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Web-only Exclusives November 30, 2000 From Our Correspondent: Hirohito and the War A conversation with biographer Herbert Bix From Our Correspondent: A Rough Road Ahead Bad news for the Philippines - and some others From Our Correspondent: Making Enemies Indonesia needs friends. So why is it picking fights? |
Week of December 1, 1995
IS JAFFNA BURNING?
Sri Lankan troops have inched their way into all but deserted sections of Jaffna, once the stronghold of the separatist Liberation Tigers of Tamil Eelam guerrillas. Jaffna's fall would mean government troops have effectively captured the western half of Sri Lanka's northern peninsula, the heartland of the 12yearlong Tamil war for independence. With the front lines closed to journalists, the army claimed the city was heavily boobytrapped and rebel suicide squads were poised to make a last ditch stand against its advancing forces. Since the government launched its "Operation Sunray" offensive on October 17, 400 of its troops have died along with an estimated 1,600 rebels.THE JUDGE STATES HIS CASE
Legal and emotionladen arguments have been raging in Hong Kong since last month, when a Chinapicked committee suggested certain parts of the colony's Bill of Rights be scrapped and six laws that had been strengthened to insure greater civil liberties be revised. The debate escalated when Chief Justice Yang Ti Liang seemed to agree with Beijing. He was critical of the outgoing colonial administration's attempt to write widesweeping human rights protection into Hong Kong's legal framework, saying the bill could throw Hong Kong's future legal system into "chaos." Yang first made his remarks privately to Hong Kong Xinhua's Deputydirector Zhang Junsheng, who promptly made them public. Forced into the open, Yang said the Bill of Rights Ordinance, tacked on to the legal system in 1991, adds a third tier of laws that unnecessarily complicates the system. The judge stressed these are his personal views. The real test will come, he said, when the laws are contested in the courtroom. ProBeijing papers praised Yang's remarks, others called for his resignation.Week of November 24, 1995
INVEST IN GROWTH...
East Asia is facing a crisis that is threatening to seriously slow economic growth. The World Bank says projects worth hundreds of billions of dollars are stalled because not enough private investors will invest in infrastructure projects, despite the pressing need to improve East Asia's power, road, communications and water systems.The Bank says over the next decade East Asian economies will need to spend between $1.2 trillion and $1.5 trillion on development, about 7% of GDP, nearly 2% above current levels. Talks between governments and investors usually bog down over disagreements about risk and return on investment. Most governments are willing to allow profits between 10% and 12%, while investors look for the 20% to 30% they may get from often safer private sector projects. The World Bank says Malaysia, Indonesia and the Philippines have policies that attract private money. But the Bank is warning other East Asian countries not to expect foreigners to fund their growth....BECAUSE IT PAYS IN THE LONG RUN
Gordon Wu, engineer and entrepreneur, has pledged a gift of $100 million to his U.S. alma mater, Princeton University. It's among the largest donations ever made to a U.S. university. The 59-year-old Wu graduated from the school in 1958 with a degree in civil engineering. He now heads Hopewell Holdings and Consolidated Electric Power Asia, Ltd., both heavily involved in infrastructure development throughout Asia. His gift will go to strengthen engineering studies. "I have always wanted to do all I could to assure that students in the future ... will have the same kinds of opportunities I had," Wu said. Said Princeton president Harold Shapiro, "This is an absolutely extraordinary gift from an absolutely extraordinary man."Week of November 17, 1995
THE COST OF DOING BUSINESS
South Korea's slush fund scandal continues to rock the country. The first businessman to break under a prosecutor's questioning was Chung Tae Soo, chairman of the Hanbo Group. He admitted to helping former president Roh Tae Woo hide more than $65 million of the $654 million he amassed while in office. Lawmaker Kum Jin Ho has been asked to explain his role in helping Roh hide funds while he was a top employee at the commerce ministry. Prosecutors have sent the names of 21 of Roh's relatives to Bern, Switzerland, suspecting money might be held by them in Swiss accounts. In 1992, investigators say, Roh's daughter, So Yong, was caught bringing $200,000 in cash into the U.S. Chairmen from South Korea's top companies, Daewoo, Lotte, Samsung and others are scheduled to appear before the prosecutor, although not all are suspects. Also under investigation are possible kickbacks from foreign companies working on South Korean projects. Roh has apologized to the nation, but says the millions did not come in the form of bribes, but rather contributions.
AND THE COST OF SECURITY
The price the U.S. charges South Korea for maintaining 36,000 troops on the peninsula is going up. It costs about $1 billion a year to keep the forces in the country, South Korea's share was about $300 million last year. By 1998, it will be paying $400 million.The price was set when U.S. Defense Secretary William Perry was in Seoul for two days of talks. Seoul is demanding changes in the 1966 agreement governing the legal status of the U.S. forces in Korea. The government wants the U.S. to turn over the suspects in rape and murder cases as soon as they are accused. Perry says he is ready to agree to a system similar to that used in Japan.Week of November 10, 1995
HEATING UP
The Malaysian government is gently trying to cool the country's economy before it overheats. In his fifth annual budget message, Finance Minister Anwar Ibrahim outlined several measures to boost savings and curtail consumption. He also tried to calm worries about the growing current account deficit, the difference in the value of the goods and services a country imports and exports. Most economists use that number, rather than consumer inflation figures, to gauge whether or not the Malaysian economy is growing too fast. The Finance Ministry expects the current account deficit to soar to 18.1 billion ringgit - or 9% of GDP - from 11 billion ringgit in 1994. That can make currency markets jittery. Officials said that the deficit is "sustainable" and some economists expect the current account to improve within a year. The Finance Ministry reported that this year's growth rate is a sizzling 9.6%, exceeding a Central Bank estimate of 8.9%; it didn't offer a specific forecast of inflation. Proposals to cool the economy included increasing the mandatory pension contribution, raising the road tax on luxury cars and increasing the minimum monthly payment on credit-card debt. Anwar also announced a 100,000-ringgit levy on real estate purchases by foreigners.BEARING DOWN
China will phase out key tax incentives that help attract foreign investors, making the country a more expensive place to do business. After weeks of hinting about a fiscal revamp, Beijing announced a five-year plan to unify tax rates for foreign ventures in its special economic zones with those of companies in the rest of China. An official said that the zones had served their purpose and that the decision was in line with the World Trade Organization principle of equal treatment for firms. The first privilege to go, on Jan.1, 1996, is duty-free imports of capital equipment for foreign companies.Week of November 3, 1995
U.N. BASH - ED
The largest gathering of world leaders in history - more than 170 heads of state or government - celebrated the 50th anniversary of the United Nations in New York City. Many gave the organization credit for defusing East-West tensions during the Cold War and for battling the spread of weapons, poverty, disease and intolerance. But just as many, including Secretary General Boutros Boutros-Ghali, said that the U.N. must reinvent itself to become a credible force in the next century. There is a nearly universal belief that the U.N. is overstretched and that its mission in a post-Cold War world is unclear. Most developing countries want the nearly bankrupt organization to do more. The U.S., roundly condemned for holding back $1.4 billion in dues, would like the U.N. to do more with less. Proposed reforms range from streamlining the General Assembly to increasing the participation of nongovernmental organizations. The most talked about change, though, is enlarging the Security Council to reflect the economic and political changes since the end of World War II. Brazil, Germany, India, Indonesia, Japan, Mexico and South Africa are among those who say they deserve a seat.SOUTHERN SUMMIT
The Nonaligned Movement, another group searching for a new role after the Cold War, vowed to seek changes in the U.N. that would give developing countries more decision-making power. Meeting in Cartagena, Colombia - the group's new lead nation - just before the U.N. confab, the 113 members also called for nuclear disarmament and restraint in the South China Sea. Malaysian PM Mahathir Mohamad, who refused to attend the U.N. gala, called NAM "the major institution through which the interests of the developing world can be protected."Week of October 27, 1995
OFFICERS ARRESTED
After weeks of rumor, Pakistan Prime Minister Benazir Bhutto confirmed that about 40 army officers, including a two-star general, were secretly arrested last month. In a meeting with newspaper editors, the premier gave few details of who was involved. She then imposed an official silence on the affair. Some newspapers speculated that the officers had been plotting a coup. But Western diplomats in Islamabad believed the arrests were more likely designed to please the U.S., which has been pressing the Bhutto government to crack down on Islamic terrorists using Pakistan as a base. For years suspicion has been that Pakistan's Inter-Services Intelligence agency has been arming and training extremist groups for operations abroad. Press reports named the two-star general as Maj. Gen. Zahirul Islam Abbasi, now with the infantry, but who is thought to have previously served in the intelligence agency.SPYING NO SECRET
It was the scandal that never was. A report by the New York Times that the CIA had spied on the Japanese during auto negotiations earlier this year produced a ho-hum response in Tokyo and Washington. Premier Murayama Tomiichi said that even if the Americans did eavesdrop, Japan got what it wanted. "Nothing surprising there," said a U.S. official, implicitly acknowledging that the spy agency had moved from the Cold War to trade wars. According to the Times, the CIA gave U.S. trade representative Mickey Kantor daily inside information on Tokyo's bargaining position as the talks on U.S. access to the Japanese auto market reached a crucial stage. Other reports in the U.S. have said that President Bill Clinton has ordered intelligence services to monitor foreign firms to ensure they are not offering bribes to unfairly win contracts against American competitors.Week of October 20, 1995
NO WORD YET
Not for the first time, North Korean leader Kim Jong Il confounded those international observers who had expected him to be officially anointed into the positions previously held by his father, Kim Il Sung. Mute and expressionless, the heir-apparent presided over a military parade in Pyongyang to mark the 50th anniversary of the Workers' Party -- but there was no word of his being appointed to the leadership of either the party or the state. The anniversary coincided with a report by the International Institute of Strategic Studies that North Korea had tested a new ballistic missile with a range of 1,500 km. In its annual report on the world military scene, the London-based institute revised downward its estimate of Pyongyang's war planes, but said it had 30 more Mi-24 combat helicopters than had previously been thought. South Korea was also stocking up, and had acquired the first 12 of 120 F-16 fighters from the U.S.A LECTURE FROM LEE
Relations between Taiwan and China seemed likely to be further strained after Taiwan's President Lee Teng-hui lectured Beijing on the need to give its people more democracy. In a keynote speech to mark Taiwan's national day, Lee said greater freedom in China was a precondition for reunification. "China has to recognize that it cannot resist the trend of freedom and democracy," he said. Lee had spoken along similar lines before, but the extra stress placed on the need for democratic reforms on the mainland was seen as new. The remarks appeared likely to raise blood pressures in the Chinese capital, where President Jiang Zemin is preparing for his summit meeting later this month with U.S. President Bill Clinton. Trade, human rights and weapons proliferation will be on the American agenda for the talks, in New York on Oct. 24, but China is almost certain to want to discuss little else but Taiwan. Lee's comments will harden that resolve.Week of October 13, 1995
WHERE NEXT?
Nick Leeson, the former Barings trader awaiting possible extradition to Singapore in a Frankfurt jail, believes punishment will be more lenient in Britain. He is even ready to plead guilty to five charges of false accounting to get there. For a brief instant last week it seemed Leeson's wish would be granted. A group of investors, who lost $78.3 million in bonds when the bank crashed, launched a private action in a London court. The group, which was not compensated for its losses when Barings was bought by Dutch bank ING in March, seeks Leeson's extradition to face false accounting and deception charges. But Britain's Serious Fraud Office, which the investors are hoping will foot the bill for their action, is thought certain to drop it. The SFO had earlier ruled out extraditing Leeson to Britain, saying Singapore has the stronger case. Leeson is sure to appeal if Germany decides on the island state. The bondholders, who lost big from Leeson's disastrous trades, are also likely to fight the SFO in British courts should it decide not to pursue their prosecution. Leeson should not give up hopes of seeing London just yet.EMU OR OSTRICH?
European finance ministers scrambled to agree to a Jan. 1, 1999 deadline for a single currency - the last allowed by the Maastricht treaty - even as doubts were raised about Germany's commitment to the timetable. Chancellor Helmut Kohl said in an interview that a further two-year delay "would not be the end of the world." That was music to the ears of the Euroskeptics, who believe German reticence to give up the deutschemark and France's unwillingness to tackle its public finances will scupper the 1999 plan. Meanwhile, financier George Soros predicted that if Britain stays out after 1999, sterling will offer "interesting opportunities" by trying to shadow the new currency. Soros shot to fame in 1992 when he made $1 billion from the collapse of sterling. Currency speculators, take note.Week of October 6, 1995
ANOTHER ROGUE
It is a scam to rival that of Nick Leeson, the man who broke Barings, Britain's oldest merchant bank. On Sept. 26 Daiwa Bank, one of Japan's major commercial banks, announced $1.1 billion in losses arising from the activities of a rogue trader at its New York branch. U.S. authorities arrested Iguchi Toshihide, 44, a former bank vice-president and U.S. citizen since the 1970s. He faces up to 30 years in jail. "We are deeply embarrassed," said the head of the New York branch. By rights, Daiwa should have more than egg on its face. Leeson ran up a $1.3 billion loss over months by trading in complex derivatives. If true, Iguchi was allowed to carry out more than 30,000 unauthorized trades over 11 years in plain, old U.S. government bonds. Daiwa Bank President Fujita Akira apologized on national TV for "causing trouble" to clients. But unlike Barings, whose capital was wiped out, Daiwa says it will aborb the loss and plans to keep its half-year net profit figure unchanged. Adding he had "strictly reprimanded" Daiwa for its lack of controls, Bank of Japan governor Matsushita Yasuo says he is confident the loss will not undermine bank management. With a rap on the knuckles and no profit revision so far, Daiwa seems to be getting off lightly.GETTING CLOSER
Building bridges can be hard work. After deciding on a landmark EuroAsian summit of government leaders to be held in Bangkok next March, the two sides are split over the agenda. The Asians - the seven ASEAN members plus China, Japan and South Korea - would like the meeting to focus on lowering Fortress Europe's trade barriers. The Europeans favor a broader agenda that would link trade concessions to human rights, labor standards and environmental protection. The aim of the summit is to strengthen fragile inter-regional ties in what many analysts agree is an emerging three-bloc trade world increasingly dominated by the U.S. That consideration is likely to bring the two sides together regardless.Week of September 29, 1995
SHARING THE SPOILS
When the region was part of the Soviet Union, Russia exploited its natural resources. Now that Central Asia is host to - albeit fledgling - democracies, you may have thought the two sides had gone their separate ways. You'd be wrong. Russia is eyeing the oil and gas riches there. It continues to use its pipelines, built during the Soviet era, as a bargaining chip in talks on how to get the oil out of the land-locked region. That dilemma is prompting some extravagant solutions. The latest: a $12 billion 7,880-kilometer pipeline running from Turkmenistan through western China to South Korea and Japan. A consortium of U.S. and Japanese firms with China's state oil company are looking into its feasibility. One aim: to keep the oil out of Russian hands. Most Central Asian republics are none too keen to share with Russia the wealth that could rebuild their battered economies. It was irrigation projects thought up by Moscow, in its eagerness to boost the region's cotton output, that caused the Aral Sea, the fourth-largest inland sea, to shrink by 75% in just 35 years.NOT OVER YET
Enron Corp. of the U.S. submitted its renegotiated bid Sept.18 to build a $2.9 billion power project - India's largest foreign investment - which was axed by Maharashtra's government last month. The Hindu right-wing coalition had alleged that project costs had been padded. Enron proposed cutting the tariff, switching fuels and giving a 30% equity stake in the project to the state government. PM Narasimha Rao, who is counting on foreign investment to meet the country's power needs, would like to see the project back on track. That may be too much to ask for. Bal Thackeray, the leader of coalition partner Shiv Sena, claims Rao's Congress was too quick to please Enron in the first place. He has urged the tariff delinked from the dollar, leaving Enron to swallow losses from the falling rupee - something unlikely to go down well with the U.S. firm.Week of September 22, 1995
PAYING THE PRICE
How history repeats itself. The U.S. dollar last week broke through the 100 yen mark for the first time since January - when Japan's currency started its latest bout of endaka - before settling back to 99. Share prices in Tokyo surged. Some things had changed: the Bank of Japan was willing to slash its discount rate to a historic low to make it happen. But corporate Japan's view of the economy continues to grow bleaker and Japan's pain is the greenback's gain. So where will the dollar go? With Japan's woes continuing, U.S. investment house Merrill Lynch predicts 105 yen within a few months. But the battle of the super currencies is unlikely to have a big impact on Asia, it says. Sales to Japan comprise only 14% of Asia's exports. The weaker yen could eat into other exports but most Asian countries don't compete directly against Japanese goods. Rather, a weaker yen should help cut prices of imported auto and electronic components from Japan. It was the strong yen during the 1980s that pushed many of its firms to set up plants offshore in Asia. Will the currency's turnaround encourage them to come back to Japan? Not likely. Japanese companies are a permanent feature of Asia's industrial landscape.A TASTE OF VICTORY
Malaysian tycoon Quek Leng Chan's ambitions to build a regional food and drinks empire are over - for now. Last week, Camerlin, the consortium Quek heads, withdrew its bid for Singapore's Yeo Hiap Seng, leaving it in the hands of the Lion City's biggest private landlord, Ng Teng Fong. Did Quek back out too soon? Camerlin said it was not "in its interest to pursue the offer" beyond Ng's S$5.35 a share. Analysts seem to agree. Ng paid too much, they say. When the battle for YHS started in June, the stock was at S$4. By Sept. 12, with victory in hand, Ng held 46% of a stock at S$5.35 with little upside potential. The veteran property magnate may hunger for something else: YHS has a $290 million landbank waiting for redevelopment.Week of September 15, 1995
FRIENDLIER TERMS
More may have come from the June 28 trade agreement between U.S. negotiator Mickey Kantor and Japan's tough-talking Hashimoto Ryutaro than first appeared. At the time, analysts agreed the 11thhour auto-and-parts deal was more a truce than a real pact. Both sides claimed victory: Kantor for the opening he had won American car makers; Hashimoto for avoiding punitive tariffs on 13 makes of Japanese luxury cars. Tokyo had argued the Americans failed to make a dent in Japan because their products did not meet the needs of its consumers. But emerging from the smoke may have come something else: goodwill. In a small but significant gesture, Japan's export-import bank has made two loans - to Ford and General Motors of the U.S. - to help develop the right-hand drive models Japanese buyers want. The two countries' economic fortunes are increasingly interwoven: the Bank of Japan's dollar-buying spree in August, which put brakes on the yen's rise while pumping up the greenback, has pushed Japan's forex reserves to a new high.POLITICAL WILL
Nepal was rocked by the biggest political protests in five years. Some 40,000 Nepalese from rival factions demonstrated over the Supreme Court's Aug. 28 ruling that the communist minority government's dissolution of Parliament in June, and call for elections, was unconstitutional. When Nepalese took to the streets in 1990 in a democratic revolution, all parties united under one banner. This time, police struggled to keep opposing factions apart. Young communist supporters had violently enforced a one-day strike Aug. 31. King Birendra summoned a special session of the reinstated Parliament Sept. 5, which is working towards a noconfidence vote in the government. The communists have asked for a postponement, citing PM Adhikari's recent injuries in a crash. But opponents dismiss that as a delaying tactic from a party that has held power for just nine months.Week of September 8, 1995
BEIJING BRACES ITSELF
Taxi drivers in China's capital have found a new excuse to take the roundabout way: the Fourth U.N. World Conference on Women is screwing up traffic. The city plays host this week to some 50,000 delegates from more than 180 countries, who meet to discuss women's social, economic and political progress. Most will be candid with their views, a prospect which has alarmed some Chinese officials. On Aug. 29, public security vice-minister Tian Qiyu told nongovernmental organizations meeting in the Beijing suburb of Huairou that protests would only be allowed in a middle-school sports field, closed to the public. That drew a retort from forum convenor Supatra Masdit: "The laws of the host country prevail only outside the site of the forum," she said. China took on the once-in-a-decade event to improve its prestige. But governing a billion people now looks like a less difficult task than keeping thousands of outspoken activists happy.TAKEOFF
People in Hong Kong and Singapore lined up at midnight to be among the first to buy it. All babies born in Australia on the magic date will get free copies of it. And Philippine President Fidel Ramos was to be the first in his country to receive it. They were all roped into the estimated $150 million Aug. 24 global launch of Microsoft's new PC operating system Windows 95. For a while, the U.S. software giant was plagued by its own success. Frustrated buyers jammed Microsoft's phone lines looking for help installing the system, while users of the company's new online service, to which Windows 95 offers an easy link, griped about Microsoft Network's lack of content. Still, rivals such as Apple would kill to be in Microsoft's seat. The California start-up made its reputation as a nimble marketer with a commercial in the 1980s putting down IBM as a computer-world dinosaur. But with its sluggish sales and problems meeting demand for new products, Apple now looks like the next contender for that spot.Week of September 1, 1995
NOT SO BAD
To hear some tell it, inflation is the worst thing to happen to an economy short of a Mexico-style meltdown. Crosby Securities warns that rising costs could cut Asian competitiveness. It points to falling inflation worldwide even as increased consumer demand, especially in Malaysia, Singapore and the Philippines, pushes up prices and costs. Some countries are already acting. Bank Negara, Malaysia's central bank, is likely to raise interest rates to about 6.5% through its regular intervention in the money market. But consider for a moment who low inflation benefits most: the cash-flush rich. Wages, on average, do keep pace with inflation - for prices cannot rise if no one can buy. An added bonus: mortgages lose their heft. Thus economic planners have a fine line to tread. They can raise interest rates to smother inflation and preserve net worths, but they risk suffocating growth and wiping out jobs. Even the world's most inflation-averse central bank knows when to let in a little air. At its Aug. 22 meeting, the U.S. Federal Reserve left interest rates alone.
BETWEEN FRIENDS
Tempers have been tested among Indonesians and Australians. Jakarta last month withdrew its ambassador-designate because of a controversy over his alleged views on East Timor. Then East Timor sympathizers in Melbourne reportedly burned Indonesia's flag, which provoked demonstrations in Jakarta hostile to Australia. On Aug. 18, the Indonesian Importers' Association (GINSI) said it would stop taking in Australian goods if Canberra did not expel East Timorese resistance leaders by Sept. 18. Still, cooler heads are likely to keep bilateral relations cozy. Both countries' militaries are friendly, and Australian military training fills the vacuum created by the U.S. when it canceled its programs due to human-rights concerns. Chamber of commerce chief Aburizal Bakrie said mutual economic growth was more important than minor rifts.
Week of August 25, 1995
AGAIN - WITH FEELING
Though most of Asia marked the 50th anniversary of the Pacific War's end on Aug. 15 with low-key ceremonies, many Asians still raised their voices to demand a fuller apology from Japan for its wartime actions. The issue goes beyond how Tokyo should express remorse; PM Murayama Tomiichi's statement at an Aug. 15 press conference denouncing his country's "colonial rule" and "aggression" was stronger stuff than many of his predecessors could muster. Though his words lacked the official self-pity and suspicious ambiguity of the Diet's "apology," passed in June, Tokyo nonetheless still sends conflicting signals. That same day, half the cabinet visited the Yasukuni shrine to 2.5 million war dead, including 1,000 war criminals. Among the visitors was trade minister Hashimoto Ryutaro, possibly the next PM. Domestic pressure from veterans' groups can be considerable. Yet as long as many of Japan's leaders refuse to see the past as most of Asia does, the war's wounds are unlikely to heal.
HIGH ON ENERGY
Some say power corrupts. But what happens with too much? Critics say Malaysia's mammoth Bakun Dam project will produce more power than the country needs - so a lot will go to waste. And Sarawak forestland with an area equal to Singapore's will be needlessly inundated. But energy, telecommunications and posts minister Leo Moggie argues that the 1,800 to 2,000 megawatts the $8-billion dam will make meets only 11.4% of Malaysia's projected demand of 16,400 megawatts in 2005, two years after the plant begins operation. He adds, "hydropower is the cheapest source of energy." Manufacturers certainly won't complain about excess electricity. The number of power disruptions sometimes reaches 10,000 a month. Some 40 firms in Penang claim they lost $16 million during a June 25 power outage. They want compensation from national power firm Tenaga Nasional. To some, the costs of too little outweigh the price of too much.
Week of August 18, 1995
A NEW EQUATION
Croatia's lightning four-day conquest of the rebel Serb-held region of Krajina brings a whiff of change into the bloody Balkan stalemate. Despite concerns over human-rights violations and suspicions that U.N. peacekeepers were used as human shields, the U.S. and Europe welcomed the Serbs' most crushing defeat since the breakup of Yugoslavia. For it could mean that Serbia, the Balkan Serbs' power-hungry patron, will be more likely to accept diplomacy. Yet the thousands of homeless, angry and vengeful Croatian Serb refugees streaming out of Krajina may provide more recruits, some say, for the Bosnian Serb army. Bosnian Serb leader Radovan Karadzic seems at the moment unable to reap this windfall. After the capture of Krajina, he demoted his army chief, Gen. Ratko Mladic, and took charge of military operations himself - angering army commanders, who sided with Mladic. With Serbia humbled and the Bosnian Serbs scattered, things have rarely looked better for Croatia, Bosnia and - surprise - the U.N.
MONEY SPINNER
Is the Bank of Japan floating more money to keep the economy from capsizing? Analysts have reason to believe the central bank is "printing" currency at a rate once associated only with poor, flailing nations. They point to the bank's recent heavy purchases of Japanese government bonds and U.S. dollars to put the brakes on the yen's rapid rise. Both moves inject more yen into the market - and cause inflation. Not that Japan has to worry about inflation. Its rate of deflation - prices are declining as much as 2% - is slashing what firms can charge for goods that still cost the same to produce. That squeezes manufacturers and does little to prime an economic recovery. So more money can be healthy. But the central bank denies it is minting the stuff. Says one official: "We're just more accommodative."
Week of August 11, 1995
RUN FOR THE MONEY
Not long after the run on the Cosmo Credit Union began, the governor of Tokyo, comedian-turned-politician Aoshima Yukio, pledged public funds to bail out the city's largest credit union. Depositors withdrew $680 million one day and more than $200 million the next, nearly 20% of total deposits in just two days. Aoshima drew a distinction between Cosmo and two credit unions the government didn't help: "Rescuing credit unions that persisted with reckless management is one thing," he said, referring to the two that had been refused. "Spending money to protect depositors is another." Nonetheless, it was the first time in 30 years the government stepped in to save a failing financial institution. It may not be the last. Japanese banks are unloading bad debts quickly, but analysts aren't sure whether it's fast enough to avoid more failures. Banks have written off $100 billion worth of bad loans in little more than two years; as much as $1 trillion may remain, according to experts. Most of the losses stem from the collapse of Japan's property market. The Nikkei Financial Daily said the government's inadequate response up to now is worrisome: "It leaves a sense of unease over the bad-loan cleanups that are looming on the horizon."
ALL CLEAR FOR LANDING
With so much attention being devoted to China-Taiwan-U.S. discord, a remarkable accomplishment in China is being overlooked: against all odds, the country seems to be achieving the Holy Grail of economic cycles - the soft landing. A year ago, it hardly seemed possible. Gross domestic product was growing nearly 12% on top of double-digit growth in 1993. Inflation finally peaked in October 1994 at 25.2%, and economists thought the real number might be even higher. But prices actually fell from May to June this year, and although June prices still were 16% higher than last year, the news was good. Clearly, daunting challenges remain, but recent performance nevertheless boosts the star of economic czar Zhu Rongji.
Week of July 28, 1995
ON THE MEND
With the passions raised last March over the hanging of Filipina Flor Contemplacion for murdering another maid seemingly spent, relations between Singapore (site of the crime and the punishment) and the Philippines are fast improving. President Fidel Ramos said a new Philippine ambassador may be named soon (if he can find someone willing to take the post). The statement came after a panel of American forensic experts unequivocally supported the findings of the original Singapore autopsy of the murder victim, Delia Mega. It disagreed with the findings of Philippine pathologists who had asserted that she was brutally beaten, probably by a man, before being strangled. The Gancayco Commission, which was formed to look into the Contemplacion affair, recommended that by 2000 there be "zero deployment" of women workers overseas. Ramos seemed to shy away from a commitment, saying that a new action group will be formed to look into workers' problems and make recommendations by August 1.
FRIENDLY INTENTIONS
China's Foreign Minister Qian Qichen will meet U.S. Secretary of State Warren Christopher on August 1 while both are attending the ASEAN Regional Forum in Brunei. Qian reportedly is seeking an apology from Washington for allowing Taiwan's President Lee Teng-hui to make a private visit to the U.S. in May and a promise not to let it happen again. Christopher may not go that far, but American leaders have been trying to assure China that U.S. intentions are fundamentally friendly. Adm. Richard Macke, Commander of U.S. Forces in the Pacific, told Congress, "we have not decided that China is our next enemy." Even House Speaker Newt Gingrich backed away from earlier remarks in which he had called for Washington to recognizeTaiwan. He said he was just trying to "rattle China's cage."
Week of July 21, 1995
TIME TO HEAL
Flanked by senators who are decorated war veterans, one of them a former prisoner-of-war, U.S. President Bill Clinton announced on July 12 that the United States would resume full diplomatic relations with Vietnam. He said this would close the book on 20 years of enmity, which began when Americans ignominiously evacuated the old capital of South Vietnam. Secretary of State Warren Christopher plans to visit Hanoi to formalize the action next month. Some senators opposed to the move have threatened to block financing for a new embassy, but it seems doubtful that many legislators will want to hamper future foreign relations with such heavy-handed use of the Congressional power of the purse. Clinton praised Hanoi's cooperation in accounting for Americans missing in the war, but there are other irritants that could sour this budding friendship. The arrest of two well-known Communist Party intellectuals in June is the prelude to what could be controversies over human rights abuses. Arrested were Tran Ngoc Nghiem and Do Trung Hieu, who had written articles either criticising the Communist Party's monopoly on power or spreading "anti-socialist propaganda."
CRUISING SPEED
It isn't every day that the United States creates a new fleet. In fact, it has't done so since the end of World War II. The U.S. Navy's new Fifth Fleet will patrol the Indian Ocean and Persian Gulf, linking the Sixth (Mediterranean) and the Seventh (western Pacific). It will be composed of an aircraft carrier, fourteen other surface craft and two nuclear-powered submarines. U.S. military planners say the permanent force is needed to counter a military buildup by Iran, which has deployed submarines and missiles at the entrance to the Gulf. Earlier this month, 58,000 Iranian troops went on maneuvers to mark the seventh anniversary of the downing of a civilian airliner by an American cruiser.
Week of July 14, 1995
WAR OF NERVES
The accused murderer of 12 people in the March 20 sarin gas attack on the subway system in Japan's sprawling capital may be behind bars, but whoever is master-minding the attacks -- or a copycat -- continues to wage a war of nerves on Tokyo's frazzled commuters. Police discovered two devices last week that would have unleashed cyanide gas in a subway station near the financial district. They contained enough chemicals to kill some 9,000 people. Victims continue to be overcome by mysterious fumes almost daily. Just hours after the cyanide was found, three persons collapsed at the capital's main station nearby. In Yokohama, 31 people were taken to hospital after breathing strange odors near a rail station, and the next day six more were treated after experiencing a burning sensation in their noses at a supermarket. The only suspect in these bizarre incidents is the Aum Shinrikyo cult and its guru, Asahara Shokou, who has, with about a dozen of his aides, been charged with murder. He is scheduled to go on trial Oct. 26 in a Tokyo district court.
WAR GAMES
There was a different war of nerves along the Taiwan Strait, as the Taiwan press trumpeted reports of large Chinese military maneuvers off the coast of Zhejiang province. It is not unusual for the PLA to conduct war games in coastal provinces at this time of year, and it could not be confirmed that "East Sea No. 5" was any more threatening than previous operations. What can't be denied is that tensions are higher because of recent visits by Taiwan's President Lee Teng-hui to America, nor that relations between China and the United States continue to deteriorate. The latest irritant involves the detention of prison labor crusader Harry Wu, a U.S. citizen. The American embassy in Beijing dispatched an official to the border with Kazakhstan, where Wu is being held in an effort to interview him. But he was unsuccessful.
Week of July 07, 1995
WHAT PRICE KINDNESS?
Even as the first rice-laden freighter was pulling up to the port at Chongjin, North Korea, officials in South Korea were wondering what they had bought with their generosity. Certainly, what they wanted was clear: closer ties with their northern neighbors. But what they actually are getting isn't so obvious. Suspicion remains high on both sides. South Korea and Japan, another potential source of rice for North Korea, sought assurances that the rice will not be stockpiled for the North Korean army or re-exported for hard currency. One South Korean official insisted: "Basically, this assistance is humanitarian, so Seoul does not have any strings attached." But some experts doubt South Korea's gift of rice comes entirely from the goodness of its heart. They suggest the rice shipments were a sweetener to get the North to agree to suspend its nuclear power program, which was suspected of being a front for weapons development. Seoul has agreed to send 150,000 tons of rice to the North, which meanwhile is trying to get an additional 1 million tons from Japan. Japan is likely to send less than half what is being asked for.
FULL DISCLOSURE
Hong Kong's corporate officers may be coming in for more scrutiny following recent revelations about the past criminal record of a chairman and the current loan practices of a managing director. New rules have been proposed by market regulators that would require corporate officials to disclose past convictions for offenses ranging from violent crimes to white-collar swindles. In May, it was found that Goldlion Holdings' Chairman Tsang Hin-chi had been convicted twice in the 1970s for possessing goods with falsified trade documents. Recently, the Hong Kong exchange's listing division said it is seeking disciplinary action against Johnny Chee Jing-yin, managing director of Cheerful Holdings, for failing to disclose loans made by Cheerful to a company he owns.
Week of June 30, 1995
WORST NIGHTMARE
Taiwan Prime Minister Lien Chan's recent visit to Europe, in which he huddled with Hungarian and Czech leaders and stopped off in Amsterdam and Vienna, was precisely what China had feared following Lee Teng-hui's U.S. trip. The nightmare for China is that U.S. concession toward Taiwan would open the floodgates. Clearly, the U.S. seriously underestimated how angry China would be about Lee's visit. To China, Taiwan is the single most sensitive issue. The dilemma for Beijing may be how to let Washington know its fury without severing ties completely. For that matter, some insiders believe such a separation is now possible, if not likely. Perhaps even more delicate for China is how to deal with Taiwan. Initially, China steered clear of criticizing Taiwan. But it lately has been taking a harder stance. A solution to this humpty-dumpty of a political mess isn't readily apparent, but surely it must include introspection by the U.S. government as to whether it is listening to experts who have a firm grasp on what China thinks.
SOUTH KOREANS CHIP IN
South Korean semiconductor makers are taking advantage of a happy coincidence this year: demand for Dynamic Random Access Memory chips (DRAM) has remained strong, while a rising yen is forcing Japanese competitors to raise prices for these commodity products. This means the South Koreans can raise their own prices with impunity and not worry much about losing market share. The good fortune has further strengthened industry leader Samsung, which is poised to make $10 billion in profits over the next five years from DRAMs. That's lots of cash to invest in production of next-generation chips. For now, 4-megabit chips are selling so well, there's barely a need to change. But Asian countries that can offer inexpensive, educated workforces may well be able to ride the coattails of Korean chip makers into the next century.
Week of June 23, 1995
FIGHTING POLLUTION
Asian governments have been taking some tentative steps toward cooperation this month as a key to solving the sort of tough environmental problems that often accompany rapid economic development. ASEAN delegates are meeting in Malaysia to discuss air pollution, especially haze, crossing national borders. ASEAN doesn't have a good track record for such cooperation, but delegates are trying to set up joint early-warning and prevention measures. Singapore is offering to transfer environmental knowhow and technology to other Asian nations. And in Hong Kong, a recent workshop on air pollution promoted the need for cooperative monitoring systems throughout the region to avoid a 50% reduction in air quality over the next 10 years. The stakes are high, given links between the energy needed to fuel Asia's projected economic growth and environmental degradation. Asian Development Bank officials say flatly: Most of Asia and the Pacific can expect things to get worse, environmentally, before they get better. If such cooperative gestures bear fruit, there's hope that the impact can be lessened.
BANKING ON CASH
The bad-loan problem for Japanese banks is huge indeed now estimated by the government at nearly $500 billion. But it isn't likely to be the kind of drag on Japan's economy that the developed world's other big financial crisis of the last 10 years, the U.S. savings and loan debacle, was on the U.S. Among the reasons: the Japanese, in general, are flush. No one wants to invest in property; the stock market is volatile; overseas investments risk currency losses; and interest rates are ridiculously low. That leads more investors to leave cash in banks. Besides, companies in Japan have a fundamentally different relationship to their government than those in the U.S. A phone call from a Japanese official is likely to prompt decisive action; in America, the same call better focus on the receiver's self-interest.
Week of June 16, 1995
HONG KONG'S JOBLESS
Hong Kong's unemployment has surged. Though a modest 3%, it's the highest in nine years. The genesis for today's problem can be found several years ago. In the late 1980s, with Hong Kong manufacturers moving to China in ever-greater numbers, the hollowing of the colony's economy was obscured by strong growth in other sectors: tourism, real estate and financial services all boomed. Now those sectors also are slumping, and weaknesses are revealed. Of course, the U.S. and developed countries in Europe, many of which would be happy with 5% unemployment, wish they had Hong Kong's "problem." Hong Kong's higher rate may well be a sign of economic maturation. Japan recently saw its unemployment rate hit a post World War II high of 3.2%. Singapore, meanwhile, has been able to replace lost low-paying manufacturing jobs with higher-paying ones in more technologically advanced industries. Economists expect other Asian countries to encounter new challenges as their economies grow, as Hong Kong has.
PROTEST IS IN THE AIR
The weather has turned warm in South Korea, which means it must be time for a protest, right? Hard to tell, and that's the problem. Since serious worker protests in 1987 led to democratic reforms, outdoor rallies in Seoul have become annual events. First, students, buoyant after finishing college-entrance exams, hit the streets. And then workers follow, gaining time off after a harsh winter and rigorous work schedule. It's all become so common that employers plan production schedules around strikes. Some Koreans think the country has matured enough to get off such a cycle. Democratic reforms are in place, wages have risen nicely, living standards are up. Korea Telecom workers may be experiencing the downside of annual protests as they carry out a work-to-rule campaign. Will complaints be taken seriously or, like a change in the weather, in stride?
Week of June 9, 1995
BEATING ON INFLATION
Inflation remains a key threat to some high-flying Asian economies such as China, Indonesia, Hong Kong and India. Recent reports suggest nations like Malaysia, which expects about 4% inflation this year, are at least containing it though are still concerned. Economists round up the usual suspects to explain the continuing inflation threat in Asia: a powerful yen, strong growth that adds spending money to consumers' pockets while soaking up excess labor, and less-than-ideal control over foreign investment. The Pacific Economic Cooperation Council expects inflation for all Asia to be a bit stronger this year -- estimated at 4.6% -- than last. The trends may be more important than actual numbers because every country figures inflation differently: each has its own varied "basket" of products weighted differently. In many countries, the precise formulas are secret. Analysts say the danger comes from countries reining in growth too much and causing a recession.
