Thursday, November 25, 2004


China's space chief to visit NASA
The head of China's space agency will visit NASA Administrator Sean O'Keefe next week; a move one U.S. expert said could mean increased cooperation between the two countries.
The December 2 meeting with Chinese National Space Agency Administrator Laiyan Sun had been under discussion for months, O'Keefe said on Tuesday.

"It's not a major milestone by any means, it's more of an evolutionary thing," O'Keefe said of the meeting, which a NASA official called a courtesy visit.
He stressed international cooperation was part of President George W. Bush's vision for space exploration, which includes human missions to the moon and eventually to Mars.

"It is not a specific agenda, more an opportunity to exchange views and get more familiar with what our respective (space) agencies are doing," O'Keefe said.

The meeting comes barely two weeks after Chinese representatives joined a NASA workshop in Washington on international space cooperation, and just over a year after China's first successful human space flight, which concluded on October 16, 2003.

China has never worked directly with the U.S. space program and is not among the nations working on the International Space Station. But there are strong signals the Chinese want to cooperate with NASA.

'Small steps forward'
The Chinese Shenzhou spacecraft has a built-in docking rink that would allow it to park at the $95 billion station.

China's launch complex in Inner Mongolia is on the same parallel as NASA's Kennedy Space Center, which would let the Chinese share an orbit with the space station.

Joan Johnson-Freese, who chairs the National Security Decision Making Department at the U.S. Naval War College, said the Chinese meeting with O'Keefe, coupled with China's participation in the NASA workshop, was good news.

"NASA could not make these moves on their own," Johnson-Freese, an expert on international space cooperation, said in a telephone interview. "It's an acknowledgment from higher up that ignoring the Chinese and their capabilities in space is not conducive of anything good in the United States.

"We would be much better off working with the Chinese than having the Chinese work with everybody but us," she said.

China has long wanted to participate in the space station, Johnson-Freese said, but NASA declined its contributions.

"The United States has always used cooperation in areas like space science ... to build bridges with countries," she said. "I think this will be small steps forward."
Source: Reuters. November 2004

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Foreign media scramble for China's pay TV
Many of the world's biggest cable TV networks, including HBO and Nickelodeon, are taking advantage of newly relaxed laws governing media investment to set up de facto channels in China.

Nearly all the new ventures are tie-ups where a foreign player supplies program-developing expertise or actual programs for use on a specific channel being developed for digital TV by a Chinese media company.
Most of the partnerships are seizing on new rules that go into effect next week allowing foreign firms to own up to 49 percent of joint ventures engaged in program production. Such ventures were previously off-limits to foreigners.

The foreign networks have effectively found a back-door into China's potentially lucrative TV market by taking advantage of those new rules, along with Beijing's desire to quickly develop the nation's digital TV infrastructure, observers say.

Until now, only four foreign media firms have been allowed to operate TV channels in China's tightly controlled media market, and all four were limited to the affluent southern province of Guangdong for widespread broadcasts.

The new wave of channels will be limited to distribution over a handful of national digital platforms being rolled out by some of the country's biggest media firms, most notably the top two, China Central Television (CCTV) and Shanghai Media Group (SMG). Recently National Geographic Channel, which has formed a China-targeted channel, World Geographic, with CCTV.

Viacom Inc.'s Nickelodeon got the show rolling as early as March, when it announced a deal to supply 90 minutes of daily programing for a children's channel being set up by CCTV.

Since then, Time Warner Inc.'s HBO and National Geographic have entered into similar tie-ups. Sony Corp., owner of the Animax TV channel, is also in tie-up talks for a new cartoon channel being developed by Hunan Broadcasting Group, China's fourth biggest media firm.

Channel building
Discovery Communications, which operates the Discovery channels, has an existing relationship with Shanghai Media Group and has "a long-standing goal" of providing its product to China viewers on a full-time basis, a spokeswoman said.

ESPN Star Sports, a joint venture between the Walt Disney Co.'s ESPN and News Corp.'s Star Group, is also believed to be in discussions for a similar tie-up.

All of the players are seeking entry or expansion in a media market that is still highly fragmented but has the potential to become one of the worlds largest. Print and TV ad revenue totaled an estimated $18.7 billion last year, and is expected to grow at double-digit rates for the foreseeable future.

China previously gave highly limited broadcast rights to a small group of foreign-owned channels, including ones backed by News Corp., Time Warner and Viacom, in an effort to control their influence while domestic players developed.

But now the government is relaxing its grip in an effort to meet ambitious goals it has set for developing the domestic digital TV industry, observers say.

China now boasts about 100 million cable TV subscribers, the vast majority with older analog service. But with the recent roll-out of newer digital distribution systems, Beijing has set a target of 30 million users within the next few years.

To do that, observers say, it will need compelling programing like the kind that foreign media firms make.

Many of the new channels are still works in progress, but the recently launched World Geographic offers a glimpse into the kinds of offerings likely to emerge.

World Geographic began trial broadcasts in August, whose National Geographic Channel is a joint venture between National Geographic, News Corp. and General Electric's NBC unit.

The channel willingly gave up the better known National Geographic moniker as required by Chinese wary of letting foreign brands get wide recognition so early in the game.
Write: by LuisB. November 2004

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Koizumi, Putin fail to settle differences
Prime Minister Junichiro Koizumi and Russian President Vladimir Putin confirmed Sunday a plan to continue talks on the long-running territorial dispute over four Russian-held islands, but failed to narrow their differences over the issue at a meeting in Santiago.

During the 45-minute summit meeting at a Santiago hotel on the sidelines of an annual summit meeting of the Asia-Pacific Economic Cooperation forum, Koizumi emphasized the need to resolve the issue quickly and conclude a peace treaty to formally end World War II, saying, "Improving Japanese-Russian relations through concluding the peace treaty will serve the strategic interests of both nations."

Putin admitted the importance of solving the issue, saying, "It's necessary to solve the territorial dispute and conclude the peace treaty." Both leaders confirmed that they would continue discussions through reciprocal visits of foreign ministers.

The government held steadfast to its views on the peace treaty and territorial dispute over the northern territories--Etorofu, Kunashiri, Shikotan and the Habomai group of islets.

The differences over the issue between Japan and Russia grew after Putin said on Nov. 15 in Moscow that he would seek a resolution to the dispute based on a 1956 Japan-Soviet declaration that called for the return of only two of the four islands--the Habomai islets and Shikotan.

Sources said neither leader made progress on a solution during the meeting.

Meanwhile, Koizumi proposed a new schedule for Putin's visit to Japan during the 2005 Aichi World Exposition, which will begin in March. Putin accepted Koizumi's proposal, saying "It's a wonderful idea." Based on the proposal, Putin's visit is set to be postponed until March.
Source: Yomiuri Shimbun. November 2004
Write: by Yuzuru Endo / Correspondent

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Pakistan, India vow cooperation
India and Pakistan agreed on Tuesday to press on with a frayed peace process as Pakistani Prime Minister Shaukat Aziz began talks with leaders in New Delhi during a rare visit across the border.

“Both sides felt the composite dialogue should continue to move forward,” Indian Foreign Ministry spokesman Navtej Sarna told reporters after the first round of talks between Shaukat Aziz and Indian Foreign Minister Natwar Singh. “Prime Minister Aziz said the delegation he has brought reflects the commitment of Pakistan’s civil society to this process,” Sarna said.

The two countries’ foreign secretaries, Pakistan’s High Commissioner Aziz Ahmed Khan, Indian High Commissioner to Pakistan Shankar Menon and senior officials were also at the meeting.

Aziz smiled and shook hands with Singh after he landed at Delhi airport, but made no comments.

He later met former Indian Prime Minister Atal Behari Vajpayee, whose offer of friendship to Pakistan in 2003 began the normalisation of ties between the nuclear-armed rivals. Aziz also met opposition leader LK Advani.

Sarna said the talks between Aziz and Natwar Singh were “friendly, positive and forward-looking.” “SAARC issues were discussed. It was felt that although a good start had been made in Islamabad, there was potential for further regional cooperation,” he said.

Talking to journalists after meeting Vajpayee, Aziz said that Pakistan had committed itself to continuing the dialogue process. He said the people of both countries wanted the resolution of disputes between them and hoped that he would push forward the peace initiative begun by Vajpayee.

“We discussed how to improve bilateral ties between the two countries,” Advani said after the meeting. He said that he would visit Pakistan in January or February.

Aziz, who is on a tour of the region as outgoing chairman of the regional South Asian Association for Regional Cooperation (SAARC), arrived in Delhi mid-afternoon accompanied by six ministers.

Aziz is due to meet Prime Minister Manmohan Singh on Wednesday. Singh on Tuesday phoned Aziz on his arrival at his hotel. He said that that he was looking forward to improving ties between the two countries.

Analysts said the faltering peace process and discord over Kashmir were likely to dominate the first visit by a Pakistani premier in 13 years. The two sides also are expected to discuss a long-running plan to build a pipeline to bring gas from Iran to energy-hungry India that will traverse through Pakistan.

In his first official visit to Kashmir last week, Prime Minister Singh rejected redrawing borders as a solution, effectively scuttling a suggestion by President Pervez Musharraf that the disputed state could be divided into seven regions — any one of which could be demilitarised and placed under a United Nations mandate or under joint control or given independence.

In response to Singh’s statement Musharraf said that the “vibes” from New Delhi were not good. But Aziz during a visit to Sri Lanka on Monday struck a more conciliatory chord.

“My visit tomorrow will improve the atmosphere of relations between the two countries,” Aziz said. “The relations have improved considerably... It is very sportsmanlike across the board.

Aziz will conclude his visit by meeting Indian President APJ Abdul Kalam. He returns to Pakistan on Wednesday night.
Source: News agencies. November 2004
Write: LuisB

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Reflections on the near-term economic outlook in Indonesia
National elections and a change in government are a wonderful time for reflection and stocktaking and Indonesia's recent set is no exception. It is a useful, as well as a fun undertaking to try and identify the most important lessons of yesterday and guess the problems we'll face tomorrow. From the standpoint of the economy, one clear picture emerges: Indonesia has shown both stability and moderate growth for the past few years and most forecasts suggest more of the same.

This picture contains both good and bad news. Stability has meant that Indonesia has weathered a number of shocks over the past several years. The country has had to endure terrorist attacks in Jakarta, its financial and political capital; and also in Bali its center for tourism.

The country faced a fall-off in trade and travel due to international strife and also regional problems such as SARS and Avian Flu. The elections themselves, until fairly recently were a source of concern - not all elections in such a large, developing country as Indonesia have gone as smoothly or as peacefully.

The robust performance with respect to these and other shocks has allowed Indonesia to put the 1997 Economic Crisis and the political upheaval of the end of the Soeharto regime firmly behind itself. Since 2001 the annual growth rate in GDP has risen from less than 4 percent to between 4.5-5 percent. This has allowed per capita income to rise and the incidence of poverty to fall. Millions of people have been made better off - at least a little. This growth has come on the back of strong household and public sector spending.

It has not come alongside strong investment spending - year after year, firms have failed to spend to open new plants or even to maintain old facilities. Currently, the investment-to-GDP ratio is nearly two full percentage points below its level in 2001.

Indeed, perversely this is one of the reasons the economy has been relatively stable: There have been so few investors that there has been no one to scare when shocks hit. While stability has been welcome, it has meant on average lower growth. More worrisome, potential growth is lower: Failure to invest in new plants, to buy new equipment, and to maintain existing facilities means that the economy will be limited in its ability to grow in the future. A lack of investment today, stunts growth possibilities tomorrow.

The reason for a lack of foreign investment is well known. Foreign investors, in particular, have been reluctant to risk new funds in view of the well-publicized problems in governance, in protecting their rights amid a corrupt and poorly functioning legal and judicial system. Any firm contemplating new investments is going to think of the experiences of Manulife and Prudential. Indonesian firms similarly have severely limited their new commitments over the past few years. They too worry about ensuring the safety of their investments.

The picture of a relatively stable economy with low investment has been quite clear for several years. During the election it has made for focused discussion on the need to encourage investment by improving governance. Arguably, it was the image of Susilo Bambang Yudhoyono as the candidate more likely to attack corruption that helped give him the victory.

Ironically, it may also be the election that makes it harder to see the economy in this fashion. It would not be unusual for an election such as this, bringing in a reform-minded candidate, after a long period of little investment that sparks a mini-boom in business spending. It would not take too much for many firms to increase their capital spending - many businesses are likely to need to spend something just to keep their production facilities going.

The Asian Development Bank's 2004 Asian Development Outlook projected only a very modest increase in investment expenditures, supporting an overall 4.8 percent rise in GDP. If that investment spending increased to 10 percent, it would boost GDP growth by more than one full percentage point. A 10 percent increase in investment spending sounds large by recent standards, but it would still put business spending 20 percent below the levels seen in 1996 and 1997, before the Economic Crisis.

I am not saying we will definitely have this pickup in business spending; many things can combine to frustrate this. (Although if it does occur, remember where you heard about it first.) We can all dream up external or internal shocks that combine to lower growth. Missteps in monetary or fiscal policy, if they occur, could also be costly.

But if the "boomlet" does come, let us be clear that it does not reflect a resolution to the many problems Indonesia has been struggling with for the last few years. An economic boomlet that stands on a cyclical upswing in investment, encouraged by a calm election and prospects for reform, will be short-lived unless these reforms actually come about. When firms have accomplished their priority spending targets, when this higher spending works its way through higher household income and expenditures, growth will again slacken.

Only when palpable changes in the investment climate emerge will there be sustainable higher levels of spending and sustainable higher growth. A boomlet will give the Government some breathing room, but the longer-term reforms will still be needed to turn a boomlet into a period of prosperity.
Write: LuisB. November 2004

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China’s mounting influence - Xinjians’s thirst threatens Kazakh water resources
Xinjiang's growing thirst for water is raising fears of a major catastrophe in Kazakhstan.
Mels Eleusizov heads the Kazakh nongovernmental organization Tabigat (Nature). He said the Irtysh and Ili rivers, which both originate in mountainous areas of Xinjiang before crossing into Kazakhstan, are being increasingly drained to serve China's needs.

"For Kazakhstan, the most alarm concerns two rivers - the Ili and Irtysh," Eleusizov said. "The new infrastructure and factories in Xinjiang consume a lot of water. The drinking water needs are increasing, too. If China continues to increase water consumption in the area, it will certainly affect the water resources on our side."

The Ili flows through Xinjiang into southeastern Kazakhstan and terminates in Lake Balkhash.

The Irtysh rises in China's Altai Mountains and also crosses into northeastern Kazakhstan, before flowing through Lake Zaysan to the Russian city of Omsk and then into the Ob River.

The increasing usage of river water in Xinjiang, which has relatively few water resources of its own, is inherent in Beijing's aim of attracting ethnic Han Chinese to the region and developing the local economy.
Ann McMillan, a scholar at Griffith University in Queensland, Australia, has been researching the interdependency between Xinjiang and Central Asia.

"There's actually a lot of concern coming out in China in the government [media]," McMillan says. "There have been reports about the water table dropping, especially around Urumqi, the capital of Xinjiang. So they are aware that they've got major problems. And they've even started charging for water in some places. But for their development to go ahead, they need water. So you've got a 'Catch 22' situation."

The Irtysh and Ili are crucial sources of fresh water for the Kazakh population. Both also play a vital role in the economy, providing water for the industrial, agricultural. and fishing sectors.

Myrzageldy Kemel is a member of the Kazakh parliament's Committee on the Protection of the Environment and Ecology. He talked about the environmental consequences of the increasing usage of the Ili's water:

"If the level of the [Ili] River decreases, the environment along the banks will be affected drastically," Kemel said. "Local citizens will suffer a lot. Now, nobody is paying attention to this, although in about 50 years [the situation] might be even worse than in the Aral Sea."

The Aral Sea has lost three-quarters of its volume since 1960, when Soviet-era planners began diverting its feeder rivers to irrigate cotton fields. The Aral Sea is widely acknowledged to be one of the world's worst man-made environmental disasters.

The United Nations Development Program (UNDP) has warned that Kazakhstan's largest lake, Lake Balkhash, is in danger of drying out if Astana does not adopt better water management practices or else gain Chinese cooperation over the usage of the Ili, the lake's main contributor.

The current construction by China of a canal - 300 kilometers long and 22 meters wide - to reroute water from the Irtysh is also of great concern.

Abai Tursunov is a professor at the Kazakh Institute of Geology and Geography in Almaty. He said he is worried about the environmental impact when the canal becomes fully operational, which is estimated to be in 2020.

"The completion of the canal will affect us drastically," Tursunov said. "Power stations will be very much affected. Nobody is raising the issue, but gradually all of this can lead to major environmental problems."

Hydropower stations and factories are located along the Irtysh, while the Irtysh-Karaganda canal makes agriculture possible in central Kazakhstan. The river also provides drinking water to the capital, Astana, as well as to three other major cities - Karaganda, Semipalatinsk and Pavlodar.

Chinese authorities have provided little information on the canal project. But speaking to RFE/RL's Kazakh Service, China's ambassador to Kazakhstan, Zhou Xiao Pei, tried to be reassuring: "We currently use 10 to 20 percent of the [Irtysh's] waters. We are building a new infrastructure. [But] we are going to use no more than 40 percent [of the water]."

In 2001, Kazakhstan and China signed an agreement aimed at facilitating cooperation on trans-boundary water management. Through consultations, the two states agreed to share information concerning the Irtysh.
Zhakybay Dostay, also of the Kazakh Institute of Geology and Geography in Almaty, said the talks have led nowhere so far.

"The [joint Kazakh-Chinese intergovernmental] commission meets every year without results," Dostay said. "They just give figures, make statements and sign documents. The problems remain."
Kazakh President Nursultan Nazarbaev visited Xinjiang in September. But there is no indication that he raised the issue of trans-boundary rivers with Chinese officials.
Write: by Antoine Blua. November 2004

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Air China IPO to raise up to $1.1 billion
Air China, the biggest Chinese international carrier, plans to raise as much as 8.7 billion Hong Kong dollars, or $1.1 billion, in its initial public offering to buy aircraft and pay debt, bankers involved in the sale said Wednesday.

The Beijing-based company is offering 2.805 billion shares at between 2.35 dollars and 3.10 dollars each, which is 8.8 times to 11 times the 2005 profit forecasts by banks arranging the sale, said the bankers, who asked not to be identified.

Air China will benefit from a rally in Hong Kong shares that pushed the city's benchmark stock index to its highest in almost four years, said Andy Mantel, managing director of Pacific Sun Investment Management.

The acquisition of a 10 percent stake by Cathay Pacific Airways of Hong Kong and a decline in fuel prices from a 14-year high last month may also lift investor confidence.

"The timing is right to list on the market and the Cathay Pacific investment will help," Mantel said. "A lot will still come down to pricing."

The range is 1.2 times to 1.5 times the company's book value in 2005, the bankers said. Cathay Pacific, Asia's sixth-largest carrier by sales, trades around 1.3 times its book value. Singapore Airlines, Asia's most profitable carrier, trades around 1.2 times, according to research from Merrill Lynch.

"Air China has better earnings prospects because of improved asset quality after the pre-IPO restructuring," said Agnes Deng, a manager at Standard Life Investments. "Much of its growth still comes from domestic routes, which international airlines have no access to," justifying a higher book value.

To attract investors, Air China is citing an expected increase in demand for air travel and air freight, buoyed by China's average 9 percent annual economic growth during the past decade.

The Hang Seng index has climbed 20 percent in the past six months; partly as an influx of mainland Chinese tourists helped revive Hong Kong's economy.

Air China plans to fix the price of its shares in the week of Dec. 6 and start trading in Hong Kong and London in the week of Dec. 13, the bankers said.

China International Capital and Merrill Lynch are arranging the sale. China International's spokeswoman in Beijing, Feng Danyun, and a Merrill Lynch spokeswoman, Connie Ling, declined to comment.

Chinese citizens will make an estimated 100 million trips abroad every year by 2020, an average annual growth rate of 12.8 percent, or triple the pace of global industry expansion, according to the World Tourism Organization, a United Nations agency.

Higher jet fuel prices are threatening to erode the profitability of Chinese airlines even while traffic is increasing. China's dominant jet-fuel supplier raised the price at which it sells to domestic airlines by 10.8 percent, the Xinhua press agency said in August.

Air China plans to spend 18.7 billion yuan, or $2.3 billion, buying 46 aircraft by 2006 and building an airport terminal, according to Merrill Lynch's research on the sale. Chinese airlines have been expanding their fleets as rising urban incomes make travel affordable to more people.

Air China may face increased competition after the nation's Civil Aviation Administration this year rolled back a 2002 ban on new domestic carriers. International airlines permitted to add routes to China this year include Cathay Pacific, United Airlines, Air France-KLM Group and Deutsche Lufthansa.
Source: Bloomberg News. November 2004
Write: by Cathy Chan

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Calvin Klein lands in India
Calvin Klein hit the headlines in the US way back in 1979 with the launch of his designer jeans - rather the commercial for his jeans featuring the 15-year old heartthrob of the time, Brook Shields - with the catch line: "You know what comes between me and my Calvins? Nothing" The jeans sold 200,000 pairs in the first week.

Well, it may be 25 years too late, but Klein, the marketing genius, the person, the designer known to provoke, the brand name considered one of the most valuable alongside Pepsi, Coca-Cola, IBM and Nike, has finally arrived in India. Klein, the man, is on a mission. "I've come to make connections. Be it fashion, fragrances or accessories, India is a market that needs to be explored. With over a billion beautiful people, the possibilities here are enormous," he says.

Named by a top US magazine as one of the 25 most influential people in America, Calvin the Conqueror - as Women's Wear Daily dubbed him once - says he is looking at retail and distribution as possibilities and was also, in the process, discovering the most extraordinary craftsmanship in India. Although the Calvin Klein brand ranging from jeans to coats, underwear to fragrances and home decor to watches is now part of the Phillips-Van Heusen Corporation, Klein continues to be creatively associated with his brand and advises on global expansion plans. Indeed, as head of the eponymous designer company that generates global revenues of more than US$2 billion a year, the presence of the man who lends his name to the Fortune 500 company and dictates the way the well-dressed world turns out, is a significant occurrence.

It shows India has progressed beyond being a land of cyber-coolies (call center executives, as they have come to be called) and a low-income, low-cost destination to a vibrant economy where the best and the most expensive designs created by top fashion labels can find a market. India's $200 billion retail market is still small compared to rivals such as China, Malaysia and Thailand, but according to estimates by McKinsey, the market size is expected to grow to $500 billion in the next five to six years.

The coming of Klein comes in the wake of another top American fashion designer, Tommy Hilfiger, who has also set up shop in India. The creator of one of the most recognizable fashion labels was in India earlier this year to launch his exclusive stores in the urban centers of Delhi, Gurgaon, Mumbai and Bangalore, bringing the biggest fashion brand to this part of the world.

"The Indian economy is soaring. I think the Indian people love brands. We have a partnership with Arvind and Murjani [as per current Indian laws, an Indian partner is a statutory requirement] and it doesn't get better than that. We are also powerful as a brand to move into a country and do well. We back it up with great stores, wonderful advertising, products and newness at the same time as in the rest of the world. There isn't another American designer on this soil. It is because maybe they don't understand it, maybe they don't know or maybe they don't care. I understand it. I care about it and I am excited about it,'' Hilfiger said in an interview on his coming to India, of course before Klein decided to move in too.

But apart from the business side, there has been another aspect to the Klein visit - the creative part. The czar of fashion has been quietly soaking up local sights, sounds and snips, traveling incognito with a few Indian friends. He has visited the local emporia and the crafts museum in the capital, absorbing various traditional Indian techniques and threads with cloth (ikat, tanchoi, chikenkari, baluchari) as well as the use of bright colors - the raspberry reds, the fuschia pinks and the sun-dried yellows. Clearly, Klein does not want his foray into India to be a one-way process and he wants to take back some of the Indian creations to expand his horizon. "The way you guys put colors together is amazing," Klein told reporters at the crafts museum, "the feel, texture, warp and weft - its exquisite."

Klein's interest is a further reflection of the fact that Indian influence is beginning to be felt at fashion hot spots around the world. American designers who have sporadically been inspired by Indian motifs in the past are embracing the eastern look - saris (traditional Indian dress worn by women), bandgala (high-neck jacket for formal occasions), choli (embroidered blouse), lehenga (Indian wrap-around), kurti (loose cotton tops) and more.

According to Rohit Bal, one of India's leading fashion designers, the West is looking at Indian fashion more seriously. "Some critics say there is too much hype about Indian fashion. Every time I show my clothes in the West, the positive feedback is that 'it's beautiful; it's like being reborn as a princess'. But the negative feedback is 'oh my god, I cannot carry off such clothing'. What we are witnessing is a conversion of this negative feedback into a positive one."

Another tricky question, though, is whether Klein will water down his signature ads for the more conservative Indian audience. "It is not a question of watering down, but we will definitely be careful about cultural sensitivities," says Klein. "At the same time, I feel there are a whole lot of Indians who do not think too differently from Americans. That should make the task easier."
Write: by Siddharth Srivastava is a New Delhi-based journalist. November 2004

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The case of Kim Jong-il's missing portraits
If you love a good, multi-layered mystery, and convoluted Asian machinations with international implications, then you'll love this one.

Speculation among North Korea watchers is feverish and rampant, and experts are trying to figure out what's going on with the world's last grand personality cult in the world's most reclusive kingdom. Some of the ubiquitous portraits of North Korea's Dear Leader Kim Jong-il are disappearing, reportedly at his direction, from some but not all public places in Pyongyang. Furthermore, the standard honorific "Dear Leader" has been dropped in many cases.

Reports on North Korea's leader Kim Jong-il's order to remove his portraits from some public places in Pyongyang are prompting rife speculation worldwide. Some analysts have said "Dear Leader" Kim might have been shifted from the top position, signaling the beginning of his downfall at a time of unprecedented economic and international political problems. Some said it could be preparation for the transfer of power to one of Kim's sons. Some said Pyongyang is just switching old portraits for new ones bearing a better, older likeness, while others conjectured Kim has just decided to show the world that the Hermit Kingdom will humanize a bit and open up a bit toward the outside world. This suggestion of possible humanism, humility and almost certain pragmatism comes at a time when North Korea, like the rest of the world, is increasingly conscious of the hardline United States administration, in advance of the still-unscheduled next round of six-party talks on defusing the Pyongyang nuclear crisis.

Nobody is sure about what is really going on. Is this an authentic downsizing of the larger-than-life personality cult, an effort to win friends and influence people, or the result of a power struggle by those dissatisfied with Kim Jong-il's refusal to undertake reforms and make concessions at a time of unprecedented international pressures, a barely sustainable economy, and now a Japan that is considering economic sanctions over its citizens abducted by North Korea years ago?

"Those portraits' removal aims to get more sympathizers with Pyongyang from international society, especially targeting South Korea's pro-North politicians and younger people by showing the world the softening of a personality cult at home," Lee Young-hwa, the representative of Rescue the North Korean People! (RENK), a Japan-based citizens' group supporting North Korean asylum seekers in China since early 1990s, told Asia Times Online. Lee is also an economics professor and third-generation Korean resident in Japan.

Many are surprised to learn that this is not the first time Kim, now 62, has ordered his own portraits to be taken down from public buildings. This goes back to the summer of 2002. It first happened in Japan in the Chongryon society, an organization of North Korean residents who for years boasted iron-clad solidarity for their motherland. The purpose for the removal of Kim's portraits from public spaces in Japan had been to emphasize Koreans' unity, North and South, as the same race. At that time the move sought to soften, dilute, even diminish the ideology of a personality cult and to play up Kim's conciliatory stance toward South Koreans - putting people before ideology. Kim specifically ordered Chongryon (the General Association of Korean Residents in Japan) to remove his portraits from North Korean schools in Japan in order to win more pro-North Korea supporters from ethnic Koreans, to make them future Chongryon members and encourage them to enroll their children in Chongryon-affiliated schools.

Kim now seems to have decided to do the same thing domestically, especially when Pyongyang faces a profound international predicament, ranging from its stubborn refusal to do away with its nuclear-arms program to Tokyo's fury over its citizens abducted over the years by North Koreans. He may well have been trying to attract more South Korean supporters for his dynasty, just by showing some limited, possibly just cosmetic, flexibility in his Stalinist nation. It might be Pyongyang's typical divide-and-rule strategy in dealing with South Korea, the United States and Japan, this time counting on pro-North supporters in the South.

The Russian news agency Itar-Tass was the first to report on Tuesday that many paintings of Kim were being removed from their usual positions, alongside those of his father, North Korea's founder Kim Il-sung. Adding fuel to the speculation on Thursday, Radiopress, the Japanese monitoring agency of North Korean media, reported that North Korea's official media on Wednesday dropped the glorifying description of "Dear Leader" from Kim's title. Radiopress said the North's Korean Central Broadcast, the Korean Central News Agency and other media simply described him as "general secretary of the Workers Party of Korea, chairman of the DPRK [Democratic People's Republic of Korea] National Defense Commission, and supreme commander of the Korean People's Army".

In the latest development, a North Korean diplomat who defected to the South last year said on Thursday that Kim himself ordered the portraits removal as early as last year, according to the Korea Times. On the same day, Japanese media reported that Kim's portraits have been removed only from certain public places - those frequented by foreign guests, including the People's Culture Palace - not from all public places in Pyongyang or across the country.

Whenever Kim actually decided to take down his portraits, at least some of them, he appears to have believed that without de-emphasizing his personality cult, leavening his rigid ideology and thus getting more support from South Koreans - especially from the pro-North ruling Uri Party members in Seoul - he cannot effectively confront the US and Japan over Pyongyang's nuclear-weapons program and its past abductions of Japanese citizens.

After Kim's order in late August 2002, Chongryon directed all of the pro-Pyongyang 110 Korean elementary and junior high schools across Japan to remove his portraits; most of this took place in September 2002. Behind this move was the dwindling number of North Korean residents in Japan. Currently about 600,000 North and South Koreans are said to live in Japan. More than 500,000 are said to be South Koreans, while only 100,000 are North Koreans. Until the 1960s the numbers from each Korea had been almost the same. But recently, many Koreans have changed their nationality from North to South. Moreover, not a few Koreans have become naturalized Japanese citizens in recent years.

As a result of all these factors, enrollment in pro-Pyongyang schools is falling year by year. This trend was fueled by expensive tuition, due to the lack of subsidies from the Japanese government. North Korean parents therefore are reluctant to send their children to those schools, seeking instead to enter them in Japanese public schools.

Moreover, the eruption of the abduction issues - Pyongyang agents abducting Japanese over the years - also accelerated Japan's trend toward anti-North Korea sentiment. Faced with this threatening of Korean national self-determination, Kim ordered Chongryon to take down portraits at schools in August 2002, to make things more comfortable for South Korean parents and to lower their resistance to sending their children to pro-North schools in Japan.

Faced with recent mass movements of refugees from North Korea - more than 460 in July - Kim might have wanted to play down the personality cult to stem the outflow, with some so desperate to leave the worker's paradise that they even climb the walls of various embassies and consulates in China, to Beijing's great embarrassment. Moreover, the decision to lower the profile of the dictator in the reclusive communist state is in line with the extremely adverse situation that North Korea has created for itself. In the past four years, US President George W Bush has applied increasing pressure to thwart North Korea's nuclear-weapons program and chronic human-rights violations. This approach appears to have been reinforced by his appointment of the tough and pragmatic Condoleezza Rice as new secretary of state in his second administration once Colin Powell leaves that post.

As for Japan, Pyongyang has continued the risky cat-and-mouse game of diplomacy with Tokyo as its economy continues to deteriorate - in a bid to run up the amount of potential Japanese economic aid and post-World War II reparations for past wrongs. Today in Tokyo, however, not a few lawmakers and citizens are asking the administration of Prime Minister Junichiro Koizumi to consider economic sanctions on North Korea. The anti-North Korea attitude has become even more acute after a Japanese delegation's week-long stay in Pyongyang did not yield good news about the fate of abducted Japanese. Instead, they brought back to Tokyo the ashes of at least two persons, including Megumi Yokota, who was kidnapped in 1977 at age 13
North Korea now can only rely on South Korean President Roh Moo-hyun's center-left, pro-Pyongyang administration. South Korean political circles are sharply divided into conciliatory pro-North progressive camps of the Uri Party and antagonistic conservatives of the main opposition, the Grand National Party. Capitalizing on these divided political circles, Kim basically appears to have adopted a conciliatory strategy toward South Koreans by downsizing the personal cult of ideology.

Professor Lee Young-hwa, who said Pyongyang is trying to get more Seoul sympathizers, also pointed out that Kim once ordered his portraits alongside those of his father Kim Il-sung to be taken from public buildings in 1978, four years after Kim Il-sung officially nominated his son as his dynastic successor. Lee, an associate professor of economics at Kansai University, said that at the time Kim Jong-il was testing his people's loyalty to him: those who actually took down his portraits as ordered were said to have been punished and sent to gulags, or prison camps, often meaning death. This is one of the major reasons, Lee said, that Koreans cannot take what appears to be Kim's direct order at face value this time around. They are cautious: wanting to obey their leader who says take down his pictures, but also aware that obedience may carry a price.

Moreover, concerning the removal of the glorifying - though some find it odious - honorific "Dear Leader" from Kim's title, Lee said that also signifies Kim's efforts at conciliation toward South Korea. "Recently North Korea has intensified its media campaigns towards [the] South Korean audience, especially in Hangul [the Korean alphabet] on the Internet," said Lee. Now North Korea is coming to realize that the "Dear Leader" title inspires disgust among Korean audiences, especially the young.

Still, Lee said he could not exclude the possibility that Kim just wants to replace his old portraits with new ones because the old standard portraits depict a man in his 20s. Then again, maybe he wants to test his people's loyalty to their Dear Leader, again.
Write: by Kosuke Takahashi is a former staff writer at the Asahi Shimbun and is currently a freelance correspondent based in Tokyo. November 2004

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Kirin to purchase 25% stake in Chinese brewer
Kirin Brewery, Japan's biggest beverage maker by sales, said Wednesday that it would spend ¥3.9 billion, or $37.6 million, for a 25 percent stake in Dalian Daxue Brewery.
Kirin said it planned to double the Dalian-based brewer's yearly production capacity to 400,000 kiloliters, or 106 million gallons, by December 2008.

"China's beer consumption is rising," said Naomichi Asano, the Kirin vice president. "Our purchase will help us expand our Chinese market share."

China, which became the world's biggest beer producer in 2002, brewed 25.1 million kiloliters last year, according to Kirin. Japan produced 6.53 million kiloliters, down from 6.93 million kiloliters in 2002.

China will produce 39.2 million kiloliters by the end of 2010, according to Takashi Kadokura, an economist with Dai-ichi Life Research Institute.

Japanese companies such as Kirin and Asahi Breweries are expanding overseas and diversifying their alcoholic and nonalcoholic products to attract consumers amid shrinking domestic demand for beer.
Kirin said it would complete the acquisition by the end of the year using its own cash. The purchase will not affect this year's earnings.

"This investment is part of the overall plan to increase our production capacity in China," Asano said. Kirin may invest more in three northeastern Chinese provinces around Dalian, he added.

Kirin plans to spend ¥100 billion on overseas M&A by December 2006, Kazuyasu Kato, the managing director, has said. It plans to double overseas sales by 2010 by buying foreign breweries, he added.

In October, the Nihon Keizai newspaper reported that Kirin planned to invest as much as ¥10 billion to double its beer output in China to one million kiloliters a year.
Source: Bloomberg News. November 2004
Write: by Issei Morita

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Singapore purchases stake in carmaker
The Government of Singapore Investment Corp. has bought about 5 percent of Proton Holdings, signaling rising investor confidence in Malaysia's largest carmaker after it announced an alliance with Volkswagen.

GIC, as the Singapore company is known, said in filings to the Malaysian stock exchange late Tuesday that it had bought a combined 27.7 million shares on Nov. 9. It did not reveal the price paid for the stake, which was worth 249 million ringgit, or $65.5 million, at the close of trading Tuesday, compared with 256 million ringgit on the day GIC bought the stake.

Proton's agreement to assemble Volkswagen cars, announced last month, is raising investor interest in the Malaysian carmaker, which had been seeking an overseas partner since Mitsubishi Motors of Japan ended a 21-year alliance in March.
Proton shares have risen 6.4 percent since Oct. 21, when the Volkswagen alliance was reported by the German newspaper Handelsblatt.

GIC's interest "could be because of the tie-up with Volkswagen, so they see greater potential from them," said Sharifah Sheila, a fund manager at Prudential Unit Trusts. Prudential's view on the stock is "more positive than before," she said.
The Singapore government investment agency is charged with achieving "good long-term returns on state assets placed under our charge by investing internationally," according to its Web site.

GIC and Temasek Holdings, another Singapore state-run investment company, have been acquiring stakes in some of Malaysia's largest companies. Relations between the countries, which were united between 1963 and 1965, have improved since Abdullah Ahmad Badawi replaced Mahathir bin Mohamad as Malaysia's prime minister a year ago.

On Nov. 10, Temasek and CIMB, Malaysia's biggest investment bank, said they would form a 1 billion ringgit fund to invest in properties in Malaysia.

In March, Temasek paid 1.6 billion ringgit for 5 percent of Telekom Malaysia, Malaysia's biggest phone company. Two months later, Telekom and Singapore Technologies Telemedia, a Temasek unit, agreed to jointly buy 33 percent of the closely held Idea Cellular, an Indian company.
GIC owns 6.1 percent of the Malaysian builder Gamuda and bought 5 percent of the auto group UMW Holdings in January.

Proton will assemble two Volkswagen models for Malaysia's car market by the end of next year and is forecast to sell 15,000 cars by 2006, the German automaker said last month. Proton may jointly develop new models with Volkswagen and share technology as part of the agreement, Proton said later.
Write: by Stephanie Phang and Khoo Hsu Chuang. November 2004

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