It's rare that a business deal intrigues investors and political scientists alike. Industrial & Commercial Bank of China Ltd.'s move to buy 20 percent of Africa's largest bank is such a transaction.
It's the biggest overseas investment by a Chinese company, in this case the world's No. 1 bank by market value. ICBC's $5.6 billion purchase of the Standard Bank Group Ltd. stake is the largest in South Africa since apartheid ended in 1994.
Yet there's something even bigger at play here. This is arguably the first Chinese investment in Africa that doesn't carry a whiff of political strategy. Nor is it directly related to China's desire for resources, which can often help despots more than African households.
ICBC's Standard Bank deal may be the watershed that begins propelling China's designs on Africa from talk to just plain business, and smart business at that.
``From the regulators' point of view, this kind of diversification is a great idea,'' says Michael Pettis, a finance professor at Peking University. ``Chinese banks are too highly concentrated in China and it's not in their best interest that banks depend exclusively on Chinese growth. That kind of dependence is highly pro-cyclical and can feed booms and busts.''
Standard Bank has offices in 18 African countries, including Nigeria and Kenya, and 21 other nations such as Argentina and Taiwan. The Johannesburg-based bank has 713 branches in South Africa and 240 throughout the continent. The deal is a sign that even if the Chinese Communist Party has strategic reasons for investing in Africa, companies are heading there for the economic potential...
ICBC's stake in Standard Bank comes without that kind of baggage. It's a state-controlled China bank, making it hard to figure out where politics end and business begins. Yet the deal shows China is now making bets on Africa's economy.
Standard Bank is gaining access to the fastest-growing major economy and fattening its capital base. China is getting a foothold into Africa's nascent investment-banking and insurance industries. It's also a way for China to use its growing cash piles overseas rather than making fresh domestic loans that may go bad or fuel inflation.
All this is stellar news for Africa, which usually suffers from the ``paradox of plenty.'' All too often, inhabitants of resource-rich nations fail to prosper while corrupt politicians and their cronies get wealthy and ignore the development needs of the struggling masses.
That has been Africa's experience for far too long. And the failure of Western efforts to reverse the dynamic left the region's leaders open to Chinese investment.
One interesting element of ICBC's deal is how different it is from the usual overture from Western banks. It didn't come laden with demands about how much control ICBC will have over Standard Bank. It didn't require pledges for financial change. It's merely one bank buying a piece of another with transparent terms and conditions. It's a sign Chinese managers are willing to treat Africans as peers.
The West hasn't learned that lesson with its aid programs and lecturing. By trying a new tack, China may be testing what development economists have argued for years: Africa doesn't need more aid, it needs more genuine investment and trade.
Bono and Columbia University's Jeffrey Sachs will keep plugging away, and thank the gods for that. But Chinese companies appear to see something in Africa many in New York, London and Tokyo don't. Africa represents huge and lucrative business opportunities if it gets its act together.
That's a big ``if.'' With the exception of Botswana and Ghana, Africa's biggest consistency seems to be to pull the rug out from under wide-eyed investors. China's interests are offering Africa a rare opportunity to boost its economies.
Another interesting angle here concerns investors. Looking at ICBC along with other Chinese deals of late -- like Citic Securities Co. buying a stake in Bear Stearns Cos. -- it's clear something transformational is afoot.
In recent years, China sought foreign investments in financial firms to shore up capital and gain expertise. Now, cash-rich from trade, stock offerings and surging share prices, China no longer needs Wall Street's money. Increasingly, it's foreigners who want a cut of China's money.
``Getting access to China's market may no longer require putting money in China,'' says Brad Setser, director of research at Roubini Global Economics LLC in New York. ``It may instead require accepting investment from China.''
China may have just found a way to tame its own pressures and tap Africa without the baggage of the past.
Birth defects in heavily polluted China have increased by nearly 40 percent since 2001, with a deformed baby born every 30 seconds, state media reported on Tuesday.The rate of defects appeared to increase near the country's countless coal mines, which produce the bulk of China's energy but are also responsible for serious air and water pollution, the China Daily newspaper said, quoting government officials.
Birth defects nationwide have increased from 104.9 per 10,000 births in 2001 to 145.5 last year, it said, citing a report by the National Population and Family Planning Commission.They affect about one million of the 20 million babies born every year, with about 300,000 babies suffering from "visible deformities.""A baby with birth defects is born every 30 seconds in China and the situation has worsened year by year," said Jiang Fan, deputy head of the commission and author of the report.
About 30-40 percent of the deformed children born each year die shortly after birth.There is a correlation between birth defects and proximity to environmentally degraded areas, said An Huanxiao, head of family planning in the heavily polluted northern province of Shanxi, source of much of the nation's coal. Shanxi tops the nation in birth defects, Xinhua said. A correlation can also be drawn with parents' poverty and low education, An was quoted as saying. China suffers from serious pollution, the price of its stunning economic rise, with air quality in major cities regularly exceeding danger levels and millions of people lacking access to clean water.
Energy demand is surging as robust growth in developing economies offsets slower demand in the West. At the same time the scientific warnings are becoming ever starker over the global warming caused by more carbon emissions from fossil fuels.
Interest in alternative, sustainable energy sources has never been stronger. Yet, despite accelerating investment, the output capacity of these energy forms remains barely more than embryonic. Fossil fuels, reliable and accessible, will continue to provide more than 90 percent of global commercial energy needs to 2030, according to the Organization of Petroleum Exporting Countries.
Leo Drollas, an executive director at the Center for Global Energy Studies in London, shares the assessment. "Oil will be the world's most important energy source for some time," he said. "Many times we hear that it's the end of oil, it's the end of the world. It's never happened."
Oil provides about 40 percent of the world's primary energy, according to both OPEC, the exporter's cartel, and the International Energy Agency, in Paris, which advises consumer governments.
Another 20 percent comes from natural gas, with the remainder coming mainly from coal, with relatively minor inputs from nuclear, biomass, hydro-power and other renewable sources. By 2030, oil's share in the energy mix will barely have declined, to 36.5 percent, according to OPEC. Similar forecasts have been made by Washington...
In July, the International Energy Agency forecast that global oil demand would rise by an average 2.2 percent a year to 2012. Production slowdowns, it said, could lead to a supply crunch as OPEC's spare capacity dwindled.
Looking farther ahead, the U.S. Energy Information Administration, in its international energy outlook published this year, predicted a 58 percent rise in
oil consumption from 2004 to 2030, to 118 million barrels per day. To feed
consumption, it projected that production would increase by 34 million barrels
per day over the period.
Demand is being led by transportation, factories in developing countries and U.S. consumers. Energy consumption in less-advanced economies should grow 2.6 percent a year through 2030, the energy administration forecast. In the developed world, where consumption growth fell last year for the first time since the early 1980s, energy use is projected to grow 0.8 percent a year.
There is a caveat to such projections: China, which has leapfrogged Japan to become the second largest user behind the United States, heavily subsidizes oil - as does India [see supply problems related to subsidies in China]. Demand could moderate if those governments should decide that their consumers must pay more.
With that in mind, gauging the remaining viable life span of the world's oil reservoirs is one of the most vexing questions in energy policy.
"You can arrive at any number of estimates," Drollas said. "What counts is not estimates but what's extracted. And here, factors like investment, economics, recovery rates and technology come in."
"Reserves" are usually classed as oil in a reservoir that can be extracted at a specific assumed cost.
Estimates of global proven reserves are constantly revised; for example 157 billion barrels at the end of 1954 became 1.317 trillion barrels as of January, according to Oil & Gas Journal. At current rates of extraction, those would last 42 years, Drollas said.
According to the journal, 56 percent of proven reserves are in the Middle East. Since 2000, the largest net increase has been in Canada, with the addition of 174 billion barrels from oil sands. Iran and Kazakhstan have also had upward revisions.
"It's not that the oil's not there," said Paul Stevens, professor at the University of Dundee in Scotland. "It's whether there's the investment to get it out. The issues are geopolitical and economic."
The largest reservoirs, or "super giants," are the cheapest to develop, in terms of cost per barrel. But the last true super giants were discovered in 1967 and 1968, according to a paper by Robert Hirsch, Roger Bezdek and Robert Wendling that has become seminal to "peak oil" theorists, who argue that reserves will soon peak at a maximum production rate, and decline thereafter.
The 2005 paper, "Peaking of World Oil Production" collated estimated dates for the peak, ranging from last year to beyond 2025. It concluded that government intervention to slow demand was required, "because the economic and social implications of oil peaking would otherwise be chaotic."
Peak oil theory is controversial. A study released last November by Cambridge Energy Research Associates, a U.S. consultancy, estimated the remaining oil base at 3.74 trillion barrels, well above peak theorists' estimates.
There have been significant recent discoveries, in Kashagan and Tengiz in Kazakhstan, Angola, Brazil, Rajasthan and the Gulf of Guinea.
But, as the easiest oil reservoirs have been found, the major oil companies have had to invest in increasingly inaccessible sites, like the Arctic Ocean, or in expensive forms, like shale.
The scarcity of rigs, other equipment and engineers, alongside the nationalism in producer countries like Venezuela and Russia, and the scramble for deals by the state oil importers in China and India, have all combined to create a sense of an industry on the edge.
Still, "this is the fifth time that the world is said to be running out of oil," said Yergin, the chairman of Cambridge Energy. Each time, "technology and the opening of new frontier areas has banished the specter of decline. There's no reason to think that technology is finished this time."
Although the drawdown on reserves should make for a more expensive barrel, and oil's climb toward $100 per barrel has appeared to add weight to the argument, prices tend not to follow consensus for long. Fundamentals of supply lead prices for a while, then economics or geopolitics takes over.
Many current oil bulls may forget that prices were below $10 a barrel as recently as 1999, when the Asian financial crisis crimped demand. The world was awash in oil, reports said at the time, and several hundred million barrels of oil were said to be "hiding," waiting for prices to rise...
Stevens, of the University of Dundee, said the most likely scenario in the next five to 15 years was for oil to stay above a floor of $60 a barrel. Ultimately, that will trigger a demand response, as the price trims consumption in China and India and as biofuels win market share. At that point, the floor might be tested.
In April, a UBS economist, Jan Stuart, estimated a long-term price of $50, below which oil would fail to yield returns that would encourage investment in production capacity growth. HSBC has a similar long-term forecast. Its analysts, Paul Spedding and David Phillips, have just raised their 2010 forecast to $55 from $47, which "should preserve oil's competitive position in the energy stakes, slowing competition from natural gas and coal." "It should also be sufficient to meet the financial needs of most OPEC countries," they said.
Within the exporter group, there are differences on pricing strategy. Those with large reserves, especially Saudi Arabia, want crude to remain competitive. But the majority are keen for prices to stay above $50 as their own consumption - mostly heavily subsidized - expands and they become increasingly reliant on oil and gas revenue to feed budgets swollen by development and demographic pressures.
UBS estimates the "breakeven" price for major producers in a range from $23 for Kuwait to between $50 and $55 in Venezuela, where production costs are high, and Iran, which has a big population relative to production and reserves.
Whatever the price, the role of OPEC is in flux, altered by unconventional resources and the emergence of Russia and Mexico as major global suppliers. According to the Energy Information Administration in Washington, the OPEC producers' share of world oil supply fell to 41 percent by 2004, from 52 percent in 1973.
According to the Oil & Gas Journal, Canadian oil sands now represent 50 percent to 70 percent of reserves that are not off-limits to international oil companies because of government restrictions on operators. Canada is a welcoming and stable host - but production is expensive and twice as energy-intensive as normal oil extraction because of the energy needed to separate the bitumen from the surrounding sand.
Will other fuels to step in to meet demand?
According to estimates by Goldman Sachs, nonconventional fuels like oil sands and shale, ethanol and biomass liquids, coal and natural gas will meet 3.5 percent of demand by 2015, up from 2.8 percent in 2006, and the share could rise to 10.6 percent by 2030. That is a considerable change, but not enough to plug the oil wells.
In recent decades, more processes have emerged to synthesize liquid hydrocarbons from natural gas and coal. There is no shortage of supply - 65 years of proven gas reserves and 150 years for coal, compared with 40 years for oil, according to BP - but it means using one high-emission fossil fuel to create another.
After oil, coal is the No. 2 source of energy. Growth is driven mainly by developing countries; every week to 10 days, a coal-fired power plant opens in China. But coal combustion needs rail, water and power lines, and it also produces more carbon dioxide per unit of energy than oil from conventional sources.
Projects that convert natural gas to petroleum products, like Shell's Pearl project in Qatar, have proved more complex and expensive than planned. The same is true of so-called coal-to-liquids, although analysts suggest that this may be a feasible option for China, given that country's vast coal reserves, modest capital cost assumptions and soaring demand for oil.
In terms of renewable sources, there have been bold steps by governments, including an EU plan to generate 20 percent of all EU energy from renewable sources by 2020.
The largest nonfossil energy source is biomass. Liquid fuels from biomass - mainly ethanol - have grown but still contribute only about 1 percent of the energy provided by oil. Wind and solar energy produce about 1 percent of the world's energy, a share that U.S. government forecasters predict will rise modestly.
Hydro power, which supplies about 2 percent of world energy, is not likely to grow significantly, outside of China and other developing Asia-Pacific areas. Nuclear power contributes about 6 percent of energy, and could expand its share if concerns over safety, security and waste disposal can be overcome.
In all of these areas, there will be advances. But squaring the needs of global economic growth with the imperative of curbing global warming will also depend on major long-term changes in consumption behavior.
Meanwhile, oil's pride of place looks assured. Prices will rise and fall, reserves will run dry and be discovered. But the thirst will continue, and will continue to be quenched.
But merely listing projects, or marveling at the architectural gigantism, doesn't get at what is unique about the emirates, which are emerging as the world's great post-democratic cities. They are rising at a time when American power seems to be in remission, when democracy has, in many parts of the world, lost its luster as an ideal, or necessary endpoint of social and political development. Material splendor and authoritarian government can, it turns out, go together. And architecturally, despite all the dissonance, the strange juxtapositions of the vulgar and the sleek, the blue-chip buildings next to the shabby high-rise clad in garishly colored glass and surmounted by a pagoda folly, the emirates are essentially an advertisement to an increasingly wowed world: Look at what enlightened, corporate, efficient and non-democratic government can do...Dubai is even aiming to take on the City of London as a global financial center according to the Telegraph. Goodness knows what would happen if all those petrodollars went to Dubai instead of London--not an unimaginable scenario:
Which hints at a deeper politics underneath the architectural eclecticism. Like the vast investment in shopping malls, the celebration of materialism, the encouragement of unashamedly conspicuous consumption, architectural eclecticism is another way of reassuring people that you have everything you need here. The state has provided. The government doesn't just build mega-projects as investment, but to demonstrate competence, power and problem-solving. The striking thing about the hundreds of concrete support pillars that have sprung up in recent months along Sheik Zayed highway -- which will support a new light rail system -- is how quickly they're going up. The delays, the disputes, the litigation, the whole messy business of "Not in My Back Yard" simply doesn't exist in the country.
"Dubai is the achievement of a certain fantasy or utopia, of a society in which the corporations, private ownership and the state are all collapsed into one another," says Mike Davis, who has written about Dubai in the recently published "Evil Paradises: Dreamworlds of Neoliberalism." The book, definitely in the left-wing tradition, surveys urban planning, social justice, environmental destruction and other issues in emergent and rapidly developing cities around the world. Whereas people in the Emirates argue that they are blazing a progressive path forward relative to other Arab and regional nations, Davis writes that Dubai is pointing the rest of the world back to "a nightmare of the past: Speer meets Disney on the shores of Araby."
Big money and all these palaces in the sky bring up the natural question, "Who puts up these architectural wonders in this playground for the wealthy?" The answer is less heartening: South Asian workers who are largely sealed off from the wonders of Dubai--that's who. It is no exaggeration to say that they are being treated as second-class citizens for they have no path to eventual citizenship in the UAE, as with most Middle East countries. While the government claims that it is attempting to better relations with these workers, such doesn't seem to be the case as a number of them have gone on strike. [Hat tip Daniel Altman.] The caption of a picture of police watching South Asian workers on Altmans's blog is apt: "Soldiers won't build those skyscrapers." From the Associated Press:
With a regional tide of petrodollars waiting to be deployed around the globe, Dubai's objective is simple: to establish itself as one of the world's leading financial centres.
"We aim to become one of the top three exchange groups in the world in the international capital markets," according to a spokesman for Borse Dubai, the holding company of the Dubai International Financial Exchange (DIFX) and its domestic counterpart, the Dubai Financial Market...
The Middle East's pan-regional boom looks well-set to play into Dubai's hands. Huge sovereign wealth funds amassed by neighbouring states such as Abu Dhabi and Qatar are contributing to the wall of capital which has turned the Gulf into one of the most formidable global centres for outbound mergers and acquisitions activity...
But there are reasons to suspect that Borse Dubai's long-term goal of becoming a top-three exchange group may have a touch of the desert mirage about it — or that, at least, it may take even longer to achieve than the state's ambitious rulers are hoping for.
The evidence of the period since the DIFX's September 2005 launch suggests it will take more than opera singers and snow in the desert to tempt large international companies to Dubai.
So far, only a handful have chosen to list there: in terms of trading volumes and funds raised, Dubai is not yet playing in the same league as London, New York or even Shanghai.
Data from Thomson Financial shows that, last year, IPOs in Dubai raised just $2.3bn, barely one-sixth of the total of London's junior AIM market.
While the amount of capital raised through equity offerings is only one measure of an exchange's success, the figures suggest the DIFX has a long road to travel to compete with more mature capital markets.
Thousands of foreign construction workers, mostly of south Asian origin, went on strike Sunday over harsh working conditions in this booming Gulf city, a day after the government threatened to deport those who had rioted over low and delayed salaries.UPDATE 11/2: The Economist adds that the workers are unhappy about the falling value of the dirham, which is of course pegged to the falling US dollar.
Inexpensive foreign labor, drawn from the impoverished underclasses of India, Pakistan and Bangladesh, form the vital underpinnings to Dubai's spectacular building boom, which includes not just soaring office towers and sprawling residential compounds but whole artificial islands and winter ski resorts in this desert city.
The workers, however, have complained about long hours, no minimum wage, harsh living conditions and no legal forums in which to air their complaints about management.
Despite the illegality of strikes in the United Arab Emirates, the laborers refused to go to work over the weekend and protested in the labor camp of Dubai's Jebel Ali Industrial Zone and on a construction site in Al Qusais, a residential neighborhood.
They demanded pay increases, improved housing and better transportation services to construction sites. Some workers threw stones at riot police that heavily outnumbered the protesters on Saturday. Ali bin Abdullah al-Kaabi, the Emirates' minister of labor, described the workers' behavior to the state news agency WAM as "uncivilized."
(b) Dai-Ichi Kangyo Bank
(c) Industrial and Commercial Bank of China
(d) Bank of America
You may be surprised to know that (c) ICBC, is the correct answer. Given the incredible run-up in Chinese bourses, it was bound to happen sooner or later. In addition, you may know the reason why I threw in (b) Dai-Ichi Kangyo Bank in there as well--in 1986, the Japanese bank had surpassed what was then known as Citibank as the world's largest bank in terms of assets. So, is it the same old, same old with China instead of Japan as the flavor of the decade? The following article from Reuters argues no, and gives further reasons as to why Chinese stocks are fairly valued despite their pricey valuations. Basically, it boils down to "China is such a whopping huge market that growth opportunities are humongous."
I'm not so sure about that. Certainly there's a bubbly element to these proceedings as Chinese retail investors have no choice but to stick with local markets for there are limited opportunities to invest abroad. Still, there are many tidbits you can pick up. Did you know that SAIC Motors now has a larger market capitalization than General Motors? Like when Japan was poised to rule the roost according to some, there are many Chinese firms appearing on the scene. Did you know that PetroChina now has the second largest oil market capitalization in the world?
China has the world's largest commercial bank, its biggest aluminum maker, its No. 2 oil firm and its fourth-largest investment bank. It has five of the world's 10 biggest companies, versus three for the United States.
Never mind that outside their home markets, the companies' business operations are dwarfed in size and sophistication by Western and Japanese giants.
Soaring prices on the Shanghai Stock Exchange have propelled listed Chinese firms' capitalizations -- including shares held by government and institutional investors that have not yet become freely traded -- to the top of global tables.
For some investors, particularly foreigners, that's a sign Chinese share prices are ludicrously high [count me in].
But with China's economy on track for its fifth consecutive year of double-digit percentage growth, the market is simply looking farther into the future to value stocks, others say. And that future justifies such prices -- except perhaps for resource stocks.
"The current A-share bull run is very similar to what happened previously in Japan, Korea and Taiwan," when those economies and markets took off in the 1980s and 1990s, says Miao Junwei, CEO of ABN AMRO TEDA Fund Management.Shanghai's stock market is up five-fold since the start of 2006. It is trading at above 40 times projected earnings for this year, dwarfing the S&P 500's 16 times. But it is still well below the 70-plus hit by Taipei at its peak in 1990, for example.
While the yuan currency keeps appreciating against the dollar and profit growth remains strong -- and there's no sign of this changing -- many blue-chip prices may continue climbing, and an extended pull-back is unlikely, Miao believes.
Take Industrial and Commercial Bank of China (ICBC), the country's biggest bank. When ICBC overtook Citigroup as the world's largest bank by capitalization in late July, it was seen as an especially absurd sign of a bubble.
Citigroup, one of the world's most sophisticated financial institutions with operations around the globe, posted net profit of $21.5 billion last year, over three times profits at ICBC, a state-controlled behemoth that is trying to modernize itself and operates almost entirely inside China.
But there's method behind the madness. ICBC has a network of around 17,000 branches across China. Citigroup, with more than a dozen Chinese branches, incorporated locally this year and entered the yuan retail banking sector, but it is unlikely ever to have a Chinese network approaching CIBA's.
The Chinese bank's earnings may grow faster than Citigroup's for years. ICBC announced a 76 percent jump in third-quarter profit last week, while Citigroup's third-quarter net fell 57 percent, partly because of exposure to the U.S. subprime loan crisis.
China's United Securities analyst Ge Jinbo estimates ICBC's profits will keep rising strongly on the back of China's economic expansion, which should produce national loan growth of about 10 percent a year, and surging non-interest income as it diversifies into areas such as insurance and investment banking."ICBC's earnings are expected to catch up with Citigroup's by 2010," he wrote in an article this month, predicting annual profit growth of about 35 percent in the next few years.
ICBC, which now has a market capitalization above $300 billion against Citigroup's $212 billion, also has plenty of money to grow through acquisitions. Last week it said it was buying 20 percent of South Africa's Standard Bank Group for $5.6 billion, the largest foreign investment in Africa.
ICBC's relatively backward retail banking operation could actually help earnings grow, as the bank takes modernizing steps that Citigroup and other Western banks took long ago.
Acquisitions may spur growth of China's blue chips in the next few years. At home, the government wants to consolidate industries to improve efficiency, and Beijing is encouraging investment abroad as it seeks access to resources and markets.
Another positive factor may persist for a year or two -- injections of major assets into listed firms by their state parents.
SAIC Motor quadrupled its earnings this year, and rocketed to become the world's ninth largest auto maker by capitalization, exceeding General Motors, by obtaining manufacturing ventures from its parent in a $2.4 billion deal.
The government now appears to be grooming SAIC as a "national car champion" by encouraging mergers with other local players.
In general, fund managers argue stocks related to consumer spending growth may deserve their high valuations. Lower labor costs, first-mover advantages and huge local networks of branches and customers may help these firms beat foreign competition.
Fund managers are most skeptical about valuations in the resources sector. Oil giant PetroChina, for example, which last week raised $8.9 billion in a Shanghai share offer, is now the world's second largest oil firm by market value, second only to Exxon Mobil.
In contrast to consumer stocks, resource firms' margins are in the long run expected to depend mainly on the cost at which they can obtain their raw material from abroad, while the global commodities markets mean they are unlikely to get away with charging their customers any premium.
"I really don't understand why China's resource firms should command such high premiums to their overseas peers," a senior portfolio manager at a major Chinese house said.
"PetroChina, like its foreign counterparts, sells its crude oil at international market prices and it does not hold any advantage in terms of reserve replacement."
China and ASEAN, should continue to step up dialogue on investment policies and work towards an early conclusion on establishing a free-trade area investment agreement. Chinese Vice-Premier Zeng Pei Yan made the call at the start of the Fourth China-ASEAN Business and Investment Summit yesterday. Trade between China and its southern neighbours grew to almost US$160 billion last year. China is expected to establish free trade pacts with Singapore, Brunei, Malaysia, Indonesia, Thailand and the Philippines by 2010.
Dr Sarah Tong, an economist from the National University of Singapore’s East Asia Institute, tells Michael Tan that a major shipping hub like Singapore will benefit from greater China -Asean economic cooperation.
ST: I think Singapore is a very efficient and important shipping hub and it does have a very important role to play in this respect. Particularly, I think this is one of the most obvious and strong comparative advantages of Singapore among ASEAN members and in the relationship with China, that will be a very important part because China - ASEAN trade within the region has become very significant. For example, components and parts, maturity of the import and export of the region are from the region so a trading hub will be essential for these closer economic relations between China and ASEAN.
China is expected to establish free trade pacts with several ASEAN countries in 2010. How is a free trade pact with China expected to benefit South-east Asian nations like Singapore?
ST: Well, I think among the ASEAN members, each member is very different in terms of their structure, industrial structure, economic structure, so they’re going to benefit in different aspects. For a country like Singapore, which is, in terms of manufacturing, playing a relatively small part in the over-all economy, and also the manufacturers are a bit more up-scale, more technologically sophisticated, in which case it doesn’t have as much direct competition with the Chinese industries, so in which case there is a lot more complementarities between the two in terms of manufacturing. And Singapore also has strengths in research and development and in high-tech products, in which case, closer relations or more trade and cross-over investments between the two countries will benefit tremendously for both.
And what would you say needs to be done to ensure a profitable partner-ship here?
ST: Well, I think the countries and the members on both parts have been pushing forward in increasingly positive aspects which is important for anything to be profitable and beneficial. Both parties, ASEAN and China, I think it’s more important to have a positive and long-term prospect and also having more dialogue which increases the understanding of both the strengths and the advantages and disadvantages of each party, understanding, and mutually respecting. I think that’s the way to go.
Chinese Vice-Premier Zeng Pei Yan has called for an early conclusion of talks on a China - ASEAN free trade area investment agreement. What is the likelihood that dialogue of this nature reaches fruition?
ST: I think relative to the free trade area, investment agreements probably vary more widely in terms of involving more broad areas, so it’s probably a little bit more difficult, relative to just product trade. I think the important thing is not the speed of how fast you can complete something, but rather to have more transparent, deeper understanding and more meaningful and effective dialogue and agreements. I’m not sure how long that will take, but I think it’s probably more difficult for an investment agreement to be reached because it does involve a lot more parties and areas.
The basic reasoning of EU steel users is that EU steelmakers don't produce enough steel to meet their needs, and hence need supplies from China. If sanctions were to be applied, EU steel users believe they would be unfairly penalized. With that in mind, on to the steelmaker's case (and more) care of the International Herald Tribune. It's going to be interesting to see what the EU makes of the steelmaker's request. With EU Trade Commissioner Peter Mandelson already striking a less than conciliatory tone towards China, expect sparks coming from this direction. Trade wars against China all around are looming:
European Union steel users sought on Tuesday to counter growing calls by many EU steelmakers for trade barriers against imports from China, saying such measures could drive the industry out of the bloc.
European steel executives meeting in Berlin on Monday said they might ask as soon as this month for EU anti-dumping duties against China's fast-growing imports which they say benefit from massive state subsidies.
But European engineering association Orgalime, representing national groups whose members include big steel consumers such as Siemens , ABB, and Alcatel-Lucent plus many smaller firms, said China is now vital to the sector.
Orgalime Secretary General Adrian Harris said it did not make sense to hurt the EU's metalworking and mechanical engineering sector which employs over 7 million Europeans to protect steelmakers who provide only 250,000 jobs in Europe.
"For us matters are simple -- our companies must have access to the supplies of steel they need at competitive market conditions," Harris said in a statement.
European steel makers fired the opening shot Monday in a looming trade war with China, asking the European Commission to impose tariffs on soaring imports, which they say are being dumped on the market at prices hugely below cost.
The request sets the scene for a debate likely to divide European governments, as steel makers and companies reliant on cheap imports fight out of their respective corners.
The European Commission will investigate the complaint and could impose provisional measures on Chinese imports within nine months. The steel makers have requested duties of 25 percent to 40 percent on cold-rolled and galvanized steel, which are typically used in engineering and construction work.
The call for countermeasures is likely to be backed strongly by several South European countries and Germany but opposed by countries more committed to free trade like Britain and the Nordic countries.
Divisions within the European industry were apparent within hours of the complaint being lodged. Gordon Moffat, director general of the European Confederation of Iron and Steel Industries, or Eurofer, said Chinese output was "out of control" and talks with Beijing have failed to cap overcapacity.
Eurofer said exports of the products concerned had "inundated the EU market," following exponential export surges into the market by up to 3,300 percent over the past four years.
"Massive volumes have been dumped on the EU market at dumping margins of up to 40 percent. EU domestic prices have been undercut by up to 25 percent," Eurofer said in a statement.
But Adrian Harris, the secretary general of Orgalime, which represents the engineering industry, said that its members were already having difficulty sourcing raw materials including steel.
The key to the commission's decision is the likely effect of any countermeasures on the overall European economy.
Orgalime says that 250,000 jobs in Europe depend on steel making, as opposed to 7 million in metalworking and mechanical engineering, which use imports.
Those figures are disputed by Eurofer, which says that steel making employs 372,000 directly and a further 1 million indirectly. Moreover, the antidumping request was aimed at specific products to avoid harming consumers, Moffat said.
The extent to which some manufacturers are already dependent on imported Chinese steel makes the case a particularly delicate one for Peter Mandelson, the European trade commissioner. He recently confided in an internal document that a conciliatory approach to Beijing on trade was not yielding results and suggested that greater use should be made of trade defense instruments.
He will have to determine first whether dumped imports are injuring European
steel producers and then if countermeasures are in the EU's overall interests.
Though the price of steel is relatively high, making it harder to argue that European steel makers are suffering, Mandelson will also have to consider whether a further surge of imports is likely to follow when construction for the Beijing Olympics is completed. This work is currently soaking up Chinese production, which could be redirected to Europe.
Because of market sensitivities, the commission said that it could not formally confirm receipt of the request from Eurofer. But Peter Power, spokesman for Mandelson, said that any such demand would be investigated thoroughly. "It is bound to be a very sensitive and complex case as there is so much at stake," he added.
The commission's decision will ultimately need approval from EU member states and could be challenged by Beijing at the World Trade Organization.
Moffat said that the entire Chinese steel industry is built on subsidy.
"Everything from soft loans from state-owned banks to support from regional banks to tax holidays," he said.
Steel imports from China from January to September 2007 grew 137 percent to 8.9 million metric tons from the same period last year. Meanwhile, the European trade gap with China widened by nearly 25 percent in the first seven months of this year.
But Harris of Orgalime said that some members of the engineering industry already planned to argue against the imposition of tariffs.
"We find ourselves in a situation of strong growth in our industry, and our members are finding a shortage of raw materials," Harris said, arguing that "there is perhaps a tendency to look over one's shoulder at the past and not to the future."
The number employed in European steel making was "peanuts" compared to those reliant on imported steel, he said.
More suspiciously, a page on the Communist Party-bashing Epoch Times which contains an excerpt of the interview has disappeared since I first visited it and attempted to link to it here (above is a snapshot of it). Hmm...things are getting interesting. Maybe there's something more to this story after all. Still, I am wary of believing these claims. If Chinese scholars were indeed spying on an appreciable scale, the US and UK would have taken serious action to curtail the influx of Chinese scholars by now. At the moment, neither has. Moreover, I think it would be natural for funders of Chinese scholars to emphasize to their student beneficiaries that they are interested in learning more about Area X or Area Y. There is nothing so underhanded about using scholarship money strategically as a quid pro quo, methinks. It looks like a fair deal all around to me: the US and UK gain talented researchers in science and engineering fields where interest from homegrown students is lacking, while China eventually reaps the benefits from improvements in its stock of human capital.
I'll send the Epoch Times a note asking why this page has disappeared. It's a bit strange, I think. You can still access the accompanying video of the interview, though, and a whole section on the Epoch Times website devoted to alleged student spying. In any event, here are excerpts from the now-gone article, wherever it's gone to. [UPDATE: The Epoch Times has now reposted the article. Note the corrections to Dr. Liu's current status and the de-emphasis on "spying"]:
Chinese Student and Scholar Associations (CSSA) worldwide claim to be neutral non-for-profit organizations dedicated to helping Chinese students overseas. But a close look at their websites reveal strong links to the Chinese Communist Party (CCP).
Many Chinese students travel overseas to study hoping for better opportunities beyond the notoriously competitive Chinese educational system. However, Chinese students who join CSSA are faced with a less safe and more sinister environment than their peers - one that prepares them for a life of part-time spying for the Chinese Communist Party (CCP). They are wooed with promises of money and better jobs at home.
Dr Wei Liu decided to reveal his identity, come forward and openly speak about his experience of spying for the Chinese Communist Party. Dr Liu served as the CSSA Chairman from 1998 to 1999 in Manchester. Dr Wei Liu currently works as a University Science Professor at the prestigious Birmingham University in England [this is erroneous; he is a research fellow there].
NTDTV: "So do they do this out in the open, or is it kind of an unspoken secret that the Chinese Communist Party runs these organizations?"
Dr. Liu: "It's a secret because only a few key members of the Association know this fact. The majority of the students and scholars, they don't know."
NTDTV: "Can you tell me where this direction is coming from? Is it coming from Beijing?"
Dr. Liu: "Yes, the Chinese Consulate or Embassy...they carry out the political agenda and policies from the Chinese Communist Party".
NTDTV: "So what sort of damage do you think this sort of spying does to Western society and universities? Do you think it's dangerous for the students?"
Dr. Liu: "I don't think most of them would like to do this, but it seems they are only fooled by the Chinese Consulate."
NTDTV: "So this has actually been going on for years? Has it being going on for a long period of time?"
Dr. Liu: "Yes. Until now the CSSA still does the same as they did 10 years ago".
We also meet up with Dr Gui Hua Li who was a part of the CSSA organization until her email got cut from the mailing list after sending information about China's live organ harvesting trade [of Falun Gong members]. At that point she began to wonder.
NTDTV: "So, Dr Li can you tell me a bit about you're experience of being a part of the CSSA organization?"
Guihua Li, Former Cambridge CSSA Member: "The CSSA is supposed to be loosely coordinated, but really it's tightly controlled. Some of the students haven't got a clear sense of what is right and what is wrong. They just feel...well, we will just do what the Chinese Communist Party asks us to do. Yeah, they just do it, because they get used to that kind of control. They don't realize the Party has no right to control them. They live outside in another country but they feel...oh, the Party is still looking after them."
NTDTV: "Do you think they get incentives or do they benefit financially?"
Guihua Li: "Oh, everybody knows, of course they do, and the Chinese Embassy always gives money to the CSSA from the very beginning."
But what will students, parents and professors do when they discover that the Chinese Communist party has long infiltrated their university campuses? The MI5 or the FBI are looking deeper into this issue.
- Lots of capital is being held back in China by outward exchange controls that will likely ensure that the yuan will depreciate not appreciate if floated;
- The Chinese banking system is not strong enough to adjust to a slower pace of reserve accumulation;
- There is little reason to worry about China's sovereign wealth fund buying up foreign concerns for it doesn't have the management expertise to manage them and it is thus uninterested in taking controlling stakes;
- Don't worry either about the currently weak $ as the currency goes through strong /weak cycles.
Sometime in the latter half of the 1990s I coined the phrase “King Dollar.” This was back in the post-Soviet collapse period when the U.S. greenback ruled the world currency roost. As the Berlin Wall came down, taking totalitarian socialism with it, global investors and businesses sought the U.S. dollar as their currency of choice. They also chose the American model of free-market capitalism — including supply-side reductions in marginal tax rates — as their economic reform of choice.
The result was the greatest world economic boom in the history of history.
From Eastern Europe to India and China, and points in between, the world has experienced an unprecedented prosperity boom, a story best captured by the unbelievable rise in global stock markets. But along the way, as the world moved toward growth economics and away from central planning, King Dollar began to slide. Not because the U.S. was faltering (as the doom-and-gloom pessimists see it), but more because the rest of the world has been doing better. In other words, the dollar hasn’t slumped because it is necessarily weak, but because the new euro and new market economies are so strong.
However, there comes a point in this transition when the U.S. must begin to stabilize the dollar. I believe we are at that point now. It is time to think about reviving King Dollar. If we don’t, there may well be negative consequences for U.S. inflation, the stock market, and economic growth. I’m not worried about too much foreign investment, but I am concerned about too little foreign investment. I do not want to see a collapse of the worldwide demand for dollars.
Although I have never been an advocate of currency intervention by governments, there are moments in market history when unexpected interventions have worked. Clinton Treasury man Robert Rubin, a canny trader from his Wall Street days at Goldman Sachs, undertook a few interventions to buy and support the dollar in the mid 1990s. He sent a signal to currency traders, and it worked. During those years, the Greenspan Fed generally maintained firm control over the creation of new dollars. So, with a restrained money supply, the Treasury dollar-buying actions proved very effective.
Treasury Secretary Henry Paulson is today standing at a similar crossroads. Wouldn’t this be a good time for Mr. Paulson to signal that enough is enough, and call a halt to the dollar’s decline?
Oil prices are rising. Gold prices are rising. And currency traders around the world have set up huge short-selling positions in the greenback. But a few strong words from Mr. Paulson, coupled with a few well-timed rounds of dollar-buying, could turn the U.S. currency story around.
Every time an international terrorist event occurs, like the al-Qaeda assassination attempt on former Pakistani prime minister Benazir Bhutto, the dollar falls. When the Turks threaten military action in Kurdistan, Iraq, with speculation that they might march toward the Kirkuk oilfields, the dollar falls. When comrade Vladimir Putin shows up in Iran, with mischief-making statements that support trade and nuclear partnerships with that terrorist government, the dollar falls. It seems as though any nasty international event leads to a dollar decline. This is not good. The dollar needs some propping up.
Ronald Reagan stated frequently that a great country should have a reliable currency. And it was the pro-growth tax cuts and counter-inflationary money of the Reagan era that ultimately reversed a 15-year dollar decline. In President Clinton’s second term, a similar policy was undertaken, and a dollar slide that began in the late 1980s under Papa Bush was reversed.
In recent news, Treasury man Paulson has in fact taken a strong-dollar step with his proposal to slash corporate tax rates. The former Goldman head honcho is working with House Ways & Means chairman Charlie Rangel to reduce the 35 percent corporate tax rate all the way down to 25 percent. This is a terrific idea. Studies have shown that 70 percent of the benefits of a corporate tax cut would go to the American workforce, boosting jobs and wages.
Right now, Wall Street is worried about the housing recession, a subprime credit hangover, and slowing domestic profits. But a big corporate tax cut would lift the animal spirits. In fact, cutting business taxes with the potential for better wage and investment returns is a much better economic stimulant than depreciating the currency. And business tax reform would add real meat and muscle to a steadier dollar.
King Dollar just might reign again.
Responsive government in China is a topic beyond the scope of this post. Suffice to say, being more attuned to those who raise legitimate environmental concerns could have saved the PRC a lot of grief had things not been allowed to reach catastrophic proportions:
China will spend more than $14 billion to clean up a famed lake inundated by so much pollution this year that it became a symbol of the country’s lax environmental regulation against polluting industries.
Officials in Jiangsu Province, in eastern China, posted a notice on Friday on a government Web site announcing plans to spend 108.5 billion yuan, or $14.4 billion, for a cleanup of Lake Tai, the country’s third-largest freshwater lake. The campaign would focus initially on eradicating the toxic algal bloom that choked the lake this spring and left more than two million people without drinking water.
“Jiangsu Province plans to effectively control the eutrophication of Lake Tai in five years, and greatly improve the water quality of the lake,” the notice declared.
Lake Tai, known as China’s ancient “land of rice and fish,” is a legendary setting, once famous for its bounty of white shrimp, whitebait and whitefish. But over time, an industrial buildup transformed the region. More than 2,800 chemical factories arose around the lake, and industrial dumping became a severe problem and, eventually, a crisis.
This spring, urban sewage and chemical dumping caused an explosion of bright green pond scum that coated much of the giant lake with a fetid algal coating. Panic quickly followed in Wuxi, a nearby city that depended on the lake to supply drinking water for its 2.3 million residents. Officials were forced to shut off the drinking water supply for several days.
Local officials initially dismissed the algal bloom as a natural phenomenon, but Chinese news media broadcast images of factories dumping directly into the lake. The scandal deepened until Prime Minister Wen Jiabao convened a meeting of the State Council, China’s cabinet, to discuss the problem.
“The pollution of Lake Tai has sounded the alarm for us,” Mr. Wen said, according to state news media. “The problem has never been tackled at its root.”
Several local officials have been fired or demoted, and state news media have reported that regulators have already closed as many as 1,000 factories in the area.
But the new crackdown has not helped Wu Lihong, a local environmentalist who has spent more than a decade trying to force official action. Mr. Wu, a feisty peasant, had repeatedly protested against the chemical factories and the local officials who protected them.
Mr. Wu was arrested shortly before the algae crisis and was later convicted in August on questionable charges. He is now serving three years in prison, even as his direst warnings about the lake have come to pass.
Details about the new cleanup campaign are somewhat sketchy, though state news media reports have hinted that more factories might be closed or forced to suspend operations. In general terms, the campaign includes stricter emissions standards for industry and tighter water treatment regulations.
Ultimately, though, the success or failure of the program will depend on the sustained commitment of local officials and regulators. In other major cleanup campaigns, including one of the Huai River, corruption and the pressure for economic development have undermined environmental protection efforts.
The role that business plays in promoting—or abusing—human rights has never been under such scrutiny. As well as Darfur, the uprising in Myanmar has revived criticism of foreign multinationals operating there, such as oil giants Chevron and Total. Meanwhile, more than 3,500 companies have signed up to the United Nations Global Compact, which includes a commitment to uphold the UN Declaration on Human Rights.
With the wind in their sails, it seems an odd moment for human-rights activists to fall out about business. Yet that is what has happened. The focus of the dispute is the work of John Ruggie, the UN secretary-general's special representative on human rights and transnational corporations. The Global Compact is thin on detail, and Mr Ruggie has been asked to write something stronger for the 60th anniversary of the UN Declaration next year. Earlier this month, 151 non-governmental organisations (NGOs) and other activists, including Amnesty International and Human Rights Watch, sent an open letter to Mr Ruggie, which his supporters see as an attack on their man and his strategy.
The letter, if listened to, “threatens to set back the cause of human rights in the corporate sector many years”, thundered Sir Geoffrey Chandler—who until recently ran Amnesty's Business Group in Britain and formerly worked for Shell, an oil firm—in a letter of his own. Sir Geoffrey says that some of the 151 signatories want to pursue a confrontational approach to business, rather than engage with companies. That is a shame, he says, since it is “abundantly clear that if we wish to see human rights prevail in the world, we will not do so without the positive involvement of companies.”
Some NGOs do want to work with business. Global Witness, for instance, which is not among the 151, has seconded a member of its staff to work with Mr Ruggie on drawing up guidelines for how companies should behave in conflict zones. Widney Brown, senior director of international law, policy and campaigns at Amnesty International, says that the differences are exaggerated. Amnesty believes both in naming and shaming and in dialogue, she says, and it simply wants legislation that is binding on companies in addition to Mr Ruggie's voluntary guidelines.
In mid-October however, Amnesty's British business group voted to dissolve itself, which insiders see as a sign that the NGO is hardening its line. Its business group previously helped Shell and BP draw up internal guidelines on human rights in the mid-1990s. Shell had been vilified for standing by as the Nigerian government executed an activist who protested against the oil firm, and BP had attracted criticism because the government-employed Colombian paramilitaries who guarded its pipeline also terrorised local people. Exposing companies rather than engaging with them, Chris Marsden, the business group's chairman, wrote in an internal memo, “may be seen by traditionalists as the right thing for Amnesty to do but it does go against all the lessons learnt through the work of the UK and other business groups.”
Public confrontation may be easier for an NGO to sell to its supporters than the moral ambiguities of engaging with the corporate world. But the risk is that a public squabble among NGOs could prompt the UN to put Mr Ruggie's work on the back-burner. If that happens, companies may in the end come under less pressure to respect human rights.
The UN Environmental Program's just-released GEO-4 flagship report puts the state of the environment in blunt terms twenty years after the Brundtland report: There are no major issues raised in Our Common Future for which the foreseeable trends are favourable. Ouch. Once again, the most damning thing about these reports on the state of the environment--unless you're a fundamentalist growth lubber (or Bjorn Lomborg, for that matter)--is that they're likely correct in calling for immediate, concerted action. It's simple, really. No Earth = no political economy or pretty much anything else. The diagram above is UNEP's conceptual framework for understanding the links between the environment and development, human wellbeing and vulnerability to environmental change. Below is part of the press blurb for the report, which can be downloaded in its 572-page entirety. It's a sobering read, but undoubtedly an important one on the shared challenges we face (including those growth lubbers and Lomborg):
On climate change the report says the threat is now so urgent that large cuts in greenhouse gases by mid-century are needed. Negotiations are due to start in December on a treaty to replace the Kyoto Protocol, the international climate agreement which obligates countries to control anthropogenic greenhouse gas emissions. Although it exempts all developing countries from emission reduction commitments, there is growing pressure for some rapidly-industrializing countries, now substantial emitters themselves, to agree to emission reductions.
GEO-4 also warns that we are living far beyond our means. The human population is now so large that "the amount of resources needed to sustain it exceeds what is available... humanity's footprint [its environmental demand] is 21.9 hectares per person while the Earth's biological capacity is, on average, only 15.7 ha/person...".
And it says the well-being of billions of people in the developing world is at risk, because of a failure to remedy the relatively simple problems which have been successfully tackled elsewhere.
GEO-4 recalls the Brundtland Commission's statement that the world does not face separate crises - the "environmental crisis", "development crisis", and "energy crisis" are all one. This crisis includes not just climate change, extinction rates and hunger, but other problems driven by growing human numbers, the rising consumption of the rich and the desperation of the poor.
BTW, you can find the 1987 Brundtland Commission report mentioned several times in GEO-4 online that coined the widely-used definition of sustainable development as that which meets the needs of the present generation without compromising the ability of future generations to meet their own needs.
Two years after urban riots roiled France — and as the European Union’s Year of Intercultural Dialogue approaches in 2008 — a new report provides a roadmap for how European governments can best engage Muslim communities on issues related to religious practice and integration.
Islam is Europe’s second largest religion, with at least 15 million Muslims now residing in Europe. In several European cities, the Muslim population exceeds 20 percent. Following current trends, the numbers of Muslims in Europe will continue to grow absolutely and as a proportion of the population.
The primary challenges for European governments are to safeguard religious freedoms and to ensure a voice for Muslim populations, while combating extremism and adapting European societies to diverse religious communities.
In Integrating Islam: A New Chapter in “Church-State” Relations, Jonathan Laurence, a professor at Boston College, draws on examples from throughout the European Union to provide a framework for establishing dialogues or interreligious councils. Dr. Laurence argues that these councils should not attempt to replace political processes or representation; rather, they should focus on practical matters where public policy and religious practice intersect, such as securing land to build mosques and appointing Muslim chaplains to hospitals and prisons. In doing so, councils can play a critical role in integrating newcomers of various faiths, many of whom still have foreign nationality.
Dr. Laurence recommends including representatives of the three main “viewpoints” of Muslim civil society:
- members of organizations that enjoy close relationships with sending countries;
- Islamist activists who obey the law and are open to dialogue with people from different origins and perspectives; and
- individual experts from within EU Member States, particularly “minorities within the minority,” such as women and young people.
Dr. Laurence also recommends guidelines for structuring dialogues based on best practices:
- Governments must establish a clear purpose for the dialogue based on the understanding that respect for the rule of law is a precondition for participation.
- Working groups should set pragmatic agendas for concrete accomplishments, such as coordinating the observance of religious holidays.
- Governments should consider ways to institutionalize groups so they are permanent structures, based on a case-by-case evaluation of the consultations’ success.
- It is essential to balance local dialogues, which are more effective in addressing challenges of practicing the Muslim faith and clashes between faith communities, and national dialogues, which can better tackle national regulatory issues.
Looking to the future of these dialogues, Dr. Laurence notes that EU Member State governments will have primary responsibility for dialogues with Muslim communities, but, once effective structures are in place, a meaningful European superstructure may be possible.
On a marshy peninsula 50 miles from this Red Sea port, King Abdullah of Saudi Arabia is staking $12.5 billion on a gargantuan bid to catch up with the West in science and technology.
Between an oil refinery and the sea, the monarch is building from scratch a graduate research institution that will have one of the 10 largest endowments in the world, worth more than $10 billion.
Its planners say men and women will study side by side in an enclave walled off from the rest of Saudi society, the country’s notorious religious police will be barred and all religious and ethnic groups will be welcome in a push for academic freedom and international collaboration sure to test the kingdom’s cultural and religious limits.
This undertaking is directly at odds with the kingdom’s religious establishment, which severely limits women’s rights and rejects coeducation and robust liberal inquiry as unthinkable.
For the new institution, the king has cut his own education ministry out the loop, hiring the state-owned oil giant Saudi Aramco to build the campus, create its curriculum and attract foreigners.
Supporters of what is to be called the King Abdullah University of Science and Technology, or Kaust, wonder whether the king is simply building another gated island to be dominated by foreigners, like the compounds for oil industry workers that have existed here for decades, or creating an institution that will have a real impact on Saudi society and the rest of the Arab world.
“There are two Saudi Arabias,” said Jamal Khashoggi, the editor of Al Watan, a newspaper. “The question is which Saudi Arabia will take over.”
The king has broken taboos, declaring that the Arabs have fallen critically behind much of the modern world in intellectual achievement and that his country depends too much on oil and not enough on creating wealth through innovation.
“There is a deep knowledge gap separating the Arab and Islamic nations from the process and progress of contemporary global civilization,” said Abdallah S. Jumah, the chief executive of Saudi Aramco. “We are no longer keeping pace with the advances of our era.”
Traditional Saudi practice is on display at the biggest public universities, where the Islamic authorities vet the curriculum, medical researchers tread carefully around controversial subjects like evolution, and female and male students enter classrooms through separate doors and follow lectures while separated by partitions...
Despite the obstacles, the king intends to make the university a showcase for modernization. The festive groundbreaking and accompanying symposium about the future of the modern university were devised partly as a recruiting tool for international academics.
“Getting the faculty will be the biggest challenge,” said Ahmed F. Ghoniem, a professor at the Massachusetts Institute of Technology who is consulting for the new university. “That will make it or break it.” Professor Ghoniem has advised the new university to lure international academics with laboratory facilities and grants they cannot find at home, but he also believes that established professors will be reluctant to leave their universities for a small enclave in the desert.
“You have to create an environment where you can connect to the outside world,” said Professor Ghoniem, who is from Egypt. “You cannot work in isolation.”
He admitted that even though he admired the idea of the new university, he would be unlikely to abandon his post at M.I.T. to move to Saudi Arabia.
Festivities at the construction site on Sunday for 1,500 dignitaries included a laser light show and a mockup of the planned campus that filled an entire room. The king laid a crystal cornerstone into a stainless steel shaft on wheels.
Cranes tore out mangroves and pounded the swampland with 20-ton blocks into a surface firm enough to build the campus on. Inside a tent, the king, his honor guard wearing flowing robes and curved daggers, and an array of Aramco officials in suits took to a shiny stage lighted with green and blue neon tubing, like an MTV awards show. Mist from dry ice shrouded the stage, music blared in surround sound, and holographic projections served as a backdrop to some of the speeches.
From a laconic monarch known for his austerity, the pomp, along with a rare speech by the king himself, was intended to send a strong signal, according to the team charged with building and staffing the new campus within two years.
The king is lavishing the institution not only with money, but also with his full political endorsement, intended to stave off internal challenges from conservatives and to win over foreign scholars who doubt that academic freedom can thrive here.
The new project is giving hope to Saudi scholars who until the king’s push to reform education in the last few years have endured stagnant research budgets and continue to face extensive government red tape.
“Because Aramco is founding the university, I believe it will have freedom,” said Abdulmalik A. Aljinaidi, dean of the research and consultation institute at King Abdulaziz University, Jidda’s biggest, with more than 40,000 students. [Does a state-owned corporation signify freedom?] “For Kaust to succeed, it will have to be free of all the restrictions and bureaucracy we face as a public university.”
Even in the most advanced genetics labs at King Abdulaziz, the women wear full face coverings, and female students can meet with male advisers only in carefully controlled public “free zones” like the library. Scientists there tread carefully when they do research in genetics, stem cells or evolution, for fear of offending Islamic social mores.
Even in Jidda, the kingdom’s most liberal city, a status rooted in its history as a trading outpost, change comes slowly. This month the governor allowed families to celebrate the post-Ramadan Id al-Fitr holiday in public, effectively allowing men and women to socialize publicly on the same streets for the first time.
The religious police were accused of beating a man to death because he was suspected of selling alcohol. Conservatives have fended off efforts by women to secure the right to drive or to run for office, although women have made considerable gains in access to segregated education and workplaces...
Upon completion, the energy-efficient campus will house 20,000 faculty and staff members, students and their families. Social rules will be more relaxed, as they are in the compounds where foreign oil workers live; women will be allowed to drive, for example. But the kingdom’s laws will still apply: Israelis, barred by law from visiting Saudi Arabia, will not be able to collaborate with the university. And one staple of campus life worldwide will be missing: alcohol.
The university president will be a foreigner, and the faculty members and graduate students at first will be overwhelmingly foreign as well. Generous scholarships will finance the 2,000 graduate students; planners expect the Saudi share of the student body to increase over the years as scholarships aimed at promising current undergraduates help groom them for graduate studies at the new university.
The university’s entire model is built around partnerships with other international universities, and faculty members are expected to have permanent bases at other research institutions abroad.
The university will also rely on a new free-market model. The faculty members will not have tenure, and almost all of them will have joint appointments. While the university will initially be awash in money, its faculty and graduate students will still have to compete with top international institutions for the limited pool of private money that underwrites most graduate research.
Suhair el-Qurashi, dean of the private all-female Dar Al Hekma College, often attacked as “bad” and “liberal,” said a vigorous example of free-thinking at the university would embolden the many Saudis who back the king’s quest to reform long-stagnant higher education.
“The king knows he will face some backlash and bad publicity,” Ms. Qurashi said. “I think the system is moving in the right direction.”
The Wall Street Journal has a fine feature on so-called "designer reefs" which have been developed to more closely mimic natural reefs. I believe "biomimicry" is the correct term. In the past, creating artificial reefs involved just throwing random stuff into the sea that more often than not just polluted the environment some more. The video clip above describes the work of Todd Barber's Reef Ball Foundation NGO. Elsewhere in the WSJ article, the for-profit efforts of Eco Reefs and others is also described. While these technologies will by no way turn back the tide on dynamite fishing, agricultural runoff, pollution, global warming, and overfishing, they represent innovative efforts to stem widespread loss and degradation of reefs. For those about to reef, we salute you:
During a recent dive here, Todd Barber hovered above such familiar tropical sights as red sea sponges, iridescent fish and a half-hidden moray eel. But the coral reefs -- hollow, spherical and made entirely from concrete -- were anything but typical.
Mr. Barber wasn't surprised, though. A decade earlier, he created the artificial reefs using 300 concrete "reef balls." Now, those once-bare and ugly spheres have been transformed into minireefs, rich with life.
"They're in pretty good shape," said Mr. Barber after he climbed onto a boat and stripped off his scuba gear. He was particularly pleased by the presence of a Pederson shrimp, a translucent creature with blue flecks making a reef ball its home.
Mr. Barber is leading a charge to build "designer reefs" that will replace or support natural ones as the effects of overfishing, pollutants and disease take a growing toll on these vital ecosystems. His nonprofit Reef Ball Foundation has so far cultivated about 4,000 reefs in 55 countries. Projects range from a mile-long reef in Malaysia to a half-mile one at a millionaire's island in the Caribbean.
Artificial reefs aren't a new idea. For years, fisheries have made faux reefs by dumping junk -- old boats, airplanes, washing machines -- into the sea. But such unscientific efforts can go haywire. In 1972, about two million tires were dumped in the waters near Ft. Lauderdale, Fla., in an attempt to provide a habitat for fish. The tires failed to attract marine life and instead littered the ocean floor. They are now being removed.
The new "designer reefs" are much more sophisticated. EcoReefs Inc., of Jackson, Wyo., sells ceramic structures shaped like branching corals, essentially a prefabricated kit for making a customized reef. A Philippine company molds artificial coral whose shape, texture, color and even chemical signature are much like the real thing. One quixotic scientist tries to spur coral growth by piping low-voltage electricity through large metal mesh placed underwater.
But copying Mother Nature isn't easy. An artificial reef may work in one location but flop elsewhere. Some coral fragments thrive only in shallower waters. Others must be oriented just so or they won't grow. On the Caribbean island of Curacao, a reef-ball team made the mistake of planting corals upright instead of sideways, and they fell off in a big storm. In Oman, which isn't known for hurricanes, a storm earlier this year wiped out some coral growth on reef balls.
Reefs that develop naturally are created from colonies of tiny coral polyps. When these animals die, they leave behind a limestone "skeleton" on which other polyps grow, slowly creating larger and larger structures. These reefs range from the size of a small flower bed to the Great Barrier Reef, a coral edifice that stretches 1,400 miles along the Australian coast.
Sea creatures depend on reefs for shelter and feeding and mating grounds. For humans, they are a rich source of fish and, increasingly, a destination for snorkeling, diving and other recreational activities. The U.S. National Oceanic and Atmospheric Administration estimates that coral reefs world-wide provide as much as $375 billion of services annually.
But reefs face increasing danger as traditional threats are compounded by the effects of global warming. Higher sea temperatures have weakened or killed a large number of coral reefs through a process known as bleaching. Warmer oceans may also be triggering more frequent intense hurricanes, and a single such storm can trash parts of a 10,000-year-old reef in minutes. In addition, as more carbon dioxide is pumped into the air, more gets dissolved in the oceans -- turning the water more acidic and hurting coral growth.
"About 30% of the world's reefs have been destroyed in my lifetime," says the 43-year-old Mr. Barber. If current conditions continue, as many as 70% of the world's reefs could disappear within 50 years, according to NOAA.