyers have thus become the battle's first casualties. Yet they are closer to the people than party officials and represent growing popular demands for justice and for a court system that is honest, fair and competent, untainted by corruption, political instructions, local protectionism and personal connections. Party leaders, however, refuse to tolerate the development of an autonomous legal profession and impartial courts. Instead, they have resurrected the "mass line" of the pre-1949 communist "liberated areas" that glorified political justice.

Plainly, the legal institutions and "spirit" of rural, revolutionary China seven decades ago cannot respond to today's demands or those of economic development and international co-operation. China now needs leaders who can take on the huge task of systemic legal reform with the same dynamism that former premier Zhu Rongji devoted to economic modernisation. Is it far-fetched to think such leaders might appear?

Chairman Mao Zedong knew little about law and cared less. Deng understood a legal system's importance to economic development but believed in law under government rather than government under law. Neither faced the sophisticated demands of the 21st century. Vice-President Xi Jinping and Vice-Premier Li Keqiang , slated to assume the nation's helm in 2012, are well-educated and experienced administrators capable of appreciating the benefits that rule of law can confer on a changing China. Might they undertake this historic task?

The recently published memoir of the late premier and party general secretary Zhao Ziyang suggests that, had he not been toppled by the 1989 Tiananmen tragedy, he might have done the job. During the 1986-89 period, there were public hints that Zhao's hopes to separate the party from daily government administration included plans to eliminate party interference with judicial decision-making. Zhao's memoir indicates how far his thinking had evolved.

Zhao came to see that economic reform could not be sustained without political reform. Although he did not then wish to end the party's monopoly on power, he thought that "its method of governing had to change". As he told the then-Soviet president, Mikhail Gorbachev, even socialist countries should be governed not by "rule by men" but by "rule of law". Moreover, he thought that legislation should be enacted to gradually implement the rights enshrined in China's constitution, including media freedom - the handmaiden of the rule of law.

Zhao saw that an independent judiciary was essential. Without it, he wrote, "the courts could not judge a case with a disinterested attitude". Yet Zhao was stunned, even before the June 4 massacre, at the enormous opposition to such reform at every level of party leadership.

After his fall, Zhao's endless, lawless detention radicalised his views. He concluded that, without a multiparty, democratic, parliamentary system that featured an independent judiciary, China could never have a healthy market economy, curb corruption, reduce the gap between rich and poor, and meet popular demands for reform.

Zhao's detention also showed him how arbitrary the administration of justice could be, even for the nation's highest officials. No legal process was ever applied to him, nor did the party elite follow party procedures in punishing him. Their accusations were factually distorted, and they decided his case in secret and without a fair hearing. Formal investigation of the accusations was never completed, and party officials refused to announce their decision and punishment even within party circles. They frequently lied to the public about his situation during the 16 years before his death, denying that he was under house arrest.

Zhao's fate may well deter would-be law reformers among the leadership. But unless someone steps forward, the very instability that present leaders fear is sure to intensify. To paraphrase Mao: "Sailing the seas depends upon the helmsman."

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


http://www.scmp.com/portal/site/ ... ss=China&s=News

Distant shores
Few cities can boast a harbour as beautiful as Hong Kong's, or a government as clueless about developing it

Stephen Vines
Aug 21, 2009           
     
  |   

  



No right-thinking person develops a habit of saying nice things about the Singapore government. But, when it comes to making the best of limited urban resources, the Singaporeans leave the Hong Kong government trailing to an embarrassing degree.

A recent visit to the Singapore River, in truth little more than a glorified ditch in some places, showed what can be done with imagination and determination.

The banks of the river have been transformed into a truly wonderful area filled with life, riverside cafes and bars, gardens and a broad promenade for walking, exercising or whatever. People flock to this area because it is so darned compelling. I could hardly keep away from the river, appreciating what had been created and, in equal parts, depressed by the massive contrast with Hong Kong's harbourside.

How can it be that one of the world's great port cities with a truly spectacular harbour, from which Hong Kong takes its name, so completely fails to take advantage of this fantastic resource?

The question is hardly original and has been addressed by both pressure groups and an official committee that advises the government on waterfront planning. This committee now wants more power to get things done and to find a way to plough through the inertia of the 12 government and quasi-government bureaucracies that have responsibility for the harbourfront.

To gauge the demand for harbourside activities, you need only visit the dismally tacky waterfront promenade in Tsim Sha Tsui, which is jam-packed with people even though there is barely anywhere to eat or drink in the open air, no more than a few struggling pieces of vegetation and a collection of insultingly awful statues of Chinese performers who surely deserve better.

Yet, for those wanting to be beside the harbour, there are few alternatives. True, there are some patches of development in a number of places, a dog-walking park, a bit of promenade attached to skyscrapers in Hung Hom and, out towards Western, a few bits of road that nestle up to the harbour in an interesting way. (I am loath to mention the latter because no redevelopment has taken place and I fear being held responsible for inciting the bureaucrats to engage in another act of official vandalism).

The activists, who have done so much to highlight the desecration of the harbourside, and have been constructive in offering alternative plans for development, can reel off the list of excuses for inaction with barely a prompt.

They have seen the buck passed from department to department, they have been solemnly assured that the government is every bit as concerned as themselves but hopes that they will understand that progress requires bigger and better roads, bigger and better palaces to house the bureaucrats and that, most unfortunately, all this needs to be done alongside the harbour.

But the public is not fooled, which explains the extraordinary and spontaneous protest that greeted the destruction of the Star Ferry terminal. And it is confirmed by every single opinion poll affirming a yearning for a harbourfront development that stretches along the entire harbour and contains the vibrancy of alfresco dining, gardens and other facilities that would make this a truly special place for the public.

The bureaucrats simply don't get it. They thought that somehow the heritage of the Star Ferry pier could be preserved by shifting the site along the harbour and creating a faux Victorian-style edifice in an inconvenient spot. Predictably, the plan has been a dismal failure.

Five years ago, the Harbourfront Enhancement Committee was established. It has now finished its latest raft of recommendations. Lamentably, only one thing can confidently be predicted and that is further delay in seizing the initiative to start transforming the harbour into a living area truly appreciated by the public.

It is unfair to assert that the bureaucrats, as individuals, are intent on doing their worst. The problem is a system of government which is impervious to the wisdom of the public and unable to connect up its fragmented departments.

Stephen Vines is a Hong Kong-based journalist and entrepreneur


http://www.scmp.com/portal/site/ ... ong+Kong&s=News

Boom and burst
Don't be fooled by false signs of economic recovery. It's just the lull before the storm

Andy Xie
Aug 24, 2009           
     
  |   

  



The A-share market is collapsing again, like many times before. It takes numerous government policies and "expert" opinions to entice ignorant retail investors into the market but just a few days to send them packing. As greed has the upper hand in Chinese society, the same story repeats itself time and again.

A stock market bubble is a negative-sum game. It leads to distortion in resource allocation and, hence, net losses. The redistribution of the remainder, moreover, isn't entirely random. The government, of course, always wins. It pockets stamp duty revenue and the proceeds of initial public offerings of state-owned enterprises in cash. And, the listed companies seldom pay dividends.

The truly random part for the redistribution among speculators is probably 50 cents on the dollar. The odds are quite similar to that from playing the lottery. Every stock market cycle makes Chinese people poorer. The system takes advantage of their opportunism and credulity to collect money for the government and to enrich the few.

I am not sure this bubble that began six months ago is truly over. The trigger for the current selling was the tightening of lending policy. Bank lending grew marginally in July. On the ground, loan sharks are again thriving, indicating that the banks are indeed tightening. Like before, government officials will speak to boost market sentiment. They might influence government-related funds to buy. "Experts" will offer opinions to fool the people again. Their actions might revive the market temporarily next month, but the rebound won't reclaim the high of August 4.

This bubble will truly burst in the fourth quarter when the economy shows signs of slowing again. Land prices will start to decline, which is of more concern than the collapse of the stock market, as local governments depend on land sales for revenue. The present economic "recovery" began in February as inventories were restocked and was pushed up by the spillover from the asset market revival. These two factors cannot be sustained beyond the third quarter. When the market sees the second dip looming, panic will be more intense and thorough.

The US will enter this second dip in the first quarter of next year. Its economic recovery in the second half of this year is being driven by inventory restocking and fiscal stimulus.

However, US households have lost their love for borrow-and-spend for good. American household demand won't pick up when the temporary growth factors run out of steam. By the middle of the second quarter next year, most of the world will have entered the second dip. But, by then, financial markets will have collapsed.

China's A-share market leads all the other markets in this cycle. Even though central banks around the world have kept interest rates low, the financial crisis has kept most banks from lending. Only Chinese banks have lent massively. That liquidity inflated the mainland stock market first, then commodity markets and property market last. Stock markets around the world are now following the A-share market down.

By next spring, another stimulus story, involving even bigger sums, will surface. "Experts" will offer opinions again on its potency. After a month or two, people will be at it again. Such market movements are bear-market bounces. Every bounce will peak lower than the previous one. The reason that such bear-market bounces repeat is the US Federal Reserve's low interest rate.

The final crash will come when the Fed raises the interest rate to 5 per cent or more. Most think that when the Fed does this, the global economy will be strong and, hence, exports would do well and bring in money to keep up asset markets. Unfortunately, this is not how our story will end this time. The growth model of the past two decades - Americans borrow and spend; Chinese lend and export - is broken for good. Policymakers have been busy stimulating, rather than reforming, in desperate attempts to bring growth back. The massive increase in money supplies around the world will spur inflation through commodity-market speculation and inflation expectations in wage setting. We are not in the midst of a new boom. We are at the last stage of the Greenspan bubble. It ends with stagflation.

Hong Kong's asset markets are most sensitive to the Fed's policy due to the currency peg to the US dollar. But, in every cycle, stories abound about mysterious mainlanders arriving with bags of cash. Today, Hong Kong's property agents are known to spirit mainland-looking men, with small leather bags tucked under their arms, to West Kowloon to view flats. Such stories in the past of mainlanders paying ridiculous prices for Hong Kong flats usually involved buyers from the northeast. In this round, Hunan people have surfaced as the highest bidders. The reason is, I think, that Hunan people sound even more mysterious. But, despite all this talk, the driving force for Hong Kong's property market is the Fed's interest rate policy.

Punters in Hong Kong view the short-term interest rate as the cost of capital. It is currently close to zero. When the cost of capital is zero, asset prices are infinite in theory. At least in this environment, asset prices are about story-telling. This is why, even though Hong Kong's economy has contracted substantially, its property prices have surged. Of course, the short-term interest rate isn't the cost of capital; the long-term interest rate is. Its absence turns Hong Kong into a futile ground for speculation, where asset prices increase more on the way up and decrease more on the way down.

When the Fed raises the interest rate, probably next year, Hong Kong's property market will collapse. When the Fed's policy rate reaches 5 per cent, probably in 2011, Hong Kong's property prices will be 50 per cent lower.

Andy Xie is an independent economist


http://www.scmp.com/portal/site/ ... +XWkYBrrkUAAAD+mogL

The mainland may have to get back on its bike


LEADER

Aug 25, 2009           
     
  |   

  



The mainland has the perfect ingredients for efficient public transport: many large cities with high population densities. Ideally, investing in bus and rail systems should pay off handsomely. Yet authorities are insisting on pouring resources into the already massive car industry, and generous incentives mean that cars are cheap to buy. Consequently, roads are day by day becoming ever more choked by traffic, and the pall of pollution from exhaust fumes is worsening.

Governments are in a bind. Roads cannot be built fast enough to keep up with vehicle numbers. Subways and elevated rail networks take time to plan and build. Outright bans are, in the absence of an alternative, not a solution.

The search for efficient and non-polluting transport that can be quickly put in place has been made a priority. Guangzhou and Shenzhen several years ago determined that motorbikes were too noisy and dirty. A Guangzhou lawmaker has stirred debate by suggesting that people turn to bicycles. It is surely the irony of all ironies that a nation that for three decades has so successfully pushed bicycles off the streets in the name of progress would even consider a return to pedal power.

Conflicting interests are difficult for any government to deal with. In the mainland's case, it involves balancing a policy of using vehicle production to boost industrial growth with ensuring that cities are liveable and function properly. The car industry is the catalyst for a plethora of spin-off industries that boost job creation, meet consumer demand and lay the groundwork for export markets. But cities are where factories, offices and workers are located and they need to be efficient and safe.

Without concerted long-term planning, there will always be an unhappy meeting of the two. Road-pricing schemes, higher fuel emission standards and transport infrastructure are the obvious way forward. But such measures require discussion, planning and time to implement. In the circumstances, with air pollution and traffic woes becoming ever more pressing problems, turning back the clock to the days when the bicycle was king on the mainland may, for now, be the best idea.


http://www.scmp.com/portal/site/ ... ss=China&s=News

An America more like China, and vice versa


LEADER

Aug 26, 2009           
     
  |   

  



The Hollywood hit Confessions of a Shopaholic tells the story of a shopping addict who finds love and learns frugality in these economically trying times. It has an uplifting moral for American consumers who suddenly discover the joy and virtue of thrift.

But the comedy may turn out to be a horror show for everyone else. For if Americans have turned their backs on the greatest shopping binge the world has known, where are exporting countries such as Japan, China and Germany going to sell their products?

Economists and policymakers have long recognised the profound imbalances in the world economy, even before the current crisis. The global recession has forced painful readjustments, for example, by forcing Americans to save more and Chinese to boost domestic spending. The current account surpluses of high-saving and export-oriented nations have all been shrinking while America's current account deficit is falling. There is, however, no guarantee this will continue.

The promised land of a sustained recovery around the world is one of rebalanced growth based on private demand, which replaces government stimulus or spending. But to get there, a number of things have to happen, such as continuing the narrowing of the current account gap between the high savers and the reformed big spenders.

One reason why global stock markets, led by Shanghai, fell out of bed at the beginning of last week was because of recurrent doubts about the strength of the economic recovery and the adequacy of government responses around the world. Wall Street took a plunge because the numbers for consumer confidence were not picking up as strongly as predicted. Shanghai was worried that Chinese bank lending would be curbed. Many investors, apparently, were still hoping for a return to the past and for the party to resume.

Later in the week, the bulls regained lost ground. They point to figures showing Japan, France and Germany have returned to growth. China's output grew at a spectacular annualised rate of 16 per cent from April to June. US Federal Reserve chairman Ben Bernanke made his most optimistic assessment on the US economy on Friday, helping to send the Dow Jones index up more than 155 points. But unless the major economies are truly committed to making the changes that are necessary to reorient themselves, the world's recovery rests on fragile ground. The current crop of green shoots needs to be sustained and nourished by more than just government-induced liquidity.

Key policymakers recognise what they need to do, but it is not clear they will succeed. White House economics director Larry Summers recently said the US economy needed to become more export-oriented rather than consumption-based.

Beijing is building social safety nets in education, health care and housing so ordinary households can spend more rather than save for a rainy day. The jury is still out on whether Japan and Germany - or for that matter, China - intend to revamp their export-oriented growth strategies.

In the best economic scenario, America would be more like China and China more like America. Whether or not that will ever come to pass is difficult to predict. Perhaps filmmakers from high savers like Germany and China should jointly produce another comedy, to be titled Confessions of a Workaholic, about a hero who learns to produce less and shop more.


http://www.scmp.com/portal/site/ ... 26+World&s=News

Health care where people are treated like animals


Nicholas Kristof
Aug 28, 2009           
     
  |   

  



Opponents suggest that a US "government takeover" of health care will be a milestone on the road to "socialised medicine" and, when he hears those terms, Wendell Potter cringes. He's embarrassed that opponents are using a playbook that he helped devise. "Over the years, I helped craft this messaging and deliver it," he noted.

Mr Potter was an executive in the health insurance industry for nearly 20 years before his conscience got the better of him. He flew in corporate jets to industry meetings to plan how to block health reform, he says. He rode in limousines to confabs to concoct messaging to scare the public about reform. But, in his heart, he began to have doubts as the business model for insurance evolved in recent years from spreading risk to dumping the risky.

Then, in 2007, Mr Potter attended a premiere of Sicko, Michael Moore's excoriating film about the US health care system. Mr Potter was taking notes so that he could prepare a propaganda counterblast - but he found himself agreeing with a great deal of the film.

A month later, he was back home in Tennessee, visiting his parents, and dropped in on a three-day charity programme at a county fairground to provide medical care for patients who could not afford doctors. Long lines of people were waiting in the rain, and patients were being examined and treated in public, in stalls intended for livestock.

"It was a life-changing event to witness that," he remembers. Increasingly, he despised himself for helping block health reforms. Mr Potter loved his job and perks. But, at 56, he left global health service company Cigna last year.

This year, he went public, testifying before a Senate committee investigating the insurance industry.

Mr Potter says he liked his colleagues and bosses in the insurance industry, and respected them. They are not evil. But he adds that they are removed from the consequences of their decisions, as he was, and are obsessed with sustaining the company's stock price - which means paying fewer medical bills.

One way to do that is to deny requests for expensive procedures. A second is "rescission" - seizing upon a technicality to cancel the policy of someone who has been paying premiums and finally gets cancer or some other expensive disease. A congressional investigation found that three insurers used this technique to cancel more than 20,000 policies over five years, saving the companies US$300 million in claims.

Insurers encourage this approach through performance evaluations. One employee earned a perfect evaluation score after dropping thousands of policyholders who faced nearly US$10 million in claims.

Mr Potter notes that a third tactic is for insurers to raise premiums for a small business astronomically after an employee is found to have an illness that is very expensive to treat. The business is forced to drop coverage for all its staff or go elsewhere.

All this is monstrous, and it negates the entire point of insurance, which is to spread risk.

The insurers are open to one kind of reform - universal coverage through mandates and subsidies, to give them more customers and profits. But they don't want the reforms that will most help patients, such as a public insurance option, enforced competition and tighter regulation.

Mr Potter argues that much tougher regulation is essential, and that a robust public option is an essential part of any health reform.

The US is at a turning point. Universal health coverage has been proposed for nearly a century. Yet, each time, it has been defeated in part by fear-mongering industry lobbyists. That may happen this time - unless the Obama administration and Congress defeat these manipulative special interests. What's un-American isn't a greater government role in health care but an existing system in which Americans without insurance get health care in livestock pens.

Nicholas Kristof is a New York Times columnist


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Slumbering US wakes up to a headless Asia


Richard Halloran
Aug 31, 2009           
     
  |   

  



A recent gathering of Asian and US diplomats, economists and scholars in Honolulu came to the surprising conclusion that no Asian nation was willing or able to assume leadership in Asia despite the economic and political progress of recent decades.

The Asian and American "Asia hands" agreed that China was not ready, Japan was not willing, India was just emerging onto the world stage, and the United States was preoccupied with Afghanistan, the Middle East and the economy.

Moreover, Asian international organisations, such as the Association of Southeast Asian Nations, have so far shown themselves to be mostly talk shops.

Most of those in the conference asserted that peace and prosperity (SEHK: 0803, announcements, news) in Asia would be best served by a balance of power, especially between China and the US.

No one suggested that Beijing and Washington take joint control over Asia, but all agreed that armed conflict between the two would be disastrous.

This consensus is surprising because a widening view among Asian leaders asserts that power is shifting from West to East.

The Asians and Americans in Honolulu met in a senior policy seminar at the East-West Centre, a research and education organisation funded largely by the US Congress. Under the conference rules, speakers and those who took part in the discussion cannot be identified, supposedly to encourage candour.

On China, one Asian said: "China is not oriented towards foreign policy but is obsessed with domestic issues, somewhat like the US."

China's first major venture into international relations, leading the six-party talks to persuade North Korea to give up its nuclear weapons, has gone nowhere in six years. Internal dissension was underscored with uprisings in Tibet last year and in Xinjiang this year.

Japan, still wrapped in the passive cocoon into which it retreated after the devastating defeat of the second world war, has been constrained by its divisive politics.

As a potential leader, India was barely mentioned. "India is in the equation for the first time," said an American, lamenting the lack of attention to India.

A military officer noted that relations between India's military forces and those of the US had expanded. "India," he said, "is getting out and about."

Some Asians and Americans argued that the US was declining in power, with its forces spread thin around the world and a troubled economy at home.

Others disagreed. "Are we seeing the twilight of the US in Asia?" one American asked. "No, we are not withdrawing."

Several speakers contended that the administration of George W. Bush had neglected Asia while US President Barack Obama was seeking to reverse that perception.

"America has been like Rip Van Winkle, sleeping under a tree," an American sceptic said. "Now he's awake but we have to see what he actually does."

Richard Halloran is a former New York Times foreign correspondent in Asia and military correspondent in Washington


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Hub hubris
Grand visions for new engines of growth go back a long way. Is Hong Kong ready to get things moving

Joseph Wong
Sep 02, 2009           
     
  |   

  



Chief Executive Donald Tsang Yam-kuen has started his consultation on this year's policy address and has made it clear that the government aims to develop the six industries recommended by the Task Force on Economic Challenges that would sustain Hong Kong's long-term growth as a knowledge-based economy.

The search for new engines of growth outside the traditional pillar industries of financial services, trade and logistics, tourism and professional services is not new. In his 1998 policy address, former chief executive Tung Chee-hwa referred to the report of the former Commission on Innovation and Technology, chaired by Professor Tien Chang-lin, and laid out his vision for Hong Kong to become a place of many centres: for example, a world centre for design and fashion, health food and Chinese medicine, or a regional centre for multimedia-based information and entertainment, or for professional and technological talent and services.

The government has since set up a permanent Innovation and Technology Commission, invested in Cyberport and set aside billions of dollars in applied research and technology. While we have seen progress in a number of areas, it is fair to say that we have yet to realise the vision set by the former chief executive; and Hong Kong lags behind places like South Korea in turning innovation and technology into new drivers for economic growth.

Ten years later, the government continues to identify innovation and technology as one of the six industries with high potential. The chief executive said he would "actively explore the possibility of new financial or tax incentives to encourage the private sector to increase investment in research and development". Many governments, such as Taiwan's, use fiscal incentives and outright subsidies to support the development of new industries. But the Hong Kong government has always held on to the principle of "small government, big market". Whether this year's policy address will unveil a major shift in the economic policy and mark the beginning of substantial and active government intervention in our economy is something we should all watch and debate.

But that is not denying the importance of government support in nourishing new industries, such as education and medical services. It is true that we have achieved progress in these two areas: we have the largest number of international schools of any city and our top universities are among the best in the region. We have a world-class medical profession and our hygiene and regulatory regime has withstood the most rigorous tests brought about by severe acute respiratory syndrome and, more recently, swine flu.

But both areas have their share of problems. Despite the rapid development of tertiary education, only 18 per cent of our secondary-school leavers can enter university, the lowest percentage among developed economies. Apart from several thousand mainland students, we have only about 200 foreigners studying in our undergraduate programmes, making our universities look more provincial than international. Whether the two earmarked sites will be developed to meet the demand of local students or to attract foreign ones will raise the fundamental issue of balancing the social needs of providing more tertiary places for our students with the economic benefit of exporting our educational services - something Australia has been doing for many years.

For medical services, reserving four sites for the development of private hospitals is a step in the right direction. But we also need to tackle such policy issues as the respective roles of public and private hospitals, the regulation of medical fees and services, and the whole unresolved question of health care financing for our own people.

The government has also outlined the possible development of three other industries: environmental industries, cultural and creative industries, and testing and certification. Only the last one is specific - the government will set up a Council of Testing and Certification in three months' time and the council will draw up a three-year market-oriented development plan within six months after its establishment.

On environmental policy, the government will have to do much more than stopping the purchase of incandescent light bulbs to turn Hong Kong into a green city with economic opportunities. On cultural and creative industries, the CreateHK office that the government set up only a few months ago has yet to produce results.

Our chief executive has announced a grand plan to propel Hong Kong in a new direction of economic growth. He will have to give us the details in his policy address.

Joseph Wong Wing-ping, formerly secretary for the civil service, is an honorary professor at the University of Hong Kong


http://www.scmp.com/portal/site/ ... ong+Kong&s=News

Don't repeat the folly of Iraq's war in Iran


LEADER

Sep 03, 2009           
     
  |   

  



Western nations are increasing the heat on Iran over its nuclear programme. They are threatening tougher sanctions if it does not take up the offer of talks. American and Israeli officials have gone a step further, hinting that military strikes are not out of the question. Given the lesson of Iraq's alleged weapons of mass destruction, now is the time for caution, not hyperbole.

Powerful lobbying groups are driving the discussion. They claim Iran's centrifuge cascades are less about processing uranium for electricity than making weapons. Teheran vehemently denies the allegations. Yet it is not being transparent - restricting the access of inspectors to its nuclear facilities and setting conditions on talks.

Fresh debate has been stirred by the UN's nuclear watchdog, the International Atomic Energy Agency, which has circulated a report outlining Iran's technical progress and compliance with UN resolutions and the nuclear Non-Proliferation Treaty. The UN Security Council's five members and Germany are meeting to weigh options. US President Barack Obama and allied European leaders have given Iran until the end of the month to accept talks on suspending its nuclear work - or face unspecified consequences. Pressure is mounting to put the issue high on the agenda of the upcoming G20 summit in Pittsburgh.

The US-led war on Iraq was originally justified with intelligence on the country's nuclear, chemical and biological weapons, which proved to be unfounded. It was a costly error, financially and in terms of innocent lives lost. An attack on Iran could well lead to the same consequences. As in Iraq, sanctions will harm citizens, not leaders. Outgoing IAEA chief Dr Mohamed ElBaradei said on Tuesday the threat from Iran was "hyped"; there was no evidence that the nation would soon have nuclear weapons. He has been criticised by Tehran's opponents for being "soft". Their judgment is wrong: a cautious approach towards Iran is needed. Talks are the only way forward. Negotiators have to base their position on proven facts, not suppositions and politically motivated claims.


http://www.scmp.com/portal/site/ ... 26+World&s=News

Much to be done on domestic helpers' rights


LEADER

Sep 04, 2009           
     
  |   

  



Malaysia is finally giving rights to its foreign domestic workers. Horrific cases of abuse by employers have prompted an agreement with Indonesia to give maids a day off each week, the right to hold passports and a minimum wage. Helpers from other countries are not covered and the high incidence of mistreatment is not tackled, but the decision is a welcome starting point. It is a reminder to other Asian governments that they must do more to improve the conditions of migrant workers.

Hong Kong prides itself on being the region's leader in guaranteeing rights to maids. The rules that Malaysia will be introducing were put in place here more than two decades ago. Authorities said on Wednesday that benefits were being further improved with the raising of the food allowance from HK$300 a month to HK$740. Such requirements still fall far short of those Hong Kong should set for itself as a developed territory.

Too many maids are being underpaid and mistreated. Rules that favour bosses make them fearful of reporting abuse. Unlike other foreign workers, they cannot qualify for residency.

Of greatest concern is the lack of respect some employers have for maids. Dozens of cases of physical, sexual and mental abuse are reported in Hong Kong each year. In Malaysia, the numbers run into the thousands. There have been scores of deaths in Singapore over the past five years, most put down to accidents and suicide.

Canada, in contrast, sets some of the world's most generous standards. Domestic helpers there are assured a minimum wage based on an eight-hour working day, privacy when off duty and citizenship after two years of employment. We are unlikely to see the adoption of similar measures in Asia any time soon. But helpers should not be made to feel like second-class citizens.

Malaysia is trying to change perceptions. It has much work to do before maids are given the rights they deserve. Singapore should follow by giving them regular rest days. Hong Kong and the region as a whole have to do their utmost to treat maids fairly.


http://www.scmp.com/portal/site/ ... sight&s=Opinion

Compromises render drug tests all but useless


Philip Yeung
Sep 07, 2009           
     
  |   

  



By caving in to discordant voices from the misguided, the government has doomed the drug-testing programme for students to early failure.

The same tiresome buzz words are being dragged into this muddled debate: a "labelling" effect on students who test positive and "respect for privacy". Students on the straight and narrow have nothing to fear, but those who stray will use every known tactic to dodge detection.

Making the test programme entirely voluntary is self-defeating. What drug-abusing students would voluntarily step forward to submit themselves to the risk of detection? What do we do if no student volunteers? While police involvement may not be desirable, compelling addicted students to join an intervention programme should be non- negotiable. Otherwise, all we have is a totally toothless programme.

I don't hear any discussion of the nitty-gritty of the test programme. Don't they know that using hair samples is the best way to go? The presence of drugs is apparently traceable in the human hair for up to 90 days, while it is only detectable in urine samples within three days of taking a drug. Besides, how do you ensure that the samples actually belong to the students, without following them into the toilets? Doesn't this then become a gross violation of their privacy, not to speak of acute embarrassment for all concerned ?

Drug-abusing students will no doubt be taught by their suppliers to take plenty of fluids to dilute their samples, while hair samples are much less susceptible to tampering. It is high time the authorities approached experts on this matter. They can be found at the Hong Kong University of Science and Technology's biology department, where I believe they have been carrying out sophisticated experiments on hair samples from drug addicts for years.

What should have been a fairly straightforward procedure and programme has now taken on unnecessary complications because the government has failed to stand firm on something other privacy-conscious jurisdictions have been doing as a matter of course. Compromise may be the art of politics but, in this case, compromise is the art of a sell-out. The test of leadership is in filtering out the noise that undercuts the soundness of a laudable programme.

While it is true that the threat of expulsion for students who continue to test positive may not be open to public schools obligated to provide 12 years of free education, refusal to enter a drug-treatment programme should constitute grounds for police enforcement action. Without the threat of legal action, the programme is nothing but fluff.

When will the government learn from the experience of schools outside our system? Why are we making much ado about nothing? Privacy should never have been invoked in the case of underage schoolchildren who find themselves in the twilight zone. Privacy does not trump protection of students who are already on the brink of self-destruction. By making the test voluntary, you not only show your weakest hand, and mollycoddle students desperately in need of rescue, you are also only playing into the hands of drug dealers.

Few ever successfully kick their smoking habit voluntarily, much less a drug-taking habit. There is a time to be soft and a time to play hardball. Is our government ever capable of playing hardball in situations where it is convinced of the rightness of its action in a vital public issue?

The latest programme has been watered down to such an extent as to be laughably toothless.

And there is something else, too. On the unlikely assumption that the test programme is a success in identifying the size of the drug-taking student population, do we have a support or treatment programme in place to handle such an eventuality? Detection is one thing, treatment and rehabilitation is something else. A bigger headache for the government may already be in the making.


Philip Yeung is a Hong Kong-based university editor. [email protected]


http://www.scmp.com/portal/site/ ... sight&s=Opinion