Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Jul 31, 2010

Tharman: Singapore is already an “activist” state

"Tharman Shanmugaratnam"Image via Wikipedia
Temasek Review

July 31, 2010

Speaking at the annual dinner organised by the Economic Society of Singapore yesterday, PAP Finance Minister Tharman Shanmugaratnam warned that “layoffs will continue in developed economies for at least another five to eight years or possibly longer.”

He also added that income disparity will continue and Singapore needs to provide incentives for ”foreign talents” to come to Singapore in reference to the PAP’s unpopular pro-foreigner and ultra-liberal immigration policies.

According to a recent Wall Street Journal, the relentless influx of foreigners into Singapore has depressed the wages of ordinary Singaporeans, increased the cost of living and led to an overall decline in the standard of living.

While Singapore economy has grown by an average 5 percent for the last ten years, the median wages of the average Singapore worker has remained stagnant at $2,400 monthly.

The income gap between the rich and the poor has also widen considerably and is the highest among developed countries after Hong Kong.

Mr Shanmugaratnam noted that “governments need to question existing policies, re-mould entire social contracts and prepare the ground for a new era of growth” and in order to achieve this, governments needs to be an “activist” state like Singapore.

“An activist state which intervenes with spirit, to promote social mobility especially among the poor. That promotes opportunities for its people, that frees up competition and that is able to sustain optimism in the future,” he was quoted as saying in Channel News Asia.

By Mr Shanmugaratnam’s definition, an “activist” state is one which is completely controlled and dominated by one single political party, broaches no dissent and is active in fixing the opposition as and when it sees fit.
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Feb 23, 2010

Gaza: Treading on Shards

Map of Gaza Strip, Stand December 2008 (SVG ve...Image via Wikipedia

By Sara Roy

February 17, 2010

Under Siege
  • Autobiography & Memoir

    Charles Glass: A poignant memoir about life in the occupied territories during the second intifada.

  • Middle East

    Joel Beinin: The longest continuous nonviolent mobilization in Palestinian history is uniting villagers from all political factions, along with Israeli and international activists, against the encroachments of Israel's separation barrier.

On January 21, fifty-four House Democrats signed a letter to President Obama asking him to dramatically ease, if not end, the siege of Gaza. They wrote:

The people of Gaza have suffered enormously since the blockade imposed by Israel and Egypt following Hamas's coup, and particularly following Operation Cast Lead.... The unabated suffering of Gazan civilians highlights the urgency of reaching a resolution to the Israeli-Palestinian conflict, and we ask you to press for immediate relief for the citizens of Gaza as an urgent component of your broader Middle East peace efforts.... Despite ad hoc easing of the blockade, there has been no significant improvement in the quantity and scope of goods allowed into Gaza.... The crisis has devastated livelihoods, entrenched a poverty rate of over 70%, increased dependence on erratic international aid, allowed the deterioration of public infrastructure, and led to the marked decline of the accessibility of essential services.

This letter is remarkable not only because it directly challenges the policy of the Israel lobby--a challenge no doubt borne of the extreme crisis confronting Palestinians, in which the United States has played an extremely damaging role--but also because it links Israeli security to Palestinian well-being. The letter concludes, "The people of Gaza, along with all the peoples of the region, must see that the United States is dedicated to addressing the legitimate security needs of the State of Israel and to ensuring that the legitimate needs of the Palestinian population are met."

I was last in Gaza in August, my first trip since Israel's war on the territory one year ago. I was overwhelmed by what I saw in a place I have known intimately for nearly a quarter of a century: a land ripped apart and scarred, the lives of its people blighted. Gaza is decaying under the weight of continued devastation, unable to function normally. The resulting void is filled with vacancy and despair that subdues even those acts of resilience and optimism that still find some expression. What struck me most was the innocence of these people, over half of them children, and the indecency and criminality of their continued punishment.

The decline and disablement of Gaza's economy and society have been deliberate, the result of state policy--consciously planned, implemented and enforced. Although Israel bears the greatest responsibility, the United States and the European Union, among others, are also culpable, as is the Palestinian Authority (PA) in the West Bank. All are complicit in the ruination of this gentle place. And just as Gaza's demise has been consciously orchestrated, so have the obstacles preventing its recovery.

Gaza has a long history of subjection that assumed new dimensions after Hamas's January 2006 electoral victory. Immediately after those elections, Israel and certain donor countries suspended contacts with the PA, which was soon followed by the suspension of direct aid and the subsequent imposition of an international financial boycott of the PA. By this time Israel had already been withholding monthly tax revenues and custom duties collected on behalf of the Authority, had effectively ended Gazan employment inside Israel and had drastically reduced Gaza's external trade.

With escalating Palestinian-Israeli violence, which led to the killing of two Israeli soldiers and the kidnapping of Cpl. Gilad Shalit in June 2006, Israel sealed Gaza's borders, allowing for the entry of humanitarian goods only, which marked the beginning of the siege, now in its fourth year. Shalit's abduction precipitated a massive Israeli military assault against Gaza at the end of June, known as Operation Summer Rains, which initially targeted Gaza's infrastructure and later focused on destabilizing the Hamas-led government through intensified strikes on PA ministries and further reductions in fuel, electricity, water delivery and sewage treatment. This near daily ground operation did not end until October 2006.

In June 2007, after Hamas's seizure of power in the Strip (which followed months of internecine violence and an attempted coup by Fatah against Hamas) and the dissolution of the national unity government, the PA effectively split in two: a de facto Hamas-led government--rejected by Israel and the West--was formed in Gaza, and the officially recognized government headed by President Mahmoud Abbas was established in the West Bank. The boycott was lifted against the West Bank PA but was intensified against Gaza.

Adding to Gaza's misery was the decision by the Israeli security cabinet on September 19, 2007, to declare the Strip an "enemy entity" controlled by a "terrorist organization." After this decision Israel imposed further sanctions that include an almost complete ban on trade and no freedom of movement for the majority of Gazans, including the labor force. In the fall of 2008 a ban on fuel imports into Gaza was imposed. These policies have contributed to transforming Gazans from a people with political and national rights into a humanitarian problem--paupers and charity cases who are now the responsibility of the international community.

Not only have key international donors, most critically the United States and European Union, participated in the sanctions regime against Gaza, they have privileged the West Bank in their programmatic work. Donor strategies now support and strengthen the fragmentation and isolation of the West Bank and Gaza Strip--an Israeli policy goal of the Oslo process--and divide Palestinians into two distinct entities, offering largesse to one side while criminalizing and depriving the other. This behavior among key donor countries reflects a critical shift in their approach to the Palestinian-Israeli conflict from one that opposes Israeli occupation to one that, in effect, recognizes it. This can be seen in their largely unchallenged acceptance of Israel's settlement policy and the deepening separation of the West Bank and Gaza and isolation of the latter. This shift in donor thinking can also be seen in their unwillingness to confront Israel's de facto annexation of Palestinian lands and Israel's reshaping of the conflict to center on Gaza alone, which is now identified solely with Hamas and therefore as alien.

Hence, within the annexation (West Bank)/alien (Gaza Strip) paradigm, any resistance by Palestinians, be they in the West Bank or Gaza, to Israel's repressive occupation, including attempts at meaningful economic empowerment, are now considered by Israel and certain donors to be illegitimate and unlawful. This is the context in which the sanctions regime against Gaza has been justified, a regime that has not mitigated since the end of the war. Normal trade (upon which Gaza's tiny economy is desperately dependent) continues to be prohibited; traditional imports and exports have almost disappeared from Gaza. In fact, with certain limited exceptions, no construction materials or raw materials have been allowed to enter the Strip since June 14, 2007. Indeed, according to Amnesty International, only forty-one truckloads of construction materials were allowed to enter Gaza between the end of the Israeli offensive in mid-January 2009 and December 2009, although Gaza's industrial sector presently requires 55,000 truckloads of raw materials for needed reconstruction. Furthermore, in the year since they were banned, imports of diesel and petrol from Israel into Gaza for private or commercial use were allowed in small amounts only four times (although the United Nations Relief and Works Agency, UNRWA, periodically receives diesel and petrol supplies). By this past August, 90 percent of Gaza's total population was subject to scheduled electricity cuts of four to eight hours per day, while the remaining 10 percent had no access to any electricity, a reality that has remained largely unchanged.

Gaza's protracted blockade has resulted in the near total collapse of the private sector. At least 95 percent of Gaza's industrial establishments (3,750 enterprises) were either forced to close or were destroyed over the past four years, resulting in a loss of between 100,000 and 120,000 jobs. The remaining 5 percent operate at 20-50 percent of their capacity. The vast restrictions on trade have also contributed to the continued erosion of Gaza's agricultural sector, which was exacerbated by the destruction of 5,000 acres of agricultural land and 305 agricultural wells during the war. These losses also include the destruction of 140,965 olive trees, 136,217 citrus trees, 22,745 fruit trees, 10,365 date trees and 8,822 other trees.

Lands previously irrigated are now dry, while effluent from sewage seeps into the groundwater and the sea, making much of the land unusable. Many attempts by Gazan farmers to replant over the past year have failed because of the depletion and contamination of the water and the high level of nitrates in the soil. Gaza's agricultural sector has been further undermined by the buffer zone imposed by Israel on Gaza's northern and eastern perimeters (and by Egypt on Gaza's southern border), which contains some of the Strip's most fertile land. The zone is officially 300 meters wide and 55 kilometers long, but according to the UN, farmers entering within 1,000 meters of the border have sometimes been fired upon by the IDF. Approximately 30-40 percent of Gaza's total agricultural land is contained in the buffer zone. This has effectively forced the collapse of Gaza's agricultural sector.

These profound distortions in Gaza's economy and society will--even under the best of conditions--take decades to reverse. The economy is now largely dependent on public-sector employment, relief aid and smuggling, illustrating the growing informalization of the economy. Even before the war, the World Bank had already observed a redistribution of wealth from the formal private sector toward black market operators.

There are many illustrations, but one that is particularly startling concerns changes in the banking sector. A few days after Gaza was declared an enemy entity, Israel's banks announced their intention to end all direct transactions with Gaza-based banks and deal only with their parent institutions in Ramallah, in the West Bank. Accordingly, the Ramallah-based banks became responsible for currency transfers to their branches in the Gaza Strip. However, Israeli regulations prohibit the transfer of large amounts of currency without the approval of the Defense Ministry and other Israeli security forces. Consequently, over the past two years Gaza's banking sector has had serious problems in meeting the cash demands of its customers. This in turn has given rise to an informal banking sector, which is now controlled largely by people affiliated with the Hamas-led government, making Hamas Gaza's key financial middleman. Consequently, moneychangers, who can easily generate capital, are now arguably stronger than the formal banking system in Gaza, which cannot.

Another example of Gaza's growing economic informality is the tunnel economy, which emerged long ago in response to the siege, providing a vital lifeline for an imprisoned population. According to local economists, around two-thirds of economic activity in Gaza is presently devoted just to smuggling goods into (but not out of) Gaza. Even this lifeline may soon be diminished, as Egypt, apparently assisted by US government engineers, has begun building an impenetrable underground steel wall along its border with Gaza in an attempt to reduce smuggling and control the movement of people. At its completion the wall will be six to seven miles long and fifty-five feet deep.

The tunnels, which Israel tolerates in order to keep the siege intact, have also become an important source of income for the Hamas government and its affiliated enterprises, effectively weakening traditional and formal businesses and the rehabilitation of a viable business sector. In this way, the siege on Gaza has led to the slow but steady replacement of the formal business sector by a new, largely black-market sector that rejects registration, regulation or transparency and, tragically, has a vested interest in maintaining the status quo.

At least two new economic classes have emerged in Gaza, a phenomenon with precedents in the Oslo period: one has grown extremely wealthy from the black-market tunnel economy; the other consists of certain public-sector employees who are paid not to work (for the Hamas government) by the Palestinian Authority in the West Bank. Hence, not only have many Gazan workers been forced to stop producing by external pressures, there is now a category of people who are being rewarded for their lack of productivity--a stark illustration of Gaza's increasingly distorted reality. This in turn has led to economic disparities between the haves and have-nots that are enormous and visible, as seen in the almost perverse consumerism in restaurants and shops that are the domain of the wealthy.

Gaza's economy is largely devoid of productive activity in favor of a desperate kind of consumption among the poor and the rich, but it is the former who are unable to meet their needs. Billions in international aid pledges have yet to materialize, so the overwhelming majority of Gazans remain impoverished. The combination of a withering private sector and stagnating economy has led to high unemployment, which ranges from 31.6 percent in Gaza City to 44.1 percent in Khan Younis. According to the Palestinian Chamber of Commerce, the de facto unemployment rate is closer to 65 percent. At least 75 percent of Gaza's 1.5 million people now require humanitarian aid to meet their basic food needs, compared with around 30 percent ten years ago. The UN further reports that the number of Gazans living in abject poverty--meaning those who are totally unable to feed their families--has tripled to 300,000, or approximately 20 percent of the population.

Access to adequate amounts of food continues to be a critical problem, and appears to have grown more acute after the cessation of hostilities a year ago. Internal data from September 2009 through the beginning of January 2010, for example, reveal that Israel allows Gazans no more (and at times less) than 25 percent of needed food supplies, with levels having fallen as low as 16 percent. During the last two weeks of January, these levels declined even more. Between January 16 and January 29 an average of 24.5 trucks of food and supplies per day entered Gaza, or 171.5 trucks per week. Given that Gaza requires 400 trucks of food alone daily to sustain the population, Israel allowed in no more than 6 percent of needed food supplies during this two-week period. Because Gaza needs approximately 240,000 truckloads of food and supplies per year to "meet the needs of the population and the reconstruction effort," according to the Palestinian Federation of Industries, current levels are, in a word, obscene. According to the Food and Agriculture Organization and World Food Program, "The evidence shows that the population is being sustained at the most basic or minimum humanitarian standard." This has likely contributed to the prevalence of stunting (low height for age), an indicator of chronic malnutrition, which has been pronounced among Gaza's children younger than 5, increasing from 8.2 percent in 1996 to 13.2 percent in 2006.

Gaza's agony does not end there. According to Amnesty International, 90-95 percent of the water supplied by Gaza's aquifer is "unfit for drinking." The majority of Gaza's groundwater supplies are contaminated with nitrates well above the acceptable WHO standard--in some areas six times that standard--or too salinated to use. Gaza no longer has any source of regular clean water. According to one donor account, "Nowhere else in the world has such a large number of people been exposed to such high levels of nitrates for such a long period of time. There is no precedent, and no studies to help us understand what happens to people over the course of years of nitrate poisoning," which is especially threatening to children. According to Desmond Travers, a co-author of the Goldstone Report, "If these issues are not addressed, Gaza may not even be habitable by World Health Organization norms."

It is possible that high nitrate levels have contributed to some shocking changes in the infant mortality rate (IMR) among Palestinians in the Gaza Strip and West Bank. IMR, widely used as an indicator of population health, has stalled among Palestinians since the 1990s and now shows signs of increasing. This is because the leading causes of infant mortality have changed from infectious and diarrheal diseases to prematurity, low birth weight and congenital malformations. These trends are alarming (and rare in the region), because infant mortality rates have been declining in almost all developing countries, including Iraq.

The people of Gaza know they have been abandoned. Some told me the only time they felt hope was when they were being bombed, because at least then the world was paying attention. Gaza is now a place where poverty masquerades as livelihood and charity as business. Yet, despite attempts by Israel and the West to caricature Gaza as a terrorist haven, Gazans still resist. Perhaps what they resist most is surrender: not to Israel, not to Hamas, but to hate. So many people still speak of peace, of wanting to resolve the conflict and live a normal life. Yet, in Gaza today, this is not a reason for optimism but despair.

About Sara Roy

Sara Roy is a senior research scholar at Harvard's Center for Middle Eastern Studies. Her new book, Hamas and Social Islam in Palestine, is forthcoming from Princeton University Press
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Jan 21, 2010

Index of Economic Freedom

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For over a decade, The Wall Street Journal and
The Heritage Foundation, Washington's preeminent think tank, have tracked the march of economic freedom around the world with the influential Index of Economic Freedom.

What is economic freedom?

Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.

How do you measure economic freedom?

We measure ten components of economic freedom, assigning a grade in each using a scale from 0 to 100, where 100 represents the maximum freedom. The ten component scores are then averaged to give an overall economic freedom score for each country. The ten components of economic freedom are:

Business Freedom | Trade Freedom | Fiscal Freedom | Government Spending | Monetary Freedom | Investment Freedom | Financial Freedom | Property rights | Freedom from Corruption | Labor Freedom

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The Index also has our traditional country pages, so that each freedom in every economy is explained in detail. Every country page includes new charts highlighting the strengths and weaknesses of each economy.

Obama blames Massachusetts Senate loss on middle-class economic pain

Democratic Party logoImage via Wikipedia

By Michael D. Shear
Washington Post Staff Writer
Thursday, January 21, 2010; A01

President Obama on Wednesday blamed the Democrats' stunning loss of their filibuster-proof majority in the Senate on his administration's failure to give voice to the economic frustrations of the middle class, a disconnect that White House aides vowed to quickly address as they continue to work to advance the president's agenda.

Obama said the relentless pursuit of his domestic policies -- and a failure to adequately explain their virtues -- had left Americans with a "feeling of remoteness and detachment" from the flurry of government actions in Washington.

"We were so busy just getting stuff done and dealing with the immediate crises that were in front of us that I think we lost some of that sense of speaking directly to the American people about what their core values are and why we have to make sure those institutions are matching up with those values," he told ABC's George Stephanopoulos.

The admission came as the president's top aides sought to come to terms with political disaster in the aftermath of the GOP's Senate victory in Massachusetts. The surprise outcome -- Republican Scott Brown took the seat of the late Democrat Edward M. Kennedy in the heavily Democratic state -- prompted crowing among GOP leaders and finger-pointing and recrimination among the president's allies.

"The American people, the people of Massachusetts, last night have rejected the arrogance," said Rep. Eric Cantor (R-Va.). "They are tired of being told by Washington how to think and what to do."

Publicly and privately, aides to the president repeatedly stressed that the White House has heard the message from angry voters. But they insisted that they are not backing away from key items on the president's agenda, including health-care reform, energy and bank regulation.

"That anger is now pointed at us because we're in charge, rightly so," press secretary Robert Gibbs told reporters. "I don't believe the president thinks that we should stop fighting for what's important to the middle class, that we should stop fighting for an economic recovery, that we should stop fighting for what we need to do to create an environment for the private sector to hire."

As they huddled behind closed doors in the West Wing, Obama's top aides were glum but undeterred. Several described an atmosphere of resolve not unlike the mood during the toughest moments of the 2008 campaign.

One top adviser insisted that "the White House gets it. We're not oblivious. We're not proceeding ahead as if it didn't happen."

But the early consensus inside the White House, they said, was to pursue a renewed effort to explain the difficult choices Obama has made. They said that the election results will not force a radical rethinking of his agenda and that the White House will attempt to convince Americans that his policies on the economy and jobs will eventually turn things around.

"What the president needs to do is go explain to the people exactly why what has been done is going to get us on a better path for the future," said former Obama White House communications director Anita Dunn, who still regularly provides advice on communications strategy. "What the president is doing now to create jobs, to build a better economic future -- that is something that contrasts very well with the Republicans' refusal to do anything."

The White House had already begun a determined effort to pivot its message to expressions of concern about the economy and jobs as it prepares for congressional midterm elections in November. Tuesday's defeat made that shift in rhetoric even more urgent.

David Axelrod, the president's senior adviser, said on MSNBC that the "main thing" to come out of the election results was a reminder that Obama and his party will be judged by whether people feel economically secure in the weeks and months ahead.

"The main thing that we saw in Massachusetts was the same sense of concern on the part of middle-class folks about the economic situation, about their wages being stagnant, about their jobs being lost," he said. "That's something that we have to pay a great deal of attention to."

While some lawmakers and pundits began predicting a full-scale retreat from the president's health-care reform effort, White House advisers said they are unwilling to accept defeat -- yet. Obama's closest advisers refused to express panic about the issue and vowed to find a way to proceed with some version of health-care reform.

Axelrod called the current health-care system "a real crisis" that is "part of what middle-class people are struggling with." Obama "believes we ought to deal with that crisis," he said. "It's not an option to simply walk away from a problem that's only going to get worse."

The president's aides were quick to accept some blame yesterday for the loss of the Senate seat but also offered a long list of failings by Democratic candidate Martha Coakley and her team, including her decision to vacation during the campaign and a failure to vigorously pursue votes during the final weeks.

White House aides rejected the idea that the Massachusetts election was a referendum on Obama. The Democratic candidate was leading by double digits just weeks ago, an indication, they said, that the political environment set by the president was not dragging her down.

But they struggled to explain how a Democratic Party that found such success in 2008 has now lost three consecutive major races, including contests for governor in New Jersey and Virginia last November.

One senior Democratic strategist said that in conversations he had with party leaders, there seemed to be an unwillingness on the part of the White House to acknowledge the party's new problem with independent voters, who were key to Obama's victory.

"Democrats on the Hill and in the White House don't seem to get that independent voters are upset with them," said the source, who spoke candidly about the president and his team on the condition of anonymity.

Administration officials said the loss of the Massachusetts Senate seat might give upcoming races across the country a jolt, awakening state parties to the perils of fielding weak candidates and giving national Democrats justification to weigh in on problematic campaigns. If there is a silver lining, they said, it is that no Democrats are now unaware of how endangered their power -- and their congressional majority -- is.

Asked whether Obama was having a bad day, Dunn laughed and asked: "Why? Because he's only got 59 votes in the Senate? Can we get a little perspective here, people?"

Staff writers Anne E. Kornblut and Chris Cillizza contributed to this report.

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Dec 4, 2009

Than Shwe Confounds His Peers

PALE, MYANMAR - APRIL 26: Burmese villagers he...Image by Getty Images via Daylife

by Wai Moe

Burma's military despot Snr-Gen Than Shwe surprised and confused his fellow generals at a four-monthly military commanders' meeting in Naypyidaw by ignoring pressing political issues and instead devoting his speech to the development of the country's economy in the post-election era, according to military sources in the capital.

Than Shwe reportedly told his fellow generals at the meeting on Nov. 23-28 that Burma is ready for a new government in line with his vision of a “disciplined democracy,” and addressed numerous economic developments and projects for the future.


A source who provided The Irrawaddy with a document on Friday analyzing the proceedings at the closed-door meeting said regional commanders and top-ranking generals were caught off-guard by the dictator's lofty aspirations and apparent far-sightedness, because he normally dwells on petty internal matters, and methods of quelling political dissent and securing power.

Than Shwe instead spoke of establishing solid business foundations in the country in the post-election period, of developing Burma's human resources and of the state's responsibility to promote a solid middle-class in the country.

During the meeting, sources say Than Shwe spoke confidently about the development of the national economy and effused about the prospects of billions of dollars in investment from China, referring to the Sino-Burmese oil-gas pipeline projects and the development of the Kyaukpyu deep sea port off the Arakan coast and related railway systems.

At the meeting, he apparently advocated expanding industry, especially factories related to oil and gas exploration and production. He also alluded to the Dawei deep sea port project in southern Burma, spoke of expanding the shipping industry and services sector, and predicted the Burmese economy would soon be “booming,” the source said.

The military dictator reportedly went on to pledge that Burma will furthermore be immune from electricity shortages because the country's hydroelectric projects would soon produce some 16,000 MW of power per year.

According to the military sources, the fact that Than Shwe did not address the upcoming election and pending political concerns, such as Aung San Suu Kyi's request for a meeting, suggests he is confident that his current strategy is working and that events are playing out in his favor.

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Looking for the Switch to Light Up Burma’s Cities

by William Boot

Efforts by Burma’s military regime to improve the country’s unreliable electricity supply ahead of promised national elections next year face big hurdles.

A new hydroelectric dam near the central city of Mandalay is being tested this month and in theory it could expand Burma’s power generating capacity by over 40 percent.

Additionally, a 150-kilometer pipeline is to be built in the south to carry gas to Rangoon, seemingly to alleviate perpetual power shortages there.

An inadequate and decrepit infrastructure, however, is likely to result in wastage of much of any extra electricity—if it isn’t sold to China anyway.

Chinese developers are this month conducting tests on the 790-megawatt capacity Yeywa hydro dam nearing completion on the Myitnge River.

The project, which has been under construction since 2004 and has reportedly cost more than US $600 million, should raise Burma’s electricity generating capacity by more than 40 percent. However, with so much Chinese involvement—including investment of about $200 million—some of the power might be pumped north into China’s equally hungry Yunnan province, observers believe.

The Yeywa dam, 50 kilometers south of blackout-plagued Mandalay, is about 300 kilometers from the Chinese border.

Burma has one of the world’s worst electricity generating capacities—a mere 1,700 megawatts for a population of around 50 million.

In comparison, neighboring Thailand has about 30,000 megawatts for a population of about 60 million people.

Burma’s power predicament is exacerbated by the fact that more than 25 percent of the electricity generated is lost “in transmission and distribution” through poor cable equipment, according to figures published in a report by the United States Central Intelligence Agency.

Burmese state-controlled media have said the Yeywa electricity will be pumped into what passes for a national grid via 230-volt cable.

“Burma’s electricity grid system is far from national because it’s concentrated in the central belt between Rangoon and Mandalay,” Bangkok-based energy industries analyst-consultant Collin Reynolds told The Irrawaddy.

“Under half of it has a 230-volt capacity, so even within the limited transmission region much of the cable is probably inadequate for handling a big boost in supply such as might come out of the Yeywa [power plant],” Reynolds said.

Even within the electricity transmission belt, noisy and polluting diesel generators are in daily use as essential backup.

Most of northern and southeast Burma and nearly all border areas have no connection to the grid.

Despite these infrastructure failings, the Burmese military government has approved at least 12 hydro dams across the country.

If they are all built they would have a generating capacity of over 22,000 megawatts. But much of this is earmarked to be pumped into China, India or Thailand.

Many dam projects are still at the drawing board stage and involve Chinese and Indian state engineering companies. China’s Sinohydro Corporation—a principal developer at Yeywa—figures in a number of them.

China is especially interested in using Burma as a proxy for hydro dams because back home it is facing increasingly vociferous opposition from environmentalists. Protests led Prime Minister Wen Jiabao to curtail river dam developments in neighboring Yunnan.

The NGO Burma Rivers Network, a rights and environmental organization that monitors river developments, says dams in Burma lead to “displacement, militarization, human rights abuses, and irreversible environmental damage, threatening the livelihoods and food security of millions. The power and revenues generated are going to the military regime and neighboring countries.”

The Yeywa dam completion coincides with the award of a $77 million contract to Singapore engineering firm Swiber to build a pipeline to carry gas from the Yadana gas field in the Gulf of Martaban to Rangoon.

The contract was issued by the junta-controlled Myanmar Oil and Gas Enterprise (MOGE), which has a stake in Yadana managed by Total of France. MOGE says the gas is to fuel Burma’s largest city and commercial center.

Most of the 780 million cubic feet of gas produced daily by Yadana goes to Thailand, but MOGE says it intends to have 200 million cubic feet a day delivered to Rangoon for domestic use by mid-2010.

Several small gas turbine plants exist in the greater Rangoon area, but wider use of gas to fuel more power plants would require new investment, and there is little backup capacity when problems strike.

In July, for instance, the Myanmar Electric Power Enterprise cut power supply in Rangoon to just six hours a day because of infrastructure damage caused by bad weather.

About 70 percent of Thailand’s electricity is generated by gas, and at least half of it comes from Burma.

But while Burma sits in the blackout dark, neighboring Thailand has a power glut, caused by over-development coupled with a sharp drop in domestic demand for electricity due to a recession triggered by the global financial crisis.

Thailand's surfeit could be good news for Shan communities living along the Salween river near the Thai-Burmese border.

The Electricity Generating Authority of Thailand is having second thoughts about its agreements to cooperate in the construction of up to five hydro dams on the Salween, which would produce thousands of megawatts it probably no longer needs.

Nov 12, 2009

Iraq, Rebuilding Its Economy, Shuns U.S. Businesses - NYTimes.com

BAGHDAD, IRAQ - FEBRUARY 5: In this Handout ph...Image by Getty Images via Daylife

BAGHDAD— Iraq’s Baghdad Trade Fair ended Tuesday, six years and a trillion dollars after the American invasion that toppled Saddam Hussein, and one country was conspicuously absent.

That would be the country that spent that trillion dollars — on the invasion and occupation, but also on training and equipping Iraqi security forces, and on ambitious reconstruction projects in every province aimed at rebuilding the country and restarting the economy.

Yet when the post-Saddam Iraqi government swept out its old commercial fairgrounds and invited companies from around the world, the United States was not among the 32 nations represented. Of the 396 companies that exhibited their wares, “there are two or three American participants, but I can’t remember their names,” said Hashem Mohammed Haten, director general of Iraq’s state fair company. A pair of missiles atop a ceremonial gateway to the fairgrounds recall an era when Saddam Hussein had pretensions, if not weapons, of mass destruction.

The trade fair is a telling indication of an uncomfortable truth: America’s war in Iraq has been good for business in Iraq — but not necessarily for American business.

American companies are not seeing much lasting benefit from their country’s investment in Iraq. Some American businesses have calculated that the high security costs and fear of violence make Iraq a business no-go area. Even those who are interested and want to come are hampered by American companies’ reputation here for overcharging and shoddy workmanship, an outgrowth of the first years of the occupation, and a lasting and widespread anti-Americanism.

While Iraq’s imports nearly doubled in 2008, to $43.5 billion from $25.67 billion in 2007, imports from American companies stayed flat at $2 billion over that period. Among investors, the United Arab Emirates leads the field, with $31 billion invested in Iraq, most of that in 2008, compared to only about $400 million from American companies when United States government reconstruction spending is excluded, according to Dunia Frontier Investments, a leading emerging-market analyst. “Following this initial U.S.-dominated reconstruction phase, U.S. private investors have become negligible players in Iraq,” Dunia said in a recent report.

Indeed, even those companies that prospered during the war and occupation, including many of the big military contractors, will simply leave with the United States military as it completes its pullout over the next two years.

KBR was among the earliest contractors in Iraq and has $33 billion in contracts to support American bases. Yet it has not had any contracts with the Iraqi government to support those facilities when they’re handed over — or for that matter, to build anything else in the country.

“KBR is currently assessing the business environment in Iraq in order to make an informed decision regarding potential government contract opportunities there,” said a spokesperson, Heather Browne.

A few big American multinationals, like Bechtel, will still be in the midst of long-term projects like power plants and waterworks — but those were five- and 10-year undertakings kick-started with American reconstruction aid.

Now, Iraq is doling out its own oil-financed funds for capital projects, and American companies have so far received surprisingly little of it. Sports City, a billion-dollar complex of stadiums and housing in Basra planned for the Gulf Games in 2013, was awarded to an Iraqi general contractor, Al Jiburi Construction, over 60 other bidders, many of them American.

“We have a couple American companies as our subcontractors,” said Adai al Sultani, an assistant to the firm’s owner, with evident pride. When the transportation ministry put up more than $30 billion in railroad expansion contracts recently, they went to Czech, British and Italian companies.

Those nations had been members of the coalition led by the United States, although all pulled outlong before the United States. But one of the biggest beneficiaries of Iraqi contract money is Turkey, which wouldn’t allow American warplanes to use its airbases during the invasion of Iraq, followed closely by Iran.

Turkey has gone from almost no legal trade with Iraq before the war to $10 billion in exports last year, five times as much as the United States. Turkey’s trade minister, Kursad Tuzmen, predicted that number would triple in the next couple years.

Both Turkey and Iran had huge pavilions at the trade fair, crowded with businessmen discussing deals. So did France and Brazil, also not coalition countries.

Last month FedEx, which has been flying packages in and out of Iraq since 2004, announced it was suspending its operations. The reason is that Iraqi officials gave RusAir, a Russian airline, exclusive rights to cargo flights.

FedEx was one of the very few American businesses that braved the risks of working not only on American bases but also in the Red Zone, back when it was particularly dangerous to do so. Now that the danger is much less, its business is being thwarted by an upstart Russian come-lately.

“FedEx Express has had no choice but to use Rus and, as a result, the reliability of our service to Iraq has been substantially degraded,” the company said in a statement about the suspension.

It is almost an article of faith among many Iraqis, judging from opinion polls, that the United States invaded Iraq not to topple Saddam Hussein, but to get their country’s oil.

If true, then the war failed in even more ways than some critics charge.

It wasn’t until last week that the first major oil field exploitation contract was signed with a foreign company — British Petroleum, in a joint deal with China’s state-run China National Petroleum Corporation.

Exxon Mobil, an American company, has an oil field deal awaiting final approval from Iraq’s oil ministry. The Italian oil giant Eni, whose junior partner is the American-owned Occidental Petroleum, is expected to sign a similar deal. These, however, are service contracts, so the foreign oil companies don’t actually own rights to any new oil they may find.

The newest edition of the Iraqi Yellow Pages, a business-to-business directory, doesn’t have a single ad from an American company.

American officials, who spoke on condition of anonymity because they were not authorized to speak on the record, disputed that United States companies were having a difficult time in the Iraqi free market. “I wouldn’t read too much into American presence or lack of it at the trade fair as a bellwether,” one official said. “I would say the future is very positive.”

Another official pointed out that a recent Iraqi-American investment conference held in Washington stirred up enormous interest among American companies. “We had to turn away several hundred companies that wanted to come,” he said, adding that the embassy in Baghdad has had many subsequent inquiries from firms. That interest has not translated into action yet.

“After the conference in Washington, I’m surprised you can get on a flight here considering all the opportunities,” said Mike Pullen, a lawyer at the British-American firm DLA Piper, who works in Iraq.

“It’s a pity we can’t get more people to come,” he said. “They’re losing out to Turkish companies, Russian companies.”

“Turkish companies are acceptable to all different Iraqi ethnic groups, because they are not an occupier, and they can implement big reconstruction projects at a lower cost,” said an executive of the Iraqiya company, a leading Iraqi construction firm that often works with the Turks. He did not wish to be identified for fear of offending American clients.

Even Iraqi Kurds, many of whom are politically at odds with Turkey, seem to get along with the Turks when it comes to business.

“Turkish companies are not afraid to do business in Iraq,” said Eren Balamir, who was in charge of Turkey’s pavilion at the fair.

The high cost of security — a cost that most regional businesses don’t have — has dissuaded many American businesses from coming; some reconstruction contracts spent as much as 25 percent of their budgets on security.

Security isn’t the only impediment. Being seen as the occupier is just not good for business. Although the United States, legally speaking, has not been an occupying power since June 2004 when the Security Council formally ended occupation, many see it that way. Even Iraq’s prime minister, Nuri Kamal al-Maliki, has described Americans as occupiers to curry electoral support.

One European ambassador, who spoke on condition of anonymity because of his government’s policy, said his own country’s trade opportunities greatly increased in Iraq after it withdrew the last of its troops more than a year ago. “Being considered an occupier handicapped us extremely,” he said. “The farther we are away from that the more our companies can be accepted on their own merits.”

“As a U.S. company you already have a few strikes against you before you even step foot in Baghdad airport,” said Marc Zeepvat of the Trans National Research Corporation in New Jersey, who specializes in studying the Iraqi market for institutional investors. “The U.S. government and U.S. companies have to wake up and realize they’re not in a privileged position any more.”

“The State Department’s travel advisory doesn’t help either,” Mr. Zeepvat said. It tells people, in effect, “don’t come.”

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Nov 4, 2009

EAP Half-Yearly Update

November 2009

Available in: العربية
eap_nov09_380x150
EXECUTIVE SUMMARY
  • East Asia’s rebound from the economic downturn has been surprisingly swift and very welcome.
    A vigorous and timely fiscal and monetary stimulus in most countries in East Asia and the Pacific along with decisive measures in developed economies to prevent a financial meltdown, have stopped the decline in activity and set in motion the regional rebound. Our projection for real GDP growth in developing East Asia is set to slow to 6.7 percent in 2009 from 8 percent in 2008, or much more moderately than after the 1997-98 Asian financial crisis.
  • Developments in East Asia and the Pacific remain strongly influenced by China.
    Take China out of the equation, and the rest of the region is recovering with less vigor. Developing East Asia excluding China is projected to grow more slowly in 2009 than South Asia, the Middle East and North Africa, and only modestly faster than Sub-Saharan Africa.
  • The aggregate numbers tell an incomplete story about the social and poverty impact of the crisis.
    The report estimates that 14 million people who would have emerged from $2-a-day poverty if the region’s economies had kept growing at pre-crisis levels, will remain in poverty in 2010.
  • The rebound has yet to become a recovery.
    That is why the authorities in the region are mindful of the risks of a premature withdrawal of stimulus, given the large output gaps and concerns that developed countries are converging to a slower-growth equilibrium.
  • The crisis has prompted countries in the region to rethink their development strategies.
    For most, the choice between growth driven by exports, and growth driven by domestic demand is a false one. Countries need to resist protectionism and become more integrated into the global economy. At the same time, governments are realizing that more growth can be extracted from domestic demand if they ease or eliminate incentives that favor the quick buildup of export-led, investment-heavy manufacturing.
  • Downside and upside risks in consolidating the rebound into recovery:
    Downside risks include a double dip in economic activity in the advanced countries as stimulus measures and inventory restocking wear off. On the upside, a more robust recovery in the advanced countries could remove some of the imperative for rebalancing in developing East Asia and encourage sustaining the pre-crisis export-oriented growth model.
  • Can East Asia and the Pacific sustain rapid growth, even if the rest of the world grows slowly?
    This will depend on whether East Asia and Pacific can integrate further regionally – through better facilitation of trade in goods and by extending its liberal trade policies to services.

Download the Executive Summary (143kb pdf)

Download the Full Report (1.4mb pdf)


DOWNLOAD CHAPTERS

Chapter 1: The Rebound (482kb pdf)

Chapter 2: Economic Policies Supporting Recovery in East Asia (195kb pdf)

Chapter 3: Transforming the Rebound Into Recovery (233kb pdf)


DOWNLOAD COUNTRY SECTIONS, KEY INDICATORS

Country Sections (591kb pdf)

  • Cambodia
  • China
  • Fiji
  • Indonesia
  • Lao People’s Democratic Republic
  • Malaysia
  • Mongolia
  • Papua New Guinea
  • Philippines
  • Thailand
  • Vietnam
Key Country Indicators (314kb pdf | 196kb xls)
Appendices (406kb pdf)
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Oct 30, 2009

Free Markets, Free Muslims - Foreign Affairs

Turgut Ozal, 8th president of TurkeyImage via Wikipedia

Can a New Middle Class Make a New Middle East?

November/December 2009
Jon B. Alterman
JON B. ALTERMAN is Director of the Middle East Program at the Center for Strategic and International Studies.

It was not long ago that word of "the Dubai miracle" was on everyone's lips. Driven by little more than a grand idea of itself, this sparsely populated, sun-baked strip on the Persian Gulf had become a gleaming multiethnic metropolis overnight. Dubai was bursting with financial assets, boasting the world's most luxurious hotels, and attracting more than six million visitors every year -- no small feat for an emirate of a mere 100,000 citizens. But in the last year, the speculative bubble that had driven much of Dubai's growth popped: cranes fell still, and ambitious projects lay languishing on the drawing board. Behind the scenes, it took tens of billions of dollars in financial guarantees from Abu Dhabi to keep the whole enterprise afloat.

Vali Nasr's new book, Forces of Fortune, was written largely in the exuberant phase of Dubai's story, but it is being published in a more sober time. It reflects some of the old enthusiasm for the notion that "the Dubai model" -- a multiethnic, capitalist society insulated from violence and ideology -- could save the Middle East from a downward spiral of intolerance and political extremism. Nasr's overall conclusion -- that the triumph of free markets in the Middle East "will pave the way to the decisive defeat of extremism and to social liberalization" -- is sympathetic to the Dubai experience. "If that battle is won by private-sector business leaders and the rising middle class tied to them," Nasr argues, "then progress with political rights will follow."

This is not merely a book about Dubai, however. It is a book about the enduring promise of Dubai, the struggles of Iran, and the success of Turkey. Bolstering these cases with brief studies on Egypt and Pakistan, Nasr suggests that where capitalism flourishes, so, too, do tolerance and moderation. He also thinks that the resurgence of Islam is promising rather than threatening. Judging that the tide has turned against extremism, he views middle-class religiosity as a path through which Muslim communities can integrate with the rest of the world. In Nasr's words, "This upwardly mobile class consumes Islam as much as practicing it," seeking to embrace modernity on Muslim terms rather than rejecting it as a form of corruption. The old populist dogmas that focused on injustice and encouraged resistance are waning. Consequently, resources poured into bolstering liberal ideals in Muslim communities merely feed the culture wars, Nasr cautions. Instead, "The key struggle that will pave the way to the decisive defeat of extremism and to social liberalization will be the battle to free the markets."

DUBAI OR NOT DUBAI

Of the three models of social and political change presented in the book, Dubai is clearly the headliner. Its remarkable wealth and its embrace of immigrants stand out against the anticolonial sentiment and xenophobia found in much of the rest of the Middle East. Its efficient business environment and high quality of life make the emirate a more attractive base for Western expatriates than any other place in the Middle East, and its can-do business culture makes it a place where even Arab businesspeople often go to broker deals. Iranians flock in, too, to trade and to party; by some estimates, there are four times as many Iranians in Dubai as native Dubaians. The city has become a safe harbor from the battles that rage throughout the Middle East over money, politics, and religion. Dubai is not about a clash of civilizations. It is about modernity, comfort, and profit.

Yet for all of its success, Dubai is an inadequate model for the future of the Middle East. Its small native population has had to learn, by necessity, to live as a minority on its home turf. The tiny native work force is easy to employ fully; the needs of customs and law enforcement alone absorb much of it. Equally important, Dubai owes at least part of its success to its wealthy neighbor Abu Dhabi, whose petrodollars act as insurance against Dubai's collapse. The Dubai model works well for Dubai, but it has limited relevance for the rest of the Middle East.

Iran's circumstances are more relevant to most countries in the region, and they present a far more cautionary tale. With its strong imperial history, vast oil and gas wealth, and population of almost 70 million, Iran is a natural powerhouse in the Middle East. Yet Nasr argues that Iran's combination of religion, politics, and economics, which mixes "theocratic Shia fundamentalism with a strong dose of class warfare and hatred for capitalism," has dragged the country down. As he explains, Iran's clerical leadership has often used Iran's isolation from the world to consolidate its economic and political grip on the country. Immediately following the 1979 revolution, private businesses were nationalized or sold, the state payroll was tripled, and the economy was crippled by international sanctions and a bloody war with Iraq. With all other options exhausted by the early 1990s, Nasr writes, President Ali Akbar Hashemi Rafsanjani cautiously sought to revive the private sector; after President Muhammad Khatami was elected in 1997, those efforts accelerated and foreign capital began to flow in. Alongside the economic reform came gradual political openness. Civil-society groups became increasingly active, the rule of law began to return, and public debate surged.

But all of this proved too much for Iran's leadership, and it reversed course. Nasr lays much of the blame for this at the feet of Iran's supreme leader, Ayatollah Ali Khamenei, who called out Iran's Revolutionary Guard Corps to curb social reform and preserve the unholy alliance between religious clerics and political cronies that the revolution had spawned. The election of the populist president Mahmoud Ahmadinejad in 2005 consolidated the counterreform effort and dealt a harsh blow to those hoping for more economic openness. What was opened, instead, was the Treasury, which poured tens of billions of dollars into subsidies, handed out wads of cash, and embarked on a state-supported building spree. Many in Iran's lower class appreciated the relief, but the middle class was devastated. Over the past few years, the value of Iran's currency has plummeted and inflation has soared, straining pensioners and government workers. The political consequences were made clear last June, when the government cracked down on the opposition for claiming that the government had stolen the presidential elections. Many close observers believed the episode was a putsch by Khamenei and the Revolutionary Guards to keep themselves in power, against the wishes of tens of millions of Iranian voters. Less attention has been paid to the economic component of Iranian authoritarianism and the creation of what Nasr calls "Islamic Republic, Inc." The government's economic and political monopolies go hand in hand.

To Nasr, Turkey represents a happier balance between the state and the public. Under the logic of Kemal Atatürk, the founder of the Turkish republic, the government pushed economic and social development from the top down throughout the middle years of the twentieth century. The state planned the economy, built industries, and managed trade. The state also enforced strict secularism as a necessary component of modernization. But in recent decades, a more bottom-up, free-market, and religious logic has emerged in the country, tied to the rising fortunes of the Justice and Development Party (AKP). This story's hero is Turkey's prime minister in the 1980s, Turgut Özal. He breathed life into Turkey's Anatolian heartland by helping create networks of entrepreneurs untethered to the state-led capitalist system that Atatürk had built. The proprietors of these thriving small and medium-sized enterprises were typically conservative and pious -- Nasr compares them to Midwestern Republicans -- and they helped lead to a fusion of religion and politics that had previously been inconceivable in Turkey.

The Turkish General Staff, the keeper of the Kemalist flame, still regards the AKP warily, and Turkish politics is rife with accusations that the AKP is little more than a gang of fundamentalists in suits who seek to overthrow the Turkish republic. For his part, Nasr is satisfied with the state of competition in Turkey. As he sees it, "commerce has both shackled state power and softened Islam's hard edges." The rise of the AKP has coincided with the rise of a capitalist middle class and a turn away from state control over the economy. Nasr also suggests that the demands of middle-class voters have forced the AKP to become a relatively tolerant technocratic force in Turkish politics. The challenge of electoral competition has helped forge a more moderate form of political Islam.

MIDDLE-CLASS HEROES

So what went right in Turkey, and what went wrong in Iran? As Nasr tells it, the two countries rose from the ashes of the failed modernization process that characterized the Middle East in the middle of the twentieth century -- secular, state-led efforts that produced little wealth and even less freedom. In 1963, the Middle East scholar Manfred Halpern predicted that as independent states in the region became stronger, the growing petite bourgeoisie of schoolteachers, army officers, and bureaucrats would constitute a "new middle class" and a modernizing force. But, Nasr writes, because this group was "a product of the state . . . it forfeited its role as the vehicle of liberalization, opting instead for state patronage."

Yet it was a broad swath of this group that grew frustrated by continued poverty and felt alienated by rulers who seemed more comfortable in the salons of Europe than in their own capitals. Islam provided both a space to organize against the status quo and a rationale for doing so. In Iran, the shah's repressive form of secular nationalism gave birth to the opposition movements that created the Islamic Republic, and in Egypt and elsewhere, secular nationalism created violent groups that have employed Islamic slogans and symbols in their efforts to overthrow existing governments. These movements, in turn, have given many observers the impression that more Islamically oriented governments would be intolerant of women and minorities, distrustful of the majority's will, and hostile to Western interests.

Nasr disagrees, arguing that a more Islamic form of nationalism throughout the region would sit more easily with the middle class, liberalize politics, and lead to new moderation throughout the Middle East. He contends that a sustained effort to promote secularist principles is a losing fight because "the current battle line in many Muslim societies lies not between Islam and secularism but rather between types of Islam." The continued defense of unalloyed secularism, he argues, only gives Muslims a feeling that they are being besieged, feeding a culture war that the West cannot win. Nasr suggests that it is far better to promote greater economic openness to empower the middle class and then to rely on these people's good sense to curb the more extreme manifestations of Islamist politics. After all, Muslims in the Middle East "have generally not thrown their support behind fundamentalist parties in elections -- at least not until those parties have abandoned the fundamentalist component of their stated goals." The new breed of Muslim yuppies have no hatred in their hearts; their Islam is one that "celebrates piety while rejecting violence and extremism."

A WAY OUT

But Nasr's view is by no means universally held. Many Christians and secularists in the Middle East would quarrel with it, and their exodus from the region is a sign that they distrust the Islamist forces.

Another flaw is that Nasr does not put forward a plan for opening the region economically, religiously, and politically or suggest how such an evolution might be managed. At points, Forces of Fortune feels as if it is guided more by sentiment than argument. Nasr points consistently to the Turkish model, but he does not dwell on its nuances and particularities -- for example, the way in which prospective membership in the European Union has both restrained Turkey's generals and inspired the AKP to pursue orthodox economic policies. Nor does Nasr dwell on the fact that in some instances wealth has been no barrier to extremism in the region (although he does mention this). After all, Osama bin Laden grew up in a very wealthy Saudi family, and his Egyptian deputy, Ayman al-Zawahiri, was raised by an upper-middle-class family in Cairo and trained as a physician. Moreover, some countries, such as Tunisia, have nurtured a middle class at the same time as they have stifled political openness, and in Dubai, elections play a vanishingly small role in governance.

But the most puzzling omission is Saudi Arabia, which barely appears in this book about religion, economics, and politics in the Middle East, despite having an abundance of all three. Saudi Arabia is the most prominent voice defining orthodox Islam, and it supports a range of nongovernmental groups in Muslim communities around the world. No government spends more money indoctrinating its own people and spreading its understanding of Islam beyond its borders. The Saudi royals and those close to them own virtually all the pan-Arab media, and the Saudi government trains thousands of clerics and prints millions of religious books every year. The country is a major economic force, too, with a GDP almost twice as large as that of the United Arab Emirates, three times as large as that of Kuwait, and four times as large as that of Qatar. Nasr describes Iran as "the only state ever created from scratch by fundamentalists," but Saudi Arabia is certainly another, and it is one that matters.

In Nasr's defense, one might argue that Saudi Arabia's oil-based economy has eviscerated the middle class and has led to precisely the sort of state-centered authoritarian system that Nasr hopes will be undermined. Nevertheless, Saudi influence -- in terms of both money and ideas -- is ubiquitous in Muslim circles. If the future of Islam lies in the marketplace, omitting Saudi Arabia from a discussion of how that is to happen is a religious, economic, and political distortion.

Even so, Nasr has written a rewarding and impressive book. He is a lively guide to a maze of issues that rarely get discussed, and he uses the fruits of his wide travels in the Middle East with great skill. Forces of Fortune is full of knowing insights, telling jokes, and subtle personal portraits, and it is an easy -- although not breezy -- read.

Judging by this book, it is no mystery that Nasr has risen to such prominence in U.S. government circles as a preeminent explainer of the complex phenomena that define the modern Middle East. Since writing it, he has become a senior adviser to Richard Holbrooke, the State Department's special representative for Afghanistan and Pakistan. Nasr's new responsibilities include figuring out how to tip these countries toward greater stability and moderation -- a process, Nasr suggests, that will take decades of sustained effort.

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