Friday, February 27, 2009

South Africa’s fourth fully democratic election takes place on 22 April, 2009

South Africa’s fourth fully democratic election takes place on 22 April, and electioneering is already underway. This election is different from the previous three elections in certain important respects:

  • The hope, and what one might describe as the innocence, which marked the first election in 1994, and which was enormously advantageous to the ANC, is now a thing of memories. In its place is a sense of disillusionment, and this applies right across the society.
  • The liberation or “struggle” legacy which was a feature of early elections, has faded over the years and, in any event, no party can today claim a monopoly of liberation credentials.
  • For the first time, with the emergence of COPE (Congress of the People), the breakaway group from the ANC, the ANC is being seriously challenged by people who can claim to share its experience and legacy.
  • This signals the emergence of a more conventional political party system – more a multi-party rather than a single-party dominated system.
  • After more than ten years of impressive economic growth, the election takes place as South Africa enters a recession.
  • South Africa has always had a strong print media, but newspapers seem to be coming into their own in this particular election. Their reportage of the campaign has been commendable with comprehensive coverage of all points of view, penetrating analysis and intelligent commentary. The effect also of the SABC, the state broadcaster, is to some extent neutralised by the emergence of the ETV station.

These are things that distinguish the coming general election from previous elections. But what about the issues? There is a profound sense that the present government has failed in what is generally called “delivery” – in all spheres of government. And there is a sense that this is due to incompetence, lack of leadership, and corruption. The result is that there really is only one issue: And that is support for public decency, government integrity and recognition of the principles of the Constitution.

Most of the established opposition parties – for example, the Democratic Alliance and the Independent Democrats – are focusing quite naturally on these issues. But something special needs to be said about COPE. When the leaders of COPE broke away from the ANC – for the reasons outlined in an earlier Insight – they called a constitutional convention in Johannesburg. Dominating this was a high-level of moral purpose. The conference speakers were chosen less for their direct political clout than for their moral or philosophical status and whether they could contribute in broad terms to what constitutional democracy means. Speakers on that occasion deplored the attacks on the judiciary and spoke up for the rule of law, independence of the courts, accountability, and integrity and transparency in government. It was a very different experience from what South Africans had become used to, and for that rea son quite remarkable. The point was made at the time that this reflected essentially the emergence of a new middle-class and its values.

Apart from who is going to lead the country after April, the only serious and main issue is in response to the general disquiet at the sleaze of our politics over the past few years – going back to Tony Yengeni’s imprisonment for a kick-back on the arms deal, when senior ANC colleagues cheered him to jail; and the Travelgate fraud – when a number of MP’s abused their travel allowances with most of them getting off scott free. And the arms deal, which like a rotting beached whale has cast a pall over our politics for the last ten years, and will no doubt continue to foul the air after the April election.

But the litany doesn’t end there:

  • The last fortnight has seen Khaya Ngqula, the ever controversial and incorrigible head of SA Airways, been required to resign because of alleged nepotism.
  • In what can only be described as an enormous personal tragedy, Carl Niehaus, prominent and up-front spokesperson for the ANC, was forced within this week to resign as spokesperson for the ANC because of serial fraud and dishonesty.
  • The on-going trial of Jackie Selebi, suspended Commissioner of Police and the dragged out trial of Judge Motata on allegations of drunken driving.
  • The antics of Judge Hlophe of the Cape Supreme Court.
  • The British government’s insistence that South Africans visiting the UK – or even passing through – require visas because South Africa’s travel documents are too freely available to non-South Africans.
  • The arrest at Heathrow, twice within a month of an SAA cabin crew for trying to smuggle drugs into the UK; and on top of all this
  • Jacob Zuma’s endless and determined efforts to stay out of court on corruption charges. (A very recently published IPSOS-Markinor poll showed that only 41% of ANC supporters believe Zuma is innocent of corruption.)

The sense of depravity and moral malaise in the society runs deep – to the point where Archbishop Emeritus Desmond Tutu at one stage said he wouldn’t vote. And Peter Bruce, straight-talking editor of Business Day in his personal column last Monday wrote: “Oh, it [the ANC] will win the election alright. The cogs still turn. But the rot and the corruption in and of the ANC is now so advanced and so unstoppable that only the most devoted follower would decline to acknowledge it. Fortunately, for Zuma there are enough of those still around.”

Bruce gives something of the flavour of South African politics at the moment and interestingly COPE, more effectively than others, has grasped this. It didn’t please the politicos in the party when the National Committee appointed Bishop Nvume Dandala, former presiding Bishop of the Methodist Church in Southern Africa as the Party’s presidential candidate. He is a senior and highly-recognised churchman, and his appointment as COPE’s presidential candidate is a stroke of brilliance – with one very important proviso – that he has the instinct for politics. As the Cape Times put it in an editorial: “The appointment seems aimed at claiming for COPE the moral high-ground. It has very deliberately chosen a man who visibly contrasts with the ANC president Jacob Zuma. Dandala is younger than his ANC counterpart. He has a solid reputation, free of blemish or baggage of any sort. He is skilled in communications. He comes from a church very different to that of the ANC, and some in the electorate may see in him much needed new blood, a man who offers a chance to break from the mould of ANC-dominated political life.”

Dandala, in a short statement after his election, said this: “I joined COPE because I have spent my life working for peace, fighting for justice and seeking a society where integrity is the most important guiding philosophy. I found in COPE people who share these values. Voting for COPE gives South Africans a chance to vote for a new beginning – for a government where integrity guides not self-interest. You’ll be voting for a robust fight against corruption. You will vote for a society where we can all stand together to build the principled society South Africans deserve.” These are welcome sentiments – and coming from whom they do, they may be taken seriously. On the ANC side, aside from an occasional Thatcherite statement by Trevor Manuel or by Minister of Education Naledi Pandor – two stars in the ANC’s political firmament – ANC government rhetoric is uninspiring. In fact, it is no exa ggeration to say that the tone is being set by the out of control and ignorant ANC Youth Leader Julius Malema.

No recent polls have been conducted to determine what the support for individual parties is. But right now, I don’t believe anybody doubts that the ANC will win the election. But it is possible that the opposition collectively could put together in the region of 35 - 40% of the vote. There is likely to be a big “stay away” and a significant “lie” factor which will mainly work against the ANC.

Dr Denis Worrall
Email: kamreyac@omegainvest.co.za for all enquiries

If you would like to reproduce any of Denis Worrall’s E-Letters you must include the source of your quote and an email address (denisw@omegainvest.co.za). Please write to info@omegainvest.co.za and inform us of any reproductions. Please include where and when the copy will be reproduced.

Denis Worrall is Chairman of Omega Investment Research, a South African based investment advisory and strategic marketing consultancy. He is a graduate of the University Cape Town (M.A.), University of South Africa (LLB) and Cornell University (Ph.D) where he was a Fulbright Scholar He started his career as an academic lecturing at universities in the US, Nigeria and South Africa . His last post was as research Professor at Rhodes University. He practised as an advocate for seven years in Cape Town, before going into public life. He has been a Member of Parliament, chairman of the Constitutional committee of the Presidents’ council, South African Ambassador to Australia and the Court of St James (London).

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Tuesday, February 24, 2009

Boeing, Lockheed win $2.8bn UAE contracts

The Armed Forces has acquired 16 military transport aircraft from Boeing and Lockheed Martin, the US aerospace and defence giants, for Dh11 billion (US$2.99bn) in a deal arranged by an Emirates leasing company, officials announced yesterday.
The planes will be used to support peacekeeping missions, such as in Afghanistan, and for humanitarian assistance and disaster response, such as the recent earthquakes in Pakistan and the 2006 tsunami in Asia.

The sale includes four C-17 heavy transport aircraft from Boeing Integrated Defense Solutions, valued at Dh4.3bn, and 12 Lockheed Martin C-130J Super Hercules, worth Dh5.9bn, in addition to supplementary contracts for training, services and support.
The contracts follow similar purchases for the C-130 and C-17 by Qatar last year, as Gulf nations have begun expanding their capabilities to respond to humanitarian events and environmental disasters in the Arab world.

Last October, Qatar bought three C-130Js from Lockheed, in addition to an order last July for two Boeing C-17s and options for two more.

The latest contract is the largest to date for Waha Capital, an Abu Dhabi-based leasing company, and also the first known private-public partnership involving the financing of aircraft for the Armed Forces. Waha Capital is expected to purchase and manage the aircraft on behalf of the military.

Waha Capital is a 12-year-old holding company that began as Oasis Leasing and was renamed two years ago in a restructuring programme. Its leasing portfolio includes district cooling systems as well as 47 aircraft in use by commercial airlines worldwide.
“It is a first of its kind that such a transaction is arranged, structured by the private sector,” said Hussein al Nowais, the chairman of Waha Capital.

The two purchases dwarf other deals announced so far at the semi-annual IDEX military expo, the largest arms exhibition in the Middle East, as Gulf states continue to acquire arms and military equipment even as the price of oil has dropped in recent months.

Officials from Lockheed and Boeing framed the sale as a key vote of confidence that could pave the way for further sales in the region, one of the largest markets for military systems.

Rick Groesch, the regional vice president of international business development at Lockheed Martin, said the Middle East had begun taking a bigger slice of global revenues.

In the UAE, Lockheed recently signed a deal with the Armed Forces for between 200 and 300 PAC-3 defensive missiles, worth up to Dh6.61bn, and is also expected to sell the THAAD missile defence system, which can intercept ballistic missiles in outer space.

Waha Capital said it had already begun tapping the markets to raise the capital needed for the deal. “We will be going to local, regional and global markets,” said Mr al Nowais.

An initial deposit for the aircraft, typically of between 20 per cent and 25 per cent of the purchase price, was due soon, he said. Waha expected to announce additional financing in the summer.

The Air Force currently flies six military transport planes, while the Italian military uses Bateen Air Base to conduct support missions to troops in Afghanistan.

igale@thenational.ae The National

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Friday, February 20, 2009

US-GCC ties should be Obama's top priority

The ascent of GCC countries as the financial and economic powerhouse of the Middle East poses both opportunities and challenges for the United States.

According to a study by a Dubai-based think-tank, this means preserving the US's relations with the GCC should be one of the top issues that the Obama administration has to address.

According to Gulf Research Centre's (GRC) "US-Arab Economic Relations and the Obama Administration" report, the US needs the region more than ever since the region would not only be instrumental to finance its deficit, but it also has a large stake in the American economy on account of its investments in dollar-denominated assets.

In addition, the current economic crisis is forcing the US to introduce a deficit-financed economic stimulus plan, which will require even more investment by GCC countries and China in US government treasury bills and bonds.

Nevertheless, the region is also obliged to assist the US economy as most of the Gulf's currencies – except Kuwait's – are pegged to the dollar.

"The US's high deficit, which allows it to maintain its large volume of imports, can put added downward pressure on the dollar, which is a matter of concern for GCC countries, who hold more than 60 per cent of their foreign assets in dollars," the report said.

The value of these foreign assets has decreased by an estimated 25 per cent during the recent turmoil in global financial markets. Consequently, GCC governments have no alternative but to prevent a dollar collapse in the short run because of their existing dollar assets. But a gradual divestment towards European and Asian assets may occur in the long run if they fear further weakness in the dollar.

And since the Obama administration has already announced that it plans to finance a large economic stimulus plan in the next few months, it must engage in close consultations with its GCC and Asian creditors, who will be asked to purchase a portion of this additional debt, it added.

Although stimulating the US economy will remain the top economic priority of the new administration, it must also demonstrate a strong commitment to long-term price stability and to the strength of the dollar in order to reassure its international creditors and restore confidence in the US economy.

"Given the magnitude of debt involved this will be a very difficult task, but it is absolutely essential," said the report, written by Nader Habibi and Henry L Leir, Professors at the Brandeis University, and Eckart Woertz, Programme Manager, Economics, at GRC.

"The US economy will face new hardships in the long run if the GCC countries and other international creditors lose faith in the stability of the dollar and reduce their investments in the US assets," it added.

Another issue to be tackled is the US policy towards foreign equity investments. As part of their long-term investment strategy, the GCC Sovereign Wealth Funds (SWFs) are allocating a larger share of their assets in equity investments but some political and media circles in the US have recently opposed large-scale investments that would offer a foreign investor substantive management power in large American firms. In 2005, for example, the US prevented the China National Offshore Oil Company (Cnooc) from acquiring Unocal, although its bid was better than Chevron's and this was followed by the strong political opposition to a Dubai-based firm's interest in acquiring six port authorities in the United States in 2006.

Notably, the sensitivity has diminished since 2007. Saudi petrochemical giant Sabic bought GE Plastics for $11.6 billion (Dh42.6bn), the Abu Dhabi Investment Authority (Adia) bought 4.9 per cent of Citigroup, and the Abu Dhabi Investment Council (Adic) bought the Chrysler building.

"As more and more American firms face financial difficulties in the current economic crisis, foreign investment is often an attractive alternative to bankruptcy and government bailouts," it said.

Some concerns, however, remain that SWFs could be used to serve political objectives and harm the national interests of the host countries.

To address this, the IMF formed a 26 member International Working Group (IWG) of Sovereign Wealth Funds to come up with a set of recommendations and guidelines for SWFs, leading to "24 Generally Accepted Principles and Practices" (Gapp) known as the "Santiago Principles".

It is important that the Obama administration support this process, says the GRC report, as such a step will facilitate larger GCC investments in US firms and provide more liquidity to the US economy.

And while the GCC tends to co-operate with the US as regards its economic sanctions against Iran, Washington needs to look at the issue more closely as Iran has established close trade and economic linkages to the region.

Figures from IMF show that the GCC countries enjoy a considerable trade surplus vis-à-vis Iran. Co-operating with US economic sanctions, therefore, will impose an economic cost on these countries.

GRC said the GCC would be the most impacted region by US pressures against trade with Iran. After China (14.3 per cent) and Germany (9.7 per cent), the GCC is the third largest exporter to Iran.

In addition, the UAE in recent years has emerged as Iran's window to the world, serving as a re-export centre for many types of machinery and spare parts that Iran needs.

GCC countries also look to Iran to overcome their looming natural gas shortage – and co-operation with US sanctions would make it more difficult for them to develop their natural gas trade with Iran.

GRC suggests if the United States insists on broad GCC participation in the sanctions, it will have to offer some political and economic concessions to offset the above-mentioned costs that GCC countries will have to incur.

"From the GCC's point of view, an even better alternative would be an attempt by the United States to resolve its dispute with Iran through direct negotiations, allowing the GCC countries to remain neutral," it added.

There are also a host of other factors that the Obama administration needs to consider in pursuing US-Middle East economic relations.

The growing competition for Middle East oil, for one, remains of prime importance.

The penetration of Chinese and Indian companies in the Mena energy markets not only takes away business opportunities that might otherwise have been awarded to American firms, but also diverts a larger share of Middle East oil exports to Asia.

This is because the service contracts awarded to Chinese and Indian firms are often part of larger long-term oil and gas export contracts, which sometimes involve reciprocal investment agreements.

State-backed Chinese oil companies are in a better position than the Western ones to overlook short-term commercial profitability in favour of long-term strategic considerations.

China poses another challenge to the US States' energy interests in the Middle East by investing in countries that are off-limits to Western energy firms because of international sanctions and political considerations.

Whereas the US has imposed sanctions on Sudan and Iran, for example, Chinese oil firms have aggressively penetrated these countries. Both China and India are expected to expand their energy co-operation with the Sudanese government despite international criticism.

More significantly, China and India have both invested in Iran's oil and natural gas. China is also involved in the construction of a 240-mile oil pipeline for transport of crude from the Caspian Sea port of Neka to a refinery near Tehran.

Overall, the policies that China and India are currently pursuing with respect to securing long-term energy supplies from the Middle East pose a challenge to the US oil and security interests in the region.

Then there is the issue of free trade agreements. The George W Bush administration tried to strengthen trade and investment ties with Mena countries by negotiating bilateral free trade agreements (FTA). It has already signed FTAs with Morocco, Israel, Jordan, Bahrain, and Oman. Currently negotiations are under way with several other Mena countries, including Egypt, Qatar, and the UAE.

The current US trade agenda in the Middle East was formulated by the Bush administration in 2003 as a graduated path toward a comprehensive US-Middle East FTA.

According to this plan, the United States would first negotiate bilateral FTA agreements with individual Middle Eastern countries and over time consolidate these individual FTAs into an integrated regional FTA.

Critics argue, however, that the separate FTAs that the United States is interested in undermine existing regional trade agreements among Arab countries.

Tensions with Bahrain rose, for example, when concern arose that the US-Bahrain FTA (which went into effect in August 2006) violated the GCC customs union, which called for a five per cent tariff on imports from non-GCC countries.

In contrast, the European Union and China are negotiating regional FTAs with groups of Middle Eastern countries and encouraging inter-Arab economic integration.

The Arab countries, says the report, seem to prefer collective free trade agreements with their major trade partners. As the Obama administration reviews the state of US economic relations with the Middle East, it must decide whether to continue the current policy of independent trade negotiations or to switch to a collective FTA option with multi-country blocs, similar to the approach taken by the European Union and China.

"By modifying its FTA programme along these lines, the United States would demonstrate its goodwill toward the region and would in all likelihood, be able to sign trade agreements with larger groups of Arab countries," it said.

The promotion of growth and economic development in Mena countries needs to be in Obama's list as well.

In light of the sizable economic and geopolitical interests of the United States in the Middle East, it is in the American national interest to promote economic growth and development in the less developed areas of Middle East for several reasons, GRC said.

First, poverty and underdevelopment create a breeding ground for the promotion of militancy and political violence, which is frequently directed toward the United States.

Second, if properly channelled, the region's oil revenues are large enough to finance its much-needed sustainable development. If the US can help address this, US businesses will benefit from the economic growth and development of Mena countries, it added.

By
Karen Remo-Listana on Thursday, February 19, 2009

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Tuesday, February 17, 2009

Partnerships that point the way to Arab-US progress

President Obama has begun his administration by calling for better relations between the US and the Muslim world, based on “mutual interest and mutual respect”. Diplomacy in the Middle East, Afghanistan and Pakistan has been the administration’s first priority.

While diplomatic action is essential, so are stronger economic partnerships. The need is urgent, nowhere more so than in the Middle East. Across the region, a growing population of jobless young people sees no path to prosperity. At the same time, the US faces crippled capital markets and a massive trade deficit.

The Obama administration, the US business community, and their counterparts in the Middle East must turn the current economic crisis into a joint opportunity. By combining our resources and skills, we can improve education, reform regulations, create jobs, and promote trade across the region. And as we do, millions of people in the region and in the US will realise that they have far more to gain by building up business than by concentrating on our conflicts.

Many in the Middle East and in the US will greet this call with both scepticism and hope. In the region, many business leaders see US companies as ill-informed, unskilled at building long-term relationships, and too short-term in their thinking about economic opportunities. They also see the US government as providing too many subsidies that stifle business opportunities. Yet they recognise how significant US technology, managerial practices and market access can be in driving growth.

In the US, business leaders tend to view the region as a difficult place to operate: regulations are complex, favouritism is widespread, personal and operational security may be threatened and the labour force is not well prepared for high-productivity jobs. Historically, the oil sector has been seen as the major “play”, with little scope for innovation. But with the rising affluence and investment clout of the Gulf, and ongoing reforms that are improving the business climate in a number of countries, new opportunities are raising interest.

Today, Jordanian and Moroccan universities and businesses are partnering with the US Education for Employment Foundation, creating successful job training programmes that link graduates directly to employers. Egypt’s government is making rules for business registration and operation simpler and more transparent, with support from the US and other partners. In turn, US businesses are finding new opportunities to invest in Egypt. Jordan and Oman have signed free trade agreements with the US, with substantial economic gains for all. Masdar in Abu Dhabi has partnered with General Electric and other US companies in its alternative energy investments. And Coca-Cola’s distribution franchise in the West Bank, the National Bottling Company, has been one of the largest Palestinian employers during the past decade.

US and regional business partners are establishing networks and forums to build longer-term relationships. The American Chambers of Commerce in the region have become important meeting points for local entrepreneurs to deepen their connection with US business partners and practices.

These and many other partnerships point the way to a future where government, business and civil society across the Middle East and in the US work in close collaboration to produce joint economic gains.

The current economic crisis raises the stakes – and the potential benefits – for stronger partnerships. Gulf states’ sovereign wealth funds and private capital have become a critical engine for sustaining the world economy. The region has a large and growing pool of potentially high productivity workers, and a strategic location for European and Asian markets. The US maintains the world’s greatest concentration of innovative talent in many sectors, from biotech and IT to building design, and its largest consumer market.

Along with more than 30 other participants in the Leadership Group on US-Muslim Engagement, we have called for the Obama administration and US business leaders to take full advantage of these opportunities by deepening economic relations with the Middle East and the broader Muslim world.

As a first step, the Leadership Group recommends that the administration and partners in the region co-convene a high level business-government summit to launch a joint initiative for job-creating growth. We see the summit as a way to focus both governments and entrepreneurs on an agenda of economic policy reform, education for employment, and business partnerships to generate jobs and profits within the region and in the US.

Creating a more peaceful future for the US and the Middle East will require not only diplomacy, but also development throughout the region. Now is the time to invest in a reform, jobs and growth agenda that can benefit us all.

By Daniel Christman and David Fairman - The National

Lt Gen Daniel Christman (US Army, retired) is the senior vice president for international affairs at the US Chamber of Commerce and a member of the leadership group on US Muslim engagement. David Fairman is managing director at the Consensus Building Institute and co-director of the US Muslim Engagement project.



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Listen to an Interview with Diane Jones, Senior Commercial Officer at the U.S. Embassy, Tripoli, Libya.

Listen to an Interview with Diane Jones, Senior Commercial Officer at the U.S. Embassy, Tripoli, Libya.

For slower internet connections, right click on this link to download the file.

Ms. Jones speaks about opportunities in Libya and what it means for American exporters. She discusses the size and scope of vaious projects and challenges of this growing market. Finally, she explains how the U.S. Commercial Service can help U.S. companies succeed in Libya.

http://export.gov/middleeast/country_information/libya/market_brief.asp

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Monday, February 16, 2009

Nouriel Roubini trusts Timothy Geithner to get it right on US banks

The "N" word, of course, is nationalisation: nationalisation of failing banks which are continuing to wreak havoc on the world's economies.

"Many US banks are insolvent, even the major ones," argues Roubini, professor of economics and international business at NYU Stern, New York University's business school, without naming names. "Call it nationalisation, or if you don't like the dirty N-word, use 'receivership' or whatever is palatable."

Call it what you want, says Roubini, but without nationalisation of some of the major banks in both the US and the UK, the banking crisis will get worse and the current recession deepen.

"If the problem of banks is one of liquidity, you can do anything you like, which seems to me what the US Treasury wants to do," he says, with reference to US Treasury Secretary Tim Geithner's slightly-fumbled banking bail-out plan launched last week to much disregard from Wall Street.

"But if the banks are insolvent, none of these will work," says Roubini of Geithner's three-part plan which includes stress-testing major banks to see if they need more public capital.

"To see which banks are insolvent, a stress test is a step to making these tough decisions," he says, tough decisions which are so politically charged that they need to be "done right" due to the number of stakeholders involved who face being wiped out if nationalisation were to occur.

"Triage the banks that are solvent but illiquid, and those that are beyond redemption need to be nationalised. But it's urgent to do it sooner rather than later. Let's not wait another 12 months."

Roubini, one of the world's foremost experts on the current banking crisis, argues that until now, the US government, like many of its European counterparts, has been busy "trying to provide manna to everyone" without actually working out who needs what.

So why, given that Geithner appears to know some of what is needed, does Roubini think he didn't go the whole hog last Tuesday?

"The benevolent view of what they've done is realise the problem, but maybe not go as far as they might like to. A month into the [Obama] administration, saying "we're going to take over most of the US banks" because they're insolvent - that might lead to being accused of being Bolshevik," he surmises.

The second reason Geithner may have held back, Roubini adds, is that perhaps he and the rest of Obama's economic team – including senior adviser Larry Summers and chairman of the White House Council of Economic Advisers Christina Romer – were banking on the economy recovering somewhat later in the year, which might lead to less stress being placed on bank assets. "A sense of cautiousness, perhaps?" he says.

Based on Roubini's forecast for the US economy, such caution is perhaps a little unwise.

He estimates that a "broad recession" – will continue well into next year, with some form of recovery into 2011. But even that is not certain, he argues, saying there is a "risk" that the current recession does not create a U-shaped curve as the majority do, but that the US ends up like Japan of the 1990's with "nasty L-shape stagnation."

"In a banking crisis, some banks are so under-capitalised that they might as well just take them over," he argues, pointing out that often it is better from a capitalist-friendly perspective to take them over, clean them up in public ownership, and sell them off again, than it is to leave them flailing for help on the open market.

Roubini, who turns 50 in March, makes his comments with a degree of inside knowledge. Although he is no way connected to the Obama administration – and is an independent economist whose only commercial tie is as chairman of economic analysis firm RGE Monitor – he did work with Geithner at the tail-end of the Clinton administration.

When Geithner was promoted to under-secretary for international affairs, Roubini became his adviser, working together for just under a year.

"I trust him," he says, despite acknowledging that he may not quite have got his ducks in a row yet. "He's someone I know well and I have great respect for him."

Why then did Geithner get it so wrong, with his ill-timed and ill-structured banking bail-out which was in many ways smothered by the ongoing debate on the now-passed $787bn fiscal stimulus package?

"You cannot blame him," says Roubini, pointing out that he's facing the "worst economic crisis since the Great Depression" and also that he is just one of a number of high-level economic advisers working under Obama. Although he does concede that his old boss could have waited for a few weeks to "get it right."

Getting it right, in Roubini's eyes of course, means nationalisation, which will invariably involve Geithner returning to the US Congress for additional funds on top of the existing $700bn bail-out fund. "Sooner rather than later, they'll need more money," estimating that $1 trillion to $1.25 trillion of extra money needs to be injected in to the US financial system to revive it, having previously warned that credit losses from US institutions will total $3.6 trillion by the time the crisis is over.

"If you do it fast, you will get private money. But if you take time, and mix good apples with bad apples, then private investors won't want to get involved," he warns.

Aware that going back to the US Congress for an extra $1 trillion of taxpayer's money will be a hard sell for Geithner, Roubini stresses that sum would not necessarily be the final cost. "That's not necessarily the total loss for the taxpayer, as the net costs are less than the headline number due to interest payments and the hope that most of the capital will be repaid."

"They'll get to that point, it's just a matter of when," shrugs Roubini, who, nationalisation or not, will no doubt be watching the actions of his former boss with keen interest.

By James Quinn, Wall Street Correspondent

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4639504/Nouriel-Roubini-trusts-Timothy-Geithner-to-get-it-right-on-US-banks.html

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The most powerful banker in the Gulf

The largest economy in the Gulf has a new custodian. Having run the country’s finances since 1983, Hamad Saud al Sayyari, 68, has stepped down as head of the Saudi Arabian Monetary Authority (SAMA). It should be a fairly easy transfer, for Mr al Sayyari was replaced by his right-hand man of more than a decade, Muhammad al Jasser.

Educated in California at San Diego State University, Mr al Jasser, 54, enters the office of central bank governor during auspicious times. Saudi Arabia is seen by many economists as the only country in the GCC with a chance of rising above the global economic morass this year. With more oil and people than the rest of the GCC combined, if Saudi Arabia fares as well as analysts expect, Mr al Jasser could soon find himself in a position of even greater economic clout with regard to his neighbours – and indeed the rest of the world – than his predecessor ever had.

Take GCC monetary union, for instance. Within the GCC, almost no initiative can pass unless the Saudi Arabian giant stands behind it. So if Saudi Arabia decided to opt out of the project to establish a single Gulf currency, the entire project would almost certainly fall apart. Mr al Jasser may not be the one actually drafting GCC economic policy during the next few years, but he and his delegation might as well be.

To the relief of the region, it seems Mr al Jasser plans to maintain his predecessor’s course when it comes to Saudi Arabian macroeconomic policy. Officials and analysts say he has been groomed for the position, and that there should be no radical policy changes from SAMA in the near future.

“He is a very strong character,” said John Sfakianakis, the chief economist at Saudi Arabian British Bank. “In that way, you will see some change in how SAMA deals with the outside world. He is very captivating, very eloquent.”

Mr al Jasser has developed a reputation for steering a straight course in the past few years, despite accusations that policies he advocated were detrimental in the short term. Last year, when there were increasing calls for the country to de-peg the riyal from the US dollar, Mr al Jasser maintained that having the peg was a smart policy, even though it may have resulted in short-term inflation. Now, with inflation on the decline and the dollar resurgent, the peg again seems like smart policy.

“He is a believer at the moment that the peg serves a very important purpose and it is to [Saudi Arabia’s] advantage. I think SAMA will hold its position on currency policy, on being a proponent of the common Gulf currency and allocating foreign assets in a very conservative manner,” Mr Sfakianakis said.

Since October, SAMA has cut its interest rates five times, lowering them by more than half. Mr al Jasser said yesterday that the cuts had alleviated any funding shortage in the nation’s banking system. The Saudi economy and financial sector were “now going through a phase of stability that is subject of envy … This shows the success of the monetary policy”, he said.

Mr al Jasser also indicated yesterday that he thought the country would rebound from the effects of the global economic crisis faster than most other countries in the world. If his prediction comes true, Saudi Arabia could use its increased economic strength to gain sway within the region.

“The GCC leaders all want the new GCC central bank to be located in their country. It’s the crown jewel. And people have been talking about Saudi as the best place, since it is the biggest economy. They are already the biggest players, and any more power could help their chances of winning,” said a Kuwaiti banker.

Saudi Arabia finds itself in such a good position now for a number of reasons. First, because of its conservative approach to finance. For the past few years, Saudi officials were chided for being too insular, and for not opening their country up to international capital flows. As recently as last year, Dubai was held up as the model for a new kind of Gulf internationalism, in which large amounts of foreign money could be leveraged to create rapid growth.

Not any more.

In the past few months, while Dubai felt the brunt of the global financial crisis, many say Saudi Arabia’s more insular economic model has been vindicated. Unlike the UAE, Kuwait and Qatar, Saudi Arabia did not create a property bubble, nor did it allow vast inflows of speculative money to throw its banking system off balance. Additionally, restrictions on foreign investments kept Saudi companies from growing dependent on the availability of foreign money, a mistake that many say the UAE and Kuwait are now being punished for.

“In Saudi Arabia, their exposure to global markets is not too high, their loans-to-deposits ratio is good, so they are still in a good position. We like Saudi Arabia. In the current climate, they feel proud that they did not open up too quickly to international inflow of capital, nor did they embrace globalisation as fast as Dubai did,” said Henry Azzam, the chief executive of Deutsche Bank’s MENA division in Dubai.

“We are excited about Saudi Arabia as we have not been excited about any market in the region for a long time,” said Ibrahim Masood, a senior investment officer at Mashreqbank in Dubai, in a recent research note. “We do expect the Saudi economy to come out of 2009 in better shape than most of its regional peers.”

Saudi Arabia’s saving grace, economists say, is its government’s ability to continue spending through the economic crisis. Although the Saudi economy is expected to slow to a near halt this year as oil prices plumb recent lows, the government has stored enough money to continue spending at similar levels.

SAMA, which stores large amounts of the country’s oil wealth, sustained a policy of “very liquid, very safe, minimal risk” international assets, Mr al Jasser said in November. The strategy has helped it avoid some of the losses that other Gulf sovereign funds are likely to have sustained in recent months, analysts say.

Even if Saudi Arabia emerges from this crisis in a position of economic triumph, there is little reason to think it might finally start opening up or allowing local banks to operate a bit more freely. In fact, Mr al Jasser seems ready to make Saudi Arabia even more inward looking. Last month, he called for the country’s banks to be even more strictly regulated by the government, citing a lack of supervision and the irresponsibility of ratings agencies as the prime causes of the global financial crisis.

* With agencies

tpantin@thenational.ae The National

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Sunday, February 15, 2009

Dubai revamps big players

Dubai has embarked on a broad reconfiguration of some of the emirate’s biggest and most important companies as it adjusts to the impact of the global economic crisis.

Yesterday, Dubai Holding, one of the emirate’s largest business conglomerates, said it was consolidating the back-office operations of its property companies and two of its financial arms in the latest move by the Government to adjust as the global economic crisis hits the Gulf.

Meanwhile, Nakheel, the sprawling property arm of Dubai World, has merged an array of its business units to form five entities as it adapts to market conditions and prepares for the challenges that lie ahead.

“Nakheel continues to readjust its current business objectives to match supply and demand in the most effective way,” the company said in a statement released to The National.

The moves are the latest examples of how governments in the Gulf are responding to intensifying pressures as the global financial crisis weighs on economies that were booming as recently as six months ago.

Since then, oil revenues – the chief creator of wealth and driver of economic activity for much of the region – have plunged by 75 per cent and the international credit crunch has undercut regional financial and property markets.

Although Dubai does not benefit directly from oil, its economy has benefited greatly from the tourist traffic and booming investment in property and financial assets that the surge in oil revenues created in the region. As those funds have dried up and international credit markets have frozen, the emirate has moved to adapt.

Dubai Holding said yesterday it would merge the administrative and back-office functions of Dubai Properties, Sama Dubai and Mizin, a subsidiary of Tatweer, to form “closer working relationships by realising efficiencies through the consolidation”.
The statement said the move would not change the companies’ “core activities” or have any impact on the legal relationships the companies have with their current partners, including their suppliers, contractors and investors.

In November, Sama Dubai said it was reviewing its eight projects, which together are worth about Dh202 billion (US$54.99bn). At least two have since been put on hold – one in Bahrain and one in Saudi Arabia.

Dubai Properties, the largest of the three with Dh348bn worth of projects, has postponed work on its Mudon development in Dubailand. Mizin has three projects in Dubai worth Dh36bn.

In a parallel move within the conglomerate’s financial firms, Dubai International Capital (DIC) and Dubai Group will also merge their back-office operations. The chairman of Dubai Group, Soud Ba’alawy, and the chief of DIC, Sameer al Ansari, were appointed co-chairmen of the combined Dubai Holding Investment Group, an existing entity that will now house both companies.

Tom Volpe, who is the chief executive of Dubai Group, will become chief executive of Dubai Holding Investment Group and acting chief executive of DIC.

Nakheel’s moves are part of a longer-running overhaul of the country’s largest property developer. In January, Nakheel merged the teams working on its Waterfront and Palm Jebel Ali projects and appointed Marwan al Qamzi as the managing director of the group.

According to a statement from the company, the most recent moves merge the business units for Palm Deira, Mina Rashid and The World to form Nakheel Northern Coastal Projects. The division is headed by Adnan al Naqi.

The Design Group and Universe Master Planning divisions have also been combined to form Nakheel Asset Management, according to an internal e-mail reviewed by The National. The group is now headed by Abdulrahman Kalantar.

The shake-up has resulted in cost-cutting measures including layoffs in recent weeks, as well as a changeover in senior management for each new business unit, according to a person familiar with the restructuring process.

Nakheel has not confirmed the redundancies. The company reduced staff by 500 in December.

Elsewhere, Hamza Mustafa, the former managing director of The World, has been appointed managing director of Nakheel Leisure, a unit that includes Nakheel Hotels and other new initiatives, while Johan Schumacher is managing director of Palm Jumeirah/Investment projects, which includes Palm Jumeirah, Tall Tower, Investment Projects and the Marine division.

The restructuring follows the postponement of work on some significant projects. These include Trump International Tower and Hotel, Frond N villas and Gateway Towers – all on Palm Jumeirah – and The Universe.

Construction work on Tall Tower, a building that is expected to be the centrepiece of the Nakheel Harbour and Tower Development and is expected to rise more than 1km, has been delayed for one year. The decision has led companies affiliated with the project to make cutbacks on staff.

By Angela Giuffrida and Sarmad Khan - The National

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Friday, February 13, 2009

GCC to earn US$4.7 trillion by 2020

GCC countries will earn more than US$4.7 trillion (Dh17.2tn) from oil exports by 2020 if prices hold at an average level of $50 per barrel, Ernst and Young, a global accounting firm, said Thursday.

The substantial stream of revenue—equal to more than four times the region’s 2008 GDP—will enable the region to easily survive, and even take advantage of the global economic downturn, Ernst and Young said.

Earnings by 2020 be 2.5 times as much as GCC countries earned from oil revenues in the last 14 years, the report said.

The revenues will leave regional economies with the resources to acquire assets overseas or continue financing local infrastructure improvements, Phil Gandier, the head of transactions advisory services at the firm, said in a statement accompanying the release of the report.

“Regional economies are well-placed to capitalise on opportunities emerging from the crisis, despite the fact that there are some concerns over issues related to the tightening of the credit markets and softening of property prices,” Mr Gandier said.

The report comes a day after the US Energy Information Administration (EIA), a division of the US Department of Energy, estimated that Opec members will earn $402 billion from oil sales this year, down 58 per cent from 2008. Opec, which includes four members of the GCC, will earn $530bn next year, the EIA said.

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US foray hits Emaar earnings

Emaar Properties, the developer behind the Burj Dubai, posted a Dh1.76 billion (US$479 million) loss in the fourth quarter of last year as the Dubai property market slowed and the firm’s foray into the US market was hit by a recession.

Its most significant loss came from investments in John Laing Homes, one of the largest home builders in the US.

Mohammed Ali Alabbar, the chairman of Emaar, said the company would focus on completing projects this year and suspend all new projects to assist in reducing supply to meet the new market conditions.

“The primary focus of Emaar in the last quarter of the year was to mitigate the negative impact of the global financial crisis by facing up to the new economic realities and identifying innovative strategies to sustain businesses in an unprecedented downturn,” he said.

Emaar bought John Laing Homes as US home prices were rising in June 2006 for Dh3.85bn, but it has been hit hard by the subprime lending crisis and recession, especially in recent months. John Laing Homes recently announced it was cutting staff and reducing its operations.

Emaar said it wrote down Dh1.77bn on its investment in the company in the fourth quarter, as well as another Dh919m because of the lowered value of the company’s inventory of land and homes. The write-downs wiped out what would have been a profit of Dh924m in the fourth quarter.

Bobby Sarkar, an analyst at Al Mal Capital, said Emaar had a reasonably good quarter except for the losses related to John Laing Homes.

“If you exclude the John Laing Homes goodwill and inventory write-downs, the company reported Dh0.15 earnings per share, which, although below consensus, presents a better picture than the headline number of a loss of Dh0.29 for the fourth quarter of 2008,” he said, adding that Emaar’s decision to make substantial write-downs indicated that Emaar was trying to put the bad news behind it.

Since the market turned at the end of the summer, Emaar has laid off more than 100 employees and introduced strategies to encourage more home buying, including two schemes which make it easier for buyers when mortgages are hard to get.

Emaar is expecting to open the Burj Dubai this year, which has been topped off with an antenna at 818 metres, according to contractors involved with the project. The tower is the tallest in the world, beating the Taipei 101 in Taiwan by about 309 metres.

It also plans to open two hotels under a new brand, The Address.

Property companies across the country are feeling the effects of a lack of access to credit and falling prices. Dubai property prices fell 8 per cent in the fourth quarter of last year, the first quarterly decline since foreign ownership became legal in 2002, according to Colliers International, a property consultancy.

Property companies are reviewing their strategies for this year, including changing the pace of projects, lowering prices and cutting costs. More than 3,000 layoffs have been announced in the sector in the past few months and more are expected.

When Emaar bought John Laing Homes in 2006, executives said it would allow them to expand Emaar’s reach into the booming US home market and take advantage of John Laing Homes’s expertise for international projects. But the company has not been able to weather the worsening economic conditions in the US.

Linda Mamet, a spokeswoman for John Laing Homes, said that staff had been cut across the company’s operations, particularly in southern California and Colorado.

The company did not say exactly how many jobs had been cut. Media in Colorado and California have reported that construction projects have also begun stalling, including the Banning Lewis Ranch in Colorado Springs and the Madrone in Hollywood.

John Laing Homes has retained Development Specialists, a legal consultancy, to assist in evaluating its operations.

Mr Sarkar said the next questions for Emaar relate to the details of its strategy for this year, including information about its cash position and whether it will lower prices to sell more of its inventory.

Emaar’s shares declined about 0.5 per cent in trading before the earnings report was released. It has lost 87.5 per cent of its value since the beginning of last year.

bhope@thenational.ae The National

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Full text of Obama's speech for the Lincoln bicentennial

THANK YOU. Thank you very much. Thank you. Thank you very much. Please everybody have a seat. Thank you. Thank you very much.

Well, it is wonderful to be back in Springfield, and I see so many familiar faces. To Mr. (Richard) Hart, to Marilyn (Kushak), to my secretary of transportation, Ray LaHood, to two of the finest governors that we've had in the past, Jim Thompson and Jim Edgar.

To Lura Lynn Ryan, and to our new governor, who's going to be doing outstanding work for us in the future, Pat Quinn.

To Reverend McCants, and to my dear friend, Loretta Durbin, I do feel guilty because Dick was the one who brought this event to my attention. I'm here and he's there. But part of the reason that Dick Durbin has been such a great friend, not just to me but to the people of Illinois, is because his work always comes first, and he has been unbelievable in providing leadership in the Senate through thick and through thin. And I'm very, very grateful to him. He is one of my greatest friends. And I would not be standing here if it were not for Dick Durbin. So please give Dick Durbin a big round of applause.

So, it is wonderful to be back in Springfield, the city where I got my start in elective office, and where I served for nearly a decade. I see some of my colleagues, your attorney general, Lisa Madigan, in the house.

And you've got some constitutional officers there. I think that's Alexi (Giannoulias), your treasurer, who's going to be playing basketball with me at some point.

Dan Hynes, a comptroller and just an incredible supporter during this past race.

And your new Senate president, John Cullerton, one of the sharpest legislators that we've ever had.

Is the Speaker around? He's over there. Mr. Speaker (Mike Madigan), it's good to see you. Thank you.

So I've got a lot of friends here. I've got to stop there. Otherwise, I'm going to be using up all my time.

So I served here for nearly a decade. And as has already been mentioned, this is where I launched my candidacy for President two years ago, this week - on the steps, on the steps of the Old State Capitol where Abraham Lincoln served and prepared for the presidency.

It was here, nearly one hundred and fifty years ago, that the man whose life we are celebrating today, who you've been celebrating all week, bid farewell to this city that he had come to call his own. And as already been mentioned, on a platform at a train station not far from where we're gathered, Lincoln turned to the crowd that had come to see him off, and said, "To this place, and the kindness of these people, I owe everything." And being here tonight, surrounded by all of you, I share his sentiment.

But looking out at this room, full of so many who did so much for me, I'm also reminded of what Lincoln once said to a favor-seeker who claimed it was his efforts that made the difference in the election. Lincoln asked him, "So you think you made me President?" "Yes," the man replied, "under Providence, I think I did." "Well," said Lincoln, "it's a pretty mess you've got me into. But I forgive you."

So whoever of you think you are responsible for this, we're takin' names.

It's a humbling task, marking the bicentennial of our 16th President's birth - humbling for me in particular, because it's fair to say that the presidency of this singular figure who we celebrate, in so many ways made my own story possible.

Here in Springfield, it's easier, though, to reflect on Lincoln the man rather than the marble giant. Before Gettysburg, before Antietam, before Fredericksburg and Bull Run, before emancipation was proclaimed and the captives were set free. In 1854, Lincoln was simply a Springfield lawyer who'd served just a single term in Congress. Possibly in his law office, his feet on a cluttered desk, his sons playing around him, his clothes a bit too small to fit his uncommon frame, uh, maybe wondering if somebody might call him up and ask him to be commerce secretary, (Obama laughs with crowd) he put some thoughts on paper, and for what purpose we do not know:

"The legitimate object of government," he wrote, "is to do for the people what needs to be done, but which they can not, by individual effort, do at all, or do so well, by themselves."

To do for the people what needs to be done but which they cannot do on their own. It's a simple statement. But it answers a central question of Abraham Lincoln's life. Why did he land on the side of union? What was it that made him so unrelenting in pursuit of victory that he was willing to test the Constitution he ultimately preserved? What was it that led this man to give his last full measure of devotion so that our nation might endure?

These are not easy questions to answer, and I cannot know if I am right. But I suspect that his devotion to the idea of union came not from a belief that government always had the answer. It came not from a failure to understand our individual rights and responsibilities. This rugged rail-splitter, born in a log cabin of pioneer stock; who cleared a path through the woods as a boy; who lost a mother and a sister to the rigors of frontier life; who taught himself all that he knew. And everything that he had was because of his hard work. This man, our first Republican President, knew better than anybody what it meant to pull yourself up by your bootstraps. He understood that strain of personal liberty and self-reliance, that fierce independence, at the heart of the American experience.

But he also understood something else. He recognized that while each of us must do our part, work as hard as we can, and be as responsible as we can - although we are responsible for our own fates, in the end, there are certain things we cannot do on our own. There are certain things we can only do together. There are certain things only a union can do.

Only a union could harness the courage of our pioneers to settle the American west, which is why Lincoln passed a Homestead Act giving a tract of land to anyone seeking a stake in our growing economy.

Only a union could foster the ingenuity of our … farmers, which is why he set up land-grant colleges that taught them how to make the most of their land while giving their children an education that let them dream the American dream.

Only a union could speed our expansion and connect our coasts with a transcontinental railroad, and so, even in the midst of civil war, Lincoln built one. He fueled new enterprises with a national currency, and spurred innovation, and ignited America's imagination with a national academy of sciences, believing we must, as he put it, add "the fuel of interest to the fire of genius in the discovery…of new and useful things." And on this day, that is also the bicentennial of Charles Darwin's birth, it's worth a moment to pause and renew that commitment to science and innovation and discovery that Lincoln understood so well.

Only a union could serve the hopes of every citizen - to knock down the barriers to opportunity and give each and every person the chance to pursue the American dream. Lincoln understood what Washington understood when he led farmers and craftsmen and shopkeepers to rise up against an empire. What Roosevelt understood when he lifted us from Depression, built an arsenal of democracy, created the largest middle-class in history with the GI Bill. It's what Kennedy understood when he sent us to the moon.

All these presidents recognized that America is - and always has been - more than a band of thirteen colonies or 50 states, more than a bunch of Yankees and Confederates, more than a collection of Red States and Blue States. That we are the United States. There isn't any dream beyond our reach … any obstacle that can stand in our way, when we recognize that our individual liberty is served, not negated, by a recognition of the common good.

That is the spirit we are called to show once more. The challenges we face are very different now. Two wars, an economic crisis unlike any we've seen in our lifetime. Jobs have been lost. Pensions are gone. Families' dreams have been endangered. Health care costs are exploding. Schools are falling short. We have an energy crisis that's hampering our economy, and threatening our planet, and enriching our adversaries.

And yet, while our challenges may be new, they did not come about overnight. Ultimately, they result from a failure to meet the test that Lincoln set. Now understand, there have been times in our history when our government has misjudged what we can do by individual effort alone, and what we could only do together; when we didn't draw the line as effectively as we should have. When government has done things that people can - and should - do for themselves. Our welfare system, before reform, too often dampened individual initiative, discouraging people from taking responsibility for their own upward mobility. In education, sometimes we've lost sight of the role of parents, rather than government, in cultivating a thirst for knowledge and instilling those qualities of good character - hard work and discipline and integrity - that are so important to educational achievement and professional success.

But in recent years, we've seen the pendulum swing too far in the opposite direction. What's dominated is a philosophy that says every problem can be solved if only government would step out of the way; that if government were just dismantled and divvied up into tax breaks, that it would somehow benefit us all. Such knee-jerk disdain for government - this constant rejection of any common endeavor - cannot rebuild our levees or our roads or our bridges. It can't refurbish our schools or modernize our health care system; it can't lead to the next medical discovery or yield the research and technology that will spark a clean energy economy.

Only a nation can do those things. Only by coming together, all of us, in union, and expressing that sense of shared sacrifice and responsibility - for ourselves, yes, but also for one another - can we do the work that must be done in this country. That is part of the definition of being American.

It's only by rebuilding our economy and fostering the conditions of growth that willing workers can find a job, and companies can find capital, and the entrepreneurial spirit that is the key to our competitiveness can flourish. It's only by unleashing the potential of alternative fuels that we will lower our energy bills and raise our industries' sights, and make our nation safer and our planet cleaner. It's only by remaking our schools for the 21st century that our children will get those good jobs so they can make of their lives what they will. It's only by coming together to do what people need done that we will, in Lincoln's words, "lift artificial weights from all shoulders [and give] an unfettered start, and a fair chance, in the race of life." That's all people are lookin' for, a fair chance in the race of life.

That's what's required of us - now and in the years ahead. We will be remembered for what we choose to make of this moment. And when posterity looks back on our time, as we are looking back on Lincoln's, I don't want it said that we saw an economic crisis, but we did not stem it. That we saw our schools decline and our bridges crumble, but we did not rebuild them. That the world changed in the 21st century, but America did not lead it. That we were consumed with small things, petty things, when we were called to do great things. Instead, let them say that this generation - our generation - of Americans rose to the moment and gave America a new birth of freedom and opportunity in our time.

These are trying days and they will grow tougher in the months to come. And there will be moments when our doubts rise and our hopes recede. But let's always remember that we, as a people, have been here before. There were times when our revolution itself seemed altogether improbable, when the union was all but lost, when fascism seemed set to prevail around the world. And yet, what earlier generations discovered - and what we must rediscover right now - is that it is precisely when we are in the deepest valley, when the climb is steepest, that Americans relearn how to take the mountaintop. Together. As one nation. As one people. … That's how we will beat back our present dangers. That is how we will surpass what trials may come. That's how we will do what Lincoln called on us all to do: and "nobly save…the last best hope of earth." That's what this is. The last best hope on earth. Lincoln has passed that legacy on to us. It is now our responsibility to pass it on to the next generation. Thank you, God Bless you, and may God Bless the United States of America.

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Thursday, February 12, 2009

South African Government to Offer Eskom Loan Gaurentees

South Africa's Treasury will provide electricity utility Eskom with loan guarantees of 175.97 billion rand ($17.71 billion) over the next 5 years to help it raise funds for spending requirements.

The Treasury said in its 2009 Budget Review, released on Wednesday, that the guarantees were in addition to a 60 billion rand, three-year direct loan to the company announced last year.

Eskom [ESCJ.UL], which is battling to meet growing demand, plans to spend 343 billion rand over five years to boost capacity but a global credit crisis had raised borrowing costs making it different for the company to raise finance.

Critics say years of under-investment in power generation and a rise in demand strained supply, leading to the power grid already collapsing in January last year.

The company has called for demand cuts, particularly from mines and industry, and has requested tariff increases to help meet planned spending.

The Treasury said it would guarantee existing bonds, the ES26 maturing in 2026, and the ES33 bond maturing in 2033, as well as floating rate notes maturing in 2026 and 2033.

The remainder of the guarantees would support the issuance of new local and international debt.

"If required, government would either repay the debt in its entirety or step into the shoes of Eskom and continue to make payments on Eskom's behalf," it added in a statement.

An annual limit, depending on cash flow requirements, would be set on the debt that the company could issue each year under the guarantees.

The Treasury also said it would consider guarantees for other state-owned companies, on merit.

"As the economic outlook and stability of these enterprises improves government will reduce its contingent liability exposure by issuing fewer guarantees and refinancing debt without such guarantees," it said.

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Obama Names Republican Senator to Lead Commerce Department

Judd Gregg, a fiscal conservative and Republican senator from New Hampshire, is US President Barack Obama’s pick to serve as secretary of commerce, the White House announced last week.

Gregg, the highest-ranking member of his party on the Senate Budget Committee, voted in favour of every major free trade agreement that came up for a vote during his 16 years in the Senate. He has also gone record in support of drilling for oil in the Alaska National Wildlife Refuge and has opposed raising taxes on oil and gas companies.

“Clearly, Judd and I don’t agree on every issue,” Obama said last week. “But we agree on the urgent need to get American businesses and families back on their feet.”

Pundits say that having Gregg at the head of the Commerce Department, which oversees a wide variety of activities ranging from promoting US exports abroad to helping foster minority-owned enterprises at home, will help Obama gain the trust of the business community.

Gregg, a former businessman who has also been a member of the House of Representatives and the governor of New Hampshire, is the third Republican that Obama has asked to join his cabinet.

“He’s willing to bring into his council chamber and to listen to somebody who comes from a different philosophy and he actively sought me out to do that,” Gregg said of Obama in an interview with The New York Times. “But he’s the captain. Put another way, I’m a field commander.”

New Hampshire governor John Lynch has named a Republican, former Capitol Hill staffer Bonnie Newman, to serve as Gregg’s replacement in the Senate. Gregg’s Senate confirmation hearing has yet to be scheduled.

In December, Obama asked former New Mexico governor Bill Richardson to lead the commerce department, but Richardson stepped back from the nomination last month amidst a federal grand jury investigation into his campaign finances.

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Wednesday, February 11, 2009

Focusing on hi-tech research

Research in an array of alternative energy fields has begun at the Masdar Institute of Science and Technology ahead of the start of master’s degree courses this autumn.

Students and their professors at the institute, the research and education arm of Masdar City, are focusing on subjects such as the interaction between the carbon and energy markets, and improvements in solar power.

Dr Marwan Khraisheh, the dean of engineering and acting provost at the institute, said other projects related to the conversion of waste to energy and sustainable aviation.

The work will not just focus on developing new technologies, but how those advances can be used in the real world. Additionally, faculty and students will research energy policy.

“We believe it’s important to develop new technology, but it’s just as important to integrate the technology into the system and see how it responds, and to develop appropriate policies that will make sure the technology is deployed,” Dr Khraisheh said. “We’ll focus on the cutting-edge multidisciplinary research needed to create new solutions for sustainable energy.”

The Masdar Institute’s goal is to become “one of the world’s premier research-driven universities” with the best faculty, according to Dr Khraisheh. “With the commitment of the leadership and with our partner, the Massachusetts Institute of Technology (MIT), we will be able to achieve this,” he said.

“We are developing a home-grown institution with the quality and reputation of MIT, developing Abu Dhabi as a knowledge hub and helping to transform its economy to a knowledge-based one.”

The centre is looking at alternative energy sources such as biomass, wind and geothermal.

Researchers are not confining themselves to work relevant to the UAE. One faculty member is looking at wave power, even though this is unlikely to be of use in the Gulf’s calm waters.

Other research is specific to the region, such as that being carried out by Dr Matteo Chiesa, a Norwegian assistant professor. He studies the way sand sticks to photovoltaic panels and reduces their efficiency, a particular problem after condensation.

“If you had a hydrophobic surface, that sticking would be less. That’s what we’re looking at, so you can reduce the amount of cleaning,” he said.

In total, 22 students have joined Masdar Institute to complete one year of research before beginning a two-year master’s programme in September.

Student numbers will grow to about 100 this autumn, when the master’s degrees in mechanical engineering, material science and engineering, engineering systems and management, information technology and water and the environment are launched.

More than 600 applications have been received for the remaining places, with the Middle East and North Africa the most heavily represented regions.

Dr Khraisheh said the admission standards were “very high” and comparable to those at MIT, which has signed a five-year deal to provide academic support and collaboration.

Fourteen staff, selected from 1,000 applicants, have started work at Masdar Institute after spending up to a year at MIT developing collaborative research projects. Five more are working at the American institution in advance of moving to the UAE.

Dr Georgeta Vidican, an assistant professor from Romania, said those enrolled were “a great group” of students. “They have a very high level of intellectual curiosity that keeps us going as academics and supports us in our research.”

Some of the students are likely to begin PhD programmes when they launch in the autumn of 2011, as the first master’s courses are completed.

Masdar Institute is based in the Petroleum Institute in Abu Dhabi, but the first phase of its permanent campus in Masdar City will be ready for the start of master’s degrees this September.

The campus is likely to be completed in late 2011 or early 2012, and by this time the institute expects to have between 500 and 600 students and 80 academic staff. Beyond this, further growth is possible with the launch of more degree programmes.

“We will definitely be able to expand and add more classrooms if we need,” said Dr Khraisheh, a Palestinian with a PhD in mechanical engineering from Washington State University.

While the UAE is already represented among the student body, there are plans to further encourage Emiratis to enter the alternative energy field through scholarships to study abroad before returning home to take up positions at Masdar Institute, or elsewhere in Masdar.

“We will provide constant help and support to these students, advising them both technically and logistically,” Dr Khraisheh said.

Masdar City is likely to include about 1,500 businesses, many working in the alternative energy field and using technology developed at Masdar Institute.

A number of students will gain particular satisfaction from helping the UAE move towards alternative energy sources. Among them is Karim Mousa, 22, who holds a Jordanian passport.

“The institute is at the heart of one of the most ambitious projects in the world and it is good to be part of something that could change the country I live in. I was born and raised here,” he said.

“Being part of that institute and being able to see its effects – that brings me to work with a different attitude.

“The country is aware there needs to be change and they’re aware that investing for future energy is not only good for the environment, but that the biggest investor now will be the biggest winner later. You only have to look at Germany to see how far it’s gone.”

Nadya Shafeeq al Mnannaei, 22, a UAE national, said that while her interest was in “helping to solve problems that affect different regions of the world”, she was nonetheless looking forward to seeing Masdar Institute develop technology that could be applied here. “I believe as a UAE national it is really important that my country is starting to develop sustainable energy.”

John Sitler, 26, an American, felt confident that academic standards would be high because of the institute’s close links with Massachusetts Institute of Technology (MIT). “I wasn’t nervous about it. I was excited to see something so large develop and grow. There is nothing really like this in the US. The other students have a deep knowledge of a lot of areas,” he said.

dbardsley@thenational.ae

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