Shinkansen station coming to Woodlands

Finally, Singapore and Malaysia have reached an accord on moving the Malaysian Railways (KTM) train station from Tanjong Pagar to Woodlands. Negotiators between the two nations shaped a compromise which involves some give and take from both nations.

Malaysian Railways junction in Kampong Bahru, Singapore

Press reports indicate that the bilateral agreement also includes the following points:

·         Reducing tolls on the Second Link between Singapore and Malaysia;

·         The building of a 'rapid transit' link between the two nations;

·         Developing an 'iconic structure' in the new Iskandar  development zone  in Johor Bahru;

·         Establishment of a jointly owned company to develop the existing KTM land in Tanjong Pagar. The company will be 60% and 40% owned by Malaysia and Singapore respectively.

Some Singaporean commentators suggest Singapore may have been too accommodating towards Malaysia. No doubt, Malaysian nationalists will be screaming blue murder at their end too.

However, take a look at the big picture. The fates of Singapore and Malaysia are intimately connected. Any agreement which promotes prosperity in neighbouring Johor is good for Singapore. Additionally, upgrading existing transportation infrastructure between the two nations has tremendous benefits for economic activities in both countries.

My only complaint is that an understanding on upgrading the rail infrastructure between Singapore and Kuala Lumpur was not concluded. Anyone who has travelled between Singapore and Kuala Lumpur (KL) by rail is aware that the current train infrastructure is, at best, sufficient for a cash strapped third world nation living on a colonial rail legacy.

While there is some romance to travelling by the fabled Khyber Mail train from Karachi to Peshawar, an almost seven hour rail journey between Singapore and KL is neither practical nor nostalgic.

Singapore and Malaysia have resources to invest in their infrastructure. The approximately 500 kilometre journey between the two capitals should not take more than three hours by rail. A bullet train, or shinkansen, should be the next shiny symbol of development and cooperation between the two nations!Perhaps the money obtained from developing the Tanjong Pagar land parcel can be reinvested into creating a bullet train line.

Japanese bullet train, or shinkansen, passing by Mount Fuji

Singapore and Malaysia are joined at the hip. Importantly, they complement each other's strengths and decrease their weaknesses. By allowing the 'special relationship' between the two nations to flourish there is a chance history may turn full circle and result in a confederation between the two sovereign states.

‘European’ Turkey and the global clash of civilizations

The best thing Europe could do now would be to bring in Turkey. When they recently took 10 new countries, they brought in 10 new problems as those countries have little to contribute.

Turkey has about the same population as those 10 countries, one language a much more productive labour force, and so on. They could solve many problems by bringing in Turkey. So if I were the European Union, I would bring in Turkey this afternoon. It would be the best thing for the European Union and its survival.

Of course, they are not going to do it because of the dirty little secret they don't like to talk about: The Turks are "not like us" Europeans. "They" got that funny language and that funny religion and that funny skin.

Acclaimed investor Jim Rogers as quoted by Steven Drobny in "Inside the House of Money," 2005.

Singaporeans may know Jim Rogers as a wealthy investor who chose to relocate to Singapore citing tax and quality of life reasons. And, for practical purposes, Rogers insists that his children be schooled in Mandarin. Within the professional investment world, Jim Rogers is better known for co-founding the Quantum Fund with George Soros, 'the man who broke the Bank of England' back in 1969.

Rogers holds strong views on most things – and he translates these views into investment theses. One may disagree with much of what he says, but it is difficult to argue with success.

And Rogers' investment career continues to be exceptionally successful.

Savvy investors look at the world with a different vision than ordinary persons. While some may see a tragic oil spill in the US Gulf, an investor sees BP as a stock shorting candidate. It's not that investors have no emotions; they just process information differently.

In 2005, the survival of the Eurozone was not on anyone's mind. Some bandied about the idea of the Euro as an alternate reserve currency to the US Dollar. Europe, like the rest of the world, was on a high. New members were queuing up outside the EU's doors. The global economy was chugging along nicely.

Things are slightly different in 2010.

Today, Turks must be quietly sniggering to themselves at the fate of the Eurozone, especially given the starring role played by their nemesis Greece. Many in Turkey's political elite might be watching the Greek tragedy and wondering whether Ataturk's European dream is still worth pursuing.

Ottoman Sultan Mehmed II entering Constantinopole in 1453

Despite the economic logic, the European Union (EU) will never admit Turkey. Everyone understands that, except Turkey itself. (Just like the parent that refuses to admit her child is a smoker, in this case Turkey prefers not to acknowledge the existence of uncomfortable realities.)

The EU's attitude towards Turkey is unfortunate. Turkey has a central role to play in bridging the gap between the Islam and the rest of the world. Turkey's conciliatory function stems naturally in part due to Turkey's geographic contiguity with Western Europe.

Turkey's policy shift towards the Islamic world at the cost of diluting its partnership with NATO and the US is partly due to Turkey's treatment by the EU. After all, how many times can a proud nation be shown the door before deciding its fate lays elsewhere?  

Turkey's special relationship with Israel has been severely weakened during the last few years. Additionally, despite US protests, Turkey has forged strong pragmatic relationships with two of its most contentious neighbours, Iran and Syria.

Turkey's historical anchoring as a geopolitical player within Europe is fast disappearing. Turkey's new moorings are forming around the Islamic world. Securing Turkey's fate exclusively to the Islamic world will be disadvantageous to both the Islamic world and Europe.

Unfortunately, continental Europeans may have forgotten World War Two but the Ottoman Wars are seared in their collective consciousness. Surely, Romanians express sentiments common among many Europeans when they insult someone by suggesting 'you are barbaric like a Turk.'

NB – Readers may be interested to note that Rogers has an entry in the Guinness Book of World Records for the longest continuous car journey – a follow up to an earlier motorcycle trip around the world. He has authored two best sellers recounting both journeys.

Islam’s military, militancy, culture and the clash of civilizations

Generalizations, though often incorrect, help humans understand an otherwise chaotic and incoherent world. Within the Islamic world, it is sometimes said, 'the Turks for the military, the Arabs for the religion and the Persians for the culture.'

Persian style miniature painting of Mogul Emperor Humayun being greeted by Persian Emperor Tahmasp

It's true that historically Turkic speakers like the Ottomans and Moguls have been at the forefront of defining Islam's territories in Europe and South Asia. Yet, Islam's initial expansion came squarely from the Arabs themselves. The famous Muslim soldier-statesman Saladin was born in Tikrit, Iraq. The same city was later to be Saddam Hussein's hometown.

As for religion, it makes sense that the Arabs are themselves most associated with Islamic theology. After all, the Koran is in the Arabic language and the Arabs have tended to discount any serious Islamic scholarship unless done in Arabic. Kind of like a scholar researching Turkish history without understanding the Turkish language. Surely, the scholar will be at some disadvantage in pursuing her academic work.

The Persians certainly have a large dose of culture in their history, with a good part of it stemming from pre-Islamic Persian traditions. Persian literary traditions have influenced poetry and mystics from all over the Islamic world. The Mogul miniature paintings came to South Asia via Mogul Emperor Humayun's entourage which attracted many Persian artists employed during his exile in Persia.

In the final analysis, generalizations are a dangerous prism for viewing the world. Huntington's clash of civilizations is not inevitable. All Muslims are not terrorists. All Americans are not bloodthirsty Christian Crusaders. And, all Singaporean Muslims are not Malay!

Similarly, there is a rich Arabic poetic tradition which is not well known outside the Arabic world. I, too, am guilty as charged. I cannot name any Arab poets with whose writings I am familiar.

Syrian poet Nizar Qabbani as a young law student in Damascus in 1944

By chance, a few days ago I came across the following poem by Syrian poet Nizar Qabbani (1923 -1998). There is nothing more to add to the poem's message. Qabbani speaks self-evident truths with eloquence that resounds even more sharply following the events of 9/11.

        Would you permit me?

In a country where thinkers are assassinated, and writers are considered infidels and books are burnt, in societies that refuse the other, and force silence on mouths and thoughts forbidden, and to question is a sin, I must beg your pardon, would you permit me?

Would you permit me to bring up my children as I want, and not to dictate on me your whims and orders?

Would you permit me to teach my children that the religion is first to God, and not for religious leaders or scholars or people?

Would you permit me to teach my little one that religion is about good manners, good behavior, good conduct, honesty and truthfulness, before I teach her with which foot to enter the bathroom or with which hand she should eat?

Would you permit me to teach my daughter that God is about love, and she can talk to Him and ask Him anything she wants, far away from the teachings of anyone?

Would you permit me not to mention the torture of the grave to my children, who do not know about death yet

Would you permit me to teach my daughter the tenets of the religion and its culture and manners, before I force on her the Hijab (the veil)?

Would you permit me to tell my young son that hurting people and degrading them because of their nationality, colour or religion, is considered a big sin by God?

Would you permit me to tell my daughter that revising her homework and paying attention to her learning is considered by God as more useful and important than learning by heart Ayahs from the Quran without knowing their meaning?

Would you permit me to teach my son that following the footsteps of the Honorable Prophet begins with his honesty, loyalty and truthfulness, before his beard or how short his dress [thob] is?

Would you permit me to tell my daughter that her Christian friend is not an infidel, and ask her not to cry fearing her friend will go to Hell?

Would you permit me to argue, that God did not authorize anyone on earth after the Prophet to speak in his name nor did he vest any powers in anyone to issue 'deeds of forgiveness' to people?

Would you permit me to say, that God has forbidden killing the human spirit, and who kills wrongly a human being is as if he killed all human kind, and no Moslem has the right to frighten another Moslem?

Would you permit me to teach my children that God is greater, more just, and more merciful than all the (religious) scholars on earth combined? And that his standards are different from the standards of those trading the religion, and that his accountability is kinder and more merciful

Would you permit me? by Nizar Qabbani

Translated from the original composed in Arabic.

Singaporean lab rats and preserving the city’s heritage

Progress requires experimentation. Some experiments are innocent enough, requiring limited risks. Others are slightly more risqué and may have adverse long term consequences. Medical tests characterize the more risky variety while experimenting with colour combinations on daily clothing is not so perilous.

"As an urbanised Asian city with nearly five million inhabitants and a strong research community, Singapore offers a conducive environment for companies to hatch new ideas and test concepts."

Speech by Mr. Lim Hng Khiang, Minister For Trade and Industry

Arguably, treating Singapore as a living laboratory for urban solutions is no bad thing. Never mind that the notion makes all Singaporeans into lab rats!

It's all about going green and conserving the environment, creating eco-friendly cities and townships for the future. Surely, being on the cutting edge of green technologies must be a competitive advantage for the local economy.

Traditional house in a kampong on Pulau Ubin. Can you spot the solar panel for generating power?

Of course, being green is no longer about a protester chaining herself to a tree in order to stop a park from becoming a parking lot. The Greenpeace environmental movement has graduated to become a multi-billion Dollar corporate enterprise.

Investors can purchase specialized green technology mutual funds focusing on renewable energy or water technologies. Private equity funds and venture capital firms abound in the green technology space.

All that being said, for me conserving the environment is more about preserving national heritage of the sort found in museums and buildings.

Let scientists research how best to recycle rain water or reduce electricity consumption. However, is there anyone looking out for the interests of the wet markets or the old National Library building? Who determines whether in twenty years the Suntec fountain should not be demolished to make way for a new shopping mall?

Of course, this is the preserve of some super efficient bureaucrat who has clear guidelines provided to her in the Ministry's operating manual. But the manual's rules can easily be overwritten by a memorandum from a senior in the event that economic progress dictates.

It is time that the mission of the National Heritage Board (NHB), a Singapore government organization, is broadened from its existing aim of "foster[ing] nationhood, identity and creativity through heritage and cultural development."

The mission should include 'the preservation of Singapore's physical and cultural heritage.' Subsequently, formal mechanisms to effectively channel tax dollars towards activities and infrastructure in line with the broadened mission should be adopted and made public. In preserving history, a little money goes a long way.

After all, even lab rats enjoy the occasional cultural activity.

Nehru’s circumcision, cultural sensitivity and leadership skills

'The Mahsud [main tribe in South Waziristan and key part of the today's Pakistani Taliban movement] jirga [council of elders] assembled that day [1946] on the Residency lawn to hear what [Nehru] had to say,' recalls Hodson. 'To my astonishment Nehru rose to his feet (it was customary for holders of jirgas to sit with tribesmen squatting on the ground in front of the chairs) and advanced with his arms in the air as though he were addressing a political rally in Allahabad. When his voice reached a crescendo, he announced that he had come to free the tribes from the slavery of British imperialism. At that the entire jirga rose in anger and (tribal elder) Mehr Dil advanced on Nehru with raised umbrella saying "We are not slaves," and tried to strike him, adding, "Come here again and we will circumcise you." The proceedings then broke up in disorder and the Mahsud's raged out of the camp.

(Major) Robin Hodson, Story and Gallantry as quoted by Jules Stewart in The Khyber Rifles.

Nehru forgot one of the first lessons of leadership – adapting leadership style to differing situations. The formula which works among Anglophile Indian parliamentarians will not produce the same results among free spirited Pathan tribesmen.

A view of the khyber Pass which links Pakistan with landlocked Afghanistan

British imperialists learnt the hard way that the Pathans are a unique people. By the end of the Empire, the British had developed a grudging respect for the Pathans. The way enemies respect each other on the battlefield.

The British 'sirkar' realized that the Pathans cannot be subdued militarily alone, cash incentives work much better.

As the Americans grapple with their involvement in Afghanistan, history provides some clues to resolving the current situation. After eight years in Afghanistan, the Americans have little to show for their efforts. If anything, they have only succeeded in widening the scope of a Pathan tribal insurgency into Pakistan.

I refer to the matter as mainly a Pathan tribal matter. Even a cursory reading of history shows the Pathans and the Balochis take their freedoms more seriously, unlike the more sedentary peoples east of the Indus River.

(People who continually compare Pakistan and India will be wise to examine the historical exigencies, including industrial base, educational standards, mileage of roads and railroads, etc. of the two geographies at independence in 1947 before forming any definitive conclusions about the state of the two nations.)

An 1890 photograph of members of the Khyber Rifles. The Khyber Rifles are a paramilitary force raised in the late 1800s and reponsible for the security of the Khyber Pass

While there are many 'myths' about the Pathan character most are based on historical tendencies observed across many centuries. Pathans do not forget. Revenge is written into the tribal code – hence the desire by tribal jirgas to sort out matters amicably before tribal feuds get out of hand and span generations.

There is a reason the British government, and its successor state Pakistan, maintained a hands-off policy with the tribal areas. The risk-reward metric in attempting to maintain central control of the region is heavily skewed against Islamabad. Only the loyalty of the tribes ensures tranquillity in the settled areas of Pakistan's Northwest Frontier Province, including its administrative capital of Peshawar.

Peshawar was a frequent target of attacks during the British raj. Martial law in Peshawar was a reasonably regular occurrence. The British also regularly used air power to subdue 'unruly' Pathan tribesmen.

To the Pathans it makes little difference that the Pakistan Army is primarily Muslim. To the tribes, they are outsiders trying to settle in tribal land and change their traditional lifestyle.

Paramilitaries, like the Frontier Constabulary manned by tribal people themselves, are only a temporary solution. Even the most disciplined fighting force gets war weary and tribal soldiers are no exception, especially when they are susceptible to sympathies for the people who they are fighting.

Back to Afghanistan where the Americans have installed a Tajik Northern Alliance governing regime since 2002, the remnants of Ahmed Shah Masood's band of warriors. The Pathans, despite being a plurality in the country, have been excluded from all levers of power.

Without the active support of the Afghan Pathans, peace will remain elusive to Afghanistan. Yes, Kabul city can be secured but at what cost? Likewise, Pakistan's major military offensives into the tribal areas are a temporary (and weak) fix.

After eight years of unrest slowly spreading outwards from Kabul, it may be the right time to negotiate a power sharing agreement. US military power can provide the backbone to ensure that certain principles are non-negotiable, i.e. female emancipation including the right of women to work. At a time when sovereign bailouts are in vogue, how long can the Western world continue to fund expensive overseas wars?

A view of the Mohabat Khan Mosque in Peshawar

Unless the US believes that the Taliban insurgency can be defeated militarily with Mullah Omar signing a humiliating Instrument of Surrender on behalf of a fragmented Taliban movement, non-military alternatives must be considered.

The Pathan is not one to be trifled with, speak with respect and he will become a friend for life.

Our dealings with the Pathans was a gentleman's game, you know. No matter how poor a Pathan was, he may meet the King of England or the Viceroy of India, but he'd look him straight in the eye and shake hands with him as if to say I'm as good a man as you are.

Colonial British Army Officer.

Nationalism, the Vietnam War and the US war on terror

Narrow forms of ideology or philosophies generally trump broad, grand versions of belief systems. If nothing else, all-encompassing dogmas are subtly adjusted to meet local cultural norms.

Pan-Islamism gives way to 'local' versions of Islam. (I have often written about the differences between Malay Islamic traditions and Pakistani traditions.) Communism gives way to 'Maoism' which is superseded by 'Communism with Chinese characteristics.' The Europeans sought to learn from Napoleon's and Hitler's versions of pan-Europeanism and developed the European Union from the humble beginnings of the European Coal and Steel Community.

Painting of the USS Maddox, the US Navy ship involved in the Gulf of Tonkin incident in Vietnam

Thus, was born the narrow concept of the nation-state and nationalism. Being more easily definable than religious or continental affinities, nationalism has been a powerful force in recent history. Nevertheless, nationalism remains a problematic concept even in the most culturally homogenous nation states.

Consider the ephemeral notion of 'Americanness' to different segments of the US population.

To some, being American implies a 'Christian' way of life. A theory supported by emphasizing the historical fact of European religious pilgrims travelling to the New World to create a new Promised Land. A more recent Mexican immigrant probably focuses on economic opportunities and the ability to create a better life for himself. For a Muslim cleric, the freedom to practice and preach Islam without fear, especially in these troubled times, may be the most important part of the American way.

Even when a country's 'National Interest' has been defined, the path to achieving the goal is often murky. After all, few Americans doubt the need to reduce the public debt but can anyone agree on the best way to reduce spending or raise revenue in the next ten years?

Public disagreements, such as concerning budgetary measures, are innocent enough. But what about the seamier side of aggressively pursuing the national interest, such as actions by the Deep State in Turkey or the American intelligence community in international jurisdictions.

One can discuss the American use of drones for assassinations in Pakistan, perhaps the most overt of US covert operations; or the 'renditions' of suspected terrorists undertaken by the US with the assistance of foreign intelligence agencies.

Mug shot of Oliver North, key player in the Iran-Contra scandal during the Reagan presidency

Ultra-nationalists (remember Reagan's National Security Adviser Colonel Oliver North and the Iran-Contra scandal?) are always guided by the best of intentions but sometimes cross the line between legal and illegal. Often their behaviour provides legitimate cover for more mainstream action.

Perhaps the best example of such an incident is the second Gulf of Tonkin battle between the US and North Vietnamese navies of August 4, 1964. Unlike the reports of the day, recent information reveals that there was apparently no naval battle on that day and all reports to the contrary provided to President Lyndon Johnson were false.

The war reports were used to justify the Gulf of Tonkin Resolution which authorized the US President to use 'conventional forces,' i.e. to deploy troops, in Vietnam to assist in the battle against communism. In other words, the Resolution effectively marks the beginning of the Vietnam War.

I am not a conspiracy theorist. I do not believe 9/11 was carried out by the CIA to justify attacks against Islam. Nor do I believe one should read too much into the individual actions of crazy people, Muslims or otherwise, to substantiate broader conspiracies.

However, can I be completely certain that no member of the Afghan security establishment supports the Afghan Taliban? Or that no members of the Pakistani intelligence community, legitimately or otherwise, maintain active communication lines with the Afghan Taliban?

By the same token, one can surely not discount instances 'created' by ultra-nationalist members of the US and allied intelligence communities to discredit Islam and Islamic militants as a means to help attain their broader national security objectives in the war against terrorism.

Naval ships of the Combined Task Force 150 patrolling the Arabian Sea

How many Americans will question the US security establishment if a Pakistani or Yemeni were picked up on vague 'terrorism' charges which later proved to be unfounded? It will probably be easier to put together a lynch mob than a sympathetic petition for the unfortunate soul who may have just been in the wrong place at the wrong time.

Sometimes all is not as simple as it seems.

My summer of 1987 with Britain’s Liberal Democrats: lessons for Singapore

The story starts in 1986. As a sophomore at Occidental College (yes, the same college Obama attended!), I applied for a Richter Fellowship to study the British first past the post electoral system. I didn't receive the grant.

Never one to take no for an answer, I reapplied for the grant the following year, 1987. (The research scholarship was handed out annually.) Maybe the selection committee liked my proposal; maybe they just wanted to shut me up or maybe the forthcoming 1987 British general elections swayed the decision.

Whatever the reason, I found myself in London during the summer of 1987 researching the electoral reform proposals of the yet to be formed Liberal Democratic Party. A third force in British politics borne out of an Alliance memo jointly issued by Sir David Steel's Liberal Party and former Labour stalwart Dr. David Owen's Social Democratic Party (SDP) which finally culminated in the formal merger of the two parties in 1988.

It was quite a time. I wrote to each of the handful of Liberal Party MPs at the House of Commons requesting an interview. Most wrote back on Parliamentary stationary excusing themselves due to commitments in their constituencies – it was Parliament's summer recess. The formality of the communications was 'quaint' to say the least!

During the process, I was referred to the Centre for Constitutional Reform operated by Lord (then Sir) Richard Holme (1936 – 2008). Sir Holme took me under his wing and his Centre gave me a place to 'house' myself while conducting my research. Through affiliation with the Centre I somehow ended up attending a Liberal Party weekend event (was it the annual conference?) at Cambridge.

Cambridge 1987 was a fascinating event. Traditional Liberals, known for their support of the Campaign for Nuclear Disarmament (CND) and legalize marijuana campaign, were being lobbied by party elders to join the 'real world' of British politics.

Woolly liberals feared their historical and revered party was the target of a takeover by SDP's 'Gang of Four' comprised of David Owen, Roy Jenkins, Shirley Williams and Bill Rogers. Months earlier, the Gang of Four had split from the increasingly left wing Labour Party, a party falling under the influence of (closet communists) Tony Benn and Ken Livingstone. *

The Liberal Party is the party of William Gladstone and David Lloyd-George. Never mind that the Liberals had not formed a government since the early 1900s – they still had a legacy to protect. (A situation reminiscent of today's Islamic world which always seems to be looking backward at the lost glories of the Mogul and Ottoman Empires rather than forward to face the challenges of the post-industrial world.)

I dutifully did my research, meeting as many Liberal and SDP MPs, leaders and strategists as were willing to say hello to me. Some later turned out to be influential public figures in their own right. I enjoyed every moment of my research.

For the 1987 general election, the Liberals and Social Democrats joined hands and hoped for a hung parliament. A Lib-Labour pact was in the making to unseat the Conservatives. The Alliance, as the Liberal-SDP coalition was then known, was set to play king maker and hoped to double its twenty odd Parliamentary seats.

Prominent among the Alliance platform was the reform of the first past the post electoral system. An electoral system under which the Alliance obtained almost one quarter of the popular vote but only five percent of the seats in the Commons.

It took the Liberals several elections, approximately 60 seats, an economic crisis and twenty-three years to get the opportunity the party so diligently worked towards. Charismatic Nick Clegg, leader of the Liberals, has been appointed Deputy Prime Minister in Britain's first coalition government since World War Two. The Conservatives have promised a referendum on the electoral system in return for support by the Liberals.

It will be interesting to note how the traditionally change resistant British population will vote in the referendum. The British seem to take pride in being different from Continental Europe, electoral system and the lack of a written Constitution are part of this 'differentiating' tradition. They may well vote to keep an inherently unfair electoral system in place. (Note to the Conservatives: it's my blog so I can write what I like!)

For the Liberals, this is their one and only chance to demonstrate that the party is back from the woods. If Nick Clegg and gang blow it, then the party may have to wait another quarter of a century before it gets another chance to govern. British voters will return to their usual choice of tweedle dum and tweedle dee. And the two 'Big Boys,' the Conservatives and Labour, will happily squeeze the 'third force' out of the political system forever.

The lessons for Singapore are plain. Democracy requires a vibrant opposition to dutifully play its role in keeping the government of the day in check. A robust opposition ensures any one political party does not regress towards complacency or arrogance through a continuous long term stint in power.

For its part, the opposition parties must have credible infrastructures supporting party organizatons. These include policy making mechanisms such as think tanks, not just enthusiastic volunteers willing to knock on people's doors to undermine the ruling party.

As in Britain, it might help Singapore's opposition if 29% of the popular vote translates into more than two parliamentary seats, as was the case in the 2006 general elections.

*I was highly impressed by a speech delivered by London Mayor Ken Livingstone a few years ago. Ken Livingstone was recently defeated by a Conservative candidate for the London Mayor's post.

Bailouts, bankruptcies and cold, hard cash

First the world witnessed the US government's 700 billion Troubled Asset Relief Program (TARP) in 2008. Over the weekend, Europe followed suit with a combined EU / International Monetary Fund (IMF) Euro 750 billion program designed to 'save' the European economies.

The US was brought to the brink by the collapse of a 'smallish' investment bank, Lehman Brothers. Europe reached the edge due to the shenanigans of a 'smallish' economy: Greece.

It was not the two individual events that created the collapse. It was the aftermaths of the Lehman and Greece bankruptcies (yes, Greece is bankrupt) which precipitated the crises.

The systemic risks were revealed by seemingly minor incidents, the law of unintended consequences at its best.

TARP has seemingly achieved its purpose as the US financial sector remains intact. The details of the EU / IMF program have not yet emerged though initial stock market reactions were wildly bullish.

Irrespective of the short term benefits of the two programs, there are serious long term consequences which the world cannot ignore.

With each passing moment, US federal government debt increases. The US debt clock moves faster than ticks on the New York Stock Exchange ticker tape on a thousand point day!

Europe will be no different. The bailout package, which amounts to approximately 8% of EU gross domestic product, will result in EU nations adding tremendously to their national debt.

Financial liabilities are just as real as financial assets.

Sara, who owns shares worth one hundred dollars, has a real, marketable asset. Wasim, on the other hand, owes one hundred dollars to the bank. Wasim has a loan and liability just as real as Sara's assets (shares).

The world seems to be overrun with borrowers lately– both in the form of individuals and countries. Hence, 'rich' government's step in and somehow 'adjust' the liabilities. (Rich = able to borrow or print money without immediate financial repercussions.)

However, no matter what governments' do someone has to take the pain of Wasim's one hundred dollar loan that is neither being serviced nor repaid. Wasim returns to normal life, without the debt, and the bank writes off the loan. The government guarantees the bank so everything's fine.

Back to the government – where does it get one hundred dollars? It borrows or prints the money because it does not wish to upset the quality of life of people who have already borrowed too much. Even governments' cannot borrow or print money forever. Or they become the Greek government.

In other words, the US and the EU must raise taxes or cut spending in the coming years if they are to remain financially solvent. The other option is to 'inflate' away the problem – repay the debts with paper money that is printed and worthless.

Many parts of the developed world partied hard for two decades, from the 1990s until 2008. Entire populations lived beyond their means for years. (For various reasons, whole swathes of the world, the 'Emerging Markets,' could not crash the party.)

The world can wait for the next bailout to rescue us, again. Then again, the 'shock and awe' strategy behind bailouts is fast losing its sheen. Perhaps, the old fashioned values of thrift and common sense (remember the notion of spending less than one earns?) remain the only sustainable hope to ride out the financial crisis.

Alternately, we can all start praying that the problems miraculously disappear in a few years.

Pakistan in the pressure cooker (again!) and preparing to explode?

Pakistan faces "very severe consequences" if a terrorist plot like the failed Times Square bombing was traced to that country, United States Secretary of State Hilary Clinton said in remarks made public yesterday. (May 9, 2010)

For a country which sees approximately one hundred (yes, that's one hundred) police, paramilitary and soldiers killed each month (yes, that's each month) at the hands of Islamic militants, Clinton's threats are difficult to swallow. I will not mention the hundreds of civilians killed in suicide bombings at Pakistani bazaars, markets and pretty much anywhere in retaliation for the government's efforts to battle militant Islamic extremists.

I guess what Clinton wants is a haven of peace and tranquility like the 160,000 US and NATO troops have established in Afghanistan. Nine years and countless operations later Afghanistan's rabid population has been unconditionally tamed and civilized by disciplined uniformed forces from faraway lands.

One only needs to ignore the fact that Afghanistan's second largest city, Kandahar, is effectively under Taliban control. Or that two thirds of Afghanistan, including in the non-Pashtun dominated areas of the Northeast and the West, remain under the sway of the Taliban to various degrees.

But at least since the US installation of President Karzai and the Northern Alliance as Afghanistan's rulers the country has been flourishing economically? Commerce is flourishing, the communications infrastructure is almost first world and a large number of Afghan citizens have gained access to clean water, electricity and medical facilities. Foreign companies, including security contractors, are beating doors down to do business in Afghanistan. Yea, right.

Just as one can find winning stocks in a bear market, there are winners in Afghanistan too: opium farmers, drug dealers, pre-Taliban warlords and a new generation of 'nouveau riche' warlords. And, of course, the hordes of foreign consultants present to ensure the judicious use of foreign aid.

When the Afghan Taliban regime was overthrown in late 2001, UN reports confirmed Afghan opium production had been virtually wiped out from a peak of approximately 400 metric tons a few years earlier. In 2009, under the effective law enforcement regime of US Special Forces and their NATO / ISAF counterparts, Afghan opium production has soared to over 1,000 metric tons.

Who needs Gulf petrodollars to fund an insurgency, opium dollars are just as effective.

Karzai's regime is staffed with technocrats leading the country through an economic revolution. Take Karzai's brother, ISAF is unable to bring drug smuggling charges against him due to lack of evidence. Surely, the Afghan population respects the moral authority emanating from an 'innocent' First Family.

Then again, there is the governor of the newly liberated Helmand province, a convicted criminal. Governor Gulab Mengal was found guilty by a German court of attempted murder prior to his 'rehabilitation' as an Afghan leader. Undoubtedly, Mengal's experience with the German justice system provides a solid foundation to dispense justice in Afghanistan. (Mengal stabbed his eighteen year old stepson while in Germany on asylum.)

Helmand, one may recall, is the province which ISAF liberates each summer from the Taliban through a well publicized media offensive. Somehow, each winter the province reverts back to the Taliban until the latest grandly named NATO offensive heroically liberates the people again. Each summer, NATO improves Helmand's physical infrastructure to help erect fresh targets for its precision bombers for the next summer.

However, since Obama's speech in Cairo and Clinton's engagement with Pakistani students in Lahore, everyone knows ISAF forces are not present in Afghanistan to bomb wedding celebrations, truck convoys or just simply villages.

US Admiral Mullen winning hearts and minds in Afghanistan

If a nation wants to join the ranks of the civilized, it must emulate global best practices. And where better for Pakistan to look for such practices than just across the border at nine years of American successes in Afghanistan? Jack Welch would surely agree with me.

Simple logic dictates that if Pakistan cannot manage its tribal areas with the same efficiency as the ISAF forces demonstrate in Afghanistan then Pakistan should be prepared to be bombed back to the Stone Age! As for border crossings, let's make the Pak-Afghan border as difficult to cross as the US - Mexican border; an estimated (minimum) two million illegal Mexicans crossing annually into the US demonstrates efficiency otherwise only seen in the use of capital by the US banking system.

Since Pakistan is the root of all evil perhaps the best solution is to outsource security for the tribal areas to the Americans. Through the Coalition Support Fund, the Americans pay (whenever they feel like it) for Pakistan's military operations in the tribal areas. Pakistan does not have to worry about paying for the cost of drone attacks - the missiles are a 'free gift,' a goodwill gesture to win the hearts and minds of Pashtuns.

American forces with their high tech gadgetry coupled with their cultural and linguistic sensitivities can tame Pakistan's tribal areas. What's the worst case scenario for Pakistan, an ethnically based Pashtun insurgency waged against the Islamabad establishment? But that won't happen for at least twenty years and by then the Americans will have forgotten Pakistan existed. Again.

Most of us are familiar with the effect of leaving something for too long in a pressure cooker - it explodes. If the US is trying to push Pakistan into joining 'the Dark Side' then Clinton and her people are doing a great job. Even in the best of times Pakistanis are an emotional people. In 2010, the Pakistani people are ready to explode.

Will it be on Clinton's conscience if General Kayani or his successors, and his band of merry warriors actively encourage 'expressions of discontent' among Islamic extremists in Western cities.

Pakistan Army Chief of Staff General Pervez Kayani walking with US General McChrystal

I wonder if the world will be a safer place if Pakistan allied itself with Iran, Syria or Chavez's Venezuela. The Pakistani establishment must be questioning whether US aid is worth the constant public humiliations and rebukes it receives every few weeks. The general population has been asking the same question for some years now.