Monday, November 30, 2009

Iran’s Ignoble Act

The semantics over whether the Iranian authorities actually did “confiscate” Shirin Ebadi’s 2003 Nobel Peace Prize medal as has been alleged by Norway, or merely “removed” it from her bank’s safe deposit box (together with other personal items) in connection with a ‘tax evasion’ case as is being claimed by the Iranians, is neither 
here nor there.

What is more relevant, considering that both the blocking of the bank account and the confiscation of the award is illegal under Iranian law, is whether the move has been motivated by petty politics. At least that is what Mohammad Ali Dadkhah, a spokesman for Ebadi’s human rights group, says is what has happened.

And given that Ebadi is an outspoken critic of the government and human rights violations, that indeed sounds more plausible. Also, the fact that the Nobel laureate has been strongly critical of the June presidential polls must have prompted a regime known for its intolerance of any degree of political dissent to carry out this ignoble act. Therein lies the most obvious motive. And the minutiae of any counter-argument or ‘technical’ justification can only make a disgraceful act more despicable.

Not surprisingly, the Norwegian Nobel Committee’s permanent secretary, Geir Lundestad, has said categorically that the move was “unheard of” and “unacceptable.” Surely, Teheran too is well aware of its plummeting reputation and credibility in the international community — primarily as a consequence of such singular acts of political vindictiveness.

Of course, President Mahmoud Ahmadinejad did secure enough votes in the controversial June 12 polls to remain in power. But it must be remembered, his re-election also sparked the largest street protests in the country since the 1979 Islamic revolution. Ahmadinejad has a lot to answer and the Iranian civil society knows it better than anyone else.

The persecution of Ebadi (including her husband or family or friends) on any pretext can only further discredit an already discredited government. Ebadi herself, who had left Iran shortly before the June polls, continues to receive all kinds of vicious threats.

She has announced that she would “return whenever it is useful for my country.” But before she returns, it would be best if the Iranian authorities reverse their decision and return Ebadi her prized Nobel medallion with full honours and, if it’s not too much to ask, with some good grace as well for good measure.Not to do so is not an option.

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America Can No Longer Afford its Wars

Congressman David Obey, a Wisconsin Democrat who is chairman of the powerful House Appropriations Committee, has come up with a novel idea: American should pay for the 
wars they are waging.

Obey’s proposal, which is backed by ten other congressmen, sounds startling — until one realises that both the Bush and Obama administrations have never properly financed their foreign wars by forcing Americans to pay for them through higher taxes.

Instead, Washington has deferred the $1 trillion to date costs of the Afghanistan and Iraq wars by simply adding them to the national debt, and paying interest on the balance owing.

So very few Americans feel the real financial costs of these wars. Future generations will get stuck with the bill.

But this kind of deceptive national accounting is becoming increasingly difficult in the face of President Barack Obama’s $1.4 trillion deficit this year, and his impending decision to send 30,000 to 40,000 more US troops to Afghanistan. Each American soldier in Afghanistan costs $1 million per annum, according to the US Congress Research Service. Thirty or forty thousand more US troops will thus cost $30 to $40 billion in additional war costs on top of the $200 billion annual cost of garrisoning Iraq and Afghanistan. Much of this money will have to be borrowed from China and Japan.

Obey and his allies want to impose a graduated surtax on Americans of 1-5 per cent, depending on their income level, to fund the actual costs of what are now Obama’s wars. Otherwise, warns Obey, the huge cost of keeping up to 100,000 US troops in Afghanistan will ‘destroy the other things we are trying to do in our economy.’ Chief among which is health care.

In a clear choice between guns or butter, Obey estimates ten years of war in Afghanistan will cost the same $900 million as providing a comprehensive health plan for all Americans. Unfortunately, chances of a war surtax passing Congress are nil. While the Afghan and Iraq wars are increasingly unpopular among Americans, a tax increase at a time of over 10 per cent unemployment will ignite the same kind of furious reaction that met President Obama’s proposed national health plan, and endanger Democrats facing midterm elections. As the Obama administration appears set to plunge deeper into the Afghan morass, the real costs of Afghanistan and Iraq are still being concealed from the public and Congress. The $200 billion annual cost for both wars is only a part of the growing expenses faced by Washington.

The annual bill for US intelligence, which employs over 200,000 people, has doubled to $75 billion, in large part to support foreign wars and operations against anti-US Muslim groups. Costs of occupying Afghanistan rose to $300 billion this year, and will increase sharply next year. Operations in Iraq will cost $684 billion in 2009.

Washington spends $25 billion funding foreign armies, the bulk of which goes to the Mideast, Afghanistan, Iraq and Pakistan. Aid to Islamabad will rise to $15 billion over the next five years, including secret ‘black’ payments.

The US supports 168,000 ‘contractors’ in Iraq, many of them gunmen. CIA runs 74,000 mercenaries in Afghanistan. The new fortified, 50 hectare US Embassy in Baghdad will cost $700 million; the new embassy in Islamabad, $800 billion. Islamic militants call them ‘crusader castles.’

Add to these costs the expense of maintaining fleets in the Gulf and Indian Ocean, and military bases in the Gulf and Diego Garcia to support operations in Iraq and Afghanistan; hugely expensive military airlift; $100 per liter fuel delivered to US forces in Afghanistan; and, of course, financial inducements to many smaller nations to send handfuls of troops to Afghanistan and Iraq.

Thus the real cost of Afghanistan and Iraq is much higher than $200 billion annually. Yet President Obama, heedless of such costs, appears determined to expand the Afghan War. It seems clear that ‘peace candidate’ Obama has fallen increasingly under the influence of America’s powerful military-industrial-financial complex and neoconservative ideologues. In short, the same calculus of forces that guided the Bush administration!

Even America’s mighty economy cannot for long support waging wars across the Muslim world. Unaffordable wars have been the ruin of many an empire, and the American Raj seems headed in the same direction.

Eric Margolis is a veteran US journalist who reported from the Middle East and Asia for nearly two decades

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UAE Offers Additional Funds to Banks

The UAE Central Bank said that local banks and branches of foreign banks can borrow funds, if needed, from a new funding facility it has set up to support the banking system.

“(The) Central Bank of the UAE ….stands behind UAE banks and branches of foreign banks operating in the UAE,” said a central bank statement. The bank said that it has issued a notice to all banks in the country about the new “special additional liquidity facility”, which it said would be linked to their current accounts at the central bank, at the rate of 50 basis points above the three-month Emirates Interbank Offered Rates or EIBOR.

The statement came days after the government of Dubai announced its intention to seek a six-month delay in debt payments for its flagship Dubai World conglomerate, saying the restructuring plan was aimed at ensuring the group’s long-term success.

The new facility would be in addition to emergency funding facilities the central bank and the federal finance ministry had announced late last year to help fend off the impact of the global credit crisis. The central bank had set up a $13.6 billion emergency bank lending facility in November 2008, followed by the finance ministry, which injected two tranches of $6.8 billion each into bank deposits from a $19 billion rescue facility.

The central bank said on Sunday that the country’s retail commercial banking system has a strong and stable deposit base and has weathered the global financial crisis better than any other.

“The UAE banking system is more sound and liquid than a year ago, with foreign interbank deposits and Medium Terms Notes, or MTNs, and Euro Commercial Papers or ECPs, issued by UAE banks stand reduced by 25 per cent,” the statement said in an apparent attempt to boost confidence in the country’s financial industry.

“From the consolidated balance-sheet of banks, interbank deposits of the UAE banking system constitute 10.3 per cent of the liabilities side, with foreign interbank deposits constituting five per cent per cent only,” it said.

A senior banker said the move appears to be a “wise precautionary measure”, which would give a strong signal to the market that the central bank stands behind the banking system. “The banking system at present is quite strong with substantial liquidity circulating in the system”, he said.

“Since the central bank is bank’s last resort, its policy announcement that it stands behind UAE banks and branches of foreign banks is a very strong message to the businesses, at a time when they really need reassurance,” said Dr Qaiser Anis, a chartered accountant based in Abu Dhabi.

The move is not only calculated but very timely as well, he said. Government had also guaranteed bank deposits for three years, starting from September last year, so there is nothing to worry about the financial system, the chartered accountant said.

Bankers said the central bank wants to ensure that late last week’s volatility in the global markets do not spill over into the UAE.

“This will support the liquidity and soundness of the banking system in the UAE and especially in Dubai. The central bank is sending a strong message to everyone that they are providing ample liquidity and the guarantee to banks in the UAE,” said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.

Stock markets in Asia fell for a second day on Friday as investors dumped shares in banks and construction firms seen as exposed to Dubai. However, European shares, which fell in early trading on Friday, regained their poise later in the day.

Shares on Wall Street, which was closed on Thursday for the US Thanksgiving holiday, opened lower but firmed up early in Friday’s trading session. The New York Stock Exchange fell initially by 2.7 per cent from Wednesday’s close, while the Nasdaq was down by 2.3per cent.

Credit-rating agency Standard & Poor’s placed four Dubai-based banks on its “credit watch” list late on Thursday, shortly after cutting the debt ratings for several Dubai government-owned and related companies. S&P said it was concerned about the banks’ high exposure to Dubai World.

Markets recoiled after the Department of Finance announced on Wednesday that Dubai World would be seeking to postpone its debt payments until May 30, 2010. Dubai World owes $59 billion in debts.

Its property subsidiary Nakheel is due to repay a $3.52 billion Islamic bond in December. Bank of America-Merrill Lynch estimated that Dubai entities will owe total debt payments of $3.8 billion this year, $12.3 billion in 2010, $19.0 billion in 2011 and $18.0 billion in 2012.

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Sunday, November 22, 2009

Growing number of US homeowners are at risk of losing their property

Data from the Mortgage Bankers Association shows almost one in eleven US homeowners face repossession

Almost one in eleven Americans is at imminent risk of losing their home, as the housing crash continues to claim thousands of victims, more than three years after prices began to fall.

Data from the Mortgage Bankers Association show that almost 5% of all American homeowners are already in the process of having their properties repossessed, while another 4.5% are at least 90 days in arrears with their mortgage repayments. In total, that means more than 9% – almost one in eleven – are on the brink of being forced to hand back their keys, on top of the many hundreds of thousands who have had their homes repossessed since the crisis began.

"The underlying dynamic in the housing market is just dreadful," said Graham Turner, of consultancy GFC Economics.

Treasury Secretary Tim Geithner recently persuaded Congress to extend the homebuyers' tax credit – part of President Obama's $800bn (£485bn) stimulus package – until next April.

The scheme offers $8,000 to first-time buyers, but mortgage applications dropped off sharply in November, when it was due to expire. The White House, alarmed at the prospect of a renewed slump in the market, extended the credit, and opened it up to existing homeowners.

The US economy expanded at a healthy annual rate of 3.5% in the third quarter – though that may be revised down when new official figures are released this week. But Turner warned that without an end to the housing slump, any recovery will be short-lived, and the Obama White House will come under intense pressure.

"We're going to have a political crisis. Obama realises that you can't keep spending money when it's not even having much effect. It will come to a head when the current tax credit expires in April – then people will say, enough is enough."

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Britain poised to lose jobs as £10bn nuclear power plant contract goes to US

Nuclear firm Westinghouse expected to appoint Shaw Group to lead its construction programme

Thousands of jobs that were to have been created in Britain to build the next generation of nuclear power plants could be heading overseas instead, after Westinghouse, the nuclear company sold by the government three years ago to Toshiba, chose one of its largest shareholders as the lead contractor to build reactors.

Westinghouse is expected to confirm this week that it has appointed US-based Shaw Group to head up its £10bn nuclear programme, passing over the favourite for the contract, rival engineering group Fluor.

Industry sources said that Shaw is likely to source far more reactor components from overseas than Fluor, which has close relationships with British manufacturers. The Unite union claimed that 10,000 new jobs in the UK would not be created as a result of Shaw being selected.

Shaw was one of the main contractors to build Total's controversial Lindsey refinery and made 51 workers there redundant this year, which sparked a series of wildcat walk-outs around the country over the use of foreign labour.

British-based manufacturers such as BAE Systems and Rolls Royce are also understood to be concerned that lucrative contracts to make reactor modules could be lost to Shaw's manufacturing bases in the US and Belgium. A spokesman for Westinghouse in the US confirmed that Shaw had been appointed but claimed that "up to 80%" of the components would be sourced from the UK. He admitted that this was not finalised as none of the supplier contracts had been signed.

He added that Shaw had teamed up with British construction firm Laing O'Rourke for the bid, but the firm will not be involved in providing any of the high specification reactor components.

Japanese firm Toshiba owns 77% of Westinghouse, with 20% owned by Shaw Group. Westinghouse is hoping to secure contracts to build at least four of its AP1000 reactors with E.ON and RWE npower, who have formed a nuclear joint venture in the UK, soon after Christmas.

Dougie Rooney, Unite's national energy officer, said: "The implications are massive. With Fluor, there is a far greater opportunity to get UK companies involved. Shaw has no allegiance to the UK and it's wrong that a company with an equity share should be involved in the competition."

It was also claimed by several industry sources that Westinghouse had initially recommended to Toshiba that Fluor be appointed, but that the parent company insisted that Shaw be chosen instead. A Westinghouse spokesman in the US said that Shaw and Westinghouse already had a partnership to build reactors in the Middle East and the US. "It was a decision made in conjunction with a number of parties, including our parent company Toshiba," he said. "It's our intention to use British labour as much as possible."

Rival French reactor firm Areva is building the rest of the UK's reactors, on behalf of EDF Energy, and has only promised to allow British firms to bid for up to 70% of the supply contracts.

Business secretary Lord Mandelson has drawn up a "low-carbon industrial strategy" to enable British manufacturers and workers to benefit from the country's huge construction programme of less polluting power plants such as wind farms and nuclear reactors. Mandelson has also repeatedly spoken of the need for the government to demonstrate "industrial activism", or a willingness to intervene on behalf of key sectors of the economy.

But British manufacturers in the power sector have so far yet to benefit. The closure of the Vestas wind turbine plant in the Isle of Wight became totemic of the UK's inability to develop its own renewables industry. Unions are now anxious that manufacturers could similarly miss out on the opportunities from plans to build at least 10 new reactors in the UK.

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Saturday, November 21, 2009

Ahmed Humaid al Tayer Appointed Head of the DIFC

The newly appointed governor of the Dubai International Financial Centre (DIFC) has pledged to build on its success in promoting Dubai as a vital hub for capital and investment.

Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, on Saturday issued a decree naming Ahmed Humaid al Tayer to replace Omar bin Sulaiman, who had led the DIFC since its creation in late 2004.

“We are here to establish an international financial centre for the UAE, to serve the region and to co-operate with other centres from Hong Kong to Frankfurt and London,” said Mr al Tayer, who is also the chairman of Emirates NBD, the largest UAE bank by assets.

His appointment followed an announcement last week that Sheikh Mohammed had named himself and two family members to replace three of Dubai’s most prominent officials on the board of the Investment Corporation of Dubai (ICD), the main government asset-management vehicle.

Bankers and analysts downplayed suggestions in international reports that the appointments represented demotions or signified a political schism.

While the crisis has raised criticisms about the borrowing used to slingshot Dubai’s growth earlier this decade, they said the transfers were part of a broader financial restructuring to help refinance the roughly US$10 billion (Dh36.73bn) in debts that Dubai needs to repay next year. That sum is part of an estimated $85bn in total debts owed by the Dubai Government and the companies it controls.

Mr bin Sulaiman will remain the deputy chairman of the Central Bank, a spokesman for the regulator confirmed. The Central Bank has lent Dubai $10bn for the Dubai Financial Support Fund, which is overseeing efforts to restructure the emirate’s debts.

The three remaining officials also retained key positions. Mohammed al Gergawi, who was removed from the ICD board, also serves as the chairman of Dubai Holding, which manages the personal wealth of Sheikh Mohammed. He is also the Minister of Cabinet Affairs.

A second ICD board member replaced last week, Mohammed Alabbar, remained the chairman of Emaar Properties, the government-controlled developer, as well as the chairman of the Dubai Economic Advisory Council.

The third former ICD board member, Sultan Ahmed bin Sulayem, remained the chairman of Dubai World, the government-owned holding company that controls DP World and owns another key Dubai developer, Nakheel Development.

“Every board member who is leaving and coming, their contribution is highly appreciated,” Mr al Tayer said yesterday. “We are always soldiers to this country, to serve our country.”

The DIFC is in many ways an emblem of Dubai’s achievements. Established in 2002, the organisation is one of Dubai’s Government-owned free zones, designed specifically to position the emirate as a hub for financial services and investment.

In addition to not having taxes on income or profits, the DIFC offers 100 per cent foreign ownership, while the UAE as a whole still requires that companies be at least 51 per cent Emirati owned.

“The fact that Dubai is established as one of the major financial centres of the world is testament to the vision of the local authorities and the investment made in physical infrastructure and people skills,” said Peter Gotke, a vice president at The Bank of New York Mellon, which like many major banks has its offices in the DIFC.

“Whilst the DIFC lives that vision, the regulators and authorities have continued to evolve laws and access to make the region accessible and liquid.”

The DIFC, like many Dubai Government-controlled entities, became highly leveraged in the course of its expansion. As a real estate development, however, DIFC is doing relatively well, analysts say.

Despite financial difficulties faced by many tenants, there is still a waiting list of at least 400 wanting to take up space, said a report last month by the ratings agency Standard and Poor’s.

DIFC racked up further debts when it paid $630 million in early 2006 for a 3.5 per cent stake in the European stock-exchange operator Euronext, which gave it a 2 per cent stake in NASDAQ Dubai. DIFC also owns one-fifth of Borse Dubai, the holding company for both NASDAQ Dubai and the city’s larger stock exchange, the Dubai Financial Market.

DIFC bought a 2.2 per cent stake in Deutsche Bank in early 2007 and also owns stakes in Dubai Aerospace and in the private equity firm Abraaj Capital. DIFC typically financed these investments with private equity-style leverage, Standard and Poor’s said, paying for about a fifth of the investment in cash and borrowing the remainder.

That strategy left it vulnerable when the financial crisis started and credit for refinancing dried up. Standard and Poor’s said the DIFC had a debt-to-capital ratio of 76 per cent. The DIFC received a $1bn lifeline from the Dubai Department of Finance last year, which it used to repay $500m in loans.

The company is also due to repay a $350m loan this week. It has $1.25bn in debt due in mid-2012.

By: Wayne Arnold and Uta Harnischfeger - The National

uharnischfeger@thenational.ae

warnold@thenational.ae

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Wednesday, November 18, 2009

Goldman Sachs’ (GS) Small Business Initiative of $500 Million

Goldman Sachs Group Inc (NYSE: GS) initiates a program to help small businesses get access to credit. This comes at a time when the company has been facing criticism over bonus payouts to its employees.

Goldman's 10,000 Businesses initiative will commit $300 million to help small businesses get capital and commit $200 million for business and management education programs. The total amount committed is just a fraction of the $10.6 billion the company is expected to report in net income this year.

Investors like Chief Executive Lloyd Blankfein, Warren Buffett and Michael Porter of Harvard Business School will be included in the advisory council for the initiative.

One often-referenced program is Goldman's 10,000 Women initiative, which is designed to provide business and management education for women in underserved parts of the world.

This image building initiative comes after the Obama administration unveiled a plan to boost small business lending. But the company will pass the test only if it continues this in the long run.

Why America Needs an Economic Strategy: by Prof Michael E. Porter

October 30th 2008

With the U.S. Election just days away, it has never been more important to consider what the next President must do to keep America competitive. In this time of crisis, Washington has focused on the immediate and the short term. Lost are the more basic questions we really need to worry about: What is the fundamental competitive position of the U.S. in the global economy? And what must we do to remain strong when other nations are making rapid progress?

The stark truth is that the U.S. has no long-term economic strategy—no coherent set of policies to ensure competitiveness over the long haul. Strategy embodies clear priorities, based on understanding the strengths we need to preserve and the weaknesses that threaten our prosperity the most. Strategy addresses what to do, but also what not to do. In dealing with a crisis, experience teaches us that steps to address the immediate problem must support a long-term strategy. Yet it is far from clear that we are taking the steps most important to America's long-term economic prosperity.

America's political system, especially as it has evolved in recent times, almost guarantees an absence of strategic thinking at the federal level. Government leaders react to current events piecemeal, rather than developing a strategy that unfolds over years. Congress and the Executive Branch are organized around discrete policy areas, not around the overall goal of improving competitiveness. Neither candidate has put forward anything close to a strategy; rather, each has presented a set of disconnected policy proposals with political appeal. Both parties contribute to the problem by approaching the economy with long-held ideologies and policy positions, many of which no longer fit with today's reality.

Now is the moment when the U.S. needs to break this cycle. The American economy has performed remarkably well, but our continued competitiveness has become fragile. Over the last two decades the U.S. has accounted for an incredible one-third of world economic growth. As the financial crisis hit, the rest of the American economy remained quite competitive, with many companies performing strongly in international markets. U.S. productivity growth has continued to be faster than in most other advanced economies, and exports have been the growth driver in the overall economy.

THE AGE OF ANXIETY

Yet our success has come with deep insecurities for many Americans, even before the crisis. The emergence of China and India as global players has sparked deep fears for U.S. jobs and wages, despite unemployment rates that have been low by historical standards. While the U.S. economy has been a stronger net job creator than most advanced countries, the high level of job churn (restructuring destroys about 30 million jobs per year) makes many Americans fear for their future, their pensions, and their health care. While the standard of living has risen over the last several decades for all income groups, especially when properly adjusted for family size, and while the U.S. remains the land where lower-income citizens have the best chance of moving up the economic ladder, inequality has risen. This has caused many Americans to question globalization.

To reconcile these conflicting perspectives, it's necessary to assess where America really stands. The U.S. has prospered because it has enjoyed a set of unique competitive strengths. First, the U.S. has an unparalleled environment for entrepreneurship and starting new companies.

Second, U.S. entrepreneurship has been fed by a science, technology, and innovation machine that remains by far the best in the world. While other countries increase their spending on research and development, the U.S. remains uniquely good at coaxing innovation out of its research and translating those innovations into commercial products. In 2007, American inventors registered about 80,000 patents in the U.S. patent system, where virtually all important technologies developed in any nation are patented. That's more than the rest of the world combined.

Third, the U.S. has the world's best institutions for higher learning, and they are getting stronger. They equip students with highly advanced skills and act as magnets for global talent, while playing a critical role in innovation and spinning off new businesses.

Fourth, America has been the country with the strongest commitment to competition and free markets. This belief has driven the remarkable level of restructuring, renewal, and productivity growth in the U.S.

Fifth, the task of forming economic policy and putting it into practice is highly decentralized across states and regions. There really is not a single U.S. economy, but a collection of specialized regional economies—think of the entertainment complex in Hollywood or life sciences in Boston. Each region has its own industry clusters, with specialized skills and assets. Each state and region takes responsibility for competitiveness and addresses its own problems rather than waiting for the central government. This decentralization is arguably America's greatest hidden competitive strength.

Sixth, the U.S. has benefited historically from the deepest and most efficient capital markets of any nation, especially for risk capital. Only in America can young people raise millions, lose it all, and return to start another company.

Finally, the U.S. continues to enjoy remarkable dynamism and resilience. Our willingness to restructure, take our losses, and move on will allow the U.S. to weather the current crisis better than most countries.

Yet what has driven America's success is starting to erode. A series of policy failures has offset and even nullified its strengths just as other nations are becoming more competitive. The problem is not so much that other nations are threatening the U.S. but that the U.S. lacks a coherent strategy for addressing its own challenges.

An inadequate rate of reinvestment in science and technology is hampering America's feeder system for entrepreneurship. Research and development as a share of GDP has actually declined, while it has risen in many other countries. Federal policymakers recognize this problem but have failed to act.

America's belief in competition is waning. A creeping relaxation of antitrust enforcement has allowed mergers to dominate markets. Ironically, these mergers are often justified by "free market" rhetoric. The U.S. is seeing more intervention in competition, with protectionism and favoritism on the rise. Few Americans know that the U.S. ranks only 20th among countries in openness to capital flows, 21st on low trade barriers, and 35th on absence of distortions from taxes and subsidies, according to the 2008 Global Competitiveness Report. We are fast becoming the kind of distorted economy we have long criticized.

Lack of regulatory oversight and capital requirements, in the name of liberalization and well-meaning efforts to extend credit to lower-income citizens, has undermined our financial markets. America underregulates in some areas while it overregulates in others.

U.S. colleges and universities are precious assets, but we have no serious plan to improve access to them by our citizens. America now ranks 12th in tertiary (college or higher) educational attainment for 25- to 34-year-olds. We have made no progress in this vital area over the past 30 years, unlike almost every other country. This is an ominous trend in an economy that must have the skills to justify its high wages. Instead of mounting a serious program to provide access to higher education, like the G.I. Bill and National Science Foundation programs of earlier years, Congress grandstands over the rate of endowment spending in our best universities.

The federal government has also failed to recognize and support the decentralization and regional specialization that drive our economy. Washington still acts as if the federal level is where the action is. Beltway bureaucrats spend many billions of dollars on top-down, highly fragmented federal economic development programs. Yet these programs are not designed to support regional clusters, nor do they send money where it will have the greatest impact in each region. For example, distressed urban communities, where poverty in America is concentrated, are starved of the infrastructure spending needed for job development. Again, no strategic thinking.

At a time when insecurity and job turnover are higher than ever, the U.S. also has abdicated its responsibility to provide a credible transitional safety net for Americans. It is no wonder Americans are becoming more populist, more protectionist, and more tolerant of harmful intervention in the economy. The job training system is ineffective and receives less and less funding each year. Pension security is eroding, and the most obvious step required to strengthen Social Security—slowly adjusting upward the retirement age—has not been taken. Improving access to affordable health insurance is a major worry for all Americans. Washington could take basic steps such as equalizing the tax deductibility of individually purchased insurance to assist those not covered by their employers. Yet the government has failed to do so.

HIGH COSTS, BIG HASSLES

Federal polices have hobbled America's entrepreneurial strength by needlessly driving up the cost and complexity of doing business, especially for smaller companies. Cumbersome regulation of employment, the environment, and product liability needs to give way to better approaches involving less cost and litigation, yet special interests block reform. The U.S. has become a high-tax country not only in terms of rates but also administrative hassle. Infrastructure bottlenecks, due to neglect and poorly directed spending, are driving up costs in an economy increasingly dependent on logistics. The U.S. is energy-inefficient, but public policies fail to promote energy conservation. Health-care costs are too high, but there is no serious effort to provide more integrated and efficient care.

Collectively, these unnecessary costs of doing business, coupled with skill gaps, are becoming significant enough to drive investments out of the country, including investments by American companies. Instead of addressing the real reasons for offshore investment, the parties spar over closing tax "loopholes," even though U.S. corporate rates are among the highest in the world. Where is the strategic thinking?

Trade and foreign investment are fundamental to the success of the U.S. economy, but America has lost its focus and credibility in shaping the international trading system. Our economy today depends on advanced services and selling intellectual property—our ideas, our software, our media. Yet rampant intellectual property theft and high barriers to competition in services tilt the world trading system against a knowledge-based economy.

With no strategy, the U.S. has failed to work effectively with other advanced countries to address these issues and has failed to assist poorer countries so they feel more confident about opening markets and internal reform. The U.S. has abdicated its strategic role in developing Latin America, our most natural trading partner. We have failed to engage meaningfully in Africa, the Middle East, and Asia to help countries improve the lot of their citizens. Our foreign aid is still tied to the purchase of U.S. goods and services, rather than the actual needs of countries. Congress fails to pass trade agreements with countries highly committed to our economic principles, such as Colombia.

A final strategic failure is in many ways the most disconcerting. All Americans know that the public education system is a serious weakness. Fewer may realize that citizens retiring today are better educated than the young people entering the workforce. In the global economy, just being an American is no longer enough to guarantee a good job at a good wage. Without world-class education and skills, Americans must compete with workers in other countries for jobs that could be moved anywhere. Unless we significantly improve the performance of our public schools, there is no scenario in which many Americans will escape continued pressure on their standard of living. And legal and illegal immigration of low-skilled workers cannot help but make the problem worse for less-skilled Americans.

The problem is not money—America spends a great deal on public education, just as we do on health care. The real problem is the structure of our education system. The states, for example, need to consolidate some of the 14,000 local school districts whose existence almost guarantees inefficiency and inequality of education across communities. Instead, government leaders haggle over incremental changes.

SAME OLD ARGUMENTS

We need a strategy supported by the majority to secure America's economic future. Yet Americans hear the same old divisive arguments. Republicans keep repeating simplistic free-market thinking, even though the absence of all regulation makes no sense. Self-reliance is preached as if no transitional safety net is needed. Some Republicans even argue passionately that the country should have no strategy because that would be "industrial policy." Yet the real issue is not picking industry winners and losers but improving the business environment for all American companies, something we cannot do without identifying our top priorities. Overall, Republicans seem to think business can thrive without healthy social conditions.

Democrats, meanwhile, keep talking as if they want to penalize investment and economic success. They defend unions obstructing change in areas like education, cling to cumbersome regulatory approaches, and resist ways to get litigation costs for business in line with other countries. Democrats equivocate on trade in an irreversibly global economy. They seem to think social progress can be achieved only at the expense of business.

To make America competitive, we have to get beyond this thinking. Political leaders, business leaders, and civil society must begin a respectful, fact-based dialogue about our challenges. We need to focus on competitive reality, not defending past policies.

A strategy would address each of the areas I have discussed. If we are honest with ourselves, we would admit the U.S. is not making real progress on any of them today. Efforts under way by both parties are largely canceling each other out. A strategy would direct our spending to priority investments that also put money into the economy, such as educational assistance and logistical infrastructure, rather than tax rebates. With a strategy, we would stop counterproductive and expensive practices such as farm subsidies and spending earmarks.

Is such strategic thinking possible, given America's political system? It happens in other countries—Denmark and South Korea are just two where I have participated in serious efforts by national leaders, both public and private, to come together and chart a long-term plan. This almost never occurs in the U.S., except around single issues.

We will need some new structures to govern strategically. I served on the last public-private President's Commission on Industrial Competitiveness—in 1983! This time we need one that is less politically motivated. Congress would benefit from a bipartisan joint planning group to coordinate an overall set of priorities. More up or down votes on comprehensive legislative programs are needed to allow a shift to a coherent set of policies and away from lots of separate bills.

The new Administration will have an historic opportunity to adopt a strategic approach to the U.S.'s economic future, something that would bring the parties together. America is at its best when it recognizes problems and accepts collective responsibility for dealing with them. All Americans should hope that the next President and Congress rise to the challenge.

http://www.businessweek.com/magazine/content/08_45/b4107038217112.htm

Tuesday, November 17, 2009

Green energy on rise across Africa but still lags behind other regions – UN

17 November 2009 – More green energy and climate-friendly projects target Africa than ever before, but the numbers still lag behind Asia and Latin America, the United Nations Environment Programme (UNEP) announced today.

The projects, from renewable energies to tree planting, are part of the Clean Development Mechanism (CDM) of the Kyoto Protocol – the global emissions reduction treaty. They allow developed countries to reduce emissions and meet global warming commitments by investing in carbon reduction projects in developing countries.

A total of 112 CDM Africa projects, worth a total of Euros 212 million a year, are at “validation, requesting registration or registered,” UNEP said, noting that this is up from 78 projects in 2008 and just two in 2004.

Around 80 per cent of the projects are in sub-Saharan Africa, with 28 projects underway or planned in South Africa, followed by 14 in Kenya. In North Africa, Egypt has 13 projects, followed by Morocco with 10.

The projects include two large solar water heating projects in South Africa, the promotion of energy efficient light bulbs in rural Senegal and a municipal waste-composting project in Uganda.

Experts say the latest figures underline the importance of Africa’s Governments pressing for reform in the weeks before the UN Climate Change Convention meeting in Copenhagen from 7 to 18 December.

At the same time, they noted that while the figures are cause for optimism, they also underline how few projects are currently flowing into Africa when compared with several other parts of the world.

Globally, there are over 4,730 CDM projects operating or close to approval. The lion’s share is in Asia and the Pacific with a total of just over 3,700 projects, followed by Latin America and the Caribbean with close to 820.

These issues will be part of the agenda at the Green Electricity Conference organized by UNEP, the Kenyan Government and the French development agency AFD in Nairobi on 23 and 24 November.

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Top UN official stresses academia’s role in solving global problems

17 November 2009 – A top United Nations official today called for a new culture of “intellectual social responsibility” to take education beyond the classroom to the search for real solutions to real problems, with the academic and educational sectors creating and sharing knowledge to help realise UN objectives and goals.

“The United Nations was founded on the premise of individual States working collectively for the greater global good,” UN Under-Secretary-General for Communications and Public Information Kiyo Akasaka told the World Innovation Summit for Education (WISE) in Doha, Qatar.

“It draws upon the strength of all nations to address a broad spectrum of security, development and human rights challenges. The time has come for scholarship to do the same, and to draw upon all its varied disciplines to inform the solutions to the problems the world faces today.

“The time has come for a new culture of ‘intellectual social responsibility’ – one that takes teaching, learning and research beyond the classroom, laboratory or campus; one that harnesses its energy and promise to the search for real solutions to the real problems that are confronted by real people; and one that recognizes that to be sustainable, education must itself have the capacity to sustain.”

Mr. Akasaka pointed to the “movement of minds” launched by his own Department of Public Information (DPI), mobilizing an international network of centres of higher learning through the Academic Impact initiative, with the simple premise that there is no area of scholarship or research which cannot have an impact on what the UN is trying to do.

“What the ‘Academic Impact’ asks is that each participating institution undertake one activity each year which can directly contribute to the realization of a specific United Nations objective,” he said of the initiative first announced by Secretary-General Ban Ki-moon last year, and which has been joined by more than 250 universities and institutions of higher learning so far and endorsed by international academic networks from every region, covering a range of disciplines.

These include technology, public health, art, physical and social sciences, global affairs and education itself which, Mr. Akasaka stressed, was central to achieving the UN Millennium Development Goals (MDGs). These include targets for slashing a host of ills, including extreme hunger and poverty, infant and maternal mortality, and lack of access to education and health care – all by 2015.

“Whether in the area of health, shelter, or livelihood, education is the means to their achievement,” Mr. Akasaka said, noting that Mr. Ban has called for a summit next year to galvanize action to achieve the MDGs by the deadline.

“As such, the Millennium Development Goals represent an excellent example of the critical link between academic research and action,” he said, underscoring that they were defined on the basis of what was seen as academically sustainable, with their benchmarks determined scientifically. Universities could mobilize their campuses to demonstrate support to the MDGs at the 2010 summit, he added, citing a tremendous groundswell of youth support, particularly from students, for the goals and the efforts of governments to attain them.

Mr. Akasaka cited both the Academic Impact and the mobilization for the MDGs as concrete examples of how to make education sustainable, a major focus of the WISE organized by Sheikha Mozah Bint Nasser Al Missned and the Qatar Foundation and bringing together a diverse group of experts and leaders.

“It will only be when education provides not only the skills, but also leads to opportunities to make use of them, that education can again be said to be truly sustainable,” he stressed, noting that 51 million jobs will need to be created in Arab countries within the next 10 years to absorb those entering the job market.

“The question remains whether the education of this region’s large youth population will be met at the same pace as the creation of jobs and other opportunities for the future educated men and women of this region. Failure to do so, and the resulting frustration and disappointment that could arise, might result in potentially ‘unsustainable’ societies,” he said.

Turning to the global picture, Mr. Akasaka said that worldwide 72 million children of primary school age are still denied the right to education, almost half of them in sub-Saharan Africa, followed by South Asia with 18 million out-of-school children. In Western Asia, 64 per cent of the 3 million children out of school are girls.

“It is only when a world preoccupied with immediate deadlines and timeframes looks to a vision of the future that the benefits of education become tangible and, indeed, sustainable,” he added.

In his speech to the summit, the Secretary-General’s High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, Cheick Sidi Diarra, focused on ways to manage international academic mobility, which he called a “double-edged sword” that offers many possibilities for developing countries but also threatens to drain them of intellectual capital.

“If current trends of internationalization continue, the distribution of the world’s wealth and talent will be further skewed,” he said. “[But] the advancement of communication technology has made it increasingly feasible to tap intellectual migrants at their host countries, creating the phenomenon of brain circulation.”

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Sunday, November 15, 2009

American Dream Lives On

The world’s richest and the second-richest men are not only worth tens of billions of dollars between them, but also love to play bridge—a game that some say died a couple of decades ago. Given half a chance, anybody would want to be a fly on the wall as they get down to the game of cards — if only to hear the banter with their partners and pick up investment tips from what could be an extremely engaging conversation.

So last week when Microsoft founder Bill Gates and Warren Buffett showed up at a town hall meeting with students at the Columbia University, there was huge excitement among students.

They spoke and spoke well — of the United States of America that is struggling to battle an infamous recession which has laid off millions of people across the world and is showing only sputtering signs of recovery.

Gates and Buffett, introduced as self-made billionaires and the world’s two greatest capitalists, have invested in and become rich from the Great American Dream that now seems under threat of dissipating, roiled by what Buffett said was an “economic Pearl Harbour”. At the meeting, Buffett declared the financial panic over and said that the US economy that was sputtering is only “sputtering some”.

America is in deep trouble but Buffett, the great investor that he is, strongly believes that investing in the US would not only help the world’s biggest economy recover, it would also provide a much-needed impetus to other ailing economies fighting their own battles.

Indeed, there has been some reason to cheer in recent weeks, with figures showing that the US economy actually expanded in the third quarter — the first three-month period of growth since the second quarter of 2008.

Buffett’s confidence in the US economy, that has helped him become the world’s second-richest man, is strong and it was amply reflected when his Berkshire Hathaway Inc bought a 77 per cent stake in a railroad company for more than $26 billion. He has a point. There is a need to reactivate the world’s biggest consumer, failing which global demand would continue to slack and dither and its unemployment rate — currently at a 26-year high — would not fall.

And looking at what is happening there, with valuations and markets way off their peaks, it just might be a good idea for those outside the United States to start looking for opportunities there. Gates agreed with Buffett, and not necessarily because they are buddies.

“The US benefits as the globe benefits. You are not going to have a case where the rest of the world does poorly and the US does well. Our fate is tied to open trade, innovation everywhere,” he said when asked whether there were more opportunities in the United States than elsewhere.

That’s a thought I would take home if I were an investor. Right, many with high exposure in the US have been burnt and burnt badly but let’s be honest: to keep capitalism alive we have to ensure that the American economy does not have a cardiac arrest.

The way I look at it is that if two gentlemen with the most dollars are willing to put their money into an economy that at least one says is still sputtering, there has to be good reason behind it. And Gates did highlight them when he said that while a complex financial system meant mistakes could be made, fundamentals such as innovation, ability and intention to take risks and invest and creating new companies means that the US example still works well. It has worked despite large-scale government intervention in companies and financial markets, which was necessary to stem the rot that would have otherwise destroyed the economy.

Indeed, a big government, job losses, a weak dollar and even tens of thousands of home foreclosures doesn’t seem to have stopped Americans from innovating and inventing.

Gates was succinct when he said: “I will bet there are some inventions that took place in that fall in the darkest hour. People were working on new drugs, new chips, new robots and things to make life better for everyone in the decades ahead.”

Since the darkest hour last fall when Lehman Brothers went into the history books forever, the world has teetered on the brink of an economic collapse that is only now beginning to settle. Bits and bobs of good news escaping from various parts of the world gives us hope that the worst might be over and that we may be entering into a far more stable period. Both greed and fear are in control, and that’s sort of good news for the moment, because they make human beings irrational.

China and India are two examples of how large economies can weather economic turmoil — first by taking prudent steps to counter the threat and then quickly massaging the gains into a more permanent feature.

India’s control over interest rates and its booming real estate market, and China’s quick steps to provide the right stimulus to its economy and a looser monetary policy meant both countries managed the downturn far better than highly leveraged US and European economies.

There is good news from the Eurozone too, with the region’s worst recession since the Second World War officialy ending though the recovery is believed to be fragile. The eurozone and the European Union have both posted growth. Britain is still a laggard though.

Whatever steps others have taken to return to growth, it doesn’t mean that the American experiment has failed. It is still a successful system that needs to be followed, if only because it — as Buffett said — can unleash huge human potential.

“What drives the American system is the quality of opportunity in a market system and the knowledge that when you get out of here, you’re going to enjoy the fruits of the knowledge you have gained. And it will keep working,” said Buffett, the investor.

It just might be time to listen to the words of one of the most successful investors of all times and get into a market that’s just ripe with the right opportunities. The Oracle from Omaha is seldom wrong. Also, the global economy is not distant from that of the United States.

We are, whether we like it or not, all part of a system that is still driven by the great American dream.

Rahul Sharma is Editor of Khaleej Times. He can be reached at rahul@khaleejtimes.com

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Saturday, November 14, 2009

Finally, a Government in Beirut

Lebanon finally has a government in place. Prime Minister Saad Hariri can at last enjoy some reprieve after five frustrating months of political wrangling. A coalition government of 30 is now finalised. Half of them are from the Hariri-led coalition, ten from the opposition parties including Hezbollah, while five are nominated by President Michel Suleiman.

The fate of this arrangement, however, depends on the ability of the coalition partners to manage the differences likely to crop up — in the larger interest of the country’s stability.

The dilemma facing Hariri since the June elections has been of appeasing a picky and difficult coalition. With a huge demand for key government portfolios, the initial attempts to cobble together a coalition failed miserably. So much so, Hariri said in September that he would abandon further attempts, leaving the task to the president.

Lebanon has seen enough of political tumult over the past five years. Things got out of hand after the 2005 assassination of former Prime Minister Rafiq Hariri, allegedly involving Syria. The West and Saudi-backed majority coalition, led now by Saad Hariri, was pitched against an opposition that had the backing of Syria and Iran. Following the resignation en masse of Shia ministers from the unity government in 2006, a civil war broke out. Hectic negotiations led by Qatar resulted in a welcome lull to the bitter fighting and saw the emergence of a national government in 2008. The elections held in June next year did not bring about the desired order and stability the country badly needed. This is why the formation of this unity coalition is so crucial for Lebanon. It has been born out of turmoil and civil war and deserves a chance to grow and flourish.

While politics in Lebanon has always been shaped by internal strife and proxy conflicts of external elements, the responsibility for stabilizing internal dynamics rests on its political groupings. Irrespective of sectarian and ideological differences, Lebanon enjoys a unique homogeneity among its people. A true melting pot of religion, sects and culture, Lebanon’s tragedy stems from the politics of vested interests. It is not something inherent in the system, but has been imposed from outside. The groups within Lebanon should realise the implications of exploiting politics for the sake of individual expediency.

It may be time for Hariri to prove his mettle at the helm of Lebanon’s politics and outline a new set of priorities after consulting his allies. Formulating a collective agenda, which places equal responsibility on coalition partners to steer the country towards stability, both political and socio-economic, should be the top priority.

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GE pumps funds into wastewater research

General Electric (GE) is boosting research into recycled water, banking on the US$5 billion global market growing even bigger.

As rapidly increasing demand for water strains supplies across the Middle East, GE has announced that it will increase research spending on waste water filtration systems by 50 per cent, including at new research centres in Saudi Arabia and Singapore.

The US technology conglomerate has long been a major supplier of power generation equipment in the region, but now sees wastewater and water re-use systems as two of the “biggest opportunities” for growth, Steve Bolze, the head of the firm’s water and power equipment units, told Bloomberg.

GE, which has a number of business links to Mubadala Development, the strategic investment arm of the Abu Dhabi Government, will also conduct research on water technologies at an energy technology centre planned for Masdar City, the carbon-neutral development at the edge of the capital.

“We think it’s going to be a great business, not only in the US but in China,” said Jeffery Immelt, the chief executive of GE. “The entire Middle East is constrained so this is a problem that’s shared broadly.”

Experts say filtration and re-use of waste water for industry, irrigation and even household applications will receive more attention as rising consumption stretches the region’s water desalination capacity.

The International Energy Agency (IEA), a group of energy consuming nations that is based in Paris, predicts energy use will soar across the Middle East as demand for desalination doubles in the next 20 years. Of that new capacity, 70 per cent will be located in the Gulf states, Algeria and Libya, the IEA said.

The increasing amounts of energy used for desalination served as an incentive for greater use of recycled water, said Dieter Ernst, the chief executive of Berlinwasser, a German water company that operates a joint-venture firm in the UAE. “There’s a very strong link between energy consumption and water use,” Mr Ernst said. “The main question is what to do with it in the re-use cycle.”

Residents, he said, “are not so aware that water is a resource”.

Demand for water in Abu Dhabi is expected to double by 2030, according to a forecast presented last week by the Abu Dhabi Water and Electricity Company.

Faced with rising demand, the Government has moved to de-regulate the wastewater sector to encourage foreign investment and increase capacity for treatment and re-use of wastewater.

The emirate recycles 60 per cent of its water and has plans to increase the figure to 100 per cent, said Alan Thomson, the managing director of the Abu Dhabi Sewerage Services Company.

* with Bloomberg

cstanton@thenational.ae

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Transcript of President Obama's Asian-policy speech in Tokyo

The transcript of President Obama's 28-minute speech Saturday (Friday night in Washington) at Tokyo's Suntory Hall, where he discussed U.S.-Asia relations and the U.S.-Japan alliance before an invited audience.

Thank you so much. Arigatou. Thank you very much. (Applause.) Good morning. It is a great honor to be in Tokyo -- the first stop on my first visit to Asia as President of the United States. (Applause.) Thank you. It is good to be among so many of you -- Japanese and I see a few Americans here -- (applause) -- who work every day to strengthen the bonds between our two countries, including my longtime friend and our new ambassador to Japan, John Roos. (Applause.)

It is wonderful to be back in Japan. Some of you may be aware that when I was a young boy, my mother brought me to Kamakura, where I looked up at that centuries-old symbol of peace and tranquility -- the great bronze Amida Buddha. And as a child, I was more focused on the matcha ice cream. (Laughter.) And I want to thank Prime Minister Hatoyama for sharing some of those memories with more ice cream last night at dinner. (Laughter and applause.) Thank you very much. But I have never forgotten the warmth and the hospitality that the Japanese people showed a young American far from home.

And I feel that same spirit on this visit: In the gracious welcome of Prime Minister Hatoyama. In the extraordinary honor of the meeting with Their Imperial Majesties, the Emperor and Empress, on the 20th anniversary of his ascension to the Chrysanthemum Throne. In the hospitality shown by the Japanese people. And of course, I could not come here without sending my greetings and gratitude to the citizens of Obama, Japan. (Applause.)

Now, I am beginning my journey here for a simple reason. Since taking office, I have worked to renew American leadership and pursue a new era of engagement with the world based on mutual interests and mutual respect. And our efforts in the Asia Pacific will be rooted, in no small measure, through an enduring and revitalized alliance between the United States and Japan.

From my very first days in office, we have worked to strengthen the ties that bind our nations. The first foreign leader that I welcomed to the White House was the Prime Minister of Japan, and for the first time in nearly 50 years, the first foreign trip by an American Secretary of State, Hillary Clinton, was to Asia, starting in Japan. (Applause.)

In two months, our alliance will mark its 50th anniversary -- a day when President Dwight Eisenhower stood next to Japan's Prime Minister and said that our two nations were creating "an indestructible partnership" based on "equality and mutual understanding."

In the half-century since, that alliance has endured as a foundation for our security and prosperity. It has helped us become the world's two largest economies, with Japan emerging as America's second-largest trading partner outside of North America. It has evolved as Japan has played a larger role on the world stage, and made important contributions to stability around the world -- from reconstruction in Iraq, to combating piracy off the Horn of Africa, to assistance for the people of Afghanistan and Pakistan -- most recently through its remarkable leadership in providing additional commitments to international development efforts there.

Above all, our alliance has endured because it reflects our common values -- a belief in the democratic right of free people to choose their own leaders and realize their own dreams; a belief that made possible the election of both Prime Minister Hatoyama and myself on the promise of change. And together, we are committed to providing a new generation of leadership for our people and our alliance.

That is why, at this critical moment in history, the two of us have not only reaffirmed our alliance -- we've agreed to deepen it. We've agreed to move expeditiously through a joint working group to implement the agreement that our two governments reached on restructuring U.S. forces in Okinawa. And as our alliance evolves and adapts for the future, we will always strive to uphold the spirit that President Eisenhower described long ago -- a partnership of equality and mutual respect. (Applause.)

But while our commitment to this region begins in Japan, it doesn't end here. The United States of America may have started as a series of ports and cities along the Atlantic Ocean, but for generations we have also been a nation of the Pacific. Asia and the United States are not separated by this great ocean; we are bound by it. We are bound by our past -- by the Asian immigrants who helped build America, and the generations of Americans in uniform who served and sacrificed to keep this region secure and free. We are bound by our shared prosperity -- by the trade and commerce upon which millions of jobs and families depend. And we are bound by our people -- by the Asian Americans who enrich every segment of American life, and all the people whose lives, like our countries, are interwoven.

My own life is a part of that story. I am an American President who was born in Hawaii and lived in Indonesia as a boy. My sister Maya was born in Jakarta, and later married a Chinese-Canadian. My mother spent nearly a decade working in the villages of Southeast Asia, helping women buy a sewing machine or an education that might give them a foothold in the world economy. So the Pacific Rim has helped shape my view of the world.

And since that time, perhaps no region has changed as swiftly or dramatically. Controlled economies have given way to open markets. Dictatorships have become democracies. Living standards have risen while poverty has plummeted. And through all these changes, the fortunes of America and the Asia Pacific have become more closely linked than ever before.

So I want everyone to know, and I want everybody in America to know, that we have a stake in the future of this region, because what happens here has a direct effect on our lives at home. This is where we engage in much of our commerce and buy many of our goods. And this is where we can export more of our own products and create jobs back home in the process. This is a place where the risk of a nuclear arms race threatens the security of the wider world, and where extremists who defile a great religion plan attacks on both our continents. And there can be no solution to our energy security and our climate challenge without the rising powers and developing nations of the Asia Pacific.

To meet these common challenges, the United States looks to strengthen old alliances and build new partnerships with the nations of this region. To do this, we look to America's treaty alliances with Japan, South Korea, Australia, Thailand and the Philippines -- alliances that are not historical documents from a bygone era, but abiding commitments to each other that are fundamental to our shared security.

These alliances continue to provide the bedrock of security and stability that has allowed the nations and peoples of this region to pursue opportunity and prosperity that was unimaginable at the time of my first childhood visit to Japan. And even as American troops are engaged in two wars around the world, our commitment to Japan's security and to Asia's security is unshakeable -- (applause) -- and it can be seen in our deployments throughout the region -- above all, through our young men and women in uniform, of whom I am so proud.

Now, we look to emerging nations that are poised as well to play a larger role -- both in the Asia Pacific region and the wider world; places like Indonesia and Malaysia that have adopted democracy, developed their economies, and tapped the great potential of their own people.

We look to rising powers with the view that in the 21st century, the national security and economic growth of one country need not come at the expense of another. I know there are many who question how the United States perceives China's emergence. But as I have said, in an interconnected world, power does not need to be a zero-sum game, and nations need not fear the success of another. Cultivating spheres of cooperation -- not competing spheres of influence -- will lead to progress in the Asia Pacific. (Applause.)

Now, as with any nation, America will approach China with a focus on our interests. And it's precisely for this reason that it is important to pursue pragmatic cooperation with China on issues of mutual concern, because no one nation can meet the challenges of the 21st century alone, and the United States and China will both be better off when we are able to meet them together. That's why we welcome China's effort to play a greater role on the world stage -- a role in which their growing economy is joined by growing responsibility. China's partnership has proved critical in our effort to jumpstart economic recovery. China has promoted security and stability in Afghanistan and Pakistan. And it is now committed to the global nonproliferation regime, and supporting the pursuit of denuclearization of the Korean Peninsula.

So the United States does not seek to contain China, nor does a deeper relationship with China mean a weakening of our bilateral alliances. On the contrary, the rise of a strong, prosperous China can be a source of strength for the community of nations.

And so in Beijing and beyond, we will work to deepen our strategic and economic dialogue, and improve communication between our militaries. Of course, we will not agree on every issue, and the United States will never waver in speaking up for the fundamental values that we hold dear -- and that includes respect for the religion and cultures of all people -- because support for human rights and human dignity is ingrained in America. But we can move these discussions forward in a spirit of partnership rather than rancor.

In addition to our bilateral relations, we also believe that the growth of multilateral organizations can advance the security and prosperity of this region. I know that the United States has been disengaged from many of these organizations in recent years. So let me be clear: Those days have passed. As a Asia Pacific nation, the United States expects to be involved in the discussions that shape the future of this region, and to participate fully in appropriate organizations as they are established and evolve. (Applause.)

That is the work that I will begin on this trip. The Asia Pacific Economic Cooperation forum will continue to promote regional commerce and prosperity, and I look forward to participating in that forum this evening. ASEAN will remain a catalyst for Southeast Asian dialogue, cooperation and security, and I look forward to becoming the first American President to meet with all 10 ASEAN leaders. (Applause.) And the United States looks forward to engaging with the East Asia Summit more formally as it plays a role in addressing the challenges of our time.

We seek this deeper and broader engagement because we know our collective future depends on it. And I'd like to speak for a bit about what that future might look like, and what we must do to advance our prosperity, our security, and our universal values and aspirations.

First, we must strengthen our economic recovery, and pursue growth that is both balanced and sustained.

The quick, unprecedented and coordinated action taken by Asia Pacific nations and others has averted economic catastrophe, and helped us to begin to emerge from the worst recession in generations. And we have taken the historic step of reforming our international economic architecture, so that the G20 is now the premier forum for international economic cooperation.

Now, this shift to the G20, along with the greater voice that is being given to Asian nations in international financial institutions, clearly demonstrates the broader, more inclusive engagement that America seeks in the 21st century. And as a key member of the G8, Japan has and will continue to play a leading and vital role in shaping the future of the international financial architecture. (Applause.)

Now that we are on the brink of economic recovery, we must also ensure that it can be sustained. We simply cannot return to the same cycles of boom and bust that led to a global recession. We can't follow the same policies that led to such imbalanced growth. One of the important lessons this recession has taught us is the limits of depending primarily on American consumers and Asian exports to drive growth -- because when Americans found themselves too heavily in debt or lost their jobs and were out of work, demand for Asian goods plummeted. When demand fell sharply, exports from this region fell sharply. Since the economies of this region are so dependent on exports, they stopped growing. And the global recession only deepened.

So we have now reached one of those rare inflection points in history where we have the opportunity to take a different path. And that must begin with the G20 pledge that we made in Pittsburgh to pursue a new strategy for balanced economic growth.

I'll be saying more about this in Singapore, but in the United States, this new strategy will mean that we save more and spend less, reform our financial systems, reduce our long-term deficit and borrowing. It will also mean a greater emphasis on exports that we can build, produce, and sell all over the world. For America, this is a jobs strategy. Right now, our exports support millions upon millions of well-paying American jobs. Increasing those exports by just a small amount has the potential to create millions more. These are jobs making everything from wind turbines and solar panels to the technology that you use every day.

For Asia, striking this better balance will provide an opportunity for workers and consumers to enjoy higher standards of living that their remarkable increases in productivity have made possible. It will allow for greater investments in housing and infrastructure and the service sector. And a more balanced global economy will lead to prosperity that reaches further and deeper.

For decades, the United States has had one of the most open markets in the world, and that openness has helped to fuel the success of so many countries in this region and others over the last century. In this new era, opening other markets around the globe will be critical not just to America's prosperity, but to the world's, as well.

An integral part of this new strategy is working towards an ambitious and balanced Doha agreement -- not any agreement, but an agreement that will open up markets and increase exports around the world. We are ready to work with our Asian partners to see if we can achieve that objective in a timely fashion -- and we invite our regional trading partners to join us at the table.

We also believe that continued integration of the economies of this region will benefit workers, consumers, and businesses in all our nations. Together, with our South Korean friends, we will work through the issues necessary to move forward on a trade agreement with them. The United States will also be engaging with the Trans-Pacific Partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement.

Working in partnership, this is how we can sustain this recovery and advance our common prosperity. But it's not enough to pursue growth that is balanced. We also need growth that is sustainable -- for our planet and the future generations that will live here.

Already, the United States has taken more steps to combat climate change in 10 months than we have in our recent history -- (applause) -- by embracing the latest science, by investing in new energy, by raising efficiency standards, forging new partnerships, and engaging in international climate negotiations. In short, America knows there is more work to do -- but we are meeting our responsibility, and will continue to do so.

And that includes striving for success in Copenhagen. I have no illusions that this will be easy, but the contours of a way forward are clear. All nations must accept their responsibility. Those nations, like my own, who have been the leading emitters must have clear reduction targets. Developing countries will need to take substantial actions to curb their emissions, aided by finance and technology. And there must be transparency and accountability for domestic actions.

Each of us must do what we can to grow our economies without endangering our planet -- and we must do it together. But the good news is that if we put the right rules and incentives in place, it will unleash the creative power of our best scientists, engineers, and entrepreneurs. It will lead to new jobs, new businesses, and entire new industries. And Japan has been at the forefront on this issue. We are looking forward to being a important partner with you as we achieve this critical global goal. (Applause.)

Yet, even as we confront this challenge of the 21st century, we must also redouble our efforts to meet a threat to our security that is the legacy of the 20th century -- the danger posed by nuclear weapons.

In Prague, I affirmed America's commitment to rid the world of nuclear weapons, and laid out a comprehensive agenda to pursue this goal. (Applause.) I am pleased that Japan has joined us in this effort, for no two nations on Earth know better what these weapons can do, and together we must seek a future without them. This is fundamental to our common security, and this is a great test of our common humanity. Our very future hangs in the balance.

Now, let me be clear: So long as these weapons exist, the United States will maintain a strong and effective nuclear deterrent that guarantees the defense of our allies -- including South Korea and Japan. (Applause.)

But we must recognize that an escalating nuclear arms race in this region would undermine decades of growth and prosperity. So we are called upon to uphold the basic bargain of the Nuclear Non-Proliferation Treaty -- that all nations have a right to peaceful nuclear energy; that nations with nuclear weapons have a responsibility to move toward nuclear disarmament; and those without nuclear weapons have a responsibility to forsake them.

Indeed, Japan serves as an example to the world that true peace and power can be achieved by taking this path. (Applause.) For decades, Japan has enjoyed the benefits of peaceful nuclear energy, while rejecting nuclear arms development -- and by any measure, this has increased Japan's security and enhanced its position.

To meet our responsibilities and to move forward with the agenda I laid out in Prague, we have passed, with the help of Japan, a unanimous U.N. Security Council resolution embracing this international effort. We are pursuing a new agreement with Russia to reduce our nuclear stockpiles. We will work to ratify and bring into force the test ban treaty. (Applause.) And next year at our Nuclear Security Summit, we will advance our goal of securing all the world's vulnerable nuclear materials within four years.

Now, as I've said before, strengthening the global nonproliferation regime is not about singling out any individual nations. It's about all nations living up to their responsibilities. That includes the Islamic Republic of Iran. And it includes North Korea.

For decades, North Korea has chosen a path of confrontation and provocation, including the pursuit of nuclear weapons. It should be clear where this path leads. We have tightened sanctions on Pyongyang. We have passed the most sweeping U.N. Security Council resolution to date to restrict their weapons of mass destruction activities. We will not be cowed by threats, and we will continue to send a clear message through our actions, and not just our words: North Korea's refusal to meet its international obligations will lead only to less security -- not more.

Yet there is another path that can be taken. Working in tandem with our partners -- supported by direct diplomacy -- the United States is prepared to offer North Korea a different future. Instead of an isolation that has compounded the horrific repression of its own people, North Korea could have a future of international integration. Instead of gripping poverty, it could have a future of economic opportunity -- where trade and investment and tourism can offer the North Korean people the chance at a better life. And instead of increasing insecurity, it could have a future of greater security and respect. This respect cannot be earned through belligerence. It must be reached by a nation that takes its place in the international community by fully living up to its international obligations.

So the path for North Korea to realize this future is clear: a return to the six-party talks; upholding previous commitments, including a return to the Nuclear Non-Proliferation Treaty; and the full and verifiable denuclearization of the Korean Peninsula. And full normalization with its neighbors can also only come if Japanese families receive a full accounting of those who have been abducted. (Applause.) These are all steps that can be taken by the North Korean government if they are interested in improving the lives of their people and joining the community of nations.

And as we are vigilant in confronting this challenge, we will stand with all of our Asian partners in combating the transnational threats of the 21st century: by rooting out the extremists who slaughter the innocent, and stopping the piracy that threatens our sea lanes; by enhancing our efforts to stop infectious disease, and working to end extreme poverty in our time; and by shutting down the traffickers who exploit women, children and migrants, and putting a stop to this scourge of modern-day slavery once and for all. Indeed, the final area in which we must work together is in upholding the fundamental rights and dignity of all human beings.

The Asia Pacific region is rich with many cultures. It is marked by extraordinary traditions and strong national histories. And time and again, we have seen the remarkable talent and drive of the peoples of this region in advancing human progress. Yet this much is also clear -- indigenous cultures and economic growth have not been stymied by respect for human rights; they have been strengthened by it. Supporting human rights provides lasting security that cannot be purchased in any other way -- that is the story that can be seen in Japan's democracy, just as it can be seen in America's democracy.

The longing for liberty and dignity is a part of the story of all peoples. For there are certain aspirations that human beings hold in common: the freedom to speak your mind, and choose your leaders; the ability to access information, and worship how you please; confidence in the rule of law, and the equal administration of justice. These are not impediments to stability, they are the cornerstones of stability. And we will always stand on the side of those who seek these rights.

That truth, for example, guides our new approach to Burma. Despite years of good intentions, neither sanctions by the United States nor engagement by others succeeded in improving the lives of the Burmese people. So we are now communicating directly with the leadership to make it clear that existing sanctions will remain until there are concrete steps toward democratic reform. We support a Burma that is unified, peaceful, prosperous, and democratic. And as Burma moves in that direction, a better relationship with the United States is possible.

There are clear steps that must be taken -- the unconditional release of all political prisoners, including Aung San Suu Kyi; an end to conflicts with minority groups; and a genuine dialogue between the government, the democratic opposition and minority groups on a shared vision for the future. That is how a government in Burma will be able to respond to the needs of its people. That is the path that will bring Burma true security and prosperity. (Applause.)

These are steps that the United States will take to improve prosperity, security, and human dignity in the Asia Pacific. We will do so through our close friendship with Japan -- which will always be a centerpiece of our efforts in the region. We will do so as a partner -- through the broader engagement that I've discussed today. We will do so as a Pacific nation -- with a President who was shaped in part by this piece of the globe. And we will do so with the same sense of purpose that has guided our ties with the Japanese people for nearly 50 years.

The story of how these ties were forged dates back to the middle of the last century, sometime after the guns of war had quieted in the Pacific. It was then that America's commitment to the security and stability of Japan, along with the Japanese peoples' spirit of resilience and industriousness, led to what's been called "the Japanese miracle" -- a period of economic growth that was faster and more robust than anything the world had seen for some time.

In the coming years and decades, this miracle would spread throughout the region, and in a single generation the lives and fortunes of millions were forever changed for the better. It is progress that has been supported by a hard-earned peace, and strengthened by new bridges of mutual understanding that have bound together the nations of this vast and sprawling space.

But we know that there's still work to be done -- so that new breakthroughs in science and technology can lead to jobs on both sides of the Pacific, and security from a warming planet; so that we can reverse the spread of deadly weapons, and -- on a divided peninsula -- the people of South can be freed from fear, and those in the North can live free from want; so that a young girl can be valued not for her body but for her mind; and so that young people everywhere can go as far as their talent and their drive and their choices will take them.

None of this will come easy, nor without setback or struggle. But at this moment of renewal -- in this land of miracles -- history tells us it is possible. This is the --America's agenda. This is the purpose of our partnership with Japan, and with the nations and peoples of this region. And there must be no doubt: As America's first Pacific President, I promise you that this Pacific nation will strengthen and sustain our leadership in this vitally important part of the world.

Thank you very much.



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