SCO Ties Moving Forward

The new secretary general of the Shanghai Cooperation Organization (SCO), Muratbek Sansyzbayevich Imanaliev, said at a news conference in Beijing earlier this week that the conflict in Afghanistan and expanding the SCO’s members to include Iran and Pakistan were the top issues on the SCO’s agenda in 2010.

Certainly, these issues are likely to dominate preparation for the SCO’s annual summit, which will take place in Tashkent, Uzbekistan sometime this coming summer, reported The Monthly Review.

The SCO was founded in 2001 by Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Formally, the SCO was created to institutionalize the founding members’ ongoing cooperation on border security, counterterrorism, and fighting extremist and separatist activism, as well as for economic cooperation. More broadly, the SCO has established itself as an increasingly important factor in Central Asian affairs, Sino-Russian relations, and the formation of an international coalition--loosely organized around Beijing and Moscow--opposed to what its members see as excessive US unilateralism.

In 2004, Mongolia became the first state to receive observer status in the SCO; in 2005, Iran, India, and Pakistan were also granted observer status. If one includes the populations and territorial extent of the four observer states along with those of the six core members, the SCO has become the world’s largest regional security organization, in terms of the number of people and the amount of territory it covers.

Among other things, the inclusion of Iran, India and Pakistan as observers significantly expands the SCO’s already considerable latent potential to exert influence over the development and marketing of Central Asia’s oil and gas resources.

Over the past three years, Russia has pushed for Iran to be accorded full membership in the SCO. In public, Chinese officials say only that the issue needs to be studied, as a formal mechanism through which the SCO can bring in new members does not currently exist. In private, Chinese officials say that including Iran would change the character and function of the SCO in important ways. In particular, Iranian membership would make it harder for Beijing to insist, as it regularly does, that the SCO is not an alliance directed against any specific country such as the United States.

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New free trade zone to benefit China

China's top brands could be on the road to becoming global household names after the launch of the 4.5 trillion U.S. dollars China-ASEAN Free Trade Area (CAFTA) market, the world's largest free trade zone, according to trade experts.

Despite the country being an economic powerhouse, few of its big companies have ever made a major impact on the world stage.

But if they dominate the 1.9 billion-population CAFTA, Chinese companies could build a platform from which to attack European and North American markets.

China will have made the switch from being a developing country exporting cheap goods to finally making a success of globalization.

Zhang Tianbing, founder of international management consultants AT Kearney's China Research Center in Shanghai, said China companies could move from being regional to global players.

“Chinese companies have never successfully taken advantage of globalization and this could be one of the opportunities presented by the free trade area,” he said.

“If they establish dominant market positions in the region they could move on to do the same in Europe and North America. It would be a major stage in the evolution of the economy.”

The China-ASEAN Free Trade Area came into being on Jan 1 with 90 percent of goods set to be tariff-free between China and Indonesia, the Philippines, Thailand, Singapore, Malaysia and Brunei.

Li Shunde, chairman of Guangyuan Tian Mei Jewelry Co, based in Guangyuan in Sichuan province, is one entrepreneur who sees the CAFTA area as a platform on which to eventually attack world markets.

“I see the ASEAN market as the first stop on the way to selling in international markets. The free trade area with its zero-tariff policy is a major opportunity for us,” she said.

China's largest private car manufacturer Geely is another that expects to benefit from the free trade area.

Yu Xueliang, vice-president of Geely, has confirmed he has had discussions about setting up car manufacturing facilities in Indonesia, where it already has an assembly plant.

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East Kalimantan will build seven power plants starting this year

The power plants built to overcome an energy crisis are located in Karang Joang (30 MW), Kariangau (200 MW), Gunung Bayan (50 MW), Embalut (100 MW), Bakrie Power Sangata (200 MW), Senipah (80) and Berau (20 MW).

"This is to prevent an electricity problem in East Kalimantan," said East Kalimantan Governor Awang Faroek Ishak, on Monday (8/2).

The power plants" construction, he continued, are the result of cooperation between the East Kalimantan Provincial Government, the East Kalimantan branch of state power firm PLN and private companies.

Besides that, several power plants are part of the government"s 10,000 MW power plant program.

"The presidential regulation said that East Kalimantan is included in the first stage of 10 thousand MW power plant program," he said.


According to Awang, PLN will auction the Kaltim Infrastucture power plant project of 200 MW and a cooperation with the United Arab Emirates of 1.300 MW.

He hoped that the construction process would be completed soon.

East Kalimantan PLN General manager, Ahmad Siang, said that the Mahakam System electrical needs already had a surplus of 25 MW from a peak load of 235 MW.

This is after the operation of Sambera and Cogindo Batakan power plants, each with a capacity of 40 MW.

But, Ahmad said that East Kalimantan was not free from rotating electricity blackouts of the Mahakam system.

"The ideal is that there is a 30 percent surplus from the total capacity. This is for backup in case of a damaged plant," he said.

The construction of the new power plant, said Ahmad, is for 97,000 households still on the waiting list for the East Kalimantan PLN service.

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Pertamina to invest Rp 10.2t on new blocks

State oil and gas company PT Pertamina has allocated about Rp 10.2 trillion (about US$1 billion) for acquisition of new oil and gas blocks in 2010, president director Karen Agustiawan told lawmakers Thursday.

Karen said Pertamina planned to spend about Rp 29.5 trillion on upstream activities, higher than last year’s estimated figure of Rp 15.8 trillion.

“Of the total Rp 29.5 trillion allocated for upstream, as much as Rp. 10.2 trillion is allocated for acquisition of new upstream assets,” Karen said.

Pertamina would focus on expansion by eyeing opportunities for new oil and gas blocks especially those located in Southeast Asia and Australia, she added.

The company particularly aims to acquire oil and gas blocks in Indonesia where contracts have expired. The company has noted that the rights on 24 oil and gas blocks will expire between 2011 and 2020.

Among the blocks that will expire in 2011 are the Bawean block operated by Medco Energy, the Pase block operated by ExxonMobil, and the North Sumatra Block A also operated by Medco Energy.

“Pertamina urges the government to automatically transfer the rights over all expired production sharing contracts to Pertamina,” said Karen, adding that the practice of transferring expired contracts to national oil companies was common in other countries.

Pertamina’s finance director Ferederick ST Siahaan said the company’s total investment was expected to reach Rp 46 trillion this year.

“We hope about 35 to 40 percent of the investment required can be financed from our internal sources,” said Ferederick, adding that the remaining funds would be financed from loans and bonds.

With regard to the plan to issue bonds, Ferederick said Pertamina would issue a note with a total value of between US$1 to $1.5 billion this semester. Pertamina is the most profitable state enterprises, contributing about half of the annual dividend paid by state enterprises to the government.

Pertamina expects to book around Rp 25 trillion in net profits this year, an increase of more than 65 percent from the unaudited profits of 2009. Ferederick said the increase was due to the higher crude price.

The Rp 25 trillion projection was based on the assumption of an Indonesia Crude Price (ICP) at
$65 per barrel with an exchange rate of Rp 10,000 to the US dollar, he added.

Revenues are expected to increase to Rp 386.8 trillion in 2010 from Rp 356 trillion last year, he said.

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BRIC-MIT Nations Need to Expand Commonalities

The BRIC-MIT nations, Brazil, Russia, India, China, Mexico, Indonesia and Turkey needed to expand their common interests and jointly push for the establishment of a new order.

As the links between the BRIC-MIT countries are building up, and the foreign direct investment that flows into each other increases, you will find an increasing willingness to see a commonality of economic purposes between these countries.

The BRIC-MIT nations were not geographically linked, but as time went on, they would converge more on the economic levels, because countries of similar levels traded more with each other.

The BRIC-MIT, which evolved from a concept coined in 2001 to a significant entity now, would not be restricted to the four countries. South Africa seems like a natural candidate, and countries like Indonesia and Mexico will also come together.

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US accused China deliberately uses manipulation to maintain an undervalued currency

World War 3: U.S. versus China

It took the onset of World War II to lift the world out of the Great Depression that began in 1929.

Ignore the historical hyperbole that claim Roosevelt’s “New Deal” had anything to do with it. It was war, plain and simple, that galvanized the U.S. manufacturing complex into debt-driven growth, and ended the period of stagnation following the economic contraction from 1929 to 34.

Bernanke’s theory is that the depression would have been averted had the Federal Reserve acted decisively and boosted liquidity - a theory he is now testing. At that time, the Fed was limited to how much liquidity it could inject by the fact that the available money supply had to be connected (at least partially) to the available gold on hand in U.S. reserves.

But scholars (to use the term loosely) agree – the advent of war was the end of the depression. War has since been recognized as good economic policy, and many U.S. administrations have embraced it as fundamental foreign policy.

I recently had a conversation with a senior Chinese government official who assured me that the Chinese observed the regime change machinations of the Bush administration with interest. He suggested that the precedents set by the United States in Iraq, Afghanistan, Panama, Colombia, Saudi Arabia, and myriad other coups overt and covert have thoroughly established the expectation among democratic citizens that forcible regime change of irresponsible governments is an acceptable tool in the democratic arsenal.

That the United States deploys this tool indiscriminately does not pass un-noticed. To the Chinese strategic thinkers, it acts to condone future regime change strategies lurking within the long range plans of expansion-minded countries whose resources may be reaching critical shortages due to excessive population.

Notice that virtually no criticism was leveled by China against Bush’s contrived Weapons of Mass Destruction fallacy, and no interference with the subsequent attack on Saddam Hussein’s fiefdom was seen.

An interesting tidbit in the news over the last 24 hours demonstrates just how easily the pre-text for war can be manufactured.

Five Chinese vessels maneuvered dangerously close to a U. S. Navy ship in the South China Sea on Sunday, closing within eight metres of the unarmed surveillance ship, the Pentagon said.

"This was a reckless, dangerous maneuver that was unprofessional" and violated international law, said Defence Department spokesman Bryan Whitman. The United States protested to Chinese authorities in Beijing and to the defense attaché in Washington over the incident, which occurred in the South China Sea, about 120 kilometers south of Hainan Island.

A Republican lawmaker called the standoff a critical "early test" for President Barack Obama just weeks before he meets Chinese President Hu Jintao in April.

Far from a provocative act of war, the unwillingness of both China and the U.S. to admit any sort of wrong-doing over the incident demonstrates the battle of wills that lurks just under the surface of U.S. – China relations.

According to the Pentagon, the targeting of the Impeccable came at the end of several days in which Chinese naval vessels had been stepping up their harassment in international waters.

The Pentagon insisted the Impeccable was engaged in "routine" and legal operations in international waters.

"The Chinese navy pursues peace and safeguards the security of the country," navy deputy chief of staff Major General Zhang Deshun told China Daily. On most levels, war between two of the planet’s superpowers is unthinkable. Since both are armed to the teeth with the most sophisticated of weaponry, it is difficult to envision a traditional war, where one side sends troops over to physically subdue the other side.

And any idea of a nuclear exchange is clearly self-defeating for obvious reasons. Chemical warfare ditto. Biological? Not in this century.

The third world war, which is, in fact, underway, is being fought economically, as evidenced by Timothy Geithner’s first verbal blunder as Treasury Secretary, where he accused the Chinese of “currency manipulation”, referring to the suppression of the rise of the Yuan against the U.S. Dollar.

Considering U.S. suppression of gold over three decades to create the illusion of a strong U.S. dollar, this is a clear case of the pot calling the kettle black. But that is an entirely different set of cats to skin.

The bottom line is the Chinese, who are the largest foreign holders of United States Treasury Bills, have been underwriting U.S. economic growth for decades, and now hold billions in foreign reserves of a currency being diluted into fractions of its former worth. This monetary hyper-inflation has, in theory, the net effect of devaluing the U.S. dollar denominated foreign reserve holdings in tandem of China and every other holder of Treasurys.

It's like two cowboys each holding a gun with trigger cocked at the other guy’s head, both of them yelling at the other guy to “drop the gun”. The likelihood of a civilized resolution to such a scenario is just about as unthinkable as a nuclear world war.

China deliberately uses manipulation to maintain an undervalued currency. The need to create jobs for the sake of “social stability” has led them to adopt “export led growth strategies” based on an undervalued currency.

This equates to subsidizing its exports and foreign direct investment, and is essentially a tax on China’s imports.

The United States, on the other hand, actively manipulates the value of the United States dollar through the illegal and destructive manipulation of gold and precious metals futures markets, where there is such an accumulation of short interest, that it is inconceivable to think that those contracts will ever be covered by real gold. This amounts to an artificial premium on the United States dollar relative to other currencies, and acts ultimately as a tax on imports.

So the two largest economies are employing similar tactics to achieve identical goals. Both are failing, and the consequence is a global financial system in which confidence has been destroyed, currencies are impossible to value, and the only thing of real value (precious metals and other commodities) are twisting in the wind waiting for somebody to win the third world war.

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China says U.S. protectionism jeopardizes trade ties

China has accused the United States of straining their vast economic relationship through a slew of anti-dumping measures, adding to growing tensions between the two global powers.

The spokesman for China's Ministry of Commerce, Yao Jian, made the comments on Monday, responding to a U.S. trade panel's recent decisions to set preliminary anti-dumping duties on electric blankets and wire decking from China.

Yao's warning came while Beijing is also at loggerheads with Washington over U.S. arms sales to Taiwan, the self-ruled island that China deems a breakaway province.

His strong words suggested trade friction could stoke broader tensions between the world's biggest and third-biggest economies.

"Since the outbreak of the financial crisis, American trade protectionism has clearly raised its head, and China has become the biggest victim of U.S. abuse of trade relief measures," Yao said in a Chinese-language statement posted on his ministry's website (www.mofcom.gov.cn).

"Currently, trade protectionism is seriously affecting the stable development of Sino-U.S. trade and economic relations, and the U.S. should fully grasp the severity of this problem."

The warning reflected the increasingly testy trade relations between China and the United States.

Washington has said Beijing is unfairly keeping its exports cheap by holding down the value of its yuan currency, and is frustrating U.S. companies seeking to expand business in China.

Last week, U.S. Commerce Secretary Gary Locke said Chinese policies that promote domestic firms and create barriers against foreign ones could cause American companies to lose interest in China.

In what appeared to be an oblique swipe at Locke, Yao said recent comments of an unidentified senior U.S. commercial official were "totally contrary to the facts."

"Now some countries engage in trade protectionism, and then turn around and accuse others, and this is totally unreasonable," said Yao.

Annual Chinese exports to the United States could approach $300 billion in 2009 when final statistics are in, down from $338 billion in 2008, but a much smaller drop than for many other countries that export products to the U.S.

U.S. steel makers, other industry groups and unions have filed dozens of cases in recent years accusing Chinese competitors of receiving government subsidies and selling goods in the United States at unfairly low prices.

With a few exceptions, the trade panel in Washington has approved substantial tariffs under anti-dumping and countervailing duty orders renewable every five years.

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China imposes antidumping measures on U.S. poultry imports

China has imposed antidumping measures on U.S. poultry imports, the country's trade ministry said on Friday.

"An investigation showed U.S. suppliers dump prices on their production, which causes harm to local producers," the ministry said in a statement.

Starting from February 13, U.S. poultry suppliers will have to pay a tax, intended to cover the difference in domestically produced and imported poultry prices.

In the first half of 2009, some 407 tonnes of poultry were imported to China. U.S. supplied 90% of poultry consumed in China.

The Chinese authorities started the antidumping investigation of U.S. poultry imports in September 2009.

Russia banned imports of U.S. chlorine-treated poultry as of January 1, citing new safety requirements. Washington, which supplied 22% of poultry consumed in Russia last year, says the move will damage American poultry industry and push prices up for Russian consumers.

Russian Foreign Minister Sergei Lavrov said in late January that "technologically, American poultry producers are prepared to observe the [new Russian] standards" which correspond to European rules.

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China's New Silk Road geo-strategy in Asia

Toward the end of World War II, the godfather of geopolitics, Nicholas Spykman, offered his famous analysis that was to become a rule of thumb for many strategists ever since: Who controls the Rimland rules Eurasia, and who rules Eurasia controls the destinies of the world.

In this ‘Asian Century’, Eurasia is dismissed as having lost its importance after the Cold War. But China is rediscovering the importance of Central Asia and is hoping that this could lead to the geopolitical reorganization of ‘Asia’ itself.



There are two proud itinerant traditions in Chinese history that did much to extend the reach of its civilization, the trade and tributary system. The first is the seafaring one best exemplified by Admiral Zheng He’s leading the Ming dynasty’s immense Armada of hundreds of vessels on seven epic voyages that went as far as Indonesia, India, Africa and even Arabia some six hundred years ago.

The second is China’s significant role in the development of the land-based Old Silk Road which connected East, South and West Asia with Europe, the Middle East and North Africa. At its peak, the Silk Road ran for 7,000 miles and served as an established route for traders, missionaries and soldiers across Eurasia for over 3,000 years.

When we view modern China, it is Admiral He’s seafaring tradition that we warily respect and perhaps fear. After all, the West primarily views the geostrategic significance of ‘Asia’ as a maritime continent – as it has been since World War Two. China has the most ambitious and fastest growing submarine and ship building program in the world; while possession of an operational aircraft carrier is still the ultimate symbol of military power.



China’s emphasis on extended its influence in East and Southeast Asia – especially through its maritime presence – is predictable. After all, it imports most of its energy needs and over four-fifths of these sail through the U.S.-patrolled Malacca Straits. But China remains at a huge disadvantage to its east and southeast by virtue of its maritime encirclement by the U.S. and its network of littoral allies and partners. Its great strategic vulnerability is reliance on energy imports that is received via ships. The current advantage lies with America and its allies for precisely this reason.

But although geography is permanent, geo-strategy is not. China is seeking to change the geostrategic parameters of the existing game for influence in Asia and this is where its second great itinerant tradition -- through the Old Silk Road -- comes in.

For most geo-strategists, Central Asia is mostly irrelevant because the region lacks individual and collective clout and is characterized by an apparent strategic emptiness. When China emerged from isolation, the geostrategic organization of littoral Asia had already been in place for decades. But this ‘strategic emptiness’ in Central Asia presents new opportunities for China to rebuild its own influence and to be creative.

While attention is focused on the naval rivalry simmering in East and Southeast Asia, China has been using a ‘New Silk Road’ strategy that it hopes will reshape geo-strategy in Asia.

First, it is attempting to build its own ‘hub-and spokes’ system in the region although it is still early days. Bear in mind that through the multi-lateral organization of the Shanghai Cooperation Organization, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Russia is in practice building strategic, economic and diplomatic relationships with China rather than separate ones with each other.

Second, Old Silk Road routes offer China the prospect of growing relief from reliance on sea-based energy imports leaving the Strait of Hormuz (22 miles wide and patrolled by the U.S. Fifth Fleet) and the Malacca Straits (1.6 miles wide and patrolled by the U.S. Seventh Fleet.) For example, there are pipelines linking Kazakhstan (with 3% of the world’s proven oil reserves) to Chinese refineries. There are gas pipelines stretching from Turkmenistan through Uzbekistan through Kazakhstan and Kyrgyzstan and ending in China. Just like the Old Silk Road, plans to develop pipelines from the port of Gwadar in Pakistan having successfully negotiated ‘sovereign guarantees to the port’s facilities with Islamabad.’ It is proposed that these pipelines would wind its way all the way to Xinjiang, China’s westernmost province.

Third, if Central Asia experiences a new economic renaissance via energy resources, Beijing has plans to be the future hub between Central Asian states and those in East and Southeast Asia just as states like Japan and Singapore traditionally existed as the key pillars of influence of a maritime based Asia.

There are inherent limitations to even the best laid plans. For example, an Afghanistan leaning toward the U.S. and India would seriously compromise proposed gas pipelines stretching from Gwadar through Afghanistan and into Turkmenistan. Even if the Kazakhstan-China pipeline operates at full capacity, more than half of China’s oil needs will still come from the Middle East. When it comes to geostrategic reconstruction, India is making its own attempts to become an Asian rather than just a South Asian great power.

Even so, as far as China is concerned, broadening the geostrategic construction of ‘Asia’ to include Central Asia makes sense. By creating a second, land-based center of strategic importance, it is well placed to dilute the traditional geostrategic order based on control of the seas in Asia. Despite some distance to go in Beijing realizing these plans, current strategists would do well to re-read their Spykman.

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Indian investors top in Dubai property buys

Indian investors were responsible for the biggest chunk of real estate sales in Dubai in 2009, a new study has revealed.

The figures, included in FutureBrand's Gulf Real Estate Study, showed that nearly a quarter or 24 per cent of sales by value in the city involved Indian investors.

The data, supplied by DUBAIFocus in association with Dubai Land Department, also reveal that UK property buyers finished second with their 21 per cent share.

Investors from Pakistan and Iran grabbed the third and fourth spot with their 12 per cent and 10 per cent contribution respectively, as per the study which was quoted in The Economic Times.

Reasons for investing in Dubai was dominated by buyer's search for high quality construction and nearly 19 per cent of the respondents stated this as their highest priority.

Innovation (15.6 per cent), building great places to live (6.8 per cent) and the ease to work with developers (6.7 per cent) were also seen as important factors by prospective buyers, according to the research.

However, the need to deliver projects on time just got a 0.2 per cent rating from respondents.

In November, research firm Proleads said some 1,845 projects worth a combined $657 billion were still active in the UAE despite the impact of the global slowdown.

The study of the civil construction industry in the country showed 69 per cent of the total projects were ongoing (not cancelled or delayed).

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Indonesia: Investment Predicted to Increase at least Rp. 13 Trillion

Investment Coordinating Board (BKPM) chairman, Gita Wirjawan is optimistic that Indonesian investment value increase from 10 to 15 percent this year. The reason cited was the enactment of the one-door integrated service, which will simplify the process of capital investment through the internet in every region.

The impact of this new system has started to show with an increase of investments in Jakarta ha In Batam, the investment process is being carried out through the internet. The use of electronics is expected to be carried out in all of Indonesia this year. Last year, investment in Indonesia amounted to Rp 135 trillion, in which Rp.100 trillion came from foreign investors and Rp. 35 trillion from domestic investors.

“This is different from the previous blueprint, targeted for 2012. We are accelerating it to 2010. With this simplification, investment will definitely increase,” said Gita, answering reporters’ questions after a visit to the Tirta Investama company in Klaten, Central Java, yesterday.

To publicize this integrated service, Gita will visit Central Java areas like the ones he made to Semarang, Solo and Klaten. “I met governors and regents to brainstorm about the potential targets that can be achieved by Central Java in order to improve coordination between the central and regional governments,” he said.

Samiaji, Klaten Deputy Regent, proposed several investment schemes to Gita, for example in the field of dairy cattle breeding, steel foundry and crafts. Gita had visited Tirta Investama Company, a domestic and foreign joint venture dealing in potable water production.

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