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June 2011 Country Archive


Pakistan, Afghanistan…and all that!
The death of Richard Holbrooke in December last year marked the end of a long, honourable and highly distinguished diplomatic career. Apart from his unparalleled role in ending the Balkan wars, he was an expert on the critical problems that Pakistan and Afghanistan present to the rest of the world. He left some of his conclusions in the hands of his widow and friends, published recently by Nicholas Kristof of the NYT /IHT. They are of such relevance, that given the state of the drama in the region and its place in the world, we repeat some of them here.

He believed that the US was over-relying on the use of force and that it was no more winnable by those means than was Vietnam. Reconciliation was what he was working towards, because he never lost sight of the reality that the inevitable conclusion must come from around a negotiating table.

He made this important distinction: that because of its size and nuclear weaponry, Pakistan was centre stage and Afghanistan was a sideshow: “a stable Afghanistan is not essential; a stable Pakistan is essential.”

He realised that Pakistan sheltered the Afghan Taliban because it distrusted America, particularly after the US walked away in 1989 after the Soviet pull-out from Afghanistan. Can Americans begin to understand how that looked to the Pakistan army? The US first raised and armed the Taliban with the help of the Pakistani army on a rallying call to jihad, a cold war ploy to resist the Russian attempt at colonisation - and then having succeeded, went home, leaving these radicalised ‘holy warriors’ holding the arena – a challenge to Pakistan as well.

Now with the clamour in the US to punish Pakistan for their duplicity, his conclusions are massively relevant, before the Western allies compound their past errors by completely alienating nuclear armed Pakistan. Holbrooke’s aim for Afghanistan was not to ‘cut & run,’ but an honourable peace. He wanted a peace agreement that could last, including other neighbours such as Iran and India. That we believe is what should be the positive outcome and where energies should now be concentrated.

The death of bin Laden has transformed the situation regarding US and allied engagement in foreign wars. More than anything else could have done, his death has created a watershed. Now it is possible to confidently plan ISAF’s departure. Choices open up and options are available. It is our belief after covering the war since the very beginning, that the whole tenor of the campaign should now overwhelmingly be diplomatic, the running made by statesmen rather than generals.

The Afghan Taliban will not miss bin Laden so much as a friend, but certainly see their leverage in potential negotiations go down, because they can no longer offer to drop any relationship with him as a reward for American acceptance of the Taliban. Paradoxically, however, those most worried by the killing of Osama are America’s allies in Afghanistan, who fear that American disengagement cannot be delayed any longer. American public opinion which was increasingly wary of the war before Osama’s killing, will be even warier now - how long can the Obama administration lag behind public opinion? Plus, many believe that Washington was already looking for a way out and now has got it. The leverage of the Karzai administration vis-à-vis Washington is therefore greatly reduced. The Pakistani invitations to Karzai to get closer to China, which were deliberately leaked to the Pakistani press in April, were mainly meant to threaten the Americans and put pressure on them to accept the Pakistani peace plan. However, the very fact that Islamabad felt such an invitation could be plausible, highlights the spreading perception that Kabul and Washington are more and more on diverging paths. A full Report at AFGHANISTAN.

Pakistan: Caught red handed
Although Washington refrained from openly pointing out how the Pakistanis were clearly protecting bin Laden in the location where he was killed by an American raid, they hardly needed to elaborate on what was obvious. Nobody believed Pakistan’s denials and privately even top PAKISTAN officers admit that they were holding him under their protection, although with the qualification that they were ‘about to hand him over’, or were meaning to deliver him ‘at the right time’. However, if Washington believed that the Pakistanis would become more co-operative after bin Laden’s death, they seem to have been mistaken. If anything, the Pakistanis are more furious than ever. Even the raid against a base of the Pakistani Navy in Karachi, which seriously damaged the country’s strategic reconnaissance capability, is attributed by Army officers to an American conspiracy. The Pakistani government cannot simply change route, lest it faces a mutiny of the army. The fact that the Pakistanis even before the raid against bin Laden were trying to curtail CIA presence inside the country, is highly significant: the CIA was getting to know too much.

On 23 May a raid on the Afghan border appears to have narrowly missed Mullah Omar. Although there is no confirmation of who carried it out, it seems to have been a combined CIA-US army operation, probably relying on intelligence sources managed by the CIA via Blackwater in North Waziristan. The Americans therefore would seem to have decided to spend the intelligence capital accumulated so far, given that they have to quit anyway; perhaps there is also a political decision to confront the Pakistanis and operate without their authorisation. The Pakistanis have been calling several American bluffs, perhaps now it is Washington’s time to try the same. Full Report in this issue of PAKISTAN.

India-Pakistan Relations: bin Laden’s Death - its Implications
Pakistan’s casting as a rogue state is strengthened by the growing evidence of the involvement of its intelligence services in the 2008 terrorist attacks in Mumbai. Moreover, despite the evidence that Lashkar-e Taiba carried out the attacks, no measures have been taken to ban the group or to try its members allegedly involved in the attacks, despite the fact that they had already been detained. On the other hand the Pakistani army is embarrassed also by a completely different kind of revelation, concerning its demands of intensified American drone raids against undesirable elements. It has also been revealed that a group of US Special Operations Forces operates on Pakistani territory, exposing the hypocrisy of a Pakistani army that in public was bashing Pakistani politicians about allowing the Americans to carry out raids inside Pakistani territory.

While many parts of the world were relieved that the perpetrator of one of the most heinous acts of terror in history had met his fate, Pakistan's long time foe and immediate neighbor INDIA, could not help but sound major alarm bells and rightly so. The discovery of bin Laden in PAKISTAN has confirmed one of India's greatest fears: its neighbor was indeed guilty of harboring terrorists. Further evidence revealed that bin Laden was protected by body guards belonging to the Lashkar-e-Taiba, a terrorist organization which claimed responsibility for the Mumbai attacks in November 2008 and has frequently launched attacks on Indian soil previously. This revelation undoubtedly armed India with the political ammunition it needed to call Pakistan a state sponsor of terrorism. Given bin Laden's death and the fact that the Pakistani ISI and military were either protecting bin Laden or were completely clueless about his presence, both of which seem plausible reasons, the relationship between India and Pakistan can be expected to alter itself significantly. Not only is Pakistan's relationship with India at stake but it has a lot of explaining to do to the United States which used Pakistan as an ally in its war on terror, only to find that the man who waged jihad against innocent Americans on 9/11 was living in the home of its ally. In this entire scheme, India now wants the U.S. to attach tougher conditions to the aid it provides Pakistan and to minimize Pakistan's role in the future of Afghanistan, as the U.S. winds down its presence there. But more importantly, the fact that bin Laden was found living in a garrison town with his own bodyguards, demonstrates that Pakistan's internal security is in complete disarray, which could potentially have dangerous repercussions for India's security in the future.

In the aftermath of bin Laden's death, INDIA decided to draw world attention to its cause by handing over a list of 50-most wanted terrorists, to the Pakistani government hoping to pressurize Pakistan. However, it turned out that at least two people on the list that Delhi had alleged were fugitives from Indian law and being sheltered in Pakistan, were in fact, living in India; a fact that has caused the Indian government some major embarrassment. This list included some of the biggest names in terrorist circles. The head of the Lashkar-e-Taiba, Hafiz Saeed, features on the top of the list. Others include Major Iqbal, suspected of serving in the Pakistani Inter-Services Intelligence (ISI), an officer who also figures in the United States Federal Bureau of Investigation indictment in a Chicago court in connection with the 2008 Mumbai terror attack; Jaish-e-Mohammed chief Maulana Masood Azhar, the prime suspect in a 2001 attack on India's parliament; Illyas Kashmiri, a former Pakistani commando who is being mentioned now as a possible successor to Osama bin Laden; and chief of Hizbul Mujahideen, the largest militant organization in Kashmir, Syed Salahuddin. Full report for June at INDIA.

The Arab Spring
LIBYA: An awful fear of stalemate is looming in LIBYA showing no indications of breakthrough. The members of the anti-Qadafi international coalition which now includes all of the G8 countries, have been very clear that Col. Qadhafi has to go. Russia, which had so far criticized the NATO military intervention to bring down the Libyan regime, has changed its position. President Medvedev stated directly that Qadhafi had lost the legitimacy to govern Libya. The Libyan leader himself has offered no indication that he would be willing to step aside. However, in May there were have been a number of developments indicating that even the inner circle of advisors and ministers in the Libyan government have, if not publicly expressed, developed many reservations over Qadhafi’s ability to snatch a victory out of the current situation. Yet, both Qadhafi and NATO do not have time on their side. Libya’s development, its wealth has been entirely based on oil production. Forty years of Qadhafi leadership have done very little to alter this reality, despite the fact that the Libyan population has benefited from widespread education possibilities, that have increased literacy. Yet, most of the work, from the menial to the more sophisticated professions and the very management of technical aspects of the oil sector has been left to foreigners. Full Report at LIBYA: we offer some scenarios for a post-Qadhafi Libya – ‘The Jamahiriya has Exhausted all Political Capital.’

EGYPT now has a regular monthly report from us, as of this issue. Without a Pharoah, Egypt seems no longer to be a ‘US poodle’. We look at how its relations with IRAN have changed and also examine what is known about the upcoming election, the event which it is hoped will confirm this nation’s new determination to be democratic.
Full report at EGYPT.

SAUDI ARABIA this month examines the dire situation of next-door Yemen, an important client state of Saudi Arabia, where the tangled political problems are enmeshed in relationships between the institutions of government and the powerful tribes, where oil, the only substantial source of the nation’s wealth is predicted to run out by 2017, with no plan for the economy after that. Because of the civil wars going on in both the north and the south of the country, it is judged too unstable for exploration drilling to take place. Full report at SAUDI ARABIA.

IRAQ ‘Bye America
The killing of Bin Laden has barely left any mark whatsoever in Iraqi politics; even the local Al Qaida has barely made an effort to commemorate the dead leader with an intensification of violence. Eventually Prime Minister Maliki made public his decision not to ask to Washington to leave troops in the country, stating that he is keen on military ties with Washington but that politically it would not have been feasible to have the Americans stay. The Iraqi air force is acknowledged to be particularly in need of continued American support, but according to Maliki even any kind of direct support to the air force would have to be approved unanimously by the parliament, which does not seem very likely. In reality probably a majority of Members of the Iraqi Parliament would like to see the Americans stay longer in order to consolidate the gains in security, and to stabilise the polity. However, few of them dare say that in public: Full report for June at IRAQ.

Syria: What is really Going On?
SYRIA’s situation looking uglier and uglier. Here the problem is not just a family but also a tribe, the Alawites, who have dominated the country now for nearly forty years. It is not a matter of a family going into exile, most of the top military are Alawites, or their close allies. They also control the banks and much of the upper levels of the economy. Syria’s other minorities are Druses, Christians, Ismailis and others are allied with the Alawites whilst the large majority of the population are Sunni, politically organised by the Moslem Brotherhood, implacable enemies to the establishment in Damascus and feared by these minorities.

There are no foreign journalists in Syria, except for a few who have managed to find a way inside. This makes the information coming out of the country very foggy. The government has made many arrests, but the protests, while violent, have not reached a ‘critical mass,’ yet as was not the case in Tunisia or Egypt; president Bashir al-Asad’s regime has managed to resist the pressure, even if he has had to promise to agree to some of the protesters’ demands. What is clear is that while Damascus and Aleppo have remained relatively immune, given the scope of unreported but huge pro-government demonstrations elsewhere, the revolts while intense and violent, remain isolated from the core. Some signs in the main protest areas such as Dara’a or Hama are openly defying Asad, as the president is seen as either too weak or too incapable to enforce the political and economic reforms he has promised, including the more immediate ones of increasing salaries for low-income workers. In the capital Damascus, whilst the atmosphere remains eerily calm as life proceeds normally, on the surface, Syria is starting to feel the effects, particularly as far as the economy is concerned.

There is also the question of possible foreign intervention; perhaps the protesters believe that if they persist, they will generate enough sympathy to prompt a western intervention similar to the NATO reaction to the Libyan uprising. However, it is unclear what the protest movement intends to do, and while NATO intervention can be ruled out, there is no alternative government idea that is being proposed. Little is known about the true scope of the protests; the West and many Syrians themselves - some say the vast majority - may be more frightened by the alternatives than the status quo. Nevertheless, Syria will not be the same; there have been reports of mass graves and intense shooting, especially around villages near the border with Lebanon, where many Syrians have been escaping. Should the frequent but vague reports of mass graves be proven, this would raise the official death toll from the revolts that started last March to much more than the current UN estimate of 1,000. The full June report is at SYRIA.

Iran: If Syria goes
After having initially welcomed the Arab Spring as a result of seeing unfriendly Arab regimes being toppled one after the other, Teheran now sees developments in Syria with worry. The Syrian regime long praised by Teheran for its firmness, seems to struggle with maintaining order in the country; Assad’s hesitation and initial flirting with the idea of reform must also not have pleased the Iranians. Teheran fears that even if the Syrian regime was to survive, it would have to rebalance its foreign policy in order to please its Sunni majority and therefore curtail relations with Teheran. Also the initial feeling that the Iranian regime had all to gain from the change of regime in several Arab countries appears no longer to be so certain; IRAN’s relations with Hamas, long the mainstay of its Arab foreign policy, are in doubt now because Hamas fears losing Syrian support and is warming up to the new Egyptian regime; Iran might not even be able to connect to Hamas anymore, if SYRIA goes, or for that matter to Hizbollah in Lebanon. Full report at IRAN.

Palestine: Netanyahu meets Obama
President Obama really impressed in his speech on Israel prior to the arrival in the US of the Likud prime minister, Benjamin Netanyahu. Although the media (and Netanyahu) reacted at the obvious idea that Israel’s boundaries should revert to those of 1967, there is nothing new about this. One of the things that both Israel and the Palestinians managed to agree in the aborted negotiations of a few months ago, was that this was a starting position and clearly the boundaries were expected to be bargained for in the negotiations. By the same token Israel made it clear that they would not accept returning arabs or their descendants, who were evicted from their homes in Israel some sixty years ago, and a list of other things including the status of the illegal settlements (now housing half a million Israelis, according to Netanyahu). These were all subjects which would be dealt with by negotiation.

The Israeli leaders who first initiated these settlements on someone else’s land must have known well that one day the bill would come in –and that day has come. The idea that the UN might recognise Palestine as a nation state, may or may not ‘have legs’, but in practical terms it becomes unworkable given these practical realities on the ground, just as the many illegal Israeli settlements would be hard put to it to cope, unless there is political agreement and reconciliation.

What seems to us important is that the ‘Quartet’ – the great powers who
want this situation resolved, are agreed that it is time to settle this long outstanding and potentially explosive matter. It has come close to the point where if Israel refuses to negotiate and see the process through, remaining a single state, they will inevitably be labelled an ‘apartheid’ regime, which objectively would be true, where a privileged minority holds total sway over the second-class majority - and most Israelis, and their supporters world-wide, would not want that. It is worth remembering that the state of Israel within its own borders is a clear cut democracy. It is listed 31st (out of 150) in World Audit’s current democracy tables whose criteria are human rights, political rights, freedom of the Press and the degree of public corruption. It has a parliamentary democracy and were it not for its treatment of the stateless Arabs outside its national frontiers, but effectively under its control, it would be quite admirable in many ways. The Israeli opposition is currently out of power but the problem at election time comes not with a pendulum effect between government and opposition, which is only the beginning. Neither of the main parties can obtain a parliamentary majority without a coalition with one or another of the tiny religious parties, who tend to be on the right of the right, with policies that rely on their biblical interpretations. Netanyahu’s Likud, mainstay of the ruling coalition, is a hardline ‘rightist’ party but does not have a majority in its own right, which fact alone demonstrates that there are many Israelis whose opinion of Netanyahu is no greater than his many western critics.

Israel is the super-power of the middle east (much of the challenge from IRAN is because of that), yet Netanyahu extensively plays the defence card. Yet not only does he have the best air force in the middle east in every sense, but also a substantial nuclear armoury which surely guarantees there will not be an invasion from any conceivable enemy. Militarily Israel has nothing to fear from conventional forces. After Gulf War One, not to have control of the air, exposing ground forces out in the open to be destroyed by devastating air attack, has been shown to be a sure way to lose. Besides any such conventional attack would have to cross a neighbour state of Israel, Syria is demonised for that role, but leaving aside the logistics, any such action would suck in the US who are bound to defend Israel in such circumstances. What Israel must and should worry about is low intensity operations, as they experienced, when they last invaded Lebanon in pursuit of Hezbollah. Once it got away from mechanised warfare, down to urban fighting, street by street, individual Israeli infantrymen -v- individual partisans, all with hand-held weapons, the price of victory in casualties became unacceptable to a democracy.

Whilst in the US Netanyahu got to address both houses of Congress. Why? Has he or his nation done something heroic recently? As a statesman he is unimpressive although an able orator. It seems to be that this reflects the power of the Israeli lobby on individual Senators and Representatives, a lobby which far surpasses any other in any legislature of the democratic world. Surely the appropriate time for us all to salute this nation would be on the far side of the negotiations which have not yet started, acknowledging the price they have been prepared to pay for a lasting peace. As of now that’s zilch! Despite the plaudits of the Congress in WDC, on his return home there was some dismay in the Israeli media that for all his grandstanding, he had brought nothing back – it had not advanced the cause of peaceful negotiations with the Palestinians in any way.

TURKEY is an extraordinary country, a key to the Middle East – and much else besides. It is a member of NATO; but in no way a stooge of the US. For instance, in 2003 its parliament refused to allow the US -led coalition troops to use Turkey as a base for the invasion of Iraq, a matter of no small moment at the time.

The politics of the Middle East might appear to be simple – Israel against the rest. Actually Turkey, which is only 5% in Europe and 95% in the Middle East, is in many ways the arbiter of the region.

It is not automatically anti-Israeli, far from it; but it is now very much anti-the present Israeli government. That is to say it is very anti-Netanyahu and his policy of expanding Israeli settlements in the West Bank and diminishing the Palestinians.

It has been consequently the target of intense diplomatic activity of late. The mullahs in Iran may be Shia, while the AKP (Adalet ve Kalkinma Partisi) Justice and Development Party, the ‘soft’Islamicist party in power in Turkey, is Sunni. But they are both after all, Muslims (a fact that would be readily acknowledged by the Iranians, even if not so easily by the Turks). Tehran is vigorously courting Ankara. The original hands-off policy vis-a-vis the US-Iraq conflict is paying off handsomely for the Turks here. Full report at TURKEY.

Russia: big changes forecast
Currently Russia is looking rather less than neutral as an investment destination partly because of political uncertainty over the Presidential elections – Putin or Medvedev for president - and neither of them are saying if they will be standing. Also a mega international deal has gone wrong when the wheels came off the intended BP- Rosneft partnership, planned to drill new oilfields in the Artic. We describe the process of what went wrong and consider to what extent government interference stopped the deal and if so was it the president or the prime minister that torpedoed the deal.

As to our previous RUSSIA report where we questioned how the Russian legal system, twenty years after the collapse of communism is still not trusted in international business, we didn’t mention criminal law because it is a commonplace that RUSSIA does not have an honest or trustworthy system of justice. At the end of May as if to confirm that, the world was treated to the spectacle of Mikhail Khordokovsky’s appeal on having completed his first sentence, being charged and convicted with the ludicrous allegation that he and his colleague Platon Lebedev stole ALL of the product of Yukos, Russia’s (then theirs) biggest oil company between 1998 and 2003. The appeal was of course dismissed, so on top of their oil company being grabbed by the State-owned Rosneft, and their eight years jail time served, they have to go back to jail for a further three years.

PM Putin’s last report to the Duma before the upcoming elections, paints a fascinating picture of change. Putin said that Russia has survived the oil crisis and has benefited enormously by the increase in revenues (up 28% this year) following the increase in world prices. Few would deny however that this is an overdependency on oil as distinct from a raft of economic progress, which leaves Russia in a position of vulnerability in the event of a big drop in the world price, which is obviously unpredictable. He went on to say that on the basis of their GDP, Russia should expect to be amongst the big five leading economies next year.

He turned to another vulnerability of his country, the largest territorially in the world, which is demographic. The population has shrunk from 148 million in 1991 to a low of 142 million now. He plans that the birth rate should rise by 25 to 30% by 2015.

What he did NOT say was whether he would be standing in the presidential election against or with the agreement of his former right hand man, the sitting president Medvedev. Full Report at RUSSIA

In UKRAINE, President Viktor Yanukovych is in a predicament, walking a tightrope between Russia and the West. He is a Russian Ukrainian, who speaks fluent Russian and gets on well with Russia's top man Putin. But the Ukrainians have always felt the allure of the West. He knows how vital it is for Ukraine to be on good terms with Russia, which provides it with most of its energy and raw materials. He thinks that the signed treaty on extension of deployment of Russia's Black Sea fleet in Crimea, Ukraine, until 2042 has made it possible to preserve the Ukrainian economy. Russia has begun paying some $4 billion a year for this. Yet, can Yanukovych bridge the gap between East and West? He made it clear Ukraine will not seek NATO membership. He wants pragmatic and productive relations with the USA and UKRAINE will continue moving toward EU membership. With ditching ideas of NATO and seeking to improve ties to Russia and EU, whether or not Yanukovich can indeed balance between the West and Russia is tough to predict. However, Yanukovich's intent to pursue this balance is likely to be a genuine aspiration.

So Gordon Gekko was Right!
Hundreds of Billions in losses –and no wrongdoing!
In April the New York Times and IHT published an article of particular interest to those millions upon millions of citizens of countries severely damaged by the depredations of Wall St, its banks and financial institutions, not least the citizens of the USA itself.

The article posed a question that has been exercising many, particularly those who still believed in ‘justice being blind’ in great democracies, of which the USA prides itself on being a leader - where justice is concerned that certainly being a questionable proposition now!

How is it, the question goes, that the greatest financial crisis almost in living memory has been analysed and explained, but three years after the situation became clear, the collapse has apparently been accompanied by no prosecutions for wrongdoing by anyone senior in authority in the banks, the mortgage specialists, the regulators, the auditors, the credit agencies, the federal and New York State institutions whose job it was to investigate and bring to a reckoning wrongdoers, without so-called ‘fear or favour’?

By contrast, in the late eighties Savings and Loans scandal, special government task forces referred 1100 cases to prosecutors and more than 800 bank officials went to jail, compared to none in the recent crisis. But the FBI we now learn, were this time pulled off investigations within a week of their commencement! It was observed in the NYT article by an academic observer of the scene, that simply “there have been no effective punishments of the elites here.”

None of the subsequent investigations by others that we read about have resulted in a criminal prosecution – and after this passage of time can there be any expectations that it will happen now? We saw the way the stricken Wall St institutions treated those of their own who were expendable, chairmen usually, sometimes chief executives, more than ready for retirement and given a munificent ‘golden farewell.’ We observed in the administration, the apparent inter-changeability of high treasury appointees and high bank officers – all it seems out of the same financial tribe. The giants among the auditor partnerships are still signing off the accounts of the world’s biggest corporations, despite what they endorsed during all the years leading up to the banking collapse.

That seems more than a little odd and reinforces the suspicion that auditors at that level are, in return for excessive fees, fulfilling one of the key criteria of dealmaking for their clients, by using their familiar name to state that a particular set of figures on a certain date were just what they signed off on. Whether that was true or false, the signatures are good enough.

The ‘Big Three’ Credit rating Agencies still give their highly priced ‘opinions,’ as they now insist is actually the service they provide - and these were the boys whose opinions were that the vast bundles of duff mortgages and other rubbish loans stacked high, rated the same AAA ratings awarded to the worlds leading nation states and top performing corporations. Surely more than a little strange, especially since their fee income appreciated magnificently during the period.

The NYT whose article is headed “Hundreds of billions in losses but no one has gone on trial,” suggests that the reason for the lack of vigour in prosecuting wrong-doing, was the fear the Financial Secretary in the dying days of the George W Bush administration, expressed to the then New York State Attorney General in the context of criminal prosecutions, showing his concern about ‘the fragility of the financial system’, and his desire to ‘calm markets.’

So ‘the market’ as we long suspected is ‘king’. Not justice! Will they start to teach this to American children? Not the rule of law, but the rule of the market. Will new immigrants to the USA having their lessons in civics, be instructed in this revealed truth?

It could not have happened were the Congress not complicit. We can comment on it – they can demand explanations – but do they?

When Barack Obama came into office he was confronted with an impenetrable ‘insiders wall’ in which no advisors were telling him to ‘take on’ Wall St. In fact he was unable to appoint his own preferred first choice of newly minted, perhaps more combative officers, as the then Senate would not have confirmed his choice, which would have resulted in deadlock at the time of an advanced degree of world financial chaos.

Murder in most human societies, is rightly regarded as the most heinous of crimes, but judging a moderated version where death was due not to intent, but to recklessness, is called manslaughter. It is considered a lesser crime - but punishable nonetheless! The events of the financial collapse stemming from the mortgage market, can fairly be laid at the door of excessive greed on a monumental scale. But, given the widespread damage done, this allied with criminal recklessness to an amazing degree, surely cries out for a reckoning?

Or are they simply beyond human justice? Is it as Michael Douglas’s Gordon Gecko so memorably said in the movie “Wall St,” that he and his kind were not as other men, but were indeed the ‘Masters of the Universe?’

Taiwan: Elections approaching
By any conventional economic yardstick, Taiwan has emerged from the recent financial crisis in very good health. Despite the economic contraction in Japan, a major export destination for Taiwan, exports were again at a record high in April. Outbound shipments were up by 24.6 percent in April, traditionally a slack month, compared to the previous year. Export orders, a signal of likely performance over the next three months, are at a new record high and domestic consumption is regaining momentum.

But while the government is upbeat, as it should be with an election looming, many are pointing out that recent disasters in Japan and elsewhere, as well as rising commodity prices add an element of uncertainty to forward projections.

Other numbers are looking quite rosy also. With new elections looming, including both legislative and presidential polls, now to be combined on the same day; the strong economic recovery should allow the KMT to romp home to victory. In fact, despite the positive news, with both major parties now declaring their presidential candidates, the outcome is by no means certain as we explain. Full June report at TAIWAN.

Philippines wrestles with Corruption
Perhaps the greatest damage done to Filipino society in recent times was the destruction of ‘delicadenza’ as a defining attribute during the administration of Gloria Macapagal-Arroyo. Under her watch, government was characterised by unethical, dishonest and abusive behaviour. The catch-cry of the day appeared to be along the lines of ‘those that are not with us are against us’. Corruption ran rife and ethical standards were trampled underfoot, even by those who in normal circumstances would regard themselves as upright and ‘honourable’ citizens.

In a nation that had become inured to corruption among government officials, Arroyo and those surrounding her were so contemptuous of public opinion in their grab for power and riches that in the 2010 election, the backlash from civil society was overwhelming.

Yet while President Aquino has an unqualified mandate to root out corruption and restore morality to government, his task is not proving to be an easy one. He has inherited both individuals lacking in delicadenza, as well as institutions from which morality has been stripped away….Full report at PHILIPPINES

The Balkans
BOSNIA has been in disarray since elections in October ended in deadlock, leaving it with no central government. The situation has been exacerbated by the actions of the Bosnian Serb leader, Milorad Dodik, who proposed a referendum on whether to reject Bosnia's state war crimes court and special prosecutor's office, established in 2005 by international decree. A political crisis loomed as it was feared that this could spark the break-up of the state. The crisis was averted at the last minute. Dodik called off the referendum after a meeting on May 12 with EU foreign-affairs chief Catherine Ashton in Banja Luka, the capital of Republika Srpska.

Dodik has managed to pursue a secessionist agenda partly because tensions between Bosniaks and Croats haven given him free rein to consolidate power within Republika Srpska without having to accommodate the country's other ethnic groups. The President employs tactics and advisers drawn from the rule of his predecessor, convicted war criminal Radovan Karadzic, by yoking all politics to ethnic identity, thus undermining the healthy functioning of the state at every turn. It helps Dodik that the Muslim Croat half of the country is also intensely dysfunctional. Relations between Bosnian Croats and Muslims in their shared Federation of Bosnia and Herzegovina are tense. June full report at BOSNIA.

In CROATIA, several key issues have dominated the political landscape in recent months. Most important is the country’s bid to join the European Union, which remains imperilled by suggestions that the nation’s judicial system needs further reforms, and that corruption is still endemic in the Balkan state. The continuing prosecution of members of the Croatian military for war crimes in the International Criminal Tribunal for the former Yugoslavia, also a pre-requisite of EU accession, has proved a source of popular discontent. The work of the UN Tribunal has provoked widespread protests across the country, where Croatian self-determination is seen as a point of pride and its assertion, a matter of national interest. Croatia’s desire for EU accession is motivated by hopes of improving its economic prospects. High unemployment (nearly 20%) and feeble growth are two of the scourges of the country’s economy.

Despite the utmost effort by the Croatian leadership, it looks like the ride to Europe may still be bumpy. It now seems highly unlikely that the accession talks will be completed in June, which was the original deadline proposed by the government. The latest progress report approved by the European Commission has suggested that in terms of judicial reform, the country's efforts have been insufficient.

Central Asia
In KYRGYZSTAN, the failure of the government to lead the country towards democracy, improve conditions for investors and work on relations with its neighbour Uzbekistan, is pushing the Central Asian state further into Russia's hands, making it likely that the US military airbase at Manas, outside the capital Bishkek – which is crucial for operations in AFGHANISTAN will close in 2014 as planned.

In April 2010 former Kyrgyz President Kurmanbek Bakiev was toppled. Ethnic clashes between Uzbeks and Kyrgyz in the south of the country killed hundreds. Since then, the opposition that took power under interim President Roza Otunbaeva has established the region's first parliamentary democracy and weakened the president's power. However, the government is paralysed by infighting and corruption, and is not doing enough to calm ethnic tensions or prevent the cash-strapped country from falling into economic collapse.

Since the June violence subsided, the new government has done almost nothing to deal with its causes, and most of those tried and sentenced in connection to the bloodshed have been Uzbeks. UZBEKISTAN has closed its shared border with KYRGYZSTAN, cutting off the region where the violence occurred and increasing the risk of further clashes between ethnic groups. Uzbek officials say that they've closed the border as they do not have any faith in Kyrgyzstan's interim government and they want to protect their security.

Kyrgyzstan's main problem is its collapsing economy. Last February, the International Monetary Fund offered hope, saying that Kyrgyzstan's GDP could rise by up to 5 percent this year. But the impoverished state produces little besides gold, and economists say the country still faces possible economic catastrophe.

TAJIKISTAN has been hit by a tough rail transit rate hike imposed by neighbouring UZBEKISTAN, and a potentially devastating increase in energy export tariffs levied by RUSSIA. The Russian tariff increase, effective from April, caused the price of petrol to rise six per cent and inflation to hit 30 per cent. TAJIKISTAN had enjoyed tariff-free energy exports from RUSSIA for 15 years until Moscow implemented tariffs in the middle of last year. TAJIKISTAN imports 90 per cent of its oil-based fuels from RUSSIA and the April tariff increase is hammering the country's struggling agricultural sector – driving up costs for farmers during spring planting season, which will result in an increase in the price of food at harvest time. To make matters worse, on March 20, UZBEKISTAN increased rail tariffs by 74 per cent for goods travelling to TAJIKISTAN, in an effort to disrupt construction of the giant Rogun hydropower plant in TAJIKISTAN. Uzbek officials have long complained that the Rogun Dam will divert water away from Uzbekistan's fields, harming its crucial cotton growing sector. Together, these price rises look set to plunge TAJIKISTAN into a financial crisis that will hit ordinary people the hardest. Around half of the population already live below the official poverty line and the World Bank has warned that “food and fuel price increases could increase the extreme poverty rate by 8.4 percentage points, as an additional 586,000 people fall below the extreme poverty line (those who live on less than $2.50 per day).”

In KAZAKHSTAN, President Nursultan Nazarbayev, who has been in power since 1989, called snap elections two months ago after scrapping a referendum to extend his term until 2020. Presidential elections were originally scheduled for 2012. He was seeking a new five-year term and called for stability in the Central Asian country after the Middle East was gripped by turmoil that ousted the leaders of Tunisia and Egypt. He cannily forestalled it by calling the election in April, in which he has won a crushing electoral victory against no opponent. The country's Central Election Commission said he had won 95.5% of votes, based on partial results. It was of course rigged.

The election has ushered in uncertainty over his succession in the second biggest former Soviet energy producer after Russia. He is 70 years of age, so that the question of succession inevitably arises. Nazarbayev’s continued dominance, while keeping economic growth steady, increases risks for investors because it may complicate an orderly transfer of power.

In UZBEKISTAN, various developments make the government a touchy subject for the West. Its human rights record is appalling and it has no vital mineral resources, unlike KAZAKHSTAN, next door, which does, and whose president became the president of the OSCE last year, despite vile human rights abuses.

UZBEKISTAN did have a useful base or two in its southernmost regions, the use of which the US was allowed in its struggle against Al-Qaida and the Taleban. UZBEKISTAN is perhaps a more reliable partner in this context than PAKISTAN, because its ruling elite has no truck whatsoever with Islamic extremists. Tashkent is deemed a surer bet for cooperation with operations in AFGHANISTAN. As long as the Afghan war continues, UZBEKISTAN is safe from undue censure by the US and the UK for the duration.

The Uzbeks are exploiting the new coolness in relations between the Americans and the Pakistanis, which predates the assassination of bin Laden, by overtures to Karachi. Prime Minister Gilani visited UZBEKISTAN at the invitation of President Karimov.

The visit was aimed at further strengthening of ties and exploring new avenues of cooperation. In addition, Gilani said PAKISTAN aims to reach out to the strategically located Central Asian Republics and enhance bilateral ties in all spheres. During the meetings, Gilani discussed ways to boost trade volumes and to move towards finalising a trilateral transit trade agreement between PAKISTAN, AFGHANISTAN and UZBEKISTAN that can not only ease transportation of goods, but also help bring the people closer.

Chinese Foreign Minister Yang Jiechi recently welcomed Karimov to Beijing. During the talks, both sides exchanged views on international and regional issues of common concern and reached common ground on some important issues. They are both implacable foes of Islamic fanaticism.

Yang said that during Karimov’s visit, both sides made plans and arrangements for further development of the CHINA-UZBEKISTAN ‘friendly and co-operative partnership, which laid a good foundation for the strengthening of bilateral relations’. In turn, Karimov said, UZBEKISTAN attaches great importance to its relations with CHINA and considers CHINA as a reliable cooperation partner. CHINA and UZBEKISTAN will continue to deepen cooperation in matters of economics and trade, according to a joint statement signed by Chinese President Hu Jintao and his Uzbek counterpart Karimov in Beijing.


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Clive Lindley


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