Only a few months ago, Khairat El-shater was languishing in an Egyptian prison, put there by the Hosni Mubarak regime. Many of his businesses were shuttered. Now the Deputy Supreme Guide or No. 2 leader of the Muslim Brotherhood, Egypt’s dominant political-Islamic group, shuttles between meetings at one of his once-closed offices in a grimy building in the Nasr City district of Cairo. His visitors include bankers and foreign investors from the U.S. to Australia. “They all have many questions about one issue: What impact will the Muslim Brotherhood have on the investment climate?” says El-shater.
Founded in Egypt in 1928, the Brotherhood has helped spawn Islamic groups across the globe, including the militant Palestinian movement Hamas. The Brotherhood’s founder, Hassan Al-Banna, preached the adoption of Islamic law as the way to lift the yoke of Western domination. Because of its popular appeal and occasionally violent tactics, the group came into conflict with secular Arab states such as Syria and Egypt, where the Brothers were persecuted intermittently from the 1950s until the Arab Spring. The Egyptian Brotherhood has long since disavowed violence.
Analysts think the Brotherhood’s Freedom and Justice Party may well emerge as a power in Parliament once elections are held. (The party says it won’t field a presidential candidate or seek more than half of Parliament’s seats.) “The Brotherhood is the largest political force,” says Samer Soliman, an assistant professor of political economy at American University in Cairo. The Brothers’ swift rise has riveted global investors. The fear, says Naguib Sawiris, a Christian and Egypt’s best-known businessman, is that the Brotherhood will encourage “better relations with Hezbollah and Hamas, more hatred of Israel, and a love-hate relationship with the U.S.”
Thanks to the Brotherhood’s history as an underground organization, outsiders don’t know whether the Brothers will be a force for moderation or a divisive element in a traumatized Egypt. Cairo investment bank EFG-Hermes recently brought 14 managers of foreign institutional funds based in the U.S., the U.K., Africa, and the Middle East to see El-shater. “I believe the meeting dismissed some investors’ concerns about an extreme economic policy,” says Wael Ziada, EFG’s head of research. He says some of the investors “were positively surprised to find some of the ideas shared by the Brotherhood to be mostly capitalist in nature.”
The Brotherhood supports private enterprise, a stock market, and engagement with the global economy. “We believe in a very, very big role for the private sector,” says El-shater. The Brotherhood also wants “to attract as much investment as possible.”
The group says it would direct more investment than the prior regime toward industries, agriculture, and information technology to create jobs. It wants to trim the budget deficit, projected at 8.6 percent of gross domestic product, and increase the use of Islamic bonds. The bonds technically don’t pay interest, which is forbidden by the Koran. Although the Brotherhood doesn’t question Mubarak’s pro-business reforms per se, it does object to the social injustice that resulted. The Brotherhood’s agenda “is a generally free-market-oriented program,” says Shadi Hamid, director of research at the Brookings Doha Center in Qatar. “I found it surprising because that is not the way the winds are blowing in Egypt.”
El-shater’s own status helps. His businesses range from furniture to clothing to bus assembly to pharmaceuticals. He estimates that he employs 2,000 people. “The Brotherhood is trying to reassure investors by saying, ‘Look, we are business owners and professionals,’ ” says Elijah Zarwan, an analyst at the International Crisis Group.
Thursday, 14 July 2011
Markets take debt drama in stride
Talks in Washington to raise the U.S. government’s debt ceiling and avoid a monumental credit default have turned ugly this week, but you’d never know it based on the markets’ so far sanguine reaction.
With U.S. bond yields barely budging, investors are clearly betting the debt-limit impasse is nothing more than a game of political chicken that, come crunch time, will end in U.S. lawmakers finally striking a bargain.
Let’s hope investors are right. If they aren’t and the Aug. 2 deadline to raise the debt ceiling is missed, it will have serious repercussions for markets around the world and could prompt another fierce sell-off.
“Nobody seems to be too worried; credit default spreads are pretty low, treasury yields are low and the stock market has been reacting to what is going on in Europe, but debt ceiling talks don’t really appear to have had much impact,” said Paul Ashworth, chief U.S. economist at Capital Economics. “To be honest, up until late last week, it looked like we could have a deal. It’s only over the past couple of days that it has gotten a bit testy.”
Since hitting its US$14.3-trillion debt limit in mid-May, the U.S. government has relied on stop-gap accounting to keep creditors paid, but those options are all but exhausted unless the debt limit is raised, U.S. Treasury Secretary Timothy Geithner said Thursday.
While the U.S. Congress has raised the statutory limit on the amount of U.S national debt dozens of times over the past century, the stakes are particularly high this time given the sheer magnitude of the country’s debt burden and the weak economic recovery.
Moody’s Investors Services put the U.S. 96-year-old Aaa credit rating under review for a possible downgrade Wednesday, saying there is a “small but rising risk of a short-lived default” if the debt limit is not raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes.
Meanwhile, U.S. Federal Reserve chairman Ben Bernanke issued a rebuke to lawmakers for failing to raise the debt ceiling. He said Thursday a U.S. default, if it came to that, would hinder investor confidence and raise borrowing costs in critical sectors of the economy.
Despite these warnings, markets appear to be confident a deal on the debt ceiling will be reached. At the very least, there’s no reason to panic just yet.
“This is supposed to be a big battle of wills,” Mr. Ashworth said. “This is the type of thing that you expect people to be banging on the table to finally get a deal in place.”
If a deal is reached in time, Mr. Ashworth believes markets will likely carry on as usual. But in the event a deal doesn’t get done, it’s difficult to predict just how markets will react, largely because the U.S. debt ceiling has never been breached.
For one, it’s possible the U.S. government will simply ignore the debt limit and continue to creatively pay it’s creditors until a deal can be reached. In that case, the market response may be muted.
Alternatively, it may prioritize debt interest payments so there is no formal default on treasuries, in which case it could still cut spending to social security and delay payment to vendors.
The latter approach would presumably have some impact on equity markets, he said, notably for S&P 500 retailers who would get hit if social security checks weren’t written. Equally, defense stocks might get hit if the U.S. government stopped paying instalments.
“Federal government spending represents 21% or 22% of overall GDP, so if you curb that to something affordable it will have a significant impact on spending and if it continues, that will impact equity markets,” he said.
“But a lot of this depends on how long it goes on. Everybody remembers the initial failure to pass the TARP bill that led to a very sharp drop in equity markets. But TARP got passed the next day and stocks rebounded.”
Peter Buchanan, a senior economist at CIBC World Markets, said the outlook could be much bleaker if failure to raise the debt ceiling results in a technical default.
“The U.S. dollar would likely lose ground in such an event, along with equities, as risk-averse investors sought out alternative havens,” he said.
Ultimately, Mr. Buchanan thinks markets have it right and believes odds are tilted heavily against default. The more likely outcome from a political perspective, he said, appears to be an interim agreement that averts default, but leaves serious longer-term fiscal challenges unresolved.
“We are in untested waters, but if default were to happen it would be pretty bad. People are still assuming the politicians will do the right thing, or at least the safe thing and raise the ceiling before everything comes crashing down.”
Source: National Post
Google makes a lot of friends
Over the past few weeks, Google Inc. finally learned how to be social and wound up making millions of new friends with the launch of its Google+ social network project.
On Thursday, the Silicon Valley titan added a few more friends on Wall Street after blowing the doors off analyst expectations and posting record quarterly revenue, sending shares of the Mountain View, California company up more than 12% after hours.
Google+, the new social network launched on June 28 on an invitation-only basis, marks the search engine giant’s boldest move yet to add a social layer to its various online services and counter the rising dominance of rival Facebook Inc.
During a conference call on Thursday, Google co-founder and chief executive Larry Page said there are already more than 10 million Google+ users, who are sharing more than one billion pieces of content every day.
“I’m super excited about the amazing response to Google+ which lets you share just like in real life,” Mr. Page said in a statement.
While Google has launched social initiatives in the past, to varying degrees of success — including the failed Wave and Buzz projects — Google+ has so far received a largely positive reaction from users, which has helped push shares of Google up 10% since its launch in late June.
Although Google+’s membership numbers remain minuscule compared to Facebook’s 750-million-strong global user base, experts say Google+ may prove to be the strongest competitor yet to the world’s largest social network.
“The early warning sign for me that Google+ is worth looking at in a completely different light is when I watch 20-somethings start to flock to it,” said Sidney Eve Matrix, a media professor at Queen’s University in Kingston, Ont.
“It’s painful to reassemble your social network, and they are, and they’re going right for it … I think people are getting sick of Facebook and are looking for an alternative.”
Still, analysts say Google’s attempt to defeat Facebook in the battle to be the default starting point for users on the Web may have cost the company as much as US$200-million, and could have an impact on future profit growth.
Of course, Google+ isn’t the only Google service to enjoy experience tremendous growth. During a conference call with shareholders on Thursday, Mr. Page said the company is now activating 550,000 mobile devices powered by Google’s Android software every day.
“Android’s really on a tear,” he said.
Mr. Page also said there are now more than 160 million people using Google’s Chrome browser.
During a conference call to discuss his first quarter as chief executive since taking over from Eric Schmidt, Mr. Page said the company has increased the velocity of its execution thanks to a new, product-focused management structure.
In addition to growth in the company’s core search advertising business, Google chief financial officer Patrick Pichette said the company is also seeing growth in its mobile, YouTube and enterprise divisions.
For the three months ended June 30, 2011, Google said revenue was US$9.03-billion, a new quarterly record for the company. Wall Street analysts had expected Google to post revenue of US$6.5-billion. Minus traffic acquisition costs, Google’s revenue was US$6.9-billion.
Google’s revenue home run represents a 32% increase over the same quarter in 2010. Google said non-GAAP earnings for the second quarter were US$8.74 per share, ahead of analyst expectations of about US$7.86 per share.
Google said non-GAAP net income for the quarter was US$2.85-billion, up from US$2.08-billion in the same quarter a year ago.
Source: National Post
Preview: 2012 Porsche 911 GT3 RS
Stuttgart, Germany • The only way to stop the racket is to fully depress the surprisingly stiff clutch. Then, and only then, does all the ruckus from the engine compartment — the rattling clutch release bearing, the gears slapping at one another in rhythm to the engine’s power strokes and God knows what else going on back there — subside. Only when that unholy din is subdued does the GT3 RS sound anything like the smooth, sophisticated Porsche 911 we’ve all come to know and love.
But sitting in neutral, ticking away at its sub-1,000-rpm idle with not even a hint of the orchestral exhaust music that awaits, the GT3 has already announced it is a race car. Although the ruckus is admittedly slightly attenuated from that of a track-only IMSA car or purebred Le Mans racer, there’s no mistaking all those mechanical grumblings for anything other than a highly tuned machine scrubbed of all unnecessary amenities (the carpeting is shaved to save weight, for gosh sakes), sound- deadening material and anything else not specifically dedicated to wringing every last ounce of speed out of its 4.0-litre highly tuned boxer six-cylinder. Squint hard enough and the RS’s impatient idle is so authentic the Porsche factory’s parking lot is really Circuit Paul Ricard’s pit lane, the security guard is your pit crew and that uniform he’s wearing is really a Nomex fire-retardant suit.
So, when you snick the stiff gear lever into first, dump the — again, surprisingly stiff — clutch, the aural assault only intensifies. Below 4,000 rpm, the GT3 sounds pretty much like any other Porsche boxer six, albeit one with a particularly effusive exhaust system. As it rather quickly gathers speed past four grand, however, Porsche’s VarioCam variable valve timing starts working its magic and the exhaust note gets decidedly more urgent. The bang from those big 666-cubic-centimetre combustion chambers seems sharper, the urge to internally combust that much more insistent.
If you never exceed 6,500 rpm, you would still be perfectly satisfied with this version of Porsche’s Otto cycle concerto. But there’s a third act, one that involves the twin conical aftermarket air filter kits feeding the larger 53-millimetre intake tubes. As the revs stretch for that last 2,000 rpm to the RS’s 8,500-rpm redline, those great honking intakes start making a sucking sound so convincing you start worrying for the poor birds flying overhead lest they get caught in the vacuum and are barbecued atop some high-compression Mahle pistons.
Naturally, all this assumes you have time to pay attention to this aural delight. All the internal-combustion music is the direct result of one seriously breathed-on boxer motor, one Porsche claims is churning out 493 horsepower. That’s the most ever from a normally aspirated 911 motor and within spitting distance of the immortal, twin-turbocharged Turbo S. Indeed, Porsche says the GT3 accelerates to 100 kilometres an hour in just 3.9 seconds, a time rendered even more impressive when you consider the RS is only available with a retro-tech six-speed manual gearbox that lacks the launch control trickery of the Turbo’s PDK tranny.
But, in truth, neither the symphonic engine note nor the acceleration is the big surprise (the former because Porsche’s engines always sound sporty; the latter because even I can read press kits and 493 hp driving only 1,360 kilograms of car is always a recipe for ungodly acceleration). Rather, it is the amazing tractability of this motor that continued to astound long after I got used to just how quickly it could make the telephone poles fly past, for this engine is tuned within an inch of its life. Porsche didn’t start with its latest high-tech direct-injection boxer six when it created the new GT3 RS but something called the Mezger engine — a derivative of the block that first powered the racing GT1 way back in the mid-1990s. Along the way, it’s gained a long-stroke crankshaft, titanium connecting rods and all manner of other gizmos to wring every last pound-foot of torque from its mere four litres. For instance, the compression ratio is an extremely high 12.6:1, an amazing figure for an engine not directly injected. In massaging it from its previous 3.8L incarnation, Porsche had no choice — because of the limitations posed by the old block design — but to lengthen the stroke rather than bore the cylinders. That means those poor 102.7-mm pistons are travelling an almost Formula One-like 22.8 metres per second when the GT3 spins all the way to 8,500 rpm.
Engines like these are supposed to be highly strung beasts, temperamental in their comportment and ready to grenade at the slightest provocation. Instead, the GT3 is a model of civility (apart from the aural cacophony of meshing gears and booming exhaust, that is). Although the heady part of its powerband is toward the top end of the rev range, the RS can easily be torqued out of hairpins at 3,000 rpm, third gear stretching all the way from piddling out of the turn to a licence-revoking 200 km/h without touching that gearshift knob. That an engine could produce so much power from so little displacement is not altogether astounding; that it could be so civilized is.
This is not to say that driving a GT3 is easy. Street legal it may be, but a daily driver it is not. Besides that stiff clutch, slightly reluctant gearshift lever and all that noise, there’s a suspension as stiff as Mike Huckabee’s speech delivery (the adjustable suspension offers two settings — immovable and intractable), tight-fitting, non-adjustable Recaro sport seats (conventional seats are available as a no-cost option) and brakes more sensitive than a Greek civil servant asked to give up his pension benefits.
That same sensitivity means the combination of Brembo brakes and ceramic discs provide excellent feedback, ideal for when you’re charging through, say, the Black Forest at an alarming pace. Ditto the steering, which feels as if it is hard-wired directly to the synapses in charge of directional computation. That same exactness can feel a little darty when all you want is to cruise along the highway with a minimum of fuss. Said twitchiness can be attributed to two factors — all the synthetic bushings in the suspension system have been replaced by metal and the car is so darned light (the front fenders are formed of carbon fibre and there’s a lithium ion battery on offer to further reduce weight). Indeed, the steering box is unchanged from that of other 911s. And, as expected, traction from the P245/35ZR 19 front and gargantuan P325/30ZR19 rear Michelin Cup performance radials is positively limpet-like.
Although you could, I suppose, drive a GT3 RS every day, it is very much a race car barely tamed for street legality. (You can even delete the radio and air conditioning for further weight savings.) But 16 lucky customers have already bought Canada’s entire allotment — at a not terribly outrageous price of $211,100 — making my advice moot. Know, then, that when you see a GT3 RS, you have seen Porsche’s most single-minded 911 ever. And then wait for the exhaust howl.
Source: National Post
Barbara Kay: Michel Thibodeau needs a case of 7Up and to grow up
Every now and then, during a slow news cycle, some media outlet will run a story about a fanatic coupon-clipper – almost invariably a housewife with plenty of discretionary time – who triumphantly demonstrates how she ends up with $300 worth of groceries for $19 by the simple expedient of clipping coupons from circulars, or mailing in rebate offers. It’s the kind of “free money” that anyone can have if they put in the time and effort, but when you have an actual “life,” you figure the satisfaction and savings just aren’t worth the tedium and mindless trolling.
Meet Ottawan Michel Thibodeau, the “language rights” equivalent of the compulsive coupon clipper. Instead of haunting supermarkets, he haunts bus companies and airlines, forever on the lookout for an abrogation of his right to hear the station stop, the weather, the time and the altitude in French, whether he is trundling across town or flying over Quebec City, Toronto or Kalamazoo.
On Wednesday the Federal Court of Canada ordered Air Canada to pay Mr Thibodeau $12,000, in part because in 2009, when he asked an English- speaking flight attendant for a 7 Up, he got a Sprite instead. That was only one of many other humiliations suffered by Mr Thibodeau and his wife Lynda in 2009 alone. There were occasions when they were not served in French at airports in Toronto, Ottawa and Atlanta (although they were evidently able to manage in English everywhere else in that town, unless they brought their own interpreter). They also complained about lapses in French-language services aboard Air Canada Jazz flights between Canada and the U.S.
The Thibodeaus know their way around language-rights suits. This is not their first win. When he was refused service in French while ordering a 7 Up on a 2000 Air Ontario flight from Montreal, he filed suit in Federal Court for $525,000 in damages (imagine how painful the sound of the English language must be to demand a half million dollars for suffering). The court ordered the airline to make a formal apology and pay him $5,375.95 – odd number that; maybe it included the price of a 7 UP – which is a far cry from what he asked, but still not a bad day’s take for filling out a form. No wonder it whetted their appetite for more.
Grievance collectors like Mr Thibodeau are the spawn of our rights culture, which supposes that minorities live in a constant state of fear of oppression or discrimination. Our courts are so sensitive to their assumed frailty that they tend to punish even the slightest lapse of vigilance as a way of reassuring them that they are loved.
These guilt payouts are absurd, and will only serve to encourage other ‘coupon-cutter’ copycats to shake down large corporations, which naturally regard the suits as a nuisance they willingly settle for what is to them piddling amounts in order to avoid publicity.
Mr Thibodeau must speak English if he is travelling widely beyond Quebec’s borders for business or pleasure. That wouldn’t be surprising. I am reminded of Norman Lester, an investigative reporter for the French-language CBC, who in 2001 caused an uproar in Montreal when he accused a Jewish General Hospital nurse of speaking to him only in English when he was a patient there. His claim was ridiculous, because he had been conversing with all and sundry at the hospital in fluent English until he decided to score political points with an indictment of one unilingual nurse. (In a book he wrote about Canada, The Black Book of English Canada, Lester viciously accused Canada of every evil under the sun.)
Another irony is that Anglophones in Quebec have very few linguistic rights, and even then such rights are often observed in the breach.
Rights must be tempered with common sense. It is unfortunate for French speakers when services are not available in their language on a flight here and there. But in the real world, stuff happens, and people of good will roll with it. When supermarkets run out of discounted items, they offer disgruntled customers a free product.
Next time Mr Thibodeau tries his little trick, the airlines should offer him a discounted ticket or maybe a case of 7 UP, and if that isn’t good enough and he persists in filing yet another suit, the Federal Court should inform him – in both official languages – that he is wasting their time.
National Post
HIV testing advised for tattoo parlour customers
Toronto Public Health is advising members of the public who visited two body piercing parlours to get tested for HIV and other diseases. An inspection found two franchises of the New York New York body piercing and tattoo parlour to have inadequate infection control practices.
Toronto Public Health inspectors entered the two locations after receiving a complaint that was unrelated to inadequate sterilizing procedures. It was during their investigation that TPH employees observed the sterilizer had not been tested within the timeframe required by regulations.
There have been no reports of customers being infected during services rendered at these two parlours, however. “The risk is very low, but as a precaution, we are advising anyone who received a piercing at one of these locations to see their doctor and get tested,” said Herveen Sachdeva, associated medical officer of health at TPH. Customers should be tested for hepatitis B, C and HIV. Piercing and tattooing equipment is required to be sterile, and sterilizing machines must be tested every two weeks to ensure they operate correctly.
National Post
jhume@nationalpost.com
Peter Goodspeed: Pakistan so unstable India isn’t even blaming it for Mumbai attacks
India’s politicians are uncharacteristically exercising restraint and refusing to speculate over who was behind the fourth major terrorist attack on Mumbai in eight years.
“We are not pointing our fingers, at this stage, at this group or that group,” India’s Home Minister Palaniappan Chidambaram told a news conference Thursday, as forensic experts sifted through the wreckage at three bomb sites in India’s financial capital.
“All angles will be examined without any pre-determination. All groups hostile to India are on the radar,” he said of the hunt for those who killed 17 people and maimed 137 others Wednesday.
That is a notable departure from previous terrorist attacks in India, when police and politicians rushed to name possible Islamist groups behind the outrages and blamed Pakistan for supporting terrorism.
But the difference this time around may not be so much a new found sense of trust as it is fear South Asia could be plunged into a dangerous period of uncertainty and tension.
Wednesday’s attacks couldn’t have come at a worse time for the region, as Pakistan flirts with violent disintegration and economic collapse. Meanwhile, regional alliances are being strained by the growing rift between Islamabad and Washington following the discovery and killing of al-Qaeda leader Osama bin Laden practically on the doorstep of Pakistan’s main military academy.
A Taliban insurgency continues to simmer in Pakistan’s tribal areas along the Afghanistan border and raging street battles between rival political groups in Pakistan’s commercial capital, Karachi, have killed more than 200 people in the last two weeks.
A confrontation with India over yet another terrorist attack may push Pakistan over the brink.
“Given the current uncertainty within the Pakistan military and volatile situation inside Pakistan, Indian leaders may be loath to escalate tensions with Pakistan,” said Lisa Curtis, a South Asia expert with Washington’s Heritage Foundation.
Since February, Indian and Pakistani leaders have been trying to rebalance their relationship, after it nearly resulted in conflict following the last major terrorist attack on Mumbai, when trained assassins from Pakistan laid siege to the city centre for 60 hours in November 2008 and killed 166 people.
The 2008 Mumbai terrorist attacks prompted Pakistan to withdraw thousands of troops deployed against the Taliban on the border with Afghanistan and move them to the border with India.
It also resulted in India cutting off diplomatic contacts with Pakistan for almost two years.
But after restarting a stuttering peace process in February, India and Pakistan’s foreign ministers met in Islamabad last month and agreed on some confidence building measures.
Pakistan’s newly appointed foreign minister, Hina Rabbani Khar, is scheduled to visit New Delhi in ten days to resume those talks with India’s foreign minister S.M. Krishna.
But Wednesday’s bombings could complicate those contacts.
“There has been positive momentum in terms of bilateral relations and my worry is that an incident of this kind could cause that to deteriorate, whoever is responsible,” warned Amir Rana, director of the Pakistan Institute for Peace Studies.
Wednesday’s bombings may have been designed to do just that.
“India has engaged with Pakistan in a peace process in the last five months; there have been signs that both countries want to work towards durable peace,” said Rahul Roy-Chaudhury, of the London-based International Institute for Strategic Studies. “Militants could feel that this would be a threat to them, if there is successful engagement between India and Pakistan.”
Improved India-Pakistan relations could threaten Pakistani terrorist groups who have thrived on tension between the two countries.
More than six decades of mistrust and animosity have bred an almost instinctive hostility between India and Pakistan when it comes to terrorism.
By stirring up old animosities, Pakistani terrorist might also buy themselves some relief from the pressure the United States has been putting on Islamabad to step up its fight against Islamist jihadists.
“One immediate outcome of Wednesday’s bombing is certain to be that the Pakistani military’s inclinations will be to stay focused on India rather than the militants, who maintain close ties to segments of the Pakistani armed forces and the intelligence service,” said James Dorsey, a researcher at the National University of Singapore’s Middle East Institute.
No one has claimed responsibility for Wednesday’s bombings, which Indian police now say were caused by sophisticated improvised explosives devices made from ammonium nitrate fertilizer.
Some security experts have said a prime suspect in the case may be the radical Muslim group Indian Mujahideen, which first emerged in 2007 claiming responsibility for a series of bomb attacks in northern India.
Indian Mujahideen has ties to the Pakistani terror group Lakshar-e-Taiba, which was behind the 2008 Mumbai massacres, and is widely regarded as one of the few home-grown Indian terror groups capable of launching simultaneous, high casualty attacks.
Only in this case, the group has not sent its traditional trademark e-mail to media outlets claiming credit for the attacks.
National Post
pgoodspeed@nationalpost.com
Mexico’s largest marijuana plantation uncovered
SAN QUINTIN, Mexico – Mexican soldiers discovered the biggest marijuana plantation ever found in the country in a remote desert surrounded by cactuses, a top army officer said on Thursday.
Soldiers patrolling the area found 300 acres (120 hectares) of marijuana plants being tended by dozens of men this week, said General Alfonso Duarte.
He said the crop, which was found in the state of Baja California, about 200 miles/320 km south of San Diego, California, would have yielded about 120 tonnes and was worth about $160 million.
“This is the biggest marijuana plantation we have found in the country,” Duarte said.
The plants will be destroyed, he said.
Most of the men tending the crop escaped capture but six suspects were arrested later at a military checkpoint.
The men had dug a well at the barren site and pumped water through hoses to irrigate the plants, which were up to 8 feet tall (2.5 meters).
President Felipe Calderon has deployed tens of thousands of troops to the streets to take on powerful drug traffickers shortly after taking office in late 2006.
Violence has spiraled since then, with more than 40,000 people killed across Mexico, hurting support for Calderon’s conservative National Action Party (PAN), which faces an uphill struggle to secure re-election next July.
Mexico is America’s top supplier of marijuana and most cocaine consumed in the United States passes through Mexico.
©Thomson Reuters 2011
Source: National Post
Soldiers patrolling the area found 300 acres (120 hectares) of marijuana plants being tended by dozens of men this week, said General Alfonso Duarte.
“This is the biggest marijuana plantation we have found in the country,” Duarte said.
The plants will be destroyed, he said.
Most of the men tending the crop escaped capture but six suspects were arrested later at a military checkpoint.
The men had dug a well at the barren site and pumped water through hoses to irrigate the plants, which were up to 8 feet tall (2.5 meters).
President Felipe Calderon has deployed tens of thousands of troops to the streets to take on powerful drug traffickers shortly after taking office in late 2006.
Jorge Duenes/Reuters
An army helicopter flies over the biggest marijuana plantation found in Mexico, in San Quintin, about 350 km (220 miles) away from Tijuana, July 13, 2011.
Mexico is America’s top supplier of marijuana and most cocaine consumed in the United States passes through Mexico.
©Thomson Reuters 2011
Source: National Post
A new fiscal order
THE seventh NFC Award and the passage of the 18th Amendment have furthered provincial autonomy and the process of devolution to an unprecedented degree.
However, in meeting the spirit of the 1973 constitution, these two seismic developments have added a layer of complexity and challenge to both the governance and fiscal framework of the federation.
On paper, the envisaged quantum increase in the transfer of resources to the provinces under the seventh NFC award, nearly doubling in size, with stepped-up increases to follow in later years, was to be financed from two sources: the introduction of an integrated (i.e. with goods and services in its ambit) and centrally collected value added tax (VAT) and the transfer of expenditure obligations from the federal budget to the provinces in line with the process of devolution of functions. The latter, however, was to occur after a lapse of one year to allow provinces to prepare, leaving the federal budget under considerable strain during the interim period.
In practice, the transfers under the NFC award have kicked in without the launch of an integrated VAT (or any successor arrangement such as Reformed General Sales Tax, or even any meaningful fiscal effort by provinces), and devolved functions have been nominally transferred to the provinces without the expenditure obligations. Hence, instead of expenditures totalling Rs187bn that were to be transferred to provinces under the devolution exercise (the original calculation worked out at the time of NFC deliberations in 2009), according to the Ministry of Finance, provinces have agreed to take on only Rs5bn to Rs6bn on to their budgets for 2011-12. This leaves the federal budget to cope with an additional fiscal burden of some 2.7 per cent of GDP at a time when it is trying to bring some sanity to the fiscal framework.
The combination of a lack of overall fiscal effort to meet the increased resource transfers, and the lack of preparation and enhancement of capacity by the provinces to take on the expenditures as well as functions relating to devolved subjects, unless managed properly, is a potential source of a permanent ‘structural’ fiscal deficit.
Of equally great concern, however, is the potential impact on service delivery. With provinces unwilling to finance key devolved functions such as education and health services, for example, and the federal budget unable to do so with its current constraints, the whole purpose of devolution could be defeated by the potential for near-collapse of service delivery to the common citizen. At its most basic level, for example, the Rabbani commission does not appear to have taken into consideration the need for physical working facilities and provision of housing for the thousands of employees required to staff the devolved functions in the provinces.
Hence, in addition to an existential threat from the lack of fiscal effort, the whole devolution exercise suffered from a fundamental weakness in the formulation stage: the overlooking of the state of provincial capacities to absorb the additional resources in a transparent and well-directed manner, and the absence of a road map on how to build those capacities before functions are transferred.
The critical issue now is how the country’s overall fiscal situation post-NFC and the 18th Amendment can be salvaged, and how the overall fiscal framework can be placed on a structurally sounder footing in the post-devolution environment. A number of recommendations to this end:
The ‘architecture’ of fiscal planning in the country needs to change fundamentally in the light of the 18th Amendment.
Essentially, five different government budgets (one centre plus four provincial) need to be synchronised more than ever before to yield one consolidated, workable overall fiscal framework. This should be done at the level of the Council of Common Interests (CCI), as propounded by Dr Ishrat Hussain.
Once the CCI has endorsed the framework, any provincial surplus targets would become binding on the provinces. Failure to do this prior to the formulation of the 2011-12 federal and provincial budgets has resulted in the disconnect between the finance ministry where it programmed a consolidated budget surplus by the provinces equal to 0.7 per cent of GDP while the individual budgets of the provinces yielded a deficit.
In the interim, the federal and provincial governments may need to consider a standstill agreement to be applied to the NFC transfers. This is important since servicing the fiscal transfers to the provinces was contingent on additional resource mobilisation. While the introduction of VAT was explicitly discussed in the NFC deliberations as a prerequisite for the framework to be viable, it was not made a formal, binding part of the NFC agreement. This was a mistake. However, contrary to popular perception, the provinces had lived up to their commitment on the issue till the shenanigans of two top federal bureaucrats unravelled the trust deficit built on the back of the NFC award, and by default, made the integrated VAT
unworkable, at least for Sindh.
Where the provinces have not lived up to their expectations is in the level of their own fiscal effort. With virtually most large tax bases domiciled in the provincial domain (such as agriculture, real estate and services), for tax collection by provinces to total an abysmal 0.5 per cent of GDP is untenable. Without a minimum threshold of provincial fiscal effort, the NFC transfers should be held in abeyance till certain benchmarks are achieved. The ‘trigger’ for NFC transfers to resume could be, for example, achievement of tax collection equal to one per cent of GDP by the provinces.
Finally, since the provinces will be able to borrow commercially after the passage of the 18th Amendment, it may become necessary to have provincial legislatures pass their own Fiscal Responsibility and Debt Limitation laws to establish the overall debt ceiling.
The writer heads an economic consultancy based in Islamabad.
Source: Dawn News
However, in meeting the spirit of the 1973 constitution, these two seismic developments have added a layer of complexity and challenge to both the governance and fiscal framework of the federation.
On paper, the envisaged quantum increase in the transfer of resources to the provinces under the seventh NFC award, nearly doubling in size, with stepped-up increases to follow in later years, was to be financed from two sources: the introduction of an integrated (i.e. with goods and services in its ambit) and centrally collected value added tax (VAT) and the transfer of expenditure obligations from the federal budget to the provinces in line with the process of devolution of functions. The latter, however, was to occur after a lapse of one year to allow provinces to prepare, leaving the federal budget under considerable strain during the interim period.
In practice, the transfers under the NFC award have kicked in without the launch of an integrated VAT (or any successor arrangement such as Reformed General Sales Tax, or even any meaningful fiscal effort by provinces), and devolved functions have been nominally transferred to the provinces without the expenditure obligations. Hence, instead of expenditures totalling Rs187bn that were to be transferred to provinces under the devolution exercise (the original calculation worked out at the time of NFC deliberations in 2009), according to the Ministry of Finance, provinces have agreed to take on only Rs5bn to Rs6bn on to their budgets for 2011-12. This leaves the federal budget to cope with an additional fiscal burden of some 2.7 per cent of GDP at a time when it is trying to bring some sanity to the fiscal framework.
The combination of a lack of overall fiscal effort to meet the increased resource transfers, and the lack of preparation and enhancement of capacity by the provinces to take on the expenditures as well as functions relating to devolved subjects, unless managed properly, is a potential source of a permanent ‘structural’ fiscal deficit.
Of equally great concern, however, is the potential impact on service delivery. With provinces unwilling to finance key devolved functions such as education and health services, for example, and the federal budget unable to do so with its current constraints, the whole purpose of devolution could be defeated by the potential for near-collapse of service delivery to the common citizen. At its most basic level, for example, the Rabbani commission does not appear to have taken into consideration the need for physical working facilities and provision of housing for the thousands of employees required to staff the devolved functions in the provinces.
Hence, in addition to an existential threat from the lack of fiscal effort, the whole devolution exercise suffered from a fundamental weakness in the formulation stage: the overlooking of the state of provincial capacities to absorb the additional resources in a transparent and well-directed manner, and the absence of a road map on how to build those capacities before functions are transferred.
The critical issue now is how the country’s overall fiscal situation post-NFC and the 18th Amendment can be salvaged, and how the overall fiscal framework can be placed on a structurally sounder footing in the post-devolution environment. A number of recommendations to this end:
The ‘architecture’ of fiscal planning in the country needs to change fundamentally in the light of the 18th Amendment.
Essentially, five different government budgets (one centre plus four provincial) need to be synchronised more than ever before to yield one consolidated, workable overall fiscal framework. This should be done at the level of the Council of Common Interests (CCI), as propounded by Dr Ishrat Hussain.
Once the CCI has endorsed the framework, any provincial surplus targets would become binding on the provinces. Failure to do this prior to the formulation of the 2011-12 federal and provincial budgets has resulted in the disconnect between the finance ministry where it programmed a consolidated budget surplus by the provinces equal to 0.7 per cent of GDP while the individual budgets of the provinces yielded a deficit.
In the interim, the federal and provincial governments may need to consider a standstill agreement to be applied to the NFC transfers. This is important since servicing the fiscal transfers to the provinces was contingent on additional resource mobilisation. While the introduction of VAT was explicitly discussed in the NFC deliberations as a prerequisite for the framework to be viable, it was not made a formal, binding part of the NFC agreement. This was a mistake. However, contrary to popular perception, the provinces had lived up to their commitment on the issue till the shenanigans of two top federal bureaucrats unravelled the trust deficit built on the back of the NFC award, and by default, made the integrated VAT
unworkable, at least for Sindh.
Where the provinces have not lived up to their expectations is in the level of their own fiscal effort. With virtually most large tax bases domiciled in the provincial domain (such as agriculture, real estate and services), for tax collection by provinces to total an abysmal 0.5 per cent of GDP is untenable. Without a minimum threshold of provincial fiscal effort, the NFC transfers should be held in abeyance till certain benchmarks are achieved. The ‘trigger’ for NFC transfers to resume could be, for example, achievement of tax collection equal to one per cent of GDP by the provinces.
Finally, since the provinces will be able to borrow commercially after the passage of the 18th Amendment, it may become necessary to have provincial legislatures pass their own Fiscal Responsibility and Debt Limitation laws to establish the overall debt ceiling.
The writer heads an economic consultancy based in Islamabad.
Source: Dawn News
Future of ties with America
RELATIONS between Pakistan and the US and cooperation between their militaries are at their lowest ebb.
As matters now stand, Pakistanis suspect that the US is contemplating coercive actions that may reduce levels of friendship with that country. If that happens, it will mean that Osama bin Laden’s strategy for bringing nearer the ‘battle of Khorasan’ would have succeeded.
However, unfortunate Pakhtuns in Afghanistan, Fata, Khyber Pakhtunkhwa and Balochistan will continue to suffer violence and death. With the recent murder of President Karzai’s brother Ahmed Wali, one can foresee the end of talks with the Taliban.
With an upset Pakistani military and a despondent President Karzai, it would appear that the US exit strategy in Afghanistan is in pieces.
Is it according to some insane design that each day a new insult is heaped upon Pakistan? The ranks of US supporters in Pakistan must be dwindling by the day. If the current trend continues, pretty soon Islamabad may be declared part of the Axis of Evil, replacing Iraq.
The uncharacteristic remarks made recently by the chairman of the US Joint Chiefs of Staff Adm Mike Mullen accusing the government of the murder of journalist Syed Saleem Shahzad are surprising. The murder, though abominable, is hardly a military matter. After all, in the past, Gen MacArthur and more recently Gen McChrystal were removed from their posts for making political statements.
The accusations against the security establishment after the discovery of Bin Laden in Abbotabad add to Pakistan’s discomfiture. These charges leave no doubt that the intent is to embarrass the ISI or other arms of the security apparatus. But what if the US is wrong in its suspicions? What if the Pakistani intelligence services were actually unaware and incompetent?
The US 9/11 commission brought out many failures of its own intelligence network when it was found that the hijackers involved had been living undetected in the US for years. It was found that the FBI had even warned Washington that one of the terrorists was taking flying lessons and was dangerous. Yet the intelligence system failed to react. Could the US institutions then be condemned for complicity?
It was recently reported that North Korea paid a bribe to Pakistani generals to obtain nuclear secrets. The central piece of this drama was a letter written in English purportedly by a North Korean and indicating the payment of a bribe.
While the authenticity of the letter is unclear, we should be concerned. In February 2003 Gen Colin Powell, then secretary of state, told the UN Security Council: “My second purpose today is to provide you with additional information … [that] the United States knows about Iraq’s weapons of mass destruction as well as Iraq’s involvement in terrorism.”
It is now known that Mr Powell had spoken inaccurately for no weapons of mass destruction were found in Iraq. However, his accusation became the justification for launching a war against Iraq that killed thousands of people. No one was held accountable.
As one US commentator suspiciously noted, the source of the leaked North Korean letter is former Financial Times journalist Simon Henderson. Mr Henderson did not say how the letter came into his possession. What we do know is that he works for the Washington Institute for Near East Policy which was founded by Martin Indyk, the former research director of the powerful American-Israel Public Affairs Committee, a primary American pro-Israel lobby group that has been known to influence US policy.
It is remarkable that when it comes to disseminating American government propaganda, even advocates of journalistic ethics have no inhibitions about publishing what appear to be half-truths. Nobody in the US seems to really care whether any of the accusations levelled against other nations are true or not.
Clearly, the US would not be so desperate unless it badly wanted something from Pakistan. Or is this an attempt to shape public opinion in the US to undertake coercive action against Pakistan?
The latter is less likely because if Pakistan does not assist the US in disengaging from Afghanistan, it will be stuck — and this is a result that President Obama can ill afford for it may well cost him an election. It would appear, then, that the US wants Pakistan to do its fighting for it.
If the US wants to disengage from Afghanistan in an orderly manner, it needs Pakistan’s help. An upset Pakistan military will
not provide that. Thus the stoppage of US assistance of $800m to the military for its past operations is bizarre. In the 140th Corps Commanders’ meeting the military has decided not to seek further US assistance in the war on terror.
Clearly, the Pakistan military will end many joint operations and perhaps initiate peace deals with the militants. If this happens, American casualties in Afghanistan will increase.
The induction of Leon Panetta as defence secretary and the constitution of his new team do not augur well. The Pakistan military seems set now to follow an independent and more nationalistic strategy against the militants. One of the first steps will be the drawdown of forces in Fata and Khyber Pakhtunkhwa.
The US policymaking establishment has lost direction in the Af-Pak region and has begun making ill-considered decisions that will harm the chances of peace in the region. More sanity needs to prevail in US-Pakistan relations, if the US exit from Afghanistan is to be orderly.
The writer is chairman of the Regional Institute of Policy Research in Peshawar.
azizkhalid@gmail.com
Source: Dawn News
As matters now stand, Pakistanis suspect that the US is contemplating coercive actions that may reduce levels of friendship with that country. If that happens, it will mean that Osama bin Laden’s strategy for bringing nearer the ‘battle of Khorasan’ would have succeeded.
However, unfortunate Pakhtuns in Afghanistan, Fata, Khyber Pakhtunkhwa and Balochistan will continue to suffer violence and death. With the recent murder of President Karzai’s brother Ahmed Wali, one can foresee the end of talks with the Taliban.
With an upset Pakistani military and a despondent President Karzai, it would appear that the US exit strategy in Afghanistan is in pieces.
Is it according to some insane design that each day a new insult is heaped upon Pakistan? The ranks of US supporters in Pakistan must be dwindling by the day. If the current trend continues, pretty soon Islamabad may be declared part of the Axis of Evil, replacing Iraq.
The uncharacteristic remarks made recently by the chairman of the US Joint Chiefs of Staff Adm Mike Mullen accusing the government of the murder of journalist Syed Saleem Shahzad are surprising. The murder, though abominable, is hardly a military matter. After all, in the past, Gen MacArthur and more recently Gen McChrystal were removed from their posts for making political statements.
The accusations against the security establishment after the discovery of Bin Laden in Abbotabad add to Pakistan’s discomfiture. These charges leave no doubt that the intent is to embarrass the ISI or other arms of the security apparatus. But what if the US is wrong in its suspicions? What if the Pakistani intelligence services were actually unaware and incompetent?
The US 9/11 commission brought out many failures of its own intelligence network when it was found that the hijackers involved had been living undetected in the US for years. It was found that the FBI had even warned Washington that one of the terrorists was taking flying lessons and was dangerous. Yet the intelligence system failed to react. Could the US institutions then be condemned for complicity?
It was recently reported that North Korea paid a bribe to Pakistani generals to obtain nuclear secrets. The central piece of this drama was a letter written in English purportedly by a North Korean and indicating the payment of a bribe.
While the authenticity of the letter is unclear, we should be concerned. In February 2003 Gen Colin Powell, then secretary of state, told the UN Security Council: “My second purpose today is to provide you with additional information … [that] the United States knows about Iraq’s weapons of mass destruction as well as Iraq’s involvement in terrorism.”
It is now known that Mr Powell had spoken inaccurately for no weapons of mass destruction were found in Iraq. However, his accusation became the justification for launching a war against Iraq that killed thousands of people. No one was held accountable.
As one US commentator suspiciously noted, the source of the leaked North Korean letter is former Financial Times journalist Simon Henderson. Mr Henderson did not say how the letter came into his possession. What we do know is that he works for the Washington Institute for Near East Policy which was founded by Martin Indyk, the former research director of the powerful American-Israel Public Affairs Committee, a primary American pro-Israel lobby group that has been known to influence US policy.
It is remarkable that when it comes to disseminating American government propaganda, even advocates of journalistic ethics have no inhibitions about publishing what appear to be half-truths. Nobody in the US seems to really care whether any of the accusations levelled against other nations are true or not.
Clearly, the US would not be so desperate unless it badly wanted something from Pakistan. Or is this an attempt to shape public opinion in the US to undertake coercive action against Pakistan?
The latter is less likely because if Pakistan does not assist the US in disengaging from Afghanistan, it will be stuck — and this is a result that President Obama can ill afford for it may well cost him an election. It would appear, then, that the US wants Pakistan to do its fighting for it.
If the US wants to disengage from Afghanistan in an orderly manner, it needs Pakistan’s help. An upset Pakistan military will
not provide that. Thus the stoppage of US assistance of $800m to the military for its past operations is bizarre. In the 140th Corps Commanders’ meeting the military has decided not to seek further US assistance in the war on terror.
Clearly, the Pakistan military will end many joint operations and perhaps initiate peace deals with the militants. If this happens, American casualties in Afghanistan will increase.
The induction of Leon Panetta as defence secretary and the constitution of his new team do not augur well. The Pakistan military seems set now to follow an independent and more nationalistic strategy against the militants. One of the first steps will be the drawdown of forces in Fata and Khyber Pakhtunkhwa.
The US policymaking establishment has lost direction in the Af-Pak region and has begun making ill-considered decisions that will harm the chances of peace in the region. More sanity needs to prevail in US-Pakistan relations, if the US exit from Afghanistan is to be orderly.
The writer is chairman of the Regional Institute of Policy Research in Peshawar.
azizkhalid@gmail.com
Source: Dawn News
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