China View    By Yangtze Yan

    BEIJING, Oct. 24 (Xinhuanet) — Leaders of the ASEAN countries and China, Japan, South Korea (ASEAN+3) have reached agreement on an 80 billion U.S. dollar foreign-exchange reserve pool to be used as a countermeasure to defend currencies and backstop Asian economies amid the global financial crisis, a Japanese official said Friday.

    The operation details and the timeline of the crisis fund, however, is still under discussion, Japanese Foreign Ministry press secretary Kazuo Kodama said at a press briefing on the sidelines of the seventh Asia-Europe Meeting (ASEM).  

    The agreement essentially firms up an earlier commitment in May by ASEAN+3 leaders, superseding the Chiang Mai Initiative, which came into being in 2000 in the wake of the 1997/98 East Asian financial crisis to ease mainly bilateral currency swaps, according to Kodama.

    Meanwhile, the crisis fund will defend regional currencies and could see its mandate widened to cover domestic liquidity issues, ASEAN Secretary General Surin Pitsuwan was quoted as saying at the conclusion of the ASEAN+3 leaders meeting Friday. Pitsuwan also denied a specific timeline for the set-up of the fund by next June as revealed by news reports.  

    The East Asian countries began talks in 2006 on transforming the Chiang Mai Initiative into a more powerful and multilateral reserve pooling mechanism.

    In May they reached preliminary agreement to create a foreign exchange reserve pool of 80 billion dollars. The initial agreement called for China, Japan and South Korea to provide 80 percent or 64 billion dollars, with ASEAN members providing the remaining 16 billion.

    ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

    The ASEAN+3 leaders met prior to the Asia-Europe Meeting (ASEM) summit held in Beijing Friday and Saturday.

Coup fears are rife and some believe it is just a matter of time before the tanks are again on Bangkok streets. ANALYSIS By Wassana Nanuam www.bangkokpost.com

Despite widespread rumours of another military coup, Prime Minister Somchai Wongsawat has left the country on a trip to Beijing, apparently confident that that it is only idle speculation.

The rumours have been intensifying since army chief Gen Anupong Paojinda went on national television last week to urge Prime Minister Somchai Wongsawat to resign over the violent suppression of People’s Alliance for Democracy protesters by police on Oct 7. He was accompanied by the chiefs of the navy, air force and police force.

Mr Somchai refuses to resign.

“Right now, people fear there may be another coup,” said Chulalongkorn University political analyst Panitan Wattanayagorn on Thursday.

“Relations between the military leaders and Prime Minister Somchai Wongsawat have soured. I think that under such circumstances everything seems to point to a coup.

“It is only a matter of time.”

If the military took over it would lead to the formation of a national government of unity which would bring all parties together, he said. But it must be done quickly to avoid possible political chaos.

Mr Somchai flew to Beijing on Thursday to attend the two-day summit of the Asia-Europe Meeting that begins on Friday.

It is Mr Somchai’s first foreign trip since he was sworn in to office.

The situation is similar to the lead-up to the Sept 19, 2006 coup when former prime minister Thaksin Shinawatra was in New York to address the United Nations general assembly.

The army took advantage of his absence to topple his government.

An army source said the army is keeping an eye on Mr Thaksin’s plan for a phone-in interview during a talk show on NBT on Nov 1. He might criticise some important people, the source said.

Gen Anupong on Tuesday signed an order changing the assignments of 141 colonels in three powerful regiments based in Bangkok. Although it was a seasonal reshuffle, the officers control the forces that are the key to a coup.

“The military does not want to stage a coup. In this situation, there is no knowing how to solve the problem. Everyone is now speaking of a coup as a solution,” said the commander of an infantry regiment in Bangkok, who asked not to be named.

Former deputy police chief Salang Bunnag’s plan to reclaim Government House from the PAD is also seen as a factor contributing to a possible coup.

He has announced plans to mobilise government supporters to seal off the Government House grounds where PAD supporters are and cut off their food and water supplies for three days.

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Thailand will propose that Asian countries pool $350 billion, or 10 percent of their foreign exchange reserves, to help protect financial systems from a looming global recession.

The money would be used to buy either Treasury bills or bonds denominated in yen, Singapore dollars and Chinese yuan provided China’s government eases conversion restrictions, Olarn Chaipravat, Thailand’s deputy prime minister, said in an interview in Bangkok today.

“The message of this initiative is for China to consider whether or not it would open up its banking system,” and offer a new convertible world currency, said Olarn, who will head to Beijing tonight for the Asia-Europe Meeting of government leaders. “If this concept is accepted, it will be a new chapter in international finance.”

The proposal by Thailand, which holds the chair of the 10- member Association of Southeast Asian Nations, comes as Asian governments struggle to find a unified approach to the global financial crisis. Central banks across the continent have already cut interest rates and guaranteed bank deposits to boost confidence in their banking systems.

The Thai plan differs from one that Philippine President Gloria Arroyo proposes, which suggests Asian governments set up a lending facility that will allow them to rescue financial institutions facing liquidity problems or holding distressed assets.

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Thailand may cut taxes if needed to spur local consumption and help counter the effects of a looming global recession.

“If needed, we are ready to provide tax incentives” to boost economic growth, Deputy Prime Minister Olarn Chaipravat said in an interview with Bloomberg Television today in Bangkok.

Thailand’s economic growth is being restrained by political squabbling that has eroded spending and investment. Exports, which comprise about 70 percent of gross domestic product, will cool as global demand slows, the central bank has said.

Finance Minister Suchart Thandathamrongvej said Oct. 20 that Thailand’s economy may expand less than 4 percent in 2009 as export growth slows to 10 percent this year, down from an expected 25 percent. He said Thailand should weaken the baht by 5 percent to boost exports, an idea rejected by the central bank.

Olarn said the government will try to issue more measures to boost the nation’s economic growth to “at least” 4 percent in the 2009 fiscal year, which started Oct. 1.

The Bank of Thailand may use interest rates to boost growth once inflation eases, Deputy Governor Bandid Nijathaworn said yesterday. The central bank on Oct. 8 kept its benchmark interest rate unchanged at 3.75 percent after two increases since July.

The government’s primary objective is to “ring fence” the economy and stock market from the fallout in global financial crisis, he said. The authority will also try to “stabilize the baht and interest rates.”

The government has faced five months of street protests that have curtailed its ability to implement policy. Two demonstrators were killed on Oct. 7 when police tried to disperse thousands who had surrounded the Parliament building, prompting the army chief to call on Prime Minister Somchai Wongsawat to resign.

“It’s not much I can do about political landscape,” Olarn said. “What we can do is provide the right information on economic strength and financial stability of the country, so they will have right information to invest in Thailand.”

UK banks reportedly may unveil capital raising plans Monday

SAN FRANCISCO (MarketWatch) — Some of the largest U.K. banks hope to unveil plans to raise billions of pounds in new capital on Monday as part of government efforts to stabilize the country’s financial system, the Wall Street Journal reported on Saturday. Royal Bank of Scotland Group (RBS: RBS 1.45, -0.04, -2.7%) , Barclays PLC (UK:BARC: UK:BARC 207.50, -34.25, -14.2%) , HBOS PLC (UK:HBOS: UK:HBOS 124.20, -29.30, -19.1%) , and Lloyds TSB Group PLC (UK:LLOY: UK:LLOY 189.40, -22.35, -10.5%) began working faster on these plans after Britain’s stock market plunged further on Friday. At least some of those banks have set Monday for announcing how the capital will be raised, although that deadline could change, the newspaper said. The U.K. government is requiring the banks to raise a total of roughly 25 billion pounds in new capital. The companies can get the money from the government or from private investors, such as shareholders or sovereign wealth funds, the WSJ explained

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Wednesday, October 1, 2008

The United States needs new weapon systems, including missile defenses and other advanced military capabilities, to deter and counter China’s steady buildup of nuclear and conventional arms, according to a draft internal report by a State Department advisory board.

U.S. defense policy has stressed missile defenses against Iran and North Korea. The report, by the Secretary of State’s International Security Advisory Board (ISAB), is the first to recommend such defenses against China, including technology in space.

The draft, a copy of which was obtained by The Washington Times, said Chinese strategy goes beyond building forces capable of retaking the island of Taiwan. China seeks to “break out” by projecting power beyond its region including sea lanes that carry energy resources for its modernization, the document said.

“Using superior U.S. military technical capacities, the United States should undertake the development of new weapons, sensors, communications, and other programs and tactics to convince China that it will not be able to overcome the U.S. militarily,” the report said.

• Read the report by the ISAB Task Force on China’s Strategic Modernization (downloads PDF)

The draft report presents a tough assessment of Chinese strategic modernization that goes beyond many current government and private-sector analyses that say that China’s military modernization does not pose a major challenge to U.S. security interests.

For example, in an interview with The Washington Times in March, CIA Director Michael V. Hayden expressed professional “admiration” for China’s rapid and sophisticated buildup and said it is “not inevitable that they will be an enemy.” The report said that to reduce the chance of a miscalculation by China that could lead to a crisis or conflict, the United States “must take seriously China’s challenge to U.S. military superiority in the Asia-Pacific region. … China’s military modernization is proceeding at a rate … to be of concern even with the most benign interpretation of China’s motivation.”

Chinese Embassy spokesman Wang Baodong said in a statement that China is “naturally becoming stronger and more influential in world affairs” after 30 years of reform, but remains committed to peaceful development and a “foreign policy of peace.”

“China will not harm anyone or pose a threat to anyone. China’s development is opportunity, not threat. Any versions of China threat will continue to be proved fallacious,” he said.

The full story in the Washington Times

When he’s not hunting tigers, Vladimir Putin looks after the Russian economy

Wednesday, October 1, 2008

Philippe Naughton

Reuters September 30, 2008

By Eric Burroughs

TOKYO (Reuters) - Central banks and regulators scrambled on Tuesday to relieve the strain on financial markets frazzled by another hefty blow to confidence, this time from the rejection by U.S. lawmakers of a $700 billion rescue plan.

Global central banks more than doubled the amount of dollar funding to $620 billion, but the move showed no signs on Tuesday of thawing the freeze in money markets where banks are hoarding cash and bracing for more trouble ahead in the deepening year-long credit crisis.

Analysts said central banks may now be forced to cut interest rates in a coordinated move because their massive fund injections have done little to ease strains that are threatening to become a bigger systemic breakdown that could endanger the global economy.

After the U.S. House of Representatives rejected the bailout for the U.S. financial system, Wall Street shares suffered their biggest sell-off since the 1987 crash. Asian shares were battered as well, falling 3-5 percent.

“The case for large synchronized global rate cuts is stronger than ever before,” said Rory Robertson, interest rate strategist at Macquarie in Sydney.

Australia, Britain and Europe are working to convince U.S. lawmakers to pass the $700 billion rescue package, which would allow the U.S. Treasury to buy up bad debt from banks, Australia’s prime minister, Kevin Rudd, said on Tuesday.

“What’s important is that all people of good will around the world act in concert with our friends in the United States to see the right measures taken through the U.S. political process to stabilize the global financial system,” he told a press conference.

Indonesia has decided to support United Nations Security Council new resolution affirming previous sanctions on Iran for refusing to halt its uranium enrichment program and offering Tehran incentives to do so.

Indonesia, which abstained in votes on the past resolutions, supported the resolutions after ensuring that the resolution promotes negotiation and dialog with the Iranian government to solve the dispute.

“At a glance the resolution design poses no problem. But we see a danger if the resolution does not mention settlement through dialog and negotiation,” said Foreign Minister Hassan Wirayuda, as quoted by Antara news agency on Saturday.

The minister said that such resolution would provide chances of the use of violent measures by other countries against Iran nuclear issue.

The vote on Saturday followed a compromise between the United States and Russia to lead a new council effort to condemn Iran’s nuclear program, without introducing any new sanctions.

The brief resolution reaffirmed the three earlier Security Council sanctions resolutions, which imposed progressively tougher sanctions on Iran for refusing to halt its uranium enrichment program.

Russian Ambassador Vitaly Churkin noted that the new resolution restated that the dispute with Iran should be solved through diplomacy. Earlier resolutions, he said as quoted by The Associated Press, were carefully crafted to “avoid any military solution were, to the problem.”

Existing sanctions include an asset freeze on 65 companies and individuals linked to Iran’s nuclear program, and a travel ban on five people associated with Tehran’s nuclear and ballistic missile programs.

The sanctions also include bans on Iranian arms exports, supplying Iran with materials and technology that could contribute to its nuclear and missile programs, and on trade in goods that have both civilian and military uses.

The latest resolution refers to the “dual-track approach” adopted by the council. This presents Iran with a choice of incentives to stop enriching uranium and, alternatively, threats of new sanctions if it does not comply.

The document also calls on Tehran “to comply fully and without delay, with its obligations” and meet IAEA’s requirements.

The incentives package put forth by the European Union in 2006 promised Iran political and economic assistance, including a pledge to help it fight drug trafficking from Afghanistan.

IAEA chief Mohamed ElBaradei warned Monday that he cannot determine whether Iran is hiding some nuclear activities, comments that appeared to reflect a high level of frustration with stonewalling of his investigators by the Iranians.

Iran insists its nuclear program is purely peaceful and designed to produce nuclear energy, but the U.S. and Europeans suspect Tehran is pursuing nuclear weapons.

The United States, Britain and France had been pressing for a new round of sanctions to step up pressure against Iran for its continuing refusal to suspend uranium enrichment as a prelude to talks on its nuclear program. But Russia and China objected to new sanctions.

Earlier this week, Iran’s President Mahmoud Ahmadinejad accused “a few bullying powers” of trying to thwart the country’s legitimate nuclear program. Ahmadinejad said that Tehran needs the ability to produce nuclear fuel because it cannot rely on other nations to supply enriched uranium to the Islamic regime’s planned reactors.

Enrichment can turn uranium into the fissile material used in nuclear warheads. But it can also be used to generate power and is allowed under the Nuclear Nonproliferation Treaty. (dre)