Author: Ben Debski

The suicide of Sun Danyong, a worker at contract cellpone maker Foxconn International who was accused of industrial espionage after a prototype Apple iPhone went missing on his watch, has thrown a spotlight on the plight of many of his peers.

China has been battered by the global financial crisis at a time when a rising tide of degree-holders is flowing out of its fast-expanding universities. At least three million are still looking for work now, official figures show.

And in a country where the laws of supply and demand are often ruthlessly applied, the employment squeeze has had a predictable effect on graduates’ futures.

“Their main pressure is to find work, so they go to the factories, where they have to start at the bottom,” said Li Qiang, Executive Director of China Labour Watch.

His organisation last year highlighted the use of student interns on the production line at Foxconn, in an apparently prescient report on the company’s hothouse working environment.

“It is quite normal for students to do this kind of work … Often when they start they are fairly depressed, but they have more opportunities to rise than ordinary workers,” Li added. But in the hunt for a monthly salary, or fast promotion, graduates across the employment spectrum are now falling victim to some of the abuses, such as bullying and excessive overtime, well documented in cases of migrant workers in China’s sweatshops.

“I didn’t have a backup plan. It’s so hard to get a job these days,” said 24-year-old Liu Xiaoping, a Japanese∞language university graduate who was tormented by his first supervisor but stayed with the firm.

Particularly vulnerable to despair when seeking a job, and to bullying when in employment, are those from poor backgrounds, whose families have often run up debts to pay for their child’s education but have no contacts to help them secure a job.

Foxconn worker Sun was from just such a humble background.

An engineering graduate employed as a factory product manager, Sun was suspected of leaking secrets when an iPhone prototype went missing during his shift, local media reported. He jumped from his 12th floor apartment after the company raided his home, they added. Apple expressed regret at his death and said it was awaiting the results of a formal investigation.

The same week in July that he died, another graduate factory-worker threw himself off a building, leaving behind a note blaming overwork after three months without a day off, local media reported.

“We have to raise awareness about rights. If not today it may be Sun Danyong but tomorrow it will be you or me,” said one angry commentator using the pen name Qi Zhi, posted on a website about life working for Foxconn (www.foxlife.cn).

“It’s just a company yet it insults a person like this!” said another poster Ying Pozi on popular forum Tianya (www.tianya.cn). Foxconn declined repeated requests for comment.

No barricades in the street
Though current discontent over job prospects echoes elements of the economic anxieties that fed the 1989 protests on Tiananmen Square, analysts say it is extremely unlikely that discontented students will take to the streets for now.

“Students, intellectuals and emerging urban middle classes were among the groups where a lot of effort was put into what is sometimes called ‘strategic generosity’, making sure they have a relatively comfortable life,” said Andrew Gilholm, Control Risks’ senior analyst for China and Northeast Asia.

“They are very much aware that they are the beneficiaries of how things are now, and any instability would be more of a threat than an opportunity for them.”

Yet if the employment prospects at the end of a degree appear to be dimming, shutting off one of the few remaining avenues of social mobility in an increasingly stratified society, it risks creating long-term disillusionment with one-party Communist rule.

Barely half this year’s college leavers have secured jobs, the respected Caijing magazine reported a survey saying, a figure far below official figures that two-thirds have signed contracts.

Stress and strain
Although statistics on balance show that a job helps protect against suicide, even those in employment will be strained when the economy is rough, said Paul Yip, Director for the Centre for Suicide Research and Prevention at the University of Hong Kong.

“Whenever you have a poor economic climate you have to lay off a lot of people to save costs.

“But for those who remain in their jobs, because they have to do some additional work to cover the other workers, they are not necessarily immune to pressure.”

No longer a guaranteed ticket to a better job or salary, an education may provide one consolation, however, in a country that has always held its intellectuals in high esteem.

“The pressure they face isn’t necessarily any more than that on ordinary workers. But if the university students face bad conditions, then the middle classes, the intellectuals, tend to rally around,” said China Labour Watch’s Li.

“There are actually many instances of ordinary workers jumping from buildings … they just don’t get much attention.”

After Beijing ended its official silence about Kim’s five-day visit that ended on May 7, Chinese media reported that North Korea was willing to enter discussions.

That was far from a firm personal commitment from Kim to rejoin the moribund six-party disarmament talks that also includes the US, Russia, South Korea and Japan.

Chinese President Hu Jintao, however, appeared focused on securing a bigger economic role for China in North Korea, and gaining more clarity over Kim’s intentions, said analysts.

China’s leaders want to “position themselves effectively in the event that there is change in North Korea, to protect their interests and advance their influence”, said Bonnie Glaser, of the Centre for Strategic and International Studies in Washington DC, who studies Chinese foreign policy.

Kim’s frailty from age and illness was visible in news footage of his visit. Worries about what could follow his death or infirmity appear to have magnified China’s determination to extend its stake in the North.

“China appears to have been preparing what is more or less a bail-out package with strings attached”, said John Park, a researcher at the US Institute of Peace in Washington DC who studies Chinese-North Korean relations.

“Kim’s frail health has raised alarm bells”.

But China’s courting of North Korea carries economic costs, and has irked the two countries’ neighbours, who fear that Beijing’s backing could dilute pressure on Kim to return to nuclear disarmament talks.

Officials in Seoul have chided China for courting Kim soon after a South Korean naval ship, the Cheonan, sank from what they have hinted was probably a North Korean torpedo.

China has vastly more trade with South Korea than with the North. But Beijing will put up with diplomatic squalls with Seoul as a down-payment for firmer ties with Pyongyang.

Turmoil in the North could release a surge of refugees into northeast China and even threaten the North’s survival as Beijing’s strategic buffer against South Korea and its ally, the US.

Chinese reports said Hu told Kim that their two countries should “strengthen strategic communication” on major domestic and foreign issues – words that could cover discussion of Kim’s succession plans.

“Hu’s proposal suggested that China does not want any more surprises such as missile tests, or nuclear tests, or incidents such as the Cheonan”, said Wei Zhijiang, an expert on Korea at Zhongshan University in southern China.

Turning point?
On this trip, Kim appeared more serious than before about China’s economic enticements, aware that his economy needs Beijing’s help more than ever, said Wei.

Kim’s visit may be a turning point towards North Korea abandoning South Korea as a source of aid and investment in favour of China, said Wei.

“In the past, it was China that was more active about seeking a bigger economic role in North Korea, but this time North Korea appeared to take more of the initiative,” Wei said by telephone from Tokyo, where he is a visiting scholar.

North Korea’s ragged economy, with an annual GDP of about $17 bn, has stumbled after a fumbled currency redenomination effort and South Korea’s suspension of aid worth $1bn a year after rising disputes with Pyongyang.

“It’s a matter of mathematical subtraction,” said Xu Wenji, a professor at Jilin University in northeast China who studies China’s economic ties with North Korea.

“If you take away South Korea, take away the US, take away Japan, take away other Western countries, then all that North Korea has left is China,” said Xu.

Both sides avoided any public mention of the sinking of the South Korean warship. Several Chinese analysts said Beijing did not want to become embroiled in that dispute, even if Seoul takes the matter to the UN.

“I think that China will treat this as a bilateral incident, even if it is found to be a North Korean torpedo,” said Wei.

On June 4th, 1989 drastic actions of the CCP against thousands of students and intellectuals protesting in Tiananmen Square in Beijing, led to worldwide condemnation. The call out of the People’s Liberation Army and subsequent protestors’ deaths, and the arrests of many other surviving activists did nothing to warm the hearts of the Chinese people. Dissent was suppressed with martial law.

The action was taken by a divided leadership who believed that democratic protests were counter-revolutionary. Although many were inspired by Western ideologies, the students were only concerned with political reform and an end to official corruption. The main cause of the protest wasn’t about overthrowing leadership.

Nevertheless, it has led to the China we know today. In order to survive, liberals like Zhao Ziyang were purged from the Chinese leadership. This began its transformation from a broad coalition of liberals, conservatives and the technocratic elite into a cohesive political force led by a conservative and technocratic elite. So the party changed, and so did its relationship with Chinese society. It co-opted the China’s rising middle classes into its own ranks, stifling dissent by inverting Marxist class-consciousness and providing a ticket for material success for those among them that carried the party card. This spearheaded an impetus for economic reform, and forced the Chinese government to accelerate economic growth through liberalisation.

Although the Chinese people have won an increasing number of freedoms over the last 20 years, the leadership shows know immediate intention to let go of power. At the time, the West hoped that Tiananmen Square would lead to the end of the one-party system, just like the fall of the Berlin Wall eventually led to the fall of the USSR. Havoc ensued, and some of its consequences can still be seen today.

The Chinese leadership learnt from Russia’s lessons, and believes that change can only occur as part of a step-by-step process. So the reform agenda, which has embraced capitalism and globalisation, has kept the one-party state in tact. Many people though believe that democracy will be inevitable in years to come. Meanwhile its people, except in Hong Kong where free speech is guaranteed by its mini-constitution, cannot engage freely in political dissent without being questioned or facing severe consequences such as imprisonment for their actions.

Since then, the doors of liberalisation have been comparatively closed in order to protect the one-party system. The voices of the dissatisfied people have become louder and stronger due to the internet and the rise of citizen journalists uncovering “cases of corruption and official venality”, says the Wall Street Journal. As a result, more of China’s citizens have taken to the streets to demand justice. There have also been more protests over land and labour rights.

Nevertheless there have been land rights reform afoot with a new pilot scheme being trialled in the north-eastern province of Liaoning, which allows 151 households to use their land rights as collateral for mortgages. This means that farmers are being given access to credit for the very first time. It enables them to buy their land and frees them from state intervention. Under current legislation farmers are not allowed to use their properties as mortgage collateral, so any reform in this area, which began with decollectivisation in the 1980s, could turn them into economically significant players.  However, it has been asserted that these reforms don’t go far enough.

Since 2006 other reforms have been introduced, such as the country’s bankruptcy laws aimed at increasing investor confidence. Western companies were initially attracted to China because of its flexibility from a legal perspective, but things are changing. In 2008 China’s top legislature passed a package of tough environmental laws to underpin its climate change strategy with the hope of removing the label of being one of the world’s worst polluters. It set out reduced energy consumption by 20 percent, to double the usage of renewable energy, and to cut pollution levels by 2010.

Over the next three years financial reform will be crucial. It had stagnated, but the Chinese government has little choice but to act as a result of the financial crisis and its dependency on exports. Sources suggest that they grew by 19 percent a year, and the country’s average export growth of 27 percent was very focused on the debt laden growth of consumption in the US. Due to the recession this growth is unlikely to return over night, and only five percent growth is predicted over the next three years. This has led China to replace its lost productivity growth with a considerable monetary expansion. In order to maintain GDP growth it will need to entertain domestic market reforms, requiring the deregulation of the domestic service industries, many of which are still state-owned, and financial reform to improve capital allocation.  The latter will improve economic growth, created by each invested dollar.

What was once a lifeless bond market is now beginning to boom. Two years ago bonds were underwritten by state-owned banks and were subject to a quota system that was eventually ditched. And yet the bond market is now picking up. Between January and April 2009 it rose by up to 60 percent, and bond issuances are expected to increase over the next two years. Companies like PetroChina have joined the market. The nation is trying to move away from bank-lending in order to establish a more flexible financial system. There are, nevertheless, more bank loans being issued than bonds at the moment.

Such reforms are required to ‘re-balance the economy’. One of the key challenges of this programme requires China to change from being an exporter of goods, to one that has its own consumer economy. To create a burgeoning domestic consumer economic it has to embrace the rise of the urban middle classes. The trouble is that, while the country’s population will grow to around a billion by 2030, most of its citizens remain comparatively poor. About 90 percent of the population earns less than US$5,000 per year, and most of this is spent on housing, clothing and food.

Income levels have to increase if the drive towards a consumer economy is going to be successful, and most of the consumers with the money to spend on consumer goods live within the region of the Yangtze River Delta, the Pearl River Delta and the Beijing-Tianjin corridor. Most of its migrant workers who go to the cities to find work don’t have the means to enjoy Western-style consumerism, but incomes over time will grow and this in turn will spur on retail market growth. An appreciation of the country’s currency, the renminbi would help matters, making foreign goods cheaper and this in turn would open up the market to new consumers.

So China has come a long way since the Tiananmen Square massacre, shown by the way it was welcomed at April’s G20 summit. There’s clearly still work to be done, with many pitfalls ahead. China, with the rise of consumerism and economic prosperity, could end up creating an underclass unless better access to social services is provided; including the provision of public health and education.

   
As one of Asia’s biggest investor draws for western companies, the political and economic affairs of Malaysia are always keenly examined, and growing speculation that Malaysian Prime Minister Najib Tun Razak may opt for parliamentary polls nearly two years ahead of schedule is headline news.
Addressing the 61st general assembly of the United Malays National Organisation (UMNO), the ruling party that he heads, on October 23rd, Najib gave “the clearest indication yet” that the 13th general election was imminent. As of now, the parliamentary poll is scheduled for March 2013.

Najib, who took over as the prime minister in April last year, told the party faithful “to get ready for it and to get into battle mode”. Deputy Prime Minister Muhyiddin Yassin was even more direct when he said that “it cannot be denied that the general election is just a few months away”. Newspapers based in Malaysia say that the party general assembly has been abuzz with talk that the elections could be held as early as July 2011.

Najib took over from Ahmed Abdullah Badawi, who quit after the party and the Barisan Nasional, the ruling alliance, fared badly, losing the traditional two-thirds parliamentary majority in March 2008 and control of four of the country’s 13 states. Multi-racial Malaysia is home to 2.1 million ethnic Indians who form eight percent of the country’s 28 million-strong population.

The ruling alliance, which includes a number of Indian-based parties, has had a victory run in recent by-elections. The opposition alliance, Pakatan Rakyat, led by former deputy prime minister Anwar Ibrahim, is widely perceived as having lost ground, media reports have said. This may be due to the fact that Ibrahim remains a controversial figure. Ten years after he was sacked from the deputy prime ministership in 1998 when he was tried and jailed on a charge of sodomy, he is currently on trial for another charge of sodomy which was brought against him last year. And analysts do not rule out violence if the court delivers a “contentious” verdict.

Political tensions spiked after the 2008 general election when unprecedented opposition gains transformed the political landscape. The National Front coalition’s 52-year grip on the country was dented when it ceded control of five states and lost its two-thirds parliamentary majority to an opposition led by Ibrahim. Since then, the political uncertainty has weighed on foreign investment with net portfolio and direct investment outflows reaching $61bn in 2008 and 2009 according to official data. While money has flowed into the bond market recently, according to central bank statistics, little has flowed into equities.

Another reason why foreign capital may have dried up is a perceived increase in public sector corruption. Malaysia used to be regarded as one of the region’s more reliable countries, but worsening corruption and a perceived lack of judicial independence have damaged investment. Malaysia’s corruption perception ranking dropped to a record low of 57th globally in anti-corruption body Transparency International’s 2009 report.

Other issues may include the country’s attitude towards minorities, especially as race and religion have always been explosive issues in Malaysian politics. While Najib took power pledging a more inclusive approach to ethnic Chinese and Indian minorities, some in his UMNO party are casting this approach aside in a bid to woo conservative Malays. The caning of three women under strict Islamic laws in February for having illicit sex signalled the government’s increasing adoption of a stronger Islamic agenda, and this has worried some investors. A heated row over the use of the word “Allah” by Catholics, which sparked attacks on religious establishments, is also threatening to prolong minority unhappiness with the government.

Government policy tries to strike a balance between the majority Malay Muslims and the country’s minority ethnic Chinese and Indians, but analysts suspect that forced spending cuts which are likely to target minorities are likely to increase racial tension. The government is trying to take measures to alleviate the problem. Najib told delegates that “a new mechanism” was needed to sustain relations as enshrined in the constitution so that they remain harmonious. His government recently set up a special body called the “Bumiputra Agenda Supreme Council” to look after their economic interests. However, commentators point out that Bumiputra, or “the sons of the soil”, refers to the Malays, which may give an indication about which sections of Malay society may benefit from it.

Yet it is usually the state of a country’s finances and spending that often come back to haunt it, and Malaysia is no different. Government debt for 2009 rose to RM362.39 billion or 53.7 per cent of GDP, its highest level in five years, according to the country’s public sector spending watchdog, the Auditor-General. This is the first time the debt to GDP ratio had breached the 50 percent mark, largely due to domestic debt. “The debt ratio to GDP at the end of 2009 is 53.7 percent, the highest level in five years and over 50 percent for the very first time,” said its report.

Furthermore, the Auditor-General has found that a total of 109 projects undertaken by 24 ministries and departments overshot their budgets to a cumulative amount of RM527.43 million.

According to the Auditor-General’s report for 2009 released at the end of October, spending without an allocation, financial mismanagement and budget over-runs were “common” in various ministries and government departments. Based on the audit analysis, there were a total of 195 cases of weak financial management were detected in several ministries and departments. Furthermore, a total of 21 ministries and departments had also applied for emergency funds and additional costing amounting to RM62.2 million despite there being a RM96.33 million balance from their initial allocations being unspent.

Malaysia’s budget for 2011 has skipped structural reforms demanded by investors. Instead, the budget strategy relies on infrastructure spending and raising incomes to fuel economic growth ahead of polls expected next year. The budget plan targets a 2.8 percent rise in spending and aims to shrink the deficit to 5.4 percent of GDP next year from 5.6 percent this year thanks to sustained strong growth.

According to the plan, Southeast Asia’s third-largest economy is expected to grow between five and six percent in 2011 after a seven percent expansion this year and a 1.7 percent contraction in 2009. “The trend of external trade is increasingly challenging, while there is heightened competition to attract foreign investment,” Najib told parliament. “To rise to these challenges, the private sector must be dynamic, creative and innovative to drive economic growth,” he added.

To shift away from the governments significant role in driving economic growth since the financial crisis in 1997/98, the 2011 budget includes a number of important initiatives designed to spur private sector investment, estimated to expand in 2011 by 12.5 percent to RM86 billion. Some projects include the Kuala Lumpur International Financial District (KLIFD) commencing in 2011, in collaboration with Mubadala Development Company, of the Government of Abu Dhabi, at a value of RM26 billion; the Mass Rapid Transit (MRT) in Greater KL, beginning in 2011 with expected private investments of RM40 billion, to be completed by 2020; and the Warisan Merdeka, an integrated development project comprising a 100-story tower, the tallest in Malaysia, to be completed by 2020 at a value of RM5 billion.

Analysts believe that the budget is more likely to please voters than investors who are frustrated with the lack of progress in reforms of Malaysia’s subsidies and its race-based policies. “A majority of the big foreign investors will be unhappy with the budget if he doesn’t give them anything in terms of real money,” said James Chin, a professor at Monash University in Malaysia.

Commentators say that Najib needs strong economic growth to secure a clear mandate from voters to push through reforms considered crucial to win back foreign investors who increasingly skip Malaysia and head to other Southeast Asian economies. Malaysia’s private investment grew only two percent on average between 2006-2010, and was expected to be 10.8 percent of GDP this year, rising to 11.3 percent of GDP next year.

But the government is trying to turn the situation around quickly, and has been delivering some welcome news. At the end of October Prime Minister Najib announced details on $444bn worth of investments the country wants to attract over the next 10 years to double its national income. A government think-tank said in September that it had identified the investments, of which 60 percent would come from the private sector, 32 percent from government-linked companies and eight percent from government. The investment aims to rebalance Asia’s third most export-driven economy towards domestic demand and the service sector, at a time when foreign investors are increasingly attracted to other regional economies.

Some of the key projects named in the investment drive included Germany’s LFoundry, which will relocate and invest in five wafer fabrication plants in Kulim Hi-Tech Park in northern Kedah state over the next five years. Its Initial investment is valued at 214 million ringgit while the total estimated investment is 1.9 billion Malaysian ringgit ($610.3m).

There are also plans to build a 208-room hotel and 160-unit residence, to be managed by St Regis, an international six-star hospitality brand, while oilfield services firm Schlumberger has recently opened its Eastern Hemisphere Global Financial Services Hub in Malaysia. This is part of the Greater KL/Klang Valley Entry Point Project which aims to attract 100 new multinational corporations to relocate their operations in Kuala Lumpur by 2020.

In fact, Malaysia’s Economic Transformation Programme (ETP) has gotten off to a strong start with nine early wins announced at its roadmap launch in October. “The ETP is already delivering results. These early wins show that by focusing on action, results will flow,” said Najib. More confirmed investments will be announced over the next few months. “Based on our tracking, 53 ‘Entry Point Projects’ (EPPs) with a total investment value of $97bn (RM300.7 billion), almost 45 percent of the total investment targeted, are already in various active stages of engagement,” he said.

Najib also announced that a four-tier ETP governance structure has been activated to monitor the progress of the initial 131 EPPs and conversion of the 60 business opportunities into new projects. “A clear governance structure is absolutely critical for the success of the ETP,” said Najib, adding that “the ETP is for all Malaysians”, pointing out that the 131 EPPs are spread all across the country, with 68 for Sarawak and 71 for Sabah.

“For several years now, the government has been the main driver of the economy, but this is neither prudent nor sustainable and the private sector has to reclaim their effective role as the main engine of growth for the economy, in line with the strategy of the 10th Malaysia Plan,” he added.

“We must grow the economic pie substantially. However, Malaysia can no longer be driven by past strategies based on labour intensive models. We need to take the high-skill, high-income route quickly to become and remain competitive in the global economy. Transformation is critical. Failure is not an option,” he said.

On paper, foreign investors and multinational companies may welcome the Kuala Lumpur’s efforts to step back from public sector investment in favour of opening up the market to foreign firms. But it is evident that investors have serious doubts about Malaysia’s political landscape, as well as the sometimes fractious nature of its multi-ethnic population. If Najib and his party call snap elections next year – and more importantly, if they win them – it may just create the political stability that investors are looking for.

Developing Islamic finance
Islamic finance may still not have had the recognition that it deserves in the west, but the recent banking crisis has prompted several Muslim countries to consider how they might be able to promote the system as a viable alternative to western banking.

In October Malaysian Prime Minister Najib unveiled the country’s 2011 budget. In it, he tried to promote greater interest in developing Islamic financial products and services. “Bursa Malaysia will launch sukuk and conventional bonds to meet retail investors demand for fixed income instruments in order to boost the bond market,” said Najib.

He added that to further promote innovation in Islamic securities products, the Malaysian government proposes that expenses for the issuance of Islamic securities which adopt the principles of Murabahah and Bai Bithaman Ajil based on tawarru be given tax breaks. This will strengthen Malaysia’s position as the leading sukuk market and promote transactions in Bursa Suq al-Sila, the worlds first syariah-compliant commodity trading platform. The government also proposes that takaful contributions for export credit be given double tax deduction.

Also in October, eleven central banks, including those from Malaysia and Iran, agreed to start a company that will issue Islamic financial products to allow banks and investors manage their funds. The International Islamic Liquidity Management Corp. is a “global initiative aimed to assist institutions offering Islamic financial services in addressing their liquidity management,” says Kuala Lumpur-based Islamic Financial Services Board. It will also “facilitate greater investment flows,” the regulator said.

Malaysia has also urged members of the Organization of the Islamic Conference (OIC), an association of 57 Islamic states promoting Muslim solidarity in economic, social, and political affairs, to invest in developing Muslim nations by creating a sovereign wealth fund. Malaysia’s Minister of Finance II Ahmad Husni Hanadzlah has said that his country “no longer sees western nations as a major investment destination”.

The sovereign wealth fund, to be supervised by the Islamic Development Bank (IDB), aims at exploring the assets of OIC members, he explained. He added that Malaysia presented the idea of the fund during the annual meeting of the Islamic Development Bank which was recently held in Azerbaijan. The sovereign wealth fund would contribute to carrying out various projects in developing Muslim countries.

Lieutenant General Sardar Mahmood Ali Khan, Deputy Chairman of the Joint Chiefs of Staff, added that such a big task in the mountainous northwest was not “firefighting” and had to be done in sequence with other battles.

Pakistan has come under fresh US pressure to send troops into north Waziristan following a failed bombing in New York claimed by Tehrik-e-Taliban Pakistan (TTP), the Taliban Movement of Pakistan, which has fighters in northwestern areas including North Waziristan.

Speaking on the sidelines of a conference in Jordan of special operations forces commanders, Khan said the army was still busy consolidating its operations following an earlier push into South Waziristan and needed to adhere to a schedule for what he called a long campaign.

Asked if troops would eventually go into North Waziristann, home to a complex web of militant groups, to attack fighters there, he replied: “Of course, all these areas which are affected are on our agenda, yes.”

The New York bomb plot suspect, Faisal Shahzad, 30, was arrested two days after authorities say he parked a crude car bomb in Times Square. Authorities say he has been cooperating in the investigation.

Attorney General Eric Holder and other US officials said that the Pakistani Taliban, based in Pakistan’s lawless border regions, were involved.

Holder said the US government was satisfied with Pakistani cooperation in the investigation, adding there was nothing to suggest the Pakistani government was aware of the plot.

The al Qaeda-linked TTP is an alliance of factions and has killed many hundreds of people in bomb attacks.

Some Western officials have questioned the determination of Pakistan to tackle militants as the long-time US ally addresses other problems, from a sluggish economy to power cuts that have made the government unpopular.

Pakistan has proved capable of capturing militants, including some of al Qaeda’s most notorious heavyweights. Khalid Sheikh Mohammed, the accused mastermind of the September 11 attacks, was arrested in Pakistan in 2003.

But Khan said North Waziristan’s geography made it an exceptionally difficult region in which to wage war and suggested any move into the region could not be done lightly.

Over the past year, the armed forces have mounted offensives against militant strongholds in the northwest, largely clearing several areas including their bastion of South Waziristan.

But North Waziristan has not been tackled, even though TTP members are believed to have taken refuge with allied Afghan factions based there that are not fighting the Pakistani state.

The army says it must secure the areas it has cleared before attacking there. But analysts say Pakistan sees the Afghan factions in North Waziristan as tools for its long-term objectives in Afghanistan, where Pakistan wants to see a friendly government and the sway of old rival India minimised.

“Basically, what the US wishes is that we go into North Waziristan,” said a senior Pakistani intelligence official who declined to be identified.

“That means targeting the Haqqani and Gul Bahadur networks,” the two main Afghan Taliban factions there.

US officials have recently been praising Pakistani efforts against militants, but Secretary of State Hillary Clinton raised eyebrows when she told CBS Pakistan would face “severe consequences” if a successful attack in the US was traced to Pakistan.

Retired Pakistani intelligence officer Asad Munir said US blame would be counter-productive.

“If they blame Pakistan, I don’t think they’ll win this war,” he said. “They will go to North Waziristan but it will take time. If Pakistan is pressured, it will be disastrous.”

“The ‘do more’ mantra will lead to thinking in the military that this is happening despite their people being killed every day and ultimately foot soldiers will be demoralised,” he said.

Asked if he would accept more US special forces in Pakistan, the joint chiefs’ Khan declined to reply directly, noting there had been a limited number of these forces doing training in Pakistan for some time and they continued to play that role.

For decades, the United States beckoned as the land of opportunity for bright, young Indians, lured by the prospect of prestigious university degrees followed by jobs on Wall Street or in Silicon Valley.

Indians have since 2001 been the largest foreign student population on American campuses, comprising around 15 percent of all international students at colleges and universities in the United States, according to the US Embassy in New Delhi. But this is changing.

America’s loss may be India’s gain, analysts say, pointing to a ‘reverse brain drain’ that may see India reaping benefits for years to come as some of its smartest and most talented people put their energies into India’ economy, Asia’s third-largest.

“The brain drain has already begun to reverse. Now there are many magnets pulling the best talent. Before, the US was where everyone wanted to go,” said Vivek Wadhwa, a US-based Indian academic who has written a paper on the issue. India’s economy has boomed at around nine percent growth in each of the last three years, lifting millions out of poverty and creating a generation of affluent and ambitious young Indians.

Many have pursued prestigious post-graduate degrees in the US and Europe and then stayed after finding high-paying jobs.
But as the global financial crisis has kicked in, Indians are seeing greater opportunities at home, where there are more job openings, the cost of living is lower and modern amenities such as shopping malls and condominiums offer them a comfortable life.

About 100,000 skilled Indian ‘returnees’ will come home from the United States in the next five years, Wadhwa estimated.

“When I joined Duke four years ago, nearly every student talked about wanting to stay and work in the US,” said Wadhwa, an adjunct professor at Duke University and a senior research associate at Harvard Law School.

“Now the vast majority plan to go back home. A few want to work here to pay off their loans, but they don’t think they will be able to get jobs.”

With US unemployment at a 26 year high, prospects at home appear better for Indian graduates as firms such as Warner Bros and IBM announce they will move jobs to India and other outsourcing hubs after laying off workers in North America.

Financial aid
Rahul Dutta, 23, is a case in point. He has changed his plans to study in the United States and is now enrolled at a local university.

“My initial plan was to do my master’s degree there and look for a job too, but now I realise that there are no jobs and no funding, so I took admission in a college in Delhi,” said Dutta.

In Bangalore, south India’s high-tech metropolis, Kripa Chettiar reached the same conclusion.

“I was looking at doing a master’s in financial engineering at Columbia University,” Chettiar said. “But now I am not even writing the GRE because now there’s no point, as there is no financial aid available at all.”

The GRE, or Graduate Record Examination, is the standard admission test for graduate university studies in the United States and several other English-speaking countries.

Garvit Bafna in Pune, a city near India’s financial capital Mumbai, took the exam, but he says he will only move to America if he gets into a top-ranked university.

Even students who have passed the GRE exam are abandoning plans to study abroad due to lack of funds, said Rajiv Ganjoo, head of international education at Career Launcher, an educational service provider in India.

“It is a waiting game now,” Ganjoo said. “Students are looking at the recession, at how the colleges react to it and how the government reacts to it, before taking any steps.”

For students already in the United States, getting fellowships and other funding is becoming difficult, especially for foreigners as the pool of scholarship dollars has dried up due to shrinking university endowments from stock market losses.

“The funding scenario is grim as compared to past years,” said Cherry Harika, a 24∞year∞old from India’s Punjab province who is studying for a masters degree at Boston University.

“My university has frozen new hiring. There are hardly any new job openings for foreigners, especially when US citizens are losing their jobs.”

Employer visa sponsorships are growing scarcer and President Barack Obama’s administration is under pressure to restrict the number of temporary work permits issued to foreigners.

About 55,000 students in India took the GRE last year, down more than 20 percent from the year before, said Jaideep Chowdhary, who heads the GRE programme at a private training institute in India.

Most students who study in the United States need to shell out around $50,000 for a two-year stay, he said.

Much of that money would come from loans which are not easy to get these days due to the credit crunch, especially for students with no reasonable assurance of a job.

By contrast, studying at the Indian Institutes of Technology in Madras, part of a highly reputed nationwide network of engineering and technology campuses, costs about $1,200 a year.

India too has taken a hit from the financial crisis which has slowed the scorching pace of growth of its IT outsourcing sector. One small advantage of the crisis for India may be the human capital benefits as the brightest stay home, said Wadhwa, who wrote a report titled “America’s loss is the world’s gain.”

“This is an economic tragedy that significantly increases the chances the next Intel or Cisco Systems will launch outside the US,” Wadhwa wrote.

Hong Kong’s environmental protection department said local air pollution indices soared to levels of around 500, smashing the previous record of 202 recorded in July 2008. A reading above 51 is considered high.

Sandstorms from northern China were mostly blamed. People with heart and lung diseases were urged to avoid outdoor activities amid what were described as “severe” readings.

Experts are studying the contents of the latest smog but a public health academic warned it came after a week of serious air pollution.

“We don’t know what this air is made of … but it is possible that it is not as toxic as the air that is coming out of the tailpipes of old trucks in Hong Kong or old power station chimneys, or ship funnels going into the harbour and the port,” said Anthony Hedley, chair professor of the School of Public Health at the University of Hong Kong.

“The interesting thing may be that it is coming on top of several days of fairly intense exposure to mostly Hong Kong-made pollutants and some other of parts of the Pearl River Delta,” Hedley told reporters.

Pollutants included particulates, nitrogen dioxide, sulphur dioxide and ozone.

“Most of us will have some chronic inflammatory response to that exposure and without question it will make us (more susceptible) to the present episode,” Hedley said.

Hong Kong’s patchy air quality has been a controversial social issue in recent years, tarnishing the city’s reputation as a financial hub versus greener rival cities like Singapore. It has also affected the health of many of its citizens.

According to the Hedley Environmental Index, which monitors and publishes in real-time the economic costs of Hong Kong’s air pollution, the bad air would have resulted in 175 premature deaths and 1.29 million visits to the doctor so far this year.

It would also have resulted in an estimated loss of HK$394 million in healthcare costs and lost productivity.

While officials have strived to clean up vehicles and power stations locally, pollutants blown in from tens of thousands of factories in southern China’s manufacturing and export hub of the Pearl River Delta have also had a serious impact on air quality.

Officials in Hong Kong and neighbouring Guangdong province have set aggressive air pollution reduction targets, although green groups say much more needs to be done.

Hong Kong aims to reduce its energy intensity by at least 25 percent by 2030, and has promoted the use of clean fuels and improved energy efficiency to reduce carbon emissions.

A court-ordered suspension of 64 projects worth an estimated $9bn to $12bn at the world’s eighth-biggest petrochemicals hub in eastern Thailand is in its fifth month, raising questions about whether a country with a government fighting fires on multiple fronts is a safe bet for investment.

Analysts say the freeze at the Map Ta Phut industrial estate is the last thing the embattled coalition government needs right now and many investors fear resolution of the problem will take a back seat while the country remains locked in a political crisis.

As a sign of growing concern about the outlook for Southeast Asia’s second-biggest economy, the cost of insuring Thai sovereign debt has risen in tandem with an increase in political tensions, with five year credit default swaps recently hitting a nine-month high.

Steve Vickers, president and CEO of FTI-International Risk, said that while protests and talk of coups, assassination threats and even civil war grab the headlines, a protracted standoff at Map Ta Phut may have a bigger impact on investor confidence.

“Unlike political concerns, risk concerns and protests, this is very quantifiable – you can see how much this is going to cost,” he said.

“Thailand is beginning to ratchet up an unfortunate [political risk] score. These are big investments and from the foreign perspective, these issues are piling up … It’s not painting Thailand in a very elegant light.”

Whether this is the result of a favour to big business or a simple bureaucratic oversight, the government is now in hot water, paying the price for failing to heed warnings to set up an independent body to assess health and environmental risks from industrial projects, as required by the 2007 constitution.

A local environmental group finally got its way last year having lobbied successive governments to clean up Map Ta Phut since 1996, claiming pollution from the plants had caused at least 2,000 cancer-related deaths. The group has threatened to target another 181 projects if they, too, fail to comply.

Illustrating the widening financial toll from the injunction, Thai energy giant PTT, which has 18 stalled projects, announced in early February that it had been forced to delay for the second time a consolidation plan aimed at boosting efficiency and cutting costs.

Share prices of PTT, other affected companies and some downstream businesses were on the up in the weeks before the October court injunction – initially on 76 projects – but have largely fallen since, although political uncertainty was also a factor weighing on the market.

More stable alternatives?

Many foreign and local investors say Prime Minister Abhisit Vejjajiva’s administration already has a credibility problem, so its heel-dragging over the complicated Map Ta Phut saga adds to concerns about government effectiveness and bureaucratic unpredictability and may prompt existing or potential investors to turn to more stable alternatives in the region.

Ford Motor Co has put on hold a planned $500m passenger car plant in Rayong, the same province as Map Ta Phut. Without referring to the injunction, Ford said it was in discussions with the Thai government. Analysts close to the case reckon the row has given Ford second thoughts.

The Japanese Chamber of Commerce in Thailand said 33 percent of its businesses in the country had been adversely affected by the injunction at Map Ta Phut and it has repeatedly warned that Japanese investors might choose to do business elsewhere.

“This is more serious than the airport closure and the unrest resulting from the political uncertainty,” Munenori Yamada, head of the Bangkok branch of the Japan External Trade Organisation, told a recent meeting of Japanese investors.

He was referring to a week-long blockade of Bangkok’s airports by anti-government protesters in November 2008, which stranded more than 230,000 tourists and disrupted trade flows, and riots last April in Bangkok. Both incidents led to downgrades in Thailand’s sovereign credit rating.

And Thailand’s political problems are far from over as lawmakers and “red shirt” protesters allied with twice-elected former premier Thaksin Shinawatra attempt to unseat Abhisit’s “illegitimate” government in coming weeks.

On February 5 Abhisit announced proposals he hopes can get the stalled projects restarted in six to nine months, but many analysts believe this is unrealistic and expect the saga to drag on much longer, a scenario the industry ministry has said could cost $18bn in terms of lost revenue and jobs.

The government has sought to speed up the drafting of new legislation and the formation of numerous panels, committees and boards to carry out assessments, hold public hearings and help companies comply with regulations, all aimed at appeasing disgruntled investors.

But analysts say that, even if new health and environmental impact measures are in place soon, the government still has no control over the legal process and whether individual projects will actually be approved.

The suspended operations still need to get the nod from a yet-to-be-formed regulator, independent experts and local people who say the plants are seriously damaging their health.

So six to nine months could be wishful thinking.

“This is very serious and it’s something that can’t be unravelled easily,” said Andrew Stotz, an economist in Thailand for more than 15 years.

“This is a case of the people against the government and there’s nothing to negotiate. There’s a very real possibility that new procedures could be futile, because these projects are still likely to be contested.”