HIGHLIGHTS

CHINA – LEGAL AFFAIRS

China's middle class rebels
Doves coo in their cages overlooking the stone courtyard, and the shouts of a man collecting goods for recycling reverberate along the narrow alleyways.
On the surface, this maze of enclosed courtyards, one-storey houses and narrow stone passageways seems to be a picture of traditional Chinese life.
But against this peaceful backdrop a drama is being played out, pitting tradition against modernity, and individuals against the power of the state.

Beijing's old city is being swallowed by the urban sprawl of shopping malls and six-lane highways. Whole blocks are being razed as China moves to create a city of the future to host the 2008 Olympics.

In one area undergoing redevelopment, I met 47-year-old Liu Changshan by chance. He invited me to visit his house, which is facing demolition. It stands alone in a wasteland of broken bricks, the only remaining structure in the entire block.

He described his emotional ties to his property.
"My mother and father got married here," he said. "They bought this place before 1949. We're six children and we all grew up here.
"Now my mother and father have both passed away. I can't bear the thought that this house will be destroyed."
But Mr Liu is refusing to go for financial reasons. He said the compensation offered was not enough to buy a new place, even in the suburbs.
He will get $1,000 per square metre, less than half the market value of the site. And the personal cost is enormous - he has already sacrificed his 20-year-long marriage.

"My wife is someone who works hard, she couldn't live in these conditions. We really felt strongly for each other but every day we argued about our situation. I knew we couldn't go on, so we had to separate, then we divorced."

Mr Liu is among those paying the price for the city's facelift. One Swiss non-governmental organisation estimates 300,000 people have been evicted in Beijing to make way for Olympic projects.

But officials have argued that figure is too high, and they insist those relocated benefit by having an average of 40 sq m more space per family.
Officials turned down my requests for an interview.

'Benefits'
Lawyer Lester Ross often represents developers. He believes that many residents are happy to take the compensation and move.
"In many instances, people are going to benefit because a great deal of the housing in Beijing, as well as other cities and rural areas, is very substandard," he said.

In the past, he has had to tackle problems caused by forced evictions by subcontractors working for the city government. But he believes the attitude is changing.
"One of the reasons why construction proceeded so fast is because they have been able to disregard what are considered to be basic rights of people who are residents or who maintain small businesses.
"If you just bulldoze them out of the way, then of course new construction can go on much faster. Beijing, in particular, is concerned now with the greater attention that's coming with the Olympics. Beijing doesn't want the great construction that's under way to be tarnished by public protests," he said.

'Damage done'
Recently the government announced it will demolish fewer buildings in a bid to tackle growing discontent.
But if Ye Guozhu is anything to go by, the damage may already have been done. His family's house was knocked down with their possessions still inside.
Unhappy with the compensation offered, his brother appealed to the authorities but got nowhere. Desperate, he tried to commit suicide in Tiananmen Square and was given a two-year jail term.

Mr Ye is deeply embittered by the experience.
"This unchecked demolition over the past few years has changed the way that people think about the party and the government. Now people think our government isn't governing for us. They're bandits and hooligans. It's a very deep problem. People have already lost confidence in the government," he said.

He now liaises with others who have lost their homes. His movements are monitored by the authorities and I was detained when I visited him, an indication of just how nervous the government is.

And he is not the only one who has turned against a government he once supported.
"These demolitions aren't being carried out properly. They're not taking account of people's rights. Everybody thinks that," said Liu Changshan, the man whose house faces demolition.
Then he pulls back some blue plastic sheeting to show me six huge containers of petrol lined along the walls.
"I'm prepared to take this fuel and pour it over my body. If they knock my house down forcibly, I'll set myself on fire," he said.

It is a sign this urban renewal is spawning a new generation of revolutionaries. It is ironic that in a communist country that has jettisoned so much of its ideological baggage, homeowners are now being thrust into the position of rebels, defying their government to defend their own property.
Source; BBC News, June 04
Write; by Louisa Lim, BBC correspondent in Beijing
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JAPAN – LABOR

Inflated fertility rate used for pension bills
Ministry allegedly sat on lower figure
Health, Labor and Welfare Ministry officials said Tuesday they had estimated a record-low fertility rate in 2003 of 1.29 almost two weeks before the contentious pension reform bills were pushed through the Diet on June 5, based on a rosier figure.
The government's pension reform package was based on a more optimistic fertility rate of 1.32 for the year, forecasting it to eventually recover to around 1.39. A figure above 2.08 is needed to sustain the population.

Opposition lawmakers had demanded that the latest figure for 2003 be disclosed before the government-sponsored pension bills were passed.
Some have speculated that the ministry intentionally delayed the announcement of the figure because the government's pension reform plan was based on a more optimistic scenario.
The revelation that the government had already estimated the actual figure to be lower than that used in its pension reform package could fuel further public distrust of the system.
Responding to a written request from Takashi Yamamoto, a House of Councilors member of the Democratic Party of Japan, the welfare ministry said the head of the division in charge of demographic statistics reported an interim result of the latest data to the head of the ministry's statistics and information department on May 24.

But the ministry only released the data on the afternoon of June 10, after major newspapers reported the figure in front page stories that day.
The total fertility rate is a calculation of the average number of children that a woman will bear during her lifetime.
A senior official of the ministry's statistics division said Tuesday the interim figure was "around 1.29." He claimed the figure was tentative and not ready for official release.
Chief Cabinet Secretary Hiroyuki Hosoda meanwhile defended the ministry.
"You need to analyze various factors even after figures are obtained," he told a regular news conference. "Usually it takes several days before publication."
The government's fertility rate forecasts have been consistently overoptimistic for more than two decades, forcing it to repeatedly revise down pension premium revenue assumptions.
A higher birthrate prediction is politically favorable for the government, which has been trying to bathe its social security plan in a rosy glow.
Pension reform will be one of the key topics in the July 11 Upper House election. Welfare minister Chikara Sakaguchi declined to say whether the ministry intentionally delayed the release of the figure.
Source; The Japan Times, June 04
Writer; by Reiji Yoshida
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TAIWAN – DEFENSE

Taiwan urged to buy US weapons
Arms budget; According to the delegation visiting Washington, US officials said that if Taiwan does not treat its national defense seriously, then the US won't either
US Deputy Secretary of Defense Paul Wolfowitz has expressed serious concern about Taiwan's ability to protect itself against possible attacks by China, and urged Taiwan to strengthen its defenses with the proposed arms purchase, according to a Taiwanese legislator visiting Washington.
According to Democratic Progressive Party (DPP) Legislator Lee Wen-chung, Wolfowitz said that if Taiwan does not treat its national defense seriously, then the Americans won't either.
Wolfowitz said that if Taiwan did not take action as soon as possible to strengthen its defenses, China would be encouraged to invest more on military equipment, Lee told the Taipei Times after he and a multi-party legislative delegation headed by Legislative Speaker Wang Jin-pyng (王金平) spent a day in Washington discussing Taiwan's arms procurement budget with top defense and State Department officials.
The 15-member delegation was briefed by 25 US military and civilian officials during a breakfast meeting on the first day of a three-day visit on Monday morning, and then went off to separate meetings at the Pentagon and the State Department.
Although Wang is from the pan-blue camp, he still showed support for the purchase.
"The balance of military power on the two sides [of the Taiwan Strait] is necessary to the area's peace, stability and prosperity," Wang said.
The delegation was to attend a congressional meeting yesterday to discuss the prospects for a measure before the US Congress to enhance military relations between the US and Taiwan through greater joint activities and mutual visits by top officials who are currently barred from such visits by long-term US policy.
That measure, proposed by Senator Sam Brownback, is expected to come up for a vote this week. The House recently approved a parallel bill.
On Monday, American officials were "vague" about the US' commitment to help Taiwan fend off an attack from China, Chinese Nationalist Party (KMT) Legislator Sun Kuo-hua told the Taipei Times.
After the US officials insisted that it would be in Taiwan's best interests to buy the weapons stipulated in the special budget package - diesel submarines, P-3C anti-submarine aircraft and Patriot anti-missile systems - the legislators received somewhat unsatisfactory answers to their questions, Sun said.
When asked if the US would come to Taiwan's defense against China if it were to buy all the weapons, the US side was "vague," Sun said, "because they couldn't say they wouldn't come to our defense, because if they said that, Beijing would say, `Okay, let's attack.'"
"I think the United States is keeping that deliberately vague," he said.
Washington has long been pressuring Taiwan to buy the robust weapons package US President George W. Bush promised in April 2001.
Meanwhile, Pentagon officials were still unable to provide details on the design and cost of the eight diesel submarines included in the package, Sun said.
"We didn't even see a configuration for the submarines ... there's a lot of uncertainties in the cost estimates," he said. "The United States Navy doesn't know."
Sun indicated that Washington was still looking toward various European countries to provide the designs.

But the US officials "gave no indication where the subs will come from" and could not provide a price estimate, Sun said.
"They could only give a rough estimate. We want them to be more accurate," he said.
"How can we approve the cost in the budget if we don't know?" he said.
US shipbuilding companies, "cannot build diesel submarines," because they have not manufactured any for more than 40 years, Sun said.
Source; Taipei Times, June 04
Write; by Charles Snyder and Debby Wu
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JAPAN – ECONOMIC AFFAIRS

China, Japan at odds over offshore gas project
Tokyo worries about sovereignty in the East China Sea.
China-Tokyo is expressing concern about a potentially lucrative natural gas field being developed by China near the border of Japan's exclusive economic zone (EEZ) in the East China Sea.
Japanese officials say the project may infringe on Japanese sovereignty, while China says it seeks joint development with Japan.
On Monday, Foreign Minister Yoriko Kawaguchi met her Chinese counterpart, Li Zhaoxing, here and expressed her concern.
Kawaguchi, who is visiting China for a regional ministerial conference, asked Li for information on the Chunxiao project because officials in Tokyo believe the area being drilled by China may cross over to Japan's EEZ, Japanese government officials said.
``There is a possibility the area marked off by China for drilling could be on Japan's side of the border dividing the two countries' EEZs,'' Kawaguchi said, according to officials.
She said it was possible the underwater gas field extends beneath the sea floor into what Japan considers its side of the boundary, and that Japanese natural resources could be tapped by China.
The Chinese foreign minister did not address Kawaguchi's requests for details. Instead, Li said the two sides should continue to stay in touch on the issue.
Li suggested that Japan and China ``shelve their differences'' and jointly develop the gas field.
In Tokyo, Shoichi Nakagawa, minister of economy, trade and industry, said Tuesday in a regular news conference that the government has no plans to jointly develop the natural gas field near Japan's claimed EEZ.
Nakagawa said he plans to inspect the site from a Japan Coast Guard aircraft.
Tokyo and Beijing dispute the boundary of the EEZ in the East China Sea. Tokyo contends that it is drawn at equal distances from the shores of the two countries. But China maintains the border is where the continental shelf ends.
The rig used in the Chunxiao project sits on the Chinese side of the line that Tokyo insists is part of its own EEZ.
Li's suggestion for a joint venture may be interpreted as an attempt to offset criticism from Tokyo, analysts said.
Officials noted that Japan could not join the project anyway, as it is almost finished. Western companies have been helping China.
``China has not given a direct answer to Japan (over its concerns). They just want to buy time,'' said a senior Foreign Ministry official.
Source: The Asahi Shimbun, June 04
Write; by Noriko Akiyama

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INDIA – POLITICAL AFFAIRS

The boys from Bihar
Some members of the new government are an embarrassment
When Sonia Gandhi, leader of the Congress party, last month turned down the chance to become India's prime minister, she robbed the opposition of its first line of attack: a xenophobic campaign against her Italian origins. A second front, however, opened at once over an issue where Congress finds it harder to take the moral high ground. Several ministers in the coalition government are tainted by criminal charges filed against them.

The new Prime Minister, Manmohan Singh, is revered both as a successful former finance minister and as an incorruptible public servant. But he has never won a direct election. Many elected politicians have far dirtier hands. Under rules that came into force last year, candidates in Indian elections now have to reveal their criminal past. According to a tally by Outlook, a weekly magazine, no fewer than 100 of the 542 present members of the lower house face criminal charges.

They include ten of the 25 MPs from the Rashtriya Janata Dal (RJD) party, Congress's biggest coalition partner. The RJD's fief is Bihar, which, with more than 80m people, is India's third most populous state, and the one where crime and politics are most inextricably linked. A notorious gangster, Mohammad Shahabuddin, was re-elected to parliament last month for the RJD. The fact that he is notionally in prison - in practice, in a comfortable hospital - and was described in a police report last year as a “cold-blooded murderer and hard-core criminal” was, apparently, not an insurmountable obstacle.

The RJD's leader, Laloo Prasad Yadav, stood down as Bihar's chief minister in 1997, when he was arrested on corruption charges, but installed his wife as his proxy. He still faces charges related to one of the biggest frauds on the Indian state ever uncovered, involving the “purchase” by the Bihar government of billions of rupees-worth of non-existent fodder.
Mr Yadav, who, rather bizarrely, has become the new railway minister, claims the charges against him are all concocted by his political opponents. Similar claims are made on behalf of his party colleague, Mohammad Taslimuddin, the minister of heavy industries, accused of crimes including attempted murder, intimidation and extortion.

Privately, senior Congress figures say how much it pains the prime minister to welcome such people into his government. In public, Mr Singh points out that they have never been convicted of any crime, and Congress accuses the opposition Bharatiya Janata Party of hypocrisy. Its government, whose six-year tenure ended last month, included a number of politicians facing criminal prosecution for involvement in a riot in 1992 when a mosque was demolished at Ayodhya, triggering widespread communal violence.
Bihar is only the most egregious example of a national phenomenon. Criminals bribe and intimidate their way into office for the protection it affords and the opportunities it offers for recouping their investments. Jayaprakash Narayan of Lok Satta, an electoral-reform lobby group, quotes an estimate of 20m rupees ($440,000) as the cost of standing for election in Bihar.

There is some hope that if the new government carries out its promise to introduce the state funding of elections, politics may attract a nicer class of person. Mr Narayan also argues for a system of proportional representation to break the link between constituency and candidate. Perhaps more pressing is the need for an overhaul of the criminal-justice system, which at present seems to produce fewer convictions than ministers.
Source; The Economist, June 04
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INDONESIA – MEDIA

TV can be friend or foe
While presidential candidate Amien is drawn to the medium, others shun it for being too revealing of shortcomings

Debates and dialogues featuring presidential candidates are saturating local television channels nearly every night, but not all the five contenders are getting equal exposure.
Dr Amien Rais has been a daily fixture, making appearances on talk shows expounding on themes ranging from politics and the economy to football.
But incumbent President Megawati Sukarnoputri has so far shunned TV debates, agreeing only to appear on taped interviews.
So far, Dr Amien's polished style - mixing humour with serious remarks - shows him to be the best communicator among the five candidates.
While some observers argue that he benefits from such exposure, others doubt the appearances will win him more votes.
Viewers who prefer the stern mien of a military man might be more inclined towards retired generals Susilo Bambang Yudhoyono and Wiranto.
Mr Bambang, another regular of presidential debates, has faced Dr Amien in at least three debates when other candidates have failed to show up at the last minute.
While Mr Wiranto gladly appears on talk shows or dialogues, he is reluctant to show up alongside other candidates in a debate.
However, while media exposure might boost their bids, some candidates have chosen to stage no-shows, citing reasons like illness or fatigue.
But commitments to take part in televised debates are no guarantees that they will turn up eventually, Mr Riza Permadi, news director of new TV network Trans TV, told The Straits Times.
Last week, the more established SCTV also cancelled a debate between Mr Wiranto and Dr Amien when the former pulled out at the last minute, citing fatigue from constant travelling.
Mr Hamzah Haz also called in sick an hour before a debate on Trans TV that was to set him and his running mate against the Wiranto- Salahuddin Wahid pair.
But Ms Megawati is by far the most media shy.
Trans TV has so far failed to get Ms Megawati to appear on its weekly presidential debates because it refused to concede to her demand to replace a team of panelists comprising analysts and human rights activists with journalists.
Ms Megawati is the only candidate who has not agreed to participate in Trans TV's fourth - and last - presidential debate next Monday.
Analysts attribute the president's coolness to live appearances to her lack of media savvy.
Said University of Indonesia political communication expert Deddy Hidayat: 'Ms Megawati's communication skill is among the worst of the five candidates.
'From the interviews we have seen so far, she appeared authoritarian and temperamental, especially when she is being asked critical questions.'
Regardless of candidates' desire for air time, however, analysts doubt whether the debates have any significant effect in winning voters over.
For one, the TV debates have been criticised for being too 'clinically clean' - candidates are not allowed to confront each other as they field questions from teams of panellists or members of the audience.
Often, the debates also get fairly pedestrian, with candidates saying similar things.
And their answers could also exhibit more style than substance.
Said media analyst Hinca Panjaitan: 'Both the panellists and the candidates like to use big words and show off their sophistication. This may backfire on them by alienating uneducated viewers.'
Source; Singapore Press Holdings, June 04
Write; by Devi Asmarani
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NEW ZEALAND – CIVIL RIGHTS

MPs under pressure as civil unions lose support
Frantic lobbying has begun at Parliament to keep plans for civil unions alive as the number of MPs expected to vote for it tomorrow begins to slide.

Days ago the Civil Union Bill had been expected to comfortably clear its first reading tomorrow and go to a select committee for public scrutiny.
But last night, numbers in favour of the bill had dropped, as some Labour and National MPs indicated they had major reservations.
The bill offers civil unions as an alternative to marriage, for gay and straight couples.
A second new law, the Relationships Bill, would end discrimination against same-sex and de facto couples but is not expected to be voted on until next week.
An indication that numbers are tighter than expected has come with Prime Minister Helen Clark's clear support for civil unions.
And yesterday Labour's first openly gay MP, Chris Carter, argued passionately for the two bills.
If they were voted down, he said, New Zealand risked its reputation as a society tolerant of diversity.
He also reminded fellow Labour MPs that introducing civil unions and ending discrimination against gays was party policy.
At least 60 of Parliament's 119 MPs will have to back the bill for it to be sent to a select committee.
Last week, the bill was thought to have support from 70 to 73 MPs. That may now be down to 63 or 64 votes.
Up to 10 Labour MPs oppose the bill. Their votes will be critical, as will any move by MPs to abstain.
Those in Labour thought to oppose civil unions include critics of the law decriminalising prostitution last year, such as Taito Phillip Field, Dover Samuels, Clayton Cosgrove, Damien O'Connor and possibly Harry Duynhoven and Janet Mackey.
Two who backed prostitution laws, but are against civil unions, are Cabinet ministers Paul Swain and John Tamihere.
Most of those MPs also form a conservative cabal within Labour, and were unhappy at Helen Clark's February Cabinet reshuffle, which saw David Benson-Pope inherit the Civil Union Bill from his sacked predecessor Lianne Dalziel.
Complicating the debate is the civil unions' companion legislation, the Relationships (Statutory References) Bill, which would end discrimination against couples who are not married, both straight and gay, and in de facto or civil union relationships.
NZ First yesterday said two of its 13 MPs had indicated their support of the Civil Union Bill to a select committee. Only a handful of National MPs are expected to do the same.
United Future's eight MPs oppose the bill. The nine Green MPs and two Progressive MPs support it.
Act's eight MPs are split, and independent Donna Awatere Huata remains undecided.
Source; New Zealand Herald, June 04
Write; by Helen Tunnah, deputy political editor

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ECONOMY – ASIA MARKETS

Opening to yawns: a rookie's challenge
China's new stock market for smaller and riskier companies will be little more than a name and a number as trading begins Thursday. Investors may not provide the support it needs to become an independent entity.

The so-called second board at the Shenzhen stock exchange is opening with a roster of eight companies. Their six-digit tickers begin with 002, setting them apart from Shenzhen's 000 series and the 600 used in Shanghai, the bigger of mainland China's two exchanges. The stocks will trade on the same electronic system and be subject to the same regulations as stocks on Shenzhen's main board.

Ophelia Tong won't be a buyer. The investment director of Hong Kong-based HT Capital Management said she did not pay attention to smaller exchanges such as Hong Kong's Growth Enterprise Market or even Shenzhen's main board. "What's the point?" she said. "It's insignificant."

Without commitment from investors, the new forum may not draw enough money or listings to avoid the fate of similar initiatives. Nasdaq Stock Market pulled out of its Nasdaq Japan venture in 2002 after two years of losses, and turnover on Hong Kong's GEM, which opened in 1999, has slumped.

Some investors say creating the second board may detract from China's efforts to stamp out financial scandals at companies such as Guangxia (Yinchuan) Industry, fined last year for the nation's biggest securities fraud.

"The primary concern for fund managers is corporate governance and the quality of the assets," said Ho Kok Hua, a fund manager at APS Asset Management in Singapore.

Securities scandals helped make Shanghai and Shenzhen stocks the world's worst performers last year even as China had the fastest economic growth among major nations. Shanghai's composite index rose 10.3 percent while its Shenzhen counterpart fell 2.6 percent.

This year, the Shanghai index has fallen 4.3 percent and Shenzhen is down 2.8 percent. The benchmarks are among the 10 worst performers this quarter out of 60 global indexes tracked by Bloomberg.

Shenzhen's second board adds another pool of stocks to China's array of Class A and B shares, Hong Kong-traded H shares and listings in Singapore and New York.

The first batch of companies, which raised 2.3 billion yuan, or $278 million, in share sales, include Zhejiang NHU, a producer of food additives and health care products, and Zhejiang Jinggong Science Technology, a maker of construction and textile machinery.

Initially, their shares will trade through existing main-board platforms and will be included in the Shenzhen Composite index, according to the exchange's Web site.

The new market will evolve into an independent entity "when the time is ripe," the Web site says.

Companies will be subject to the same regulations, including rules on earnings reports, as main-board stocks. Like other Class A shares, they will be denominated in yuan and open only to domestic investors and a few overseas fund managers approved by China's government.

Li Mingzhong, a spokesman for the Shenzhen exchange, said a second-board index would be created when there were more listed companies.

The board is aimed at companies with a technology focus, the exchange said in a statement on its Web site.

None of the share sales by the first eight companies and 10 more that plan to join them in coming weeks has exceeded 30 million shares. Li, the exchange spokesman, said that was not an explicit limit.
Source; Bloomberg News, June 04
Write; by Sara Webb and Janet Ong
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NEPAL – SOCIAL AFFAIRS

No sign of abducted Nepal workers
The authorities in Nepal say they have no idea of the whereabouts of 140 cement workers abducted by Maoists.
The employees were taken from a state-run cement works in Udaipur district on Tuesday and a search by security forces has brought no clues.
There has been no word from the rebels, who are fighting to replace Nepal's monarchy with a communist republic.
In the past, rebels have made abductees attend political and cultural programmes before freeing them.
Thousands of people, including students and teachers across the kingdom, have been taken to remote rebel hideouts and later released after a few days.
About 9,000 people have died in the eight-year struggle between the Maoists and Nepal's security forces.
Source; BBC News, June 04


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FOCUS

MALESYA – INTERNAL AFFAIRS

Still Malaysia's reigning king of controversy
In the space of less than a fortnight, former Malaysian premier Mahathir Mohamad has managed to land himself in four political controversies. That's quite a feat for someone who is supposed to have retired.

Controversy number one arose after President Robert Mugabe of Zimbabwe said in an interview in May that the Malaysian and Chinese governments had provided partial funding for his US$5 million oriental-design, 25-bedroom mansion near the capital, Harare. He did not make it clear whether the supply of rare timber for paneling in the mansion, under construction for more than five years, represented the full extent of Malaysia's involvement.

Mugabe's comments sparked a public outcry in Malaysia, and it took Mahathir 15 days to shed some light on the issue, which appeared to have caught the Malaysian government and cabinet unaware.

"Yes, I think we did" supply timber for the mansion, Mahathir finally told reporters on June 10, but added that this was the "usual practice" in promoting Malaysian timber abroad. Mugabe has often said he regards Mahathir as a close friend, and the two men share many similarities, including a strong anti-Western rhetoric that has been undermined by autocratic rule at home.

After Mahathir's admission, Malaysia's opposition parties and public interest groups responded by calling for an immediate probe into the gift of timber.

"Mahathir is also accountable to the public for his action," said P Ramakrishnan, president of the social reform group, Aliran. "He must come clean by providing facts and figures to justify why a guy like Mugabe, who is regarded as a tyrant and a despotic dictator, deserves this 'gift' from Malaysians."

No sen in sight
Barely had the dust settled when Mahathir caught media attention again on June 17. This time, he was widely reported as saying he was "not getting even one sen" from serving as adviser to national petroleum corporation Petronas and national car maker Proton, as well as to the development authorities of two resort islands - Langkawi, off Mahathir's home state of Kedah, and Tioman, off the peninsula's east coast.

He said he was only receiving the pension for serving as prime minister for more than 22 years. This amounted to half of his last-drawn monthly salary of RM20,000 ($5,260), he was reported as saying in the pro-establishment Star, the country's top-selling English-language newspaper.

"I don't get a single sen at all," he said. "I am provided an office by Petronas." Mahathir said he needed to explain this matter because there had been talk that he was receiving huge allowances from these particular firms and agencies, the Star reported.

A day later, Mahathir was forced to "clarify". In a report by Utusan Malaysia, a paper linked to his former party, the ruling United Malays National Organization, Mahathir said he did receive taxable monthly allowances from Petronas after all. "However, the amount he received was totally far off from the hundreds of thousands of ringgit he was alleged to have received," said the report. It was not known who made those allegations and what prompted the about-turn.

Protection payment takes a hit
As if that was not enough, Mahathir stirred up a third hornet's nest when he called for a review of the honorarium of the annual RM10,000 ($2,600) paid by the northern state of Penang to neighboring Kedah for the historical acquisition of Penang Island and the accompanying strip of land on mainland Penang known as Seberang Perai, formerly province Wellesley.

In the late 18th century, Kedah, under the rule of Sultan Abdullah, offered to lease Penang to England's East India Company in return for protection against possible attacks from Siam (now Thailand) and Burma (Myanmar) and future uprisings by his own relatives. English country trader Captain Francis Light representing the East India Company formally took possession of Penang Island in 1786. Seberang Perai was leased to the English in 1800. However, Sultan Abdullah discovered too late that the compensation and the "protection" Kedah was to receive was much less than he had expected.

In calling for a review of the payment, also on June 17, Mahathir said the amount was no longer realistic. "Kedah should ask Penang for a review of the payment," he said. "We must make a demand because with RM10,000, now you can't even buy a house, or else we ask that Penang and Seberang Perai be returned to us," Mahathir said.

Those with longer memories were left puzzled as to why Mahathir was raising this issue now after stepping down last October after 22 years in power. They point out that when a request was made in 1994 for the payment to be increased to RM10 million, Mahathir himself had dismissed it. "The royalty payment is only a condition ... it is history, and we are only continuing with what is history. It has become meaningless," he said then. These critics also point out that subsequent historical events - Kedah becoming part of independent Malaya in 1957 and of the Federation of Malaysia in 1963 - had superseded the earlier agreement with the British.

Water under the bridge
In another salvo, Mahathir also said Kedah should think about charging Penang for the raw water it had received for free over the years. He pointed out that Singapore and Malacca state had to pay their neighbor Johor for water "but Kedah, a poor state at that, supplies raw water for free to a rich state like Penang."

In a way, Mahathir's admission of Kedah being poor is an admission of his administration's failure to raise socio-economic conditions in the state, which remains among the poorest in the country. Penang, by contrast, is one of the most developed states, and its Penang Water Authority (PBA) is widely regarded as one of the most efficient, supplying the public with water at a price that is among the cheapest in the country.

It would not have escaped Mahathir's attention that the PBA's exemplary track record has cast other water authorities in the country in an unfavorable light.

"Water has become a commodity and every state government wants to make money from the sale of water," says economist Charles Santiago, who noted that Kedah was also in the midst of privatizing its water resources. Penang, he said, has been profitable in water and "what Mahathir was saying is that since you are profitable you pay for your water."

But Santiago pointed out that the government had played a clear role in providing access to water as an important component of development, resulting in 95% of the Malaysian population having access to affordable, piped water.

Though both Kedah and Penang are governed by the ruling coalition, United Malays National Organization holds the reins in Kedah while its coalition partner, the multi-ethnic but Chinese-dominated Gerakan, leads the Penang government. Gerakan President Datuk Seri Dr Lim Keng Yaik holds the water portfolio in the federal cabinet, which was previously held by a staunch Mahathir loyalist, Samy Vellu, president of the Malaysian Indian Congress.

These unnecessary controversies are the last things current Prime Minister Abdullah Badawi needs as he seeks to distance himself from his predecessor. It only goes to show that, even in retirement, the former premier has a knack for ruffling feathers, whether international or domestic, and stirring emotions over the lack of transparency and accountability that characterized his administration. Perhaps after more than two decades in power, it was too much to expect Mahathir to lie low and confine himself to sailing, carpentry or horseback riding.
Source; Asia Times Online Ltd. June 04
Write; by Anil Netto
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HIGHLIGHTS


SOUTH KOREA – DEFENSE

S Korea cautious on US troop cuts
South Korean officials have responded cautiously to a US proposal to cut by a third its troops based in the country.

Officials said more negotiations were needed, and South Korea needed time to prepare "countermeasures".
China indicated that it welcomed the plan, saying it hoped it would contribute to regional stability. But South Korean opposition, civic groups and analysts said the relatively quick timescale for the pull-out could jeopardise security.

The US has proposed withdrawing 12,500 of its 37,000 troops by 2006.

The US has said it needs to modernise its forces, but the move may leave some South Koreans feeling vulnerable to North Korea.

"There still need to be negotiations," Defence Minister Cho Young-kil said on Tuesday.
"In response to the US-presented broad idea, our idea is also going to prepare a countermeasure in a broad framework," a government official said on condition of anonymity.
"I think the direction of our response will be decided this week after concluding a careful review of the US proposal and collecting various opinions," he said.
The main opposition Grand National Party was less sanguine, calling the US plan "shocking and surprising".
"The number of troops Washington wants to cut came as no surprise, but the timing is rather faster than expected," Professor Kim Tae-hyo at the Institute of Foreign Affairs and National Security told The Korea Herald.

The Pentagon says its commitment to defend the South will not be affected and the use of longer-range weapons and better technology will compensate for the reduction in numbers.
But the South does not want big changes until the resolution of the dispute over North Korea's development of nuclear weapons, says the BBC's correspondent in Seoul, Charles Scanlon. It would prefer the pull-out to happen gradually over 10 years.

Plans are already under way to redeploy the US troops, which will remain in South Korea, and the two sides held a second day of Future of the Alliance talks on that issue in Seoul on Tuesday.

At present nearly half the 37,000 US troops in South Korea are stationed north of Seoul, a throwback to the 1950-53 Korean War.

Their forward position puts them in range of North Korean artillery and US officials have said that pulling troops back south of the capital would strengthen the military's hand.
The US also wants to move the main US army headquarters from its current location in central Seoul to free up money for better military technology and infrastructure.
Source; BBC News, June 04

US TROOPS IN SOUTH KOREA
US to pull out 12,500 troops
Significance largely symbolic: S Korea has 690,000 troops, N Korea 1.1m
US plans to pull remaining troops back from DMZ

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CHINA – HUMAN RIGHTS

Chinese protests on the rise
More than three million people took part in protests in China last year, according to official statistics.
The figures confirm police reports that demonstrations within China are growing in size and number, and becoming better organised.
The report, in Outlook magazine, blames dissatisfaction with government policy.
The main problems, it says, are wage disputes, social welfare problems, the restructuring of state-owned enterprises, and evictions.
These problems amount to a list of the fallout from China's reform process.
Many protests in China happen far from the public eye, but these figures show they are on the rise.

The Ministry of Public Security says last year there were more than 58,000 "mass incidents" -the term they use to describe public protests - involving three million people: that is an increase of almost 15% over the year before.

Western experts say that as protests increase, Chinese police are trying different strategies to contain them, sometimes even making economic concessions to demonstrators - moves that may even encourage others to stage protests.
And one Western academic has warned that, when it comes to the growing unrest, China's leaders will face riskier dilemmas than at any time since the massive protests in 1989.
Source; BBC News, June 04
Write; by Louisa Lim in Beijin

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INDIA/PAKISTAN – BILATERAL AFFAIRS

India and Pakistan ministers to meet
Natwar Singh, the Indian foreign minister, is to hold talks with his Pakistani counterpart during a two-day regional meeting in Islamabad on July 21-22.
Mr Singh would attend the seven-nation South Asian Association for Regional Co-operation, said Masood Khan, the foreign ministry spokesman. He would be the first cabinet minister from the new government to visit Pakistan.
Pakistani and Indian officials are due to meet in New Delhi next week to discuss ways to improve nuclear security. Farhan Bokhari, Islamabad
Source; Financial Times, June 04
Write; by Farhan Bokhari

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VIETNAM – INTERNAL AFFAIRS

Vietnam Gov'ts to Enforce Net Crackdown
Vietnam has ordered local governments nationwide to closely monitor Internet use and enforce regulations aimed at cracking down on "bad information" sent or read on the Web, an official said Tuesday.
The move comes after the communist country sentenced several dissidents to long prison terms over the past two years for using the Internet to criticize the government and promote democracy.

The Ministry of Culture and Information last week instructed the People's Committees in all 64 city and provincial governments to closely monitor all online information, a ministry official said on condition of anonymity.
Under the new regulations, part of government policy announced in March, Internet cafe owners can be fined or jailed for allowing clients to download or send "bad information" on the Internet, the official said.

That includes allowing access to sites ranging from those deemed pornographic to those accused of disseminating state secrets.
Internet cafe owners must also document what Web sites their clients visit and for how long, and all users must present identification cards before logging on.
There are an estimated 5,000 Internet cafes in Vietnam. About 4 million people out of Vietnam's population of 81 million regularly use the Internet.
Source; The Associated Press, June 04

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NEW ZELAND – POLITICAL AFFAIRS

N.Z. Labour Regains Voter Support After Budget, TV3 Poll Shows
June 6 (New Zealand's governing Labour party, buoyed by a big-spending budget, regained its lead over the main opposition National party, according to a poll conducted for TV3 News in Auckland.
Voter support for Labour rose to 43 percent from 42 percent in March. National fell to 40 percent from 42 percent, according to the poll results, which were e-mailed to Bloomberg News.

Labour last month pledged NZ$14.1 billion ($8.8 billion) of new spending the next three years aimed at boosting the income of families and encouraging more people into work. The government hasn't led in the TV3 poll since January.
In February, National took the lead in the poll for the first time since October 1996 after leader Don Brash attacked the government for policies he said favor native Maoris over other New Zealanders.

Clark remains most preferred prime minister with 35 percent support from Brash with 26 percent support, according to the TV3 poll of 1,000 voters. The poll was carried out from May 27 to June 3 by Auckland-based TNS and has a margin of error of 3.1 percent.
Separately, consumer confidence was unchanged after falling in March to its lowest since April last year, according to the poll. The proportion of people expecting the economy to improve the next three months was steady at 40 percent. Still, 30 percent expect the economy to deteriorate from 28 percent in March.
Source; Bloomberg, June 04
Write; by Tracy Withers in Wellington, New Zealand

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AUSTRALIA / NEW ZELAND – LABOUR

Economist warns of looming labour shortage
A small dip in newspaper job ads has not dented hopes that the 5.6 per cent unemployment rate is about to fall to a 23-year low.
The ANZ job ads series, which counts the number of ads in metropolitan newspapers, fell 2.8 per cent in May.

But the drop followed an exceptional year of employment growth and also masked a rise in the use of internet advertising, where ad numbers have risen 51 per cent since May last year.
ANZ measured a monthly rise of 3.4 per cent if newspaper and internet ads were measured together. The rival Olivier internet job ads survey recorded a monthly rise of 4.7 per cent.
Scott Haslem, an economist with UBS, said forward indicators such as the job ads surveys suggested unemployment would soon fall to its lowest rate since 1981.

Tony Meer, an economist with Deutsche Bank, said Australia, Britain and New Zealand were on the cusp of a historic demographic shift that would create a labour shortage over the next 10 years.

"By the end of this year, or early next year, we'll have an unemployment rate in the low 5s or high 4s," he said. "You have to go back well over three decades ago to find a sustainable unemployment rate below that."
Unemployment was last at 5.6 per cent in 1989, before the 1990 recession, but has not fallen consistently below that mark since the mid-1970s. In 1981 the unemployment rate dipped briefly to 5.4 per cent.

Robert Olivier, a director of the Olivier Group recruitment firm, said the labour market was looking increasingly like a sellers' market. "Employers are finding it increasingly difficult to attract top candidates," he said. "It also means there will be pressure on organisations to raise salaries in their June reviews."

Ninety per cent of jobs created in the 12 months to April were full-time, said the federal Minister for Employment and Workplace Relations, Kevin Andrews.
He was responding to a report in yesterday's Herald that said more than half of all jobs created in the past 16 years had gone to casual workers, and more than a quarter of workers were employed on a casual basis.

Casuals were "an essential and legitimate part of a flexible labour market", he said, adding that they received loadings of up to 30 per cent above normal wages to compensate for the lack of entitlements.
Mr Andrews warned that if a Labor government was elected it would force employers to pay casual workers for sick leave, holidays and redundancies - a move that would force businesses to lay off staff.

Labor's workplace relations spokesman, Craig Emerson, described Mr Andrews's claims as "another Liberal lie".
"Labor policy is to give regular, long-term casuals the choice to request a conversion to permanent employment with employers being able to say no if it's reasonable to do so," he said.
Mr Emerson said the ABS definition of full-time work included casual and permanent full-time employees.
The most recent ABS survey of casual employment showed almost 45 per cent of new jobs created between August 2002 and August 2003 were casual.
Source; The Sydney Morning Herald
Write; by John Garnaut and Aban Contractor

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JAPAN – ECONOMY

Rising Japanese bond yields a 'positive sign'
Heizo Takenaka, Japan’s economy and financial services minister, on Tuesday sought to quell concern about rising long-term interest rates, describing a three-and-a-half year spike in 10-year bond yields as a positive sign of the strength of the economic recovery.
"Yields can rise when the economy is getting better and they can also rise when the credibility of JGBs [Japanese government bonds] is deteriorating," he told journalists. "I do not see the yield rise as negative at all. Rather I see it as a positive sign."
On Tuesday, the yield on the benchmark 10-year JGB rose three basis points to 1.7 per cent, its highest since early 2001 when the Bank of Japan began its current ultra-loose monetary policy.

Mr Takenaka was reacting to investor concern about the danger a sharp rise in long-term interest rates could pose as the economy recovers and as inflationary expectations gradually take hold.

Pessimists worry that rising interest rates could cause problems on a number of fronts, making it harder for the government to service its debt, raising private borrowing costs, and reducing the value of bond holdings held by commercial banks.
Hajime Takata, chief strategist of Mizuho Securities in Tokyo, said there was a possibility that long-term interest rates would overshoot, damaging the economy and causing big losses for institutions holding government bonds.

Mr Takata, who has long warned of the dangers of a collapse in the government bond market, said the risks of bond market turbulence became more acute as the economy pulled out of its long deflationary phase.

"This is like a prisoner dilemma situation," he said. "With 97 per cent of government bonds held by Japanese, Japanese people have no way of escaping from the interest rate risk." He said the government should adopt a policy to minimise the risks, issuing more floating-rate bonds and, perhaps, getting the Bank of Japan to buy more long-term JGBs.
Peter Tasker, consultant economist at Dresdner Kleinwort Wasserstein, said such fears were exaggerated. Bond yields were rising, he said, because the prospects for nominal growth and inflation were improving, precisely what Japan had long been waiting for.
Any negative impact caused by falling bond prices, Mr Tasker said, would be more than compensated for by stronger growth and rising equity prices.

Economists said that, even if banks, which have been big purchasers of government bonds, suffered losses on their fixed-income portfolios, they would be able to compensate by gaining wider spreads on lending. Regional banks' balance sheets are more skewed to bonds than the big city banks, which are still big holders of equity.

Economists were also not unduly alarmed at the higher interest rate payment that the government might face on refinancing public debt, now about 140 per cent of gross domestic product. As bond yields rose, so would the tax take, they said.
Nonetheless, the government said it remained vigilant against excessive interest rate rises. Sadakazu Tanigaki, finance minister, said: "We need to watch movements in long-term interest rates closely."

Mr Tanigaki also said the ministry would continue to diversify its bond issuance. The government has held two auctions of inflation-linked bonds, both of them heavily oversubscribed.
Source; FT, June 04
Write; by David Pilling in Tokyo

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CHINA – CULTURE

Greatest archeological discovery since new China
Of the archeological activities on Western Zhou over the past 70 years, Qishan graveyards may be the only large relics of Zhou population ever found. From the burial sites the walls, oracles and advanced buildings and graves are discovered and the oracles reading "Duke of Zhou (Zhou Gong)" appeared many times there.
After a number of on-site investigations, researches and discussions carried out by many famous archeologists the Western Zhou large burial site has received wide attention and was regarded as belonging quite likely to the family of the Duke of Zhou. This greatest archeological discovery as such ever since the founding of new China proves immeasurably precious to the research on China's civilization and for carrying on and developing China's excellent traditional culture.

The large Western Zhou burial site is located in the ruins of the Duke Zhou Temple in Qishan County of Shaanxi Province. Archeological team composed of Shaanxi Archeology Institute and Peking University, has discovered 19 large graves: nine with four grave tunnels, four with three and two respectively and two with one grave tunnel. There are another 13 funerary pits. Over 700 oracle bone pieces were discovered outside the graves, 420-word oracle identified, four slates with characters reading "Duke of Zhou" ever found, over 1500-meter-long wall and sites of foundations of six large buildings of rammed earth.

After three days of careful investigation Professor Zou Heng from Peking University said, it is the only large community of Zhou people, in which the Western Zhou walls, oracles, advanced buildings were all discovered ever since the archeological activities on the Western Zhou Dynasty were started over 70 years ago. That referring to the Duke of Zhou appeared many times on oracle bones indicates that the site is the feud of Duke Zhou and the burial site belongs to his family. The 78-year-old Zou, dubbed "No.1 archeologist on China's Shang and Zhou dynasties", is the discoverer of the capital ruins of the States of Yan and Jin of the Western Zhou Dynasty and instructor for exploring and excavating Lord Jin's grave of the Western Zhou Dynasty.

Yin Shengping, former curator of Shaanxi History Museum, a noted expert in Western Zhou history, said, king-level graves discovered previously only had one or two tunnels, and it is the first time for us to discover four-grave-tunnel graves in the feud of the Duke Zhou. Duke Zhou was a person honored as King of Zhou and is fully qualified to use the funeral treatment of the highest level. It is no wonder that graves with four tunnels were discovered in his family burial site.

Named Dan and surnamed Ji, Duke Zhou is the founder of Zhou Dynasty, and once assisted King Zhou Wu and afterwards serving as regent for seven years, he gave the power back to King Zhou Cheng. He initiated feudalistic system, and formulated the rites and composed music, thus laid the political and cultural foundation of the Chinese nation. Confucius turned his thought more humanized and worldly, and on the basis he formed the Confucianism, which has been passed on for thousands of years, becoming the most fundamental cultural tradition in Chinese society. "Dreaming of Duke Zhou" still remains a catchword nowadays.

Doctor Zhang Tian'en, director of Shang and Zhou Office of Shaanxi Archeology Institute who devoted for years to seeking tombs for kings of the Western Zhou, held that the title of Duke Zhou is hereditary and lasted for five to six hundred years. Although Zhou Gongdan's eldest son was given the State of Lu in the east but Western Zhou practiced the system of returned burial, i.e. one must be buried in the mother town when he died. As descendents of Duke Zhou given provincial enfeoffment must also be buried in the family graveyards, therefore, many graves appeared with four tomb-tunnels.

Researcher Yuan Zhongyi, former curator of Qinshihuang Terracotta and Horses Museum, said, the size of the four-tunnel graves are generally a bit small, so they are not likely to be of the graves for kings but more likely to be graves of the family of Duke Zhou. As to whom they actually belong, that depends on the final determination after excavation.
Source; People's Daily Online

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FOCUS


INDONESIA – INTERNAL AFFAIRS

Indonesia's shameful export
Poverty, ignorance and unenforced laws fuel an industry that has sold 70,000 children into prostitution overseas

The talk in Jakarta
It is not something any government likes to make public, but the figures say it all: Indonesia is one of the world's largest exporters of sex workers, mainly children.
The Unicef says as many as 70,000 Indonesian children have been sold across the country's borders as sex commodities. They are employed in countries such as Malaysia, Thailand, Japan, Australia, Hong Kong and Singapore.
Similarly, nearly half of the 400,000 estimated sex workers in Indonesia are children under 18 years old.

This grim reality has mostly been ignored, buried deep in local newspapers. In this instance, it is the lack of discussion about the problem that is disturbing. That is, until unique cases like the most recent arrest of a 'madam' emerged.
Twenty-seven-year-old Arum was arrested last month for operating a network of prostitutes from her humble food stall in a densely populated neighbourhood in South Jakarta.
Reports said she had recruited girls, mostly students between the ages of 14 and 16, to work for her by first luring them to buy items from her, on credit. These included mobile phones, clothes and shoes.

When the girls ended up with huge debts, she then made them escort older men.
The girls would meet their customers in the daytime, after school, before going home.
Arum's case was special, as she did not operate in a typical 'lokalisasi' or red-light district area.

A report by the Jakarta office of the International Labour Organisation-International Programme on the Elimination of Child Labour (ILO-Ipec) said a large number of children in the country are trapped in the worst forms of child labour, mainly prostitution.
These children come from both urban and rural areas.
Poverty is the trigger in most cases. Government reports say between three million and six million children had been left, without parental care, to eke out a living after the 1997 economic crisis.

In some rural areas, parents are also known to sell their children for money to recruits for the sex industry.

Yet it is the large cross-border syndicates, which recruit girls through deceptive means, that are running a lucrative business of prostitution and people trafficking in an industry that generates millions of rupiah a year in the country.
With the authorities, such as some police and immigration officials, on their payroll, the syndicates target Indonesia as a place for recruitment as well as a destination for sex tourists.
Activists point out the government's glaring lack of effort to tackle this problem. The government last year came up with a national plan to combat the trafficking of women and children.

But with a lack of capacity and resources, the plan was criticised as just 'lip service'. For instance, there is no budget to implement the plan.

'If we want to fight organised crime groups that are making a lot of money, we have to be willing to spend some money,' said Mr Aris Merdeka Sirait, the secretary-general of the National Commission on Children Protection, in Jakarta recently.
The government has drafted a law that mandates severe punishment for exploiters of children. But the enforcers, either out of lack of knowledge or collusion with the suspects, often ignore the law and prosecute the cases using the regular criminal code.
For activists like Mr Aris, nothing is more frustrating than seeing the stacks of cases they submit to the police receive little follow-up.

'We get hundreds of cases and data on child prostitution, but if you'd ask me a year later how many of those have been successfully prosecuted, you'd be disappointed to hear the answer,' he said.

The government only started to act when people began talking about the country's corruption problem. So, until more people start talking about it, this problem of teen prostitutes will see little change.
Source; Singapore Press Holdings, June 04
Write; by Devi Asmarani

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MALAYSIA – INTERNALL AFFAIRS

Malaysia; The elusive Islamic state
Muslims the world over often affirm that Islam is a religion of peace based on submission to God. Yet opinions vary considerably as to how this Divine Will should be actualized.

Cut off from centuries of classical Islamic and legal scholarship, which requires one to understand not just Arabic but the context and evolution of Islamic history in the first place to be able to render a sound juristic verdict, the legal sensibility of Muslims has been severely compromised.

Muslims in Malaysia, not unlike those in the Middle East, have resorted to appreciating Islam through the narrow prism of al Halal wal Haram fil Islam - which means abiding by the "lawful and prohibited acts in Islam", and which is detailed in a book of the same name by Yusuf Qaradawi.

In this philosophy, submission to God is reduced to a series of dos and don'ts - a binary moral code. This approach was systematized by Qaradawi, dean of Islamic law at Qatar University, and the methodology gained currency in the Middle East, and subsequently in Southeast Asia.

Since 1960, when Qaradawi wrote his book in Arabic, his narrow approach toward Islam has predominated. In Malaysia, his influence is deep, even among the governing Muslim elites. When former deputy premier Anwar Ibrahim was the president of the International Islamic University, Malaysia, he spent considerable time with Qaradawi, expressing his support for the latter's fiqh al aliyyah (introducing Islamic law according to priorities).

In his governmental post of deputy to Prime Minister Mahathir Mohamad, Anwar was able to bring some of Qaradawi's ideas into public policy. Eventually Anwar was dumped from the government and jailed on charges of sodomy and corruption; however, the thoughts and practice of Qaradawi have not been totally excluded from government policy, including the reductionist elements.

Islamic scholars and thinkers in Malaysia continue to look to Qaradawi for various Islamic interpretations and verdicts, such as on the legality of suicide terrorism. More important, the inspiration of Qaradawi is integral to the conceptual blueprint for an Islamic state as held by the opposition Parti Islam SeMalaysia (PAS), which controls the Kelantan state government.

PAS's Islamic state is based on the permissible and the prohibited as outlined by Qaradawi. Observe the "Islamic state document" produced by PAS last year, the first of its kind in the history of the party, after much demand from Malaysians as to what a PAS-style Islamic state would actually represent.

In this document, it was clearly stated that PAS would implement "the Shariah [Islamic law] to achieve the five imperatives of the Shariah; therein to protect a Muslim's beliefs, life, intellect, dignity and property".

In seeking to fulfill these five imperatives, the document read: "In implementing the Shariah all vices and crimes that pertain to the above stated aspects would be controlled. Man-made laws have been [proved] a failure in securing the security and dignity of the human race."

From this line of reasoning, it is clear that punitive logic is not far from the implementation of Shariah as envisaged by PAS.

In fact, despite promising to keep true to the five objectives, what is known as Maqasid al-Shariah, PAS is totally silent on the jurisprudential methodology and tradition that would be employed on how these objectives can be fulfilled.

Yet anyone who is vaguely informed on Shariah is aware that the recourse to different methods or schools of thought on Shariah - whether it be mazhab Shafii (as is customary in Malaysia and Indonesia) or mazhab Maliki (as is common in Northern Africa) - can produce variations to each law.

PAS stated that the reason for the creation of an Islamic state is a Fardhu Ain (necessary Islamic obligation). To justify the creation of an Islamic state, PAS quoted the Islamic maxim: "Something becomes obligatory if an obligatory injunction fails to be fulfilled without it."

Going by the above assertion, Islamic law, in the words of M B Hooker, an Islamic-law specialist based in Australian National University, is a creature of "executive institution", something that the Islamic state must create.

Hence, rather than based on Islamic scholasticism, where religious scholars debate on each point of law before it is deployed or introduced, it is now the Islamic state that will decide how Islamic laws are best made.

It is in this context that Parvez Manzoor, a Muslim scholar based in Stockholm University, argues that the Islamic state can become an "all-watchful Hegelian state". This is because it carries within it the administrative, theological and bureaucratic reach, to sanction and approve every mode of behavior.

How one practices Islam in Malaysia, according to PAS, should boil down to observing the prescriptions (the dos) and proscriptions (the don'ts) of the Islamic state, and the kind of restrictive Shariah conceived by it. Therefore, the intermingling of men and women is banned, as are art events deemed offensive.

Although Islamists inspired by the clarity of Qaradawi's work often point to the validity of his approach, since there is a phrase in the Koran that encourages Muslims "to advocate virtue and forbid vice", they fail to note that even Qaradawi himself openly acknowledged the difficult and unprecedented nature of reducing Islam to a set of positive and negative deeds.

That this warning is not heeded is largely due to a shallow understanding of Islamic history, combined with even poorer understanding of Islamic law, and the methods with which laws are derived.

In seeking to create an Islamic state to police and punish, the very position of Islam itself is made controversial, especially in a modern and multiracial society such as Malaysia, where up to half of the population are non-Muslims.

Due to the tendency to assume that a punitive Islamic state is the norm, when Islamists in Malaysia do propose a legislative agenda, they are often predisposed to an approach that rarely questions the spirit and ethics laden in Shariah to satisfy the five imperatives.

Rather, the jurisprudence is based on sanctions and injunctions of the Islamic faith, which in fact is the most simplistic, if not crudest, rendition of Islam into contemporary context.

Herein lies the irony in Malaysia: Despite the clarion call of PAS to create an Islamic society guided by moral awareness, the current approach dilutes it. Instead, it is heavily tilted toward creating an all-powerful Islamic state rather than one fostered on ethical precepts.

Nevertheless, it remains PAS's contention that an Islamic state must come into existence first before an ethical Islamic society could come to be. Morality, in other words, comes after power.

Although the ruling party of Malaysia, the United Malays National Organization (UMNO), is arguably "softer" on the importance of Islamic state, even its Islamization program is not without punitive elements, in some cases even on par with PAS. Islamic laws passed by states ruled by UMNO have been just as strong and harsh.

The only way out for Malaysia is for scholars and students of Islam to be more sensitive to the context of Islamic history, rather than to adopt it wholesale, as is the preferred approach in Islamic institutes and universities thus far. Unless Islamists in Malaysia combine a perceptive reading of Islamic history and Islamic jurisprudence, the reliance on a punitive approach will continue to predominate.
Source; Asia Times Online Co, Ltd. June 04
Write; by Yukiko Ohashi

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HIGHLIGHTS


CHINA - GEOPOLITICA

China approves changes to draft resolution on Iraq
China has welcomed modifications to a draft resolution on Iraq made by the United States and Britain.
The Chinese government says it hopes the United Nations Security Council can reach a consensus on a resolution at an early date, to stabilise the security situation in Iraq and promote the process of reconstruction.
The draft resolution would give international backing both to a caretaker Iraqi government and the US-led multinational force that will remain in the country after June 30.
The latest version outlines a rough timeline for US-led troops to leave Iraq "upon completion of the political process" to create a constitutionally elected Iraqi government.
France and Russia - who along with the US, Britain and China are permanent members of the Security Council - have voiced reservations about the modified draft resolution.
Source; Chinese foreigner office, May 04

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CHINA – HUMAN RIGHTS

Amnesty calls on China to conduct inquiry into Tiananmen massacre
The human rights group, Amnesty International, says China should conduct an independent inquiry into the 1989 massacre of pro-democracy demonstrators in and around Tiananmen Square.
In a strongly worded statement issued on the eve of the 15th anniversary of the June 4 incident, Amnesty says those found responsible should be tried and brought to justice. The London-based organisation is also calling on the government to release all those who are still held in connection with the Tiananmen crackdown and who never received fair trials. The group has records of more than 50 people it believes remain imprisoned in China for their part in the protests. It says this represents a fraction of the true figure, never released by Chinese authorities.
Source; Amnesty International, May 04

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INDONESIA – INTERNAL AFFAIRS

Poll predicts huge loss for Indonesia's President Megawati
A new poll in Indonesia suggests President Megawati Sukarnoputri is facing a devastating defeat in the country's first direct presidential election next month.
The poll suggests former cabinet minister Susilo Bambang Yudhoyono could snatch a victory by gaining more than 50 per cent in the first round of voting.
Our Indonesia correspondent, Tim Palmer, reports the poll, conducted by the Japanese LSI agency across Indonesia, suggests the momentum behind Mr Yudhoyono, known as SBY, continues to grow.
The poll gives Mr Yudhoyono 49.8 per cent of the vote - close to the simple majority needed to sweep the election at the first round.
President Megawati trails by more than 30 per cent and now appears locked in a battle for second place with former general, Wiranto, of the Golkar party.
The poll shows both have about 14 per cent of the vote.
A second placed candidate would head into a second round election in September if no candidate wins more than 50 per cent in the first poll.
Source; National news agencies, May 04

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INDONESIA – ECONOMY

World Bank report shows millions of Indonesians living in poverty
The World Bank says weak growth in investment and exports is hampering efforts to lift millions of Indonesians out of poverty.
In a report to a meeting of international aid donors, the World Bank says despite a recent fall in poverty levels, more than half the population still lives on less than $US2 a day. The World Bank says services to the poor are among the worst in the region. Unemployment rose to 9.3 percent last year and some two-thirds of the jobless were aged 15-24. Indonesia's maternal mortality rate is twice as great as in the Philippines and five times greater than Vietnam. The report says severe malnutrition among infants had increased from 6.3 percent in 1989 to eight percent in 2002.
Source; The World Bank, May 04

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FIDJI ISLAND – PUBLIC HEALTH

HIV/AIDS pose major threat to Fiji
Fiji's Minister for Health, Solomoni Naivalu, says HIV/AIDS poses a national security threat.
The first four cases of HIV infection were reported in 1989 - by December 2003, there were 142. Mr Naivalu says there could be as many as 4,000 unreported HIV infections based on the rate of increase between 2001 and 2002. He says the disease in Fiji is displaying trends experienced by countries that are now undergoing catastrophic problems. Mr Naivalu predicts there will be more deaths, increased poverty and more orphans. He says a wide range of social, economic and cultural factors have led to an environment in which risky sexual behaviour is widespread He was speaking to delegates at the Seventh Commonwealth Women's Affairs Ministers meeting in Nadi.
Source; FHM, May 04

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VIETNAM – INTERNAL AFFAIRS

Vietnamese crime boss executed by firing squad
Vietnamese mafia boss Nam Cam and four others have been executed by a firing squad, following a corruption scandal that exposed links between organised crime and the communist government.
Nam Cam, also known as Truong Van Cam, was found guilty last June of ordering the assassination of a rival underworld figure and bribing state officials to protect his criminal network. He was handed two death sentences. An appeal against the conviction was rejected and a bid for presidential clemency was turned down. Nam Cam ran gambling dens, restaurants, brothels and protection rackets in Ho Chi Minh City until he was arrested in December 2001.
Source; National news agency, May 04

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AFGHANISTAN – INTERNATIONAL AFFAIRS

Aid group suspends work in Afghanistan after five workers slain
Aid agency Medecins Sans Frontieres (MSF) has announced it will temporarily stop all operations in Afghanistan following the murder of five of its workers.
The five aid workers were killed on Wednesday in a gun attack on their vehicle in Baghdis province in northwest Afghanistan. The victims have been identified as a Belgian woman, a Dutchman, a Norwegian man, and two Afghan men. A spokeswoman for MSF says the agency's activities will be suspended nationwide. She says there is no clear motive for the killing or any indication of who was behind the murders. Foreign aid workers are regularly targeted in the south and east of the country, but until now not in the north. MSF is a non-political organisation, which provides health care primarily in war zones and other impoverished nations. It has been working in Afghanistan since 1979.
Source; MSF data, May 04

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BURMA – NATIONAL CRISIS

Burma cyclone toll rises to 220: Red Cross
The Red Cross says the death toll from last month's cyclone on Burma's west coast has risen to 220, with 14,000 people homeless.
Red Cross officials say an unknown number of people are missing from the cyclone - the worst to hit the coastal communities of Rakhine state in nearly 40 years. The aid agency is set to launch an international appeal for the cyclone victims, which it expects to raise about $US120.000. The United Nations Children's Fund (UNICEF) said recently Burma had made a surprise plea for international assistance after the cyclone, which struck on May 19 but was not reported until last week. The AFP news agency says Burma's military government is known for under-reporting natural disasters and accidents and rarely seeks foreign help. UNICEF has already begun relief missions to the affected area.
Source; AFP, May 04

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SOUTH KOREA – INTERNAL AFFAIRS

South Korean Olympic official jailed on corruption charges
International Olympic Committee (IOC) vice-president Kim Un-Yong has been sentenced to two years and six months in prison on corruption charges.
In the district court in the South Korean capital, Seoul, Kim, 73, has also been ordered to pay $US677, 000 in part restitution of embezzled funds. The AFP news agency quotes court officials as saying that Kim was found guilty of diverting $US2.8 million from South Korean sports organisations. He was also accused of accepting bribes from business contacts. Kim resigned from the leadership of the World Taekwondo Federation in January and also stepped down as a national legislator. The IOC has suspended him from his post as vice-president and opened its own investigation into his activities.
Source; AFP, May 04

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FOCUS


NEPAL – NATIONAL AFFAIRS

King reappoints prime minister to avert political crisis
Nepal's former Prime Minister Sher Bahadur Deuba has been reappointed in an apparent bid by the King to avert a political crisis.
King Gyanendra sacked the prime minister two years ago for alleged incompetence and took charge of government, sparking massive pro-democracy protests. Opposition parties and Maoist insurgents have been demanding that King Gyanendra accept an 18-point plan to limit his powers - or face the abolition of the monarchy.

Presenter/Interviewer: Mike Woods
Speakers: Dr Chitra Tiwari, independent analyst and Nepal specialist

TIWARI: You know his options are very limited and offers are running out. He probably will have to strike some sort of deal with the parties because parties are also getting more support from international agencies, even you know India, United States, Great Britain, Australia and othe countries. They say that the political parties must come together as a pre requisite you know to peace with the Maoists in the future. So if the King does not listen to these ideas.... to these opinions probably he might be in danger in the days to come.

WOODS: THe political alliance containing the five parliamentary parties have submitted an 18-point road map limiting the King's power, calling for transparency from the Royal household. The King either accepts that or sees the monarchy abolished. Wouldn't his advisers be telling him that some monarchy is better than no monarchy at all?

TIWARI: Well I would think so but again remember the Nepal is declared as a Hindu kingdom and I am of the opinion that you know in Hindu, monarchy and constitutional monarchy are two different concepts...they can't go together but somehow the people are making that mistake there. A Hindu monarch does not receive his powers from the constitution but he receives his powers from the religious texts.

WOODS: What sort of guarantee does the Alliance...the Political Alliance have, that should a republic come to fruition, that the Maoists would participate in a democratic republic and not see a bigger prize...that being more power?

TIWARI: They have been telling the parties that they would abide by the spirit of the competitive politics and they would participate in politics along with other parties in the event Nepal is declared a republic. But you know as a revolutionary party...as a party you know that led the republican movement, I would think that they would definitely have some say...they would definitely you know emerge as the largest party in the new set up. But given the international situation. given the you know antipathy towards you know Maoists coming from India and from other countries, the Maoists will have to make some adjustment with the political forces... with the political parties, so I believe they cannot do away the multi-party system there even if they want to.

WOODS: Do you believe that the monarchy can survive in Nepal? And if so how quickly must the King move to ensure that survival?

TIWARI: I think you know he can still survive there if he agrees you know for the change in the constitution.... a constitution you know that will be approved by the assembly. You know the election to constitute assembly does not mean necessarily that it is against the monarchy. You know once you have elections you know the tide could go anywhere.... to any side. So still you know the King has a place there, he will have time you know to bargain with the republicans. If he does that he will survive, if not if he goes into confrontation with the political parties on the one hand and the Maoists on the other then I'm afraid his future is bleak.
Source; ABC, May 04



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FRENCH POLYNESIA – INTERNAL AFFAIRS

Fate of government in the balance
In French Polynesia, people are awaiting the first meeting of the newly elected Assembly, to determine whether there will be a change of government.
In a surprise result, the opposition Union for Democracy won 27 seats in last month's Assembly elections, against 28 seats for the ruling Tahoeraa party of President Gaston Flosse. Now the opposition coalition has won the support of two minor parties, gaining a one-seat majority in the Assembly. With such a tight result, the fate of the Flosse government is still uncertain.

Presenter/Interviewer: Nic Maclellan
Speakers: Jean-Marc Regnault, University of French Polynesia, Tahiti

MACLELLAN: With 29 seats in French Polynesia's 57-seat Assembly, the opposition Union for Democracy hopes to form a new government.

This coalition unites pro-independence parties - Oscar Temaru's Tavini Huiraatira and Jacqui Drollet's Ia Mana Te Nunaa - together with autonomy parties like Here Ai'a, Emile Vernaudon's Ai'a Api and the trade union O Oe To Oe Rima.

Now the opposition has gained support from Nicole Bouteau, a former government minister, and Philip Schyle, President of the autonomy party Fetia Api.

Jean-Marc Regnault, lecturer at the University of French Polynesia in Tahiti, says the opposition's electoral success was unexpected.

REGNAULT: "I think that the surprise was immense on all sides. Only a few activists close to the independence party seriously thought they might win.

"I think that amongst the political leadership and outside commentators, no one was expecting it.

"Even the general public was surprised, because at the start of counting, the results came from the outer islands - the Australs, the Marquesas and the Tuamotus - where Gaston Flosse won a significant majority. So no one thought it was possible for him to lose.

"When the final results were tallied, it completely astounded those who won and those who lost."

MACLELLAN: Except for a brief period in the early 1990s, President Gaston Flosse and his Tahoeraa party have governed French Polynesia for over twenty years.

President Flosse has long been supported by his political ally French President Jacques Chirac, who held a France-Oceania summit in Tahiti last July.

But Jean-Marc Regnault believes that there is a mood for change amongst ordinary Tahitians.

REGNAULT: "There's a very deep gulf between the government and the political elite who benefit from being in government, and the vast bulk of the population who don't benefit from the current set-up.

"The public seemed a bit irritated with a leader who seems just too sure of himself, and also seeing the French President visit here last July as if he was entering a conquered nation.

"There was also the issue that the President had organised for the winning electoral ticket to get a bonus of 33 per cent of the seats. For many citizens voting here, this seemed a bit like over-kill, as if Gaston Flosse was too sure of his victory.

"This desire to crush the opposition seem to create a mobilisation amongst the people to give a lesson to Gaston Flosse."

MACLELLAN: Both President Flosse and independence activist Oscar Temaru have announced that they will be candidates for the Presidency to be decided on June 10. But with just one seat difference in the Assembly, the Union for Democracy will need to guarantee support from all its members.

This week, New Zealand Foreign Minister Phil Goff stated that the post-election transition should be managed without any violence, an indication of concern that opposition activists might protest if President Flosse returns to power.

Jean-Marc Regnault says that people are waiting quietly for events to unfold.

REGNAULT: "Until now, the country has been surprisingly calm. You might have thought the victors would celebrate their victory, or start issuing demands that they want this or that.

"But there's been none of this. The country is very calm, with people happy to discuss amongst themselves the events that are unfolding.

"But as people have expressed a desire for change, and if this was thwarted by a political manoeuvre, it would certainly be unacceptable for a certain number of activists.

"Even though as a university academic I can't be partisan, it's clear that Gaston Flosse manipulated the elections - through the short electoral campaign and the bonus seats for the winners, he clearly tried to manipulate the result.

"So it would be extraordinary if, after having lost the vote, he now tried to change the results by buying one or two members of the opposition."

MACLELLAN: Jean-Marc Regnault stresses that President Flosse has not yet given up the fight.

REGNAULT: "Since yesterday, Gaston Flosse has made a number of statements that are extremely worrying for democracy. He's announced that he's trying to have the elections annulled, based on pretexts that have got no validity.

"He's also made some very serious statements. He said that he's held a discussion with France's Overseas Minister and that France will no longer give money to French Polynesia if the independence movement takes power.

"There are two options: either the Minister really said this, which would be really serious because France respects the rule of law and should accept an election result. This would be an intervention by the French State that is unusual, or even illegal, I would say.

"But if the Minister didn't say this, Gaston Flosse is making threats and he must take full responsibility for the consequences of what might happen. I think there are some people who are playing with fire."
Source; ABC, May 04

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HIGHLIGHTS


INDIA – BUSINESS – TECHNOLOGY

Microsoft building for first time in India
Microsoft continues to extend its presence in India: no longer content only to lease space, Microsoft has acquired its first plot of land in Hyderabad with plans to construct a three-building complex that will house at least 1,000 employees. While Microsoft portrayed the move as "thoughtful and deliberate," other industry insiders described it as a "wake-up call" for Microsoft’s 27,000 employees in the Seattle area:
"Every employee Microsoft hires overseas means they're placing an employee at Redmond in direct competition with someone that makes a fraction of their wage." Whether these fears are "overblown" or not, the fact remains that big-name U.S. technology companies continue to establish a permanent presence in India as part of a broader cost-cutting strategy.
Source; Seattle Post-Intelligencer, May 04

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SOLOMON ISLANDS – ECONOMY

Pacific fisheries agency seeks new role
The Pacific Islands Forum Fisheries Agency is to re-examine the way it operates.
Most Pacific states and nations with major tuna fishing fleets have ratified a new Pacific tuna convention, to take effect on 19 June.
The Honiara-based fisheries agency was set up a quarter of a century ago by Pacific Island Forum members to exercise greater control over their combined fishing resources.
But with a new commission to oversee the convention soon to be established in the Federated States of Micronesia, the agency is re-examining its role.
At the agency's annual board meeting in Kiribati last week, Forum government officials agreed to accelerate the development a new strategic plan.
That plan will include helping Pacific island nations meet their obligations under the convention. The agency also reported that staff working conditions in Honiara had improved dramatically since the arrival of the Regional Assistance Mission to Solomon Islands, RAMSI, and last July.
Source; FFA, May 04

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TONGA – POLITICAL AFFAIRS

Tongan anger saddens NZ inquiry official
The deputy chair of a New Zealand parliamentary inquiry into relations with Tonga says she is saddened by the attitude of the Tongan government towards her committee.
Tonga's former-acting prime minister, Clive Edwards, recently labelled the New Zealand committee an interference in the kingdom's internal affairs and said it would not be welcome if it tried to come to Tonga. The deputy head of the committee, Winnie Laban, says she hopes Tonga changes its mind about letting them in.
"We are a bi-partisan parliamentary select committee, and the intent and spirit of the inquiry is looking at our relationship with Tonga," she said.
"This was an opportunity for us to reflect on New Zealand's part in the relationship (and) Tonga's part in the relationship."
Source; ABC, May 04

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ECONOMY – ENERGY MARKETS

Oil prices rise in Asian trading in wake of Saudi attacks
World oil prices have surged in Asian trading in the first market reaction to the weekend attacks in Saudi Arabia.
Singapore dealers say, in early trade, the benchmark New York light sweet crude for July was at $US40.38 a barrel, up from $US39.88 at the close of trading in the United States on Friday.
The AFP news agency says with the US markets closed for a public holiday on Monday, the hike in Asian trading is the first indication of heightened fears about a disruption to world oil supplies following the weekend attacks in Saudi Arabia. Suspected al Qaeda militants killed 22 people, including 19 foreigners, in the attacks at oil company offices and a housing complex in the eastern Saudi city of al Khobar. The al Khobar attack is the second in a month on a hub of the oil industry in Saudi Arabia, the world's largest crude exporter. The surge in oil prices comes despite Saudi Arabia issuing assurances after the al Khobar attack that supplies would not be affected.
Source; AFP, May 04

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JAPAN – POLITICAL AFFAIRS

Japan's lower house approves bill to ban NKorean ships
Japan's House of Representatives has approved a bill to ban North Korean ships from calling at Japanese ports if they are deemed a threat to the country's security. The approval paves the way for the enactment of the legislation. Kyodo news agency says the new legislation will give the government a second tool to press North Korea to resolve the abduction and other issues.
It follows February's revisions to the foreign exchange law to enable the government to impose economic sanctions without United Nations authorization. North Korea has admitted its agents kidnapped at least 13 Japanese citizens in the 1970s and 1980s. While many have been allowed to return home, Tokyo wants a proper investigation into the Cold War abductions. The ruling Liberal Democratic Party, its coalition partner, the New Komeito party, and the main opposition Democratic Party of Japan reached an agreement last month to pass the bill, and make it a special law, so it can be abolished in line with changes in the international situation.
Date; May 04

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FOCUS


CHINA – ECONOMY

China booming property market sets records
Beijing is introducing measures to rein-in economic growth but it appears that even tough new banking regulations haven't been able to dampen China's newly found passion for the property market. In both Beijing and Shanghai real estate is the hottest investment around, and official warnings of bursting property bubbles are to no avail.

Presenter/Interviewer: James Panichi
Speakers: Scott Barrack, SPACE director; Guy Hollis, China country head, Jones Lang

LaSalle; Bernie Shuttleworth, ANZ senior economist
PANICHI: Shanghai's heritage flats and houses were built between the 1800s and 1950, and feature hardwood floors and European-style high ceilings. Not surprisingly, they've become a prime target of the insatiable appetites of property investors. Scott Barrack is the director of SPACE, a Shanghai real estate agency.

BARRACK: The first people to go in and really starting buying these things were the local Chinese, but that was driven indirectly or directly by the fact that three or four years ago you had an influx of westerners into Shanghai, who were coming here on expat packages and wanted these old places. Recently now, people have started to feel a little more comfortable with foreigners and now you've got, I'd say, half western and half Chinese who are purchasing these, primarily for the purpose of investment, a little bit more now for individual living.

PANICHI: So, clearly the demand for these houses is on the rise, but to what extent are prices also rising?

BARRACK: Quite significantly. About two and a half years ago, when we first starting getting in the sales market, I purchased a property and a friend of mine purchased a property at the same time and we both paid about US$ 1,000 a square metre. Now, these same properties at the moment... well, I know one of them is for sale for US$ 3,000 plus a square metre. And that's in about two, two and a half years.

PANICHI: In other words, property investments in mainland China continue to boom. In fact, both Beijing and Shanghai are now selling over 20 million square metres of real estate each year. That's in spite of a raft of government measures to dampen enthusiasm, including raising the equity requirement for bank loans from 10 to 30 per cent. According to some observers, the problem is that the growth of city populations appears to be unstoppable. Guy Hollis is China country head for property consultancy Jones Lang LaSalle.

HOLLIS: Property is something that all Chinese seem to love and people are very keen. But the government have got a problem here, in as much as there's mass urbanisation going on China in the moment and the figures that are published -- and these aren't government figures, they're not our figures, they are actually from the European Commission on mortgages -- and they say something like 340 million Chinese are going to urbanise in the next 25 to 30 years, which is roughly the population of the United States. So, that bottom end of the market -- they've got to keep building into that market. And the government give tax-breaks to developers, they give incentives to developers and they also give tax incentives to buyers to buy into that market because that's the mass-market. So, while you slow down the economy, they've got to keep providing housing at that end. The bit they want to stop is developers building speculative schemes at the top-end of the market.

PANICHI: But the value of commercial properties, as well as that top end of the residential market, continues to grow. And the phenomenon may be spreading. In Hong Kong, the property market appears to have woken from its slumber. In the first land auction for 20 months, local developers snapped up two public sites for a total of US$ 380 million -- well above the reserve price. And because investors from Hong Kong and Taiwan are playing a large part in Shanghai's property boom, the previously disparate Chinese markets now appear closer than ever. But does that mean Hong Kong property prices will start to look increasingly like the prices of Shanghai? Guy Hollis.

HOLLIS: I don't know. I mean, Hong Kong is a different market. It's a small, enclosed market and it tends to work in smaller cycles. Shanghai works on more traditional cycles, more five-to-ten-year cycles, it seems to be, as it is maturing. But what is driving Shanghai is the foreign, direct investment and all the industrial growth that's bringing all of the jobs in and around Shanghai and Shanghai is becoming the financial centre for China, which is the Chinese government's policy.

PANICHI: So, on the one hand government policy has to reflect the need for residential developments in Shanghai, while on the other it has to drag an economic growth rate of around 9 per cent - to which the property market contributes - back down to more manageable levels. The good news is that if the market is substantially overvalued -- as many observers believe it is -- a sudden downturn may not have a lasting economic impact. Bernie Shuttleworth is a senior economist with Australia's ANZ Bank.

SHUTTLEWORTH: The bubble is in prices of new, luxury apartments that are largely targeted at investors, many of them from outside China, from places like Hong Kong and Taiwan. Now, if that bubble bursts, the investors will be hurt, the property developers will be hurt and it could very easy add to the bad debt situation of the banks. But bear in mind that the major banks are all government owned, and in a sense it's on the government's balance sheet and I don't think that would lead to a banking collapse.
Source; ABC, May 2004



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