Nepal's Army Accepts New Government

Reuters

May 29, 2006

KATMANDU, Nepal, May 28 (Reuters) — Nepal's army will accept the authority of the new government, the chief of the army said Sunday.

In his first comments since Parliament curbed King Gyanendra's powers, including his control of the armed forces, the army chief, Gen. Pyar Jung Thapa, said troops were committed to democracy in Nepal.

King Gyanendra gave in to violent protests in April, returning power to political parties and reinstating Parliament, which he had dissolved in 2002.

"The Nepalese Army is committed to follow the directives of the government," an army statement quoted General Thapa as saying in an address to trainees at the army's Command and Staff College.

Parliament moved fast this month to curb the king's powers, take control of the army and strip the king of his title of supreme commander in chief. Parliament also changed the name of the armed forces from the Royal Nepalese Army to simply the Nepalese Army.

General Thapa said the 90,000-member army was engaged in "consolidating multiparty democracy and promoting national prosperity by maintaining peace."

Until a month ago, the army was pitted against Maoist rebels, who had backed the political parties in their campaign against the king.

On Friday, the government and rebels held their first meeting since 2003, agreeing to a 25-point code of conduct, including a commitment to end provocations and stop using arms to intimidate people.

Pakistan's Economy To Expand As Much As 8%, Aziz Says

Bloomberg

May 29 (Bloomberg) -- Pakistan's economy will probably grow at an annual pace of as much as 8 percent over the next five years, matching neighboring India, on record foreign investment and rising consumer spending, Prime Minister Shaukat Aziz said.

``We are creating gradually a middle class which is driving consumption,'' Aziz, 57, a former global head of private banking and executive vice president at Citibank NA, said in a May 22 interview in the capital Islamabad. ``It's a very viable economy and it is growing.''

The $118 billion economy expanded 8.4 percent in the year ended June 30, 2005, the fastest in two decades, as households increased spending and government support for the U.S.-led war on terrorism helped draw investment from overseas. Aziz, who will complete his first term as prime minister in October 2007, said growth depends on selling state assets, improving regulation and opening up the nation's markets.

``Growing at 7 to 8 percent on a sustainable basis is beyond Pakistan's capacity without real institutional strengthening,'' said Sakib Sherani, chief economist at ABN Amro Bank in Islamabad. ``The government needs to be more realistic.''

The key Karachi Stock Exchange 100 index, which has gained 7.2 percent this year and reached a record on April 17, tumbled 3.9 percent to 10,247.59, a 10-week low, at close. The drop came on speculation of selling by overseas funds, said Faisal Potrik, who helps manage the equivalent of $2.5 million as chief executive officer at First Capital Mutual Fund in Karachi.

Foreign Exchange

Aziz was appointed finance minister by President Pervez Musharraf in 1999, after working three decades in Citibank offices including New York, Singapore, Jordan, Greece and Malaysia, to help turn around an economy that had barely one month of foreign exchange reserves and was in danger of defaulting on foreign debt repayments. He's also had to win back overseas investors, who had avoided the nation after the Sept. 11 attacks made Pakistan's border with Afghanistan a focus of the U.S. fight against the al-Qaeda terrorist group.

Confidence in Pakistan will be tested next month as the government prepares to sell a 51 percent stake in Pakistan State Oil Co., the biggest supplier of fuel, by June 30. It will also sell management rights in National Investment Trust Ltd., the largest mutual fund company, next month, the asset-sale agency said on May 25. In June, it sold a 26 percent stake in Pakistan Telecommunication Co., the biggest phone company, to Emirates Telecommunications Corp. for $2.59 billion.

``There are no sweetheart deals in Pakistan anymore,'' Aziz said. ``Today, Pakistan offers a level-playing field to all investors. We are one of the few countries where no sectors are taboo to invest, whether local or foreign.''

China, Middle East

Pakistan estimates it will get $3 billion of overseas investment annually to sustain the economic growth rate, Aziz said. Companies from China, Singapore and the Middle East are investing in Pakistan, while Japanese companies such as Toyota Motor Corp. make cars in the country, he added.

Temasek Holdings Pte, Singapore's state-owned investment company, this year bought a 72.6 percent stake in Pakistan's NIB Bank Ltd. and it also plans to start an asset-management company in the South Asian country.

``Growth is based on strong macroeconomic fundamentals and a structural reform agenda which has been broad-based and deep,'' said Aziz. ``Reforms are based on a philosophy which is deregulation, liberalization, privatization, transparency and good governance.''

Pakistan's economy is set to grow between 6 percent and 8 percent this year, which will help the nation's annual per- capita income surpass the $800 mark, said Aziz, who became prime minister in August 2004. He said his administration has reduced poverty by about 8 to 10 percentage points since 2001.

`Very Optimistic'

``I am very optimistic about Pakistan's economic potential and prospects,'' central bank Governor Shamshad Akhtar said in a May 24 interview in the southern port city of Karachi. ``With investment coming back, I am quite optimistic we will have growth kicking up at a faster pace than what we had expected.''

The State Bank of Pakistan is forecasting growth this fiscal year of between 6.2 percent and 6.7 percent.

Last year's 8.4 percent economic growth rate compares with an average 4 percent pace in the decade starting 1990, when, according to the government, Pakistan's poverty rate almost doubled to 33 percent.

India's economy is expected to grow at an 8 percent pace this year, matching the rate of expansion of the previous three years, Finance Minister Palaniappan Chidambaram said May 23. The $775 billion economy expanded 7.6 percent in the three months to Dec. 31 from a year earlier.

Credit Rating

Pakistan's long-term foreign currency rating was raised in November 2004 by a level to B+, or the fourth non-investment grade, by Standard's & Poor's after falling to within two levels of default status in October 1998. This followed nuclear weapons tests that led to sanctions, including a ban on aid and loans from countries in Europe and the U.S.

The resumption of aid and loans after the country supported the U.S.-led war on terrorism in 2001 has helped Pakistan's benchmark stock exchange index surge 10-fold.

Improved ties with India will also help reduce poverty in the region, Aziz said. A peace treaty offered by India's Prime Minister Manmohan Singh this year ``must be driven by dispute resolution,'' he said.

``We remain cautiously optimistic'' about peace talks with India, Aziz said. ``We have tied trade and business relations with India with the resolution of the Kashmir dispute. So progress on Kashmir will determine the progress on trade and investment ties with India.''

Peace Process

Aziz was also tasked with taking forward the peace process with India started by his predecessor Zafarullah Khan Jamali in 2003. The South Asian nuclear-armed neighbors have been improving ties since then, including the resumption of sporting and transportation links.

The two countries came close to fighting a fourth war in 2002. Two of the previous three wars between Pakistan and India were fought over control of Kashmir, which is divided between the two nations and claimed by both in full.

Pakistan and the U.S. have a ``common interest'' in fighting terrorism, Aziz said. ``Pakistan has made good progress to reduce the scourge'' of terrorism, he added.

Pakistan became a key U.S. ally after providing intelligence and logistics support to U.S. forces in their attacks on Afghanistan in 2001. In 2004, the U.S. announced Pakistan as a key ally outside the North Atlantic Treaty Organization.

U.S. Ally

Since 2003, Pakistan's security forces have been hunting in the country's tribal regions for Taliban and al-Qaeda fugitives who fled Afghanistan after the attacks by U.S. forces. Afghanistan's President Hamid Karzai said Pakistan's religious schools were inciting people to fight a holy war in his country, Agence France-Presse reported May 19.

Pakistan's security situation, such as the insurgency in southwestern Baluchistan province and the hunt for terrorists in the northwestern tribal region, may hurt foreign investment, said Ather Medina at Atlas Asset Management Ltd. in Karachi.

``The perception problem we have is very severe,'' said Medina, who helps manage the equivalent of $80 million as chief operating officer at the company. ``Foreign investors get influenced by reports of insurgency and bomb blasts. Such reports coming out of Pakistan can keep them away.''

To contact the reporter on this story:
Khalid Qayum in Islamabad, Pakistan at
kqayum@bloomberg.net.

Stuck In Conflict, Sri Lanka Monitors Find New Roles

Reuters

Monday May 29, 07:05 AM

By Peter Apps

VAVUNIYA, Sri Lanka (Reuters) - For civilians caught on the front line of a growing conflict between Sri Lanka's government and Tamil Tiger rebels, truce monitor Jukka Heiskanen's white jeep is almost the only reassurance around.

But with only four members of the Nordic-staffed Sri Lanka Monitoring Mission (SLMM) to cover a huge area of interlocking government and rebel territory around Vavuniya, moving from monitoring a ceasefire to active peacekeeping could be a step too far.

"It seems to help that we keep coming here," the Finnish homicide detective told Reuters as he visited a family who said their main breadwinner had been shot dead the previous week by members of the military near the northern town.

"It helps send a signal that we know what's going on here."

The government denies any involvement in deaths of Tamil civilians in the island's north, and says it is urgently investigating the cases. But the truce monitors believe the army is involved and police have made little progress.

The unarmed 60-person mission, made up of staff from Sweden, Denmark, Norway, Iceland and Finland, was designed to help solve disputes and highlight violations of the truce. It began work on the assumption that both sides were committed to peace.

The government and the Liberation Tigers of Tamil Eelam (LTTE) maintain they are still committed to the truce that halted a two-decade civil war that killed more than 64,000 people.

But with violence rising and nearly 300 people dead in the past month, SLMM head Swedish Major-General Ulf Henricsson says they are now monitoring "a low-intensity war".

That war sees the monitors in Vavuniya -- led by a Finnish soldier and also comprising Finnish policeman Heiskanen, a Norwegian human rights specialist and a Danish aid worker -- increasingly on the front line.

ANOTHER DAY, ANOTHER BODY

Barely a day goes by without at least one of them visiting the district hospital's foul-smelling morgue to see a new dead body. They monitor suspected Tiger attacks on the military, possible murders by members of the armed forces and what they say are probably government attacks behind rebel lines.

They should also have visited the scene of government air strikes on rebel territory in the aftermath of a naval clash off the north coast, but the Tigers denied them access to what the military says was a rebel airstrip.

With the two sides blaming each other for a deteriorating situation, the SLMM is winning itself few friends.

The government is angry at being accused of deaths, while the Tigers -- who want to carve out a separate homeland for ethnic Tamils in the north and east where they already run a de facto state -- are angry the SLMM chief said they had no rights at sea.

With the rebels threatening new naval attacks, they have warned the monitors they cannot vouch for their safety if they continue their work aboard navy ships.

The SLMM says it will not withdraw and is ordering flak jackets, helmets and perhaps even armoured vehicles. Additional police guards have been posted.

Few residents here will now risk openly talking to the SLMM Vavuniya team. When one household gives them information, the monitors must now visit another half dozen to conceal who is providing them with information.

CALMING PRESENCE

And while some combatants on both sides remain friendly, soldiers who normally smile at foreigners in civilian vehicles simply stare at the occupants of the SLMM's small fleet of well-marked, white jeeps.

But the monitors say they still get a good response from the increasingly scared civilian population, who say army harassment falls in areas where the SLMM shows a presence.

As well as vehicle patrols, the monitors walk around the local area, carrying large wooden sticks to beat away the dogs and snakes that lurk in the undergrowth. But they can cover only a fraction of their area.

Near the scene of one killing, local people said the only thing stopping them fleeing their homes was the repeated SLMM patrols.

"Just their presence makes things a little calmer," said one woman, although she was scared even to be seen talking to a monitor. "The SLMM presence stops the round-ups, the arrests. Otherwise, there would be no one to tell the world."

The monitors worry expectations are becoming unrealistic.

"We cannot be satisfied with this," Heiskanen told the woman through his translator. "There must be some other solution. But for now we will keep coming."

Microfinance: Myths and Realities

The News

May 29, 2006

Nadeem Hussain

Microfinance in Pakistan is literally taking its first baby steps. With less than 12 % penetration of a potential market of six million households, the current outreach is dominated by government programmes like the National Rural Support Programme and Khushali Bank, which is a public private partnership. Unfortunately, these institutions are currently financially unsustainable as they are not empowered to charge a market rate which would allow them to make a profit. The five specialised microfinance banks have yet to make an impact as either they are less than a year old and hence have yet to reach scale, or their risk appetite has precluded them from reaching scale.

So clearly, the window of opportunity for enterprising commercial banks to enter this segment of the market is wide open. Examples also exist in the region as scaling down by commercial banks into the microfinance segment has successfully been demonstrated in countries in Asia such as India, Bangladesh and Indonesia.

Commercial banks in Pakistan are currently enjoying very high profits. As a result many of them may be in a position to consider a pilot programme for the microfinance segment. However, the mainstream banks continue to shy away from this sector, which has a potentially high social impact and is financially sustainable, because of some preconceived notions. There are many myths connected to this sector. At the heart of this prejudice is the misplaced belief that it is unprofitable, and hence the view that microfinance must always remain a charitable enterprise. This is followed by the notion that given the low incomes of potential borrowers and their lack of traditional collateral, the loan loss rate must be very high. Lastly, it is expected that this customer base, given its low level of literacy must be averse to technology, hence average transaction cost cannot be brought down for sustainability.

Let us examine each myth and determine what the reality is. The first myth is that this must be a charitable activity since the customer can never be profitable given the small size of the loan, the cost incurred in acquiring and maintaining this customer, and lastly the expected loan loss experience. Yet, worldwide experience suggests that, if handled correctly, not only is this customer base profitable it can be the most profitable and sustainable segment in a commercial bank’s portfolio. Successful commercial banks have demonstrated ROA (return on assets) in the range of 9-15 per cent in South Asia, let alone Latin America, where it is even higher.

In the microfinance business model, the revenue, in order of priority, is driven by scale, interest rate and size of loan. While the principal cost determinants are the cost of funds and the cost of intermediation, i.e. acquiring and administrating the loan portfolio. The last driver for profitability is the credit loss. Achieving scale is the key as the average loan is usually small given for a maximum for twelve months with monthly repayments. The acquisition model must have two key components. Firstly, the microfinance acquisition team must be compensated on a variable basis, i.e. a reasonable fixed component and an increasing variable component based on performance. Secondly, acquisition must be localised. Unlike consumer product acquisition, which is usually from a centralised location, microfinance branches or sales and service centres must be located where the customer is. This is necessary because unlike other segments relationship managers must be more aware of their customer’s monthly cash flows and the potential difficulties they may face. As the branch rental in low-income areas is low compared to the more commercialised parts of a city, the number of branches does not cause an unsustainable expense burden. Once these two components are in place, scale can be achieved without crippling fixed costs and more than expected credit loss.

An effective interest rate is the next most important revenue driver. Successful commercial banks charge a rate which not only covers their fully loaded costs but also provides the necessary expected return from their investments. The trap to avoid is that charging a sustainable interest rate may be viewed as usurious, thereby generating negative press and impacting the brand of the commercial bank.

Three principal facts should be kept in mind. First, this is a commercial venture, hence the effective rate must be sustainable. Second, the target customer base typically borrows from the informal sector, where the interest rates are usually a multiple of whatever the effective rate the commercial banks come up with. Third, the target customers are more than willing to pay the effective rate, as becoming part of the formal credit world allows them to create a credit history which facilitates repeat loans of a higher value.

The last important revenue driver is the size of the loan. While loans can start as low as Rs10,000, the average loan size must be higher in order to be sustainable. The current average loan in Pakistan is $170 which is only 45 per cent of the per capita income. Successful commercial banks have much higher loan sizes.

On the cost side, the funding costs are a key issue for specialised commercial banks. However, given that the current cost of funds for commercial banks in Pakistan is less than two per cent, this is not a major issue. The cost of intermediation, i.e. branches, staff and systems can be a major hurdle. And if commercial banks used their current model of distribution they would not be successful. The microfinance customer base requires a completely different mindset regarding management, products and distribution.

The last myth is that of the perceived loan loss. The perception is that as one goes lower down the income chain the quality of the loan portfolio, and thereby the loan loss, increases. In the case of microfinance this assumption does not hold true. The reality is that this customer base greatly values its introduction to formal lending providers. The global experience suggests that unless the customer base repayment is assessed correctly the write-off is less than one per cent.

Hence, in order to succeed four elements are critical: First, the sales force compensation must be a low-cost-variable model. The sales force must also be trained to become income assessors as opposed to purely sales staff. Second, the distribution channel must consist of low-cost branches in non-prime locations where the customer base resides. Technology must be leveraged to reduce maintenance cost .For example, the introduction of biometric, voice-aided, touch-screen ATMs reduces the need for multiple tellers, given the high-volume low-value savings transactions. Third, back-office operations need to be minimised, particularly paper based transactions. Fourth, the product offered must be simple, easy to purchase and must satisfying basic needs.

There are three basic models available to commercial banks to access this market. One is that they can first use the existing management, infrastructure and branches in order to leverage the existing costs. Unfortunately, this usually does not work as a totally different mindset is required. Another model is that a totally separate subsidiary can be created. This model has been successfully used. Although it initially leads to increased cost the long-term returns more than compensate for this initial investment. A third model is that commercial banks can use the existing microfinance players to originate and service loans for them. Commercial banks provide the use for their balance sheet and low-cost funding. The originators are paid a service fee and the credit risk is split between the two.

The reality of the dynamics of the microfinance market suggests that there is a significant opportunity for commercial banks out there. Profits and social dividends will only accrue to those who are willing to seize it.

The writer is CEO of Tameer Microfinance Bank. Email: nadeem.hussain@tameerbank.com

What, Me Worry?

The News

May 28, 2006

Masood Hasan

When I saw Prime Minister Shaukat Aziz come down the steps of the hijacked national airline wide-bodied jet I peered hard to see if by any chance it was another aircraft and that the big man had finally done the impossible and flown on a regular airliner. The mirage was short lived as the PIA monogram swung into gloomy view. Unable to multiply so many gallons of fuel with so many losses of revenue and so many rescheduling of flights that must go into play to make these VIP junkets possible, I gave up. It struck me that among the string of countries that were on the prime minister's circuit this time, there was a particular spot, which he graced with his beaming countenance. This was none other than the luxury resort on the Red Sea called Sharm El Sheikh. I don't quite know what it actually means, my French not being very good, but surely 'Sharam El Aziz' is something that springs to the lips.

It is apparent that unless the prime minister undertakes these terribly tiring journeys, the entire edifice of this country and knowledge of its very existence would be simply erased from the memory of the thousands of people who live elsewhere. On many of his now legendary trips, the PM has revealed that there hadn't been anyone from our many governments who had ever travelled to such far-flung parts of the world like Greece. To the amazement of the Greeks who have seen it all before and then seen some more, here was this man from a far away land called Pakistan. The Greeks whose knowledge of the world was once legion could only wonder in disbelief why the gods had deprived them of the sight of this benign and smiling man who stood in their midst and said nice things in dulcet tones. That we now have a bilateral relationship with Greece is as remarkable a feat as the discovery of the atom. What is even more gratifying is that we are soon building a railway system for the Libyans as well. Truly the ways of God are strange and wondrous. A train system in Libya with Tulli dressed like Lawrence of Arabia racing across the great Libyan Desert, his white and gold silk robes flowing in the wind behind him and the fan belts keeping his toupee in firm check. As he transcends vast spaces, the cry goes up, 'Behold Tulli the Libyan Locomotive'. Never mind if most of their trains derail with unflinching regularity. Their officials can seek inspiration from men of vision such as Shamim Haider who having derailed as many trains as he could, has now been chosen to plant the kiss of death on sports which are already very dead.

With the prime minister having set our estranged relations with the Greeks right on course, we should simply close down our embassy there, fire the useless ambassador whom no one seems to know, fire the staff and order a NAB probe into all those who have held posts in Athens without ever telling the Greeks they were from Pakistan. We should, while we are at it, disband all the embassies. The PM can do all that work just by himself. When you have a man who can fly even when he is on the ground in Tharparkar, his other home, why waste money on people and buildings? Even the Hotel Scherezade should be restored to its earlier vision of a cabaret featuring voluptuous beauties from the Nile. We should do this before the PM rushes to another remote part of the world like France or the obscure island of Britain both of which undoubtedly have never heard of us or from us.

In the meantime, though this is entirely irrelevant to the subject at hand, President Mahmoud Ahmadinejad, the Iranian President needs talking to. The man has no style and wears the wrong clothes. Rather than taking a cue from our swank PM and his merry band of ministers, he has gone and returned the 59 million dollar VIP Airbus that his predecessor had purchased. Instead of immediately taking off for the Caspian Sea, as any sensible Pakistani power-man would have done in a trice, he ordered his transport minister to either sell the aircraft or let ordinary passengers use it. He simply did not want it. How foolish. No wonder he is not very welcome here since he is bound to be a bad influence on the 765 ministers we have in Islamabad. Apparently they are multiplying so fast that all self-respecting rabbits have relocated to Attock and refused to admit that they were once residents of Islamabad.

Other than showing bewildered nations of the world where Pakistan is located on the map that the PM carries at all times, he has also sought investment from energy-rich Muslim countries to the capital-deficient Muslim countries -- Pakistan is not part of this squalid club. Having spent about US$705 million already in six months on foreign travel, Pakistan's burgeoning officials led by hordes of ministers and advisors and other lay abouts are hoping to streak by a figure of US$1.5 billion before the fiscal year is done. And since this is the season for figures with another 'people-friendly' budget stew being cooked in Islamabad -- go easy on the spices Salman Shah Jee, the prime minister's housekeeping expenses are a pittance at Rs700,000, although why they want to spend this kind of money when he is never there, is puzzling. Pakistan's globetrotting president, another journeyman in the tradition of the great explorers, who is often not here, still manages to make do with another Rs700,000 spent on his housekeeping, which may be a new way of defining mathematics as the game of the absurd numbers.

A housing colony for ministers valued at Rs205 million has been approved. However, Islamabad has realised that just a colony will not be enough to house thousands of ministers, advisors and other beasts that now roam Islamabad with the same fearless abandon displayed by the wild boars of Potohar. Some have suggested that an entire country might be required given that the prime minister immediately appoints anyone who has a different opinion to the person next to him. That means that guttersnipes like us might one day find our way into those hallowed ranks where blubber passes for intelligence.

As for the assets of the rich and famous, I have not stopped crying since I read that Ch. Shujaat Hussain, who has the world at his feet, does not own a car. Isn't that amazing? When such angels cast their blessings on the land, what is there to worry about? And finally, it has been clarified that the prime minister never applied for two plots from the National Police Foundation Islamabad while he was finance minister We are all truly ashamed that we thought otherwise. I wonder though how does a banker get two plots at throwaway prices from the cops? Was he perhaps a policeman in disguise? Oh well, such are the mysteries of public life. Happy budgeting next week.

The writer is a Lahore-based columnist. Email: masood_news@yahoo.com

Tackling The Tigers

The Dawn

May 28, 2006

By Irfan Husain

DRIVING into Colombo from the airport, one does not get a sense of a country on the brink of civil war. But within the city, you can see discretely located machine-gun positions behind sea-green sand bags.

Despite the government’s desire to downplay the prospects of a complete breakdown of the crumbling ceasefire, the number of tourists has fallen sharply. Given the economy’s dependence on this source of foreign exchange and employment, this is a disastrous consequence of the renewed fighting in the north and east.

Many observers had foreseen a collapse of the peace efforts once the Sinhala nationalist and extreme left JVP joined the ruling coalition. Ranil Wickremsinghe’s narrow defeat in the presidential election last year was the final nail in the peace process’s coffin. ‘Ranil’, as he is popularly known, was widely regarded as the peace candidate, having earlier pushed negotiations forward vigorously, and gained a ceasefire as prime minister. But his government was dismissed by a power-hungry Mrs Chandrika Ranatunga who was then President.

The LTTE ruthlessly enforced a boycott of the presidential elections, depriving Ranil of key Tamil support, thus allowing Rajapakse to squeak through by a handful of votes. My friends in the south of the country speak darkly of rigging, but the bottom line is that the more rigid Mahinder Rajapakse is now in power for another seven years.

Most outsiders blame the LTTE leadership for the current situation. While Prabhakan and his deadly Tigers are more than capable of sabotaging the peace process, the fact is that they have been seriously provoked. A breakaway faction led by ‘Colonel Karuna’ operates freely from army-controlled areas, so that when the LTTE retaliates against them, this is depicted routinely by the government as anti-army attacks. Local friends privately accuse the JVP of carrying out murderous attacks against Tamil civilians.

So given Ranil’s commitment to peace, why did the LTTE boycott the election, effectively sabotaging his campaign? Many theories have been advanced, but according to the most credible one, Prabhakan calculated that with Ranil in power for the next seven years, he would be under great pressure to negotiate seriously and make some concessions to preserve the spirit of the federal solution that had already been agreed upon. But if Ranil lost, he could say that serious talks were not possible with a government headed by the committed unitarian Rajapakse, and supported by the JVP and the Buddhist monks’ party, the JHU.

One problem with the stuttering peace talks has always been that the LTTE is not answerable to voters or to the international community. The government, on the other hand, needs to attract tourists and foreign investment, as well as abide by a certain code of conduct. The LTTE can simply refuse to engage in serious talks, finding all sorts of excuses to derail them, while the government is under pressure to settle the 25-year old civil war. After all, Prabhakan and his group wield absolute power in the territories under their control, raising taxes as well as performing all the functions of a government. So why compromise?

Meanwhile, the economy is performing far below its potential, the Sri Lankan rupee and stock market are both plunging, and unemployment is rampant. According to a recent calculation, the economy could be growing at 10 per cent annually were it not for the uncertainty caused by the civil war.

And yet, despite the escalation of violence, the government is keen not to let the situation reach a breaking point. All sensible Sri Lankans dread the outbreak of open warfare, and except for the extreme Sinhala, Buddhist chauvinists, everybody knows there is no military solution available. A guerrilla war is a nightmare for an army that tried for years to break the LTTE. The Tigers have shown repeatedly that they can send their suicide bombers to any corner of the country. A few weeks ago, they almost succeeded in killing the army chief outside his headquarters in Colombo.

Given the intractable nature of the conflict, is there a political solution in sight? Clearly, as long as the JVP and the JUH are key components of the ruling coalition, the government will be unable to make the concessions and compromises necessary. However, if Ranil Wickremsinghe is invited to head a new government of national unity and given a free hand, it is just possible that a war can be averted and a peaceful solution to the conflict found.

The stakes are high: the international donor community has put together an aid package totalling four billion dollars if the two sides can reach an agreement. But although the rest of the world has a juicy carrot to dangle, it has no stick at its disposal. While the ruling coalition would love to get its hands on the money, the LTTE is collecting taxes locally and receiving millions of dollars from its supporters in the Tamil Diaspora.

A lawyer friend in Colombo who has been a serious student of conflict resolution put the problem in perspective: “When the older son fights his six-year old brother, the father normally sides with the younger child because he is weaker and more vulnerable. In Sri Lanka, because the Tamils have a genuine sense of grievance, the state should listen to them and not allow the bigger Sinhalese majority to bully them. Instead, successive governments in Colombo have viewed the conflict solely from the perspective of the majority.”

Perhaps there are lessons here for Pakistan. Maybe Islamabad should have been listening more closely to complaints and protests from the smaller provinces instead of acting almost exclusively to safeguard the interests of the largest province. Had it acted in the national interest, we might not now be facing so much internal dissent and violence.

Donors Take Stock As Dead Bodies Pile Up In Sri Lanka

Agence France Presse

May 28, 2006

by Amal Jayasinghe

Sri Lanka's key foreign aid donors will meet to reevaluate the troubled nation's faltering peace process this week at a meeting in Tokyo as blood continues to be spilt in the south Asian nation.

Japan's peace envoy Yasushi Akashi is to host a meeting of the United States, the European Union and Norway in order to review their involvement in Sri Lanka's faltering peace process.

"There will be soul-searching," Akashi said during a visit to Colombo earlier this month.

"Where are we with the peace process? Where we should be going? Why is there not enough progress in the process."

Nearly four years ago Akashi, a former UN diplomat with experience in Cambodia and Kosovo, said the Sri Lankan peace process was a "shining beacon" for other nations, as he aimed to help end three decades of ethnic bloodshed.

More recently, Akashi and other diplomats have privately expressed their frustration at the faltering process, while publicly remaining positive, hoping that a promises of funds could woo the government and rebel Tamil Tigers back to the negotiating table.

In June 2003, Akashi helped raise 4.5 billion dollars to boost the Norwegian-led peace effort.

"Did we do it right? Was the money spent properly?" Akashi asked. "These are issues we will discuss in Tokyo."

Sri Lanka's donors pledged nearly 100 million dollars in support of the peace effort in November 2002 after the Colombo government and the rebel Liberation Tigers of Tamil Eelam (LTTE) opened talks following a ceasefire signing in February that year.

They increased financial pledges in June 2003 to 4.5 billion dollars in a move widely seen as an incentive to keep the parties engaged. But that April the Tigers withdrew from talks, claiming they were being sidelined.

Although negotiations were put on hold, the two sides pledged to uphold the ceasefire put in place by Norway.

However, the truce came under intense pressure following the election of President Mahinda Rajapakse last November.

Scandinavian monitors say that since December about 600 people -- more than half of them civilians -- have been killed, with the toll mounting every day. The LTTE's political wing leader, S. P. Thamilselvan told Akashi earlier this month that they were being forced to break the ceasefire and that "repression of their normal life will force them to take a decision that will bring doom to Sri Lanka."

In an interview with AFP, Thamilselvan said international aid donors must be "very judicious" in assessing whether the ceasefire agreement has been fully implemented.

He said they must make an honest judgment based on the violence which has occurred while the ceasefire has been in place

"The erring party should be asked to explain and not the party that has been fighting for the freedom of the Tamil people," he said.

Sri Lanka's government says it remains hopeful international pressure will bring the Tigers back to the negotiating table.

Sri Lanka is also counting on the European Union to brand the Tigers a terrorist organisation.

"We think a ban on the LTTE by the EU before the meeting in Tokyo will send a message to them to give up violence," government spokesman Keheliya Rambukwella told AFP.

The Tigers have said that any ban by the EU could isolate them and force them to resume their campaign for an independent homeland.

Tamils comprise 12.5 percent of the population in a country where Sinhalese are the majority.

More than 60,000 people have been killed in the island's conflict since 1972 and four previous peace attempts have ended in failure.

Copyright © 2006 Agence France Presse

More Than 4,600 Dead In Indonesian Quake

Reuters

May 28, 2006

BANTUL, Indonesia - Rescue workers dug desperately for survivors on Sunday and hospitals struggled to cope with the thousands of injured, a day after an earthquake killed more than 4,600 people on Indonesia's Java island.

Up to 20,000 had been injured and more than 100,000 have been left homeless, UNICEF (the U.N. Children's Fund) spokesman John Budd told Reuters, but he said figures were still sketchy.

"Nobody really knows for sure simply because a lot of people were actually evacuated out ... in order to be treated and a lot of people who are injured have been turned away," Budd said.

Trucks full of volunteers from Indonesian political parties and Islamic groups, as well as military vehicles carrying soldiers, headed south from the ancient royal city of Yogyakarta to Bantul, hardest hit by the quake, to help in the effort.

"Kopassus (special forces troops) and Indonesian Red Cross volunteers are trying to comb through rubble because thousands of houses are damaged and people may still be trapped beneath them," Ghozali Situmorang, director general of aid management for the national social department, told Yogyakarta radio.

Medical supplies and body bags were arriving at the airport of Yogyakarta, about 25 km (16 miles) from the Indian Ocean coast where Saturday's 6.3 magnitude quake was centered just offshore.

A vulcanologist said the quake had heightened volcanic activity at nearby Mount Merapi, a volcano experts believe may be about to erupt. Merapi has been rumbling for weeks and sporadically emitting hot lava and highly toxic hot gas.

The official death toll jumped to 4,611 on Sunday night, said the Social Affairs Ministry's disaster task force.

In the Bantul area, which accounted for more than 2,000 of the deaths and where most buildings were flattened, makeshift plastic tents dotted the roads.

In the afternoon heat Sugiyo picked through the remnants of his brick home. He had been trapped with his family before being rescued by other village residents. His mother was killed.

"I found my motorcycle but it was destroyed, then I found the cupboard but it was broken too," said Sugiyo.

But his face lit up as he spotted a pink box containing diapers and baby clothes. "This is for my 2-year-old daughter," he said holding the box tightly in his arms.

Throughout the disaster-struck region, authorities struggled to deliver aid.

"The problem now is that we are still short of tents, many people are still living on the streets or open areas," said Suseno, a field officer of the Yogyakarta disaster task force.

Clean water was another problem, officials said. In Bantul all 12 water distribution systems had been either knocked out completely or were not working properly, UNICEF'S Budd said.

MANY STILL IN BED

Saturday's dawn quake struck while many were still in bed. Houses in the area tended to be poorly constructed, their wooden roofs collapsing on occupants when the quake shook.

Hospitals struggled to cope. Hundreds of people crammed the corridors and grounds of Yogyakarta's Bethesda hospital.

"There's a lot of severe injuries. It was definitely overwhelmed," said hospital volunteer Andrew Jeremijenko.

"I've been to the other hospitals. They're all overwhelmed. There are not enough nurses or doctors to cope with the load."

Saturday's quake was the third major tremor to hit Indonesia in 18 months. The worst, the December 26, 2004 quake and its resulting tsunami, left some 170,000 people dead or missing around Aceh. Indonesia sits on the Asia-Pacific's so-called "Ring of Fire," marked by heavy volcanic and tectonic activity.

On Sunday morning, a quake measuring 6.7 in magnitude struck the South Pacific island nation of Tonga and the New Britain region of Papua New Guinea was shaken by a 6.2 magnitude quake, the U.S. Geological Survey said.

WORLD TRIES TO HELP

The international community has rallied to help Indonesia, offering medical relief teams and emergency supplies. The United Nations, which played a major humanitarian role in Indonesia's past natural disasters including the tsunami, also sent aid.

Australia and the United States have also pledged to send humanitarian aid worth $2.5 million and $2.2 million respectively.

President Bush called his Indonesian counterpart, Susilo Bambang Yudhoyono, to express condolences. Yudhoyono has temporarily moved his office to Yogyakarta to be close to the rescue effort.

A prime tourist attraction, Yogyakarta is home to ancient and protected heritage sites such as Borobudur, the biggest Buddhist monument on Earth, which survived the quake.

But the Prambanan Hindu temple complex near the city suffered some damage, as did the roads and houses near it, a Reuters witness said. Some residents were begging passing motorists for money, he added.

Local media reported that outer sections of Yogyakarta's centuries-old royal palaces had also collapsed.

(Additional reporting by Lewa Pardomuan in Yogyakarta, Yoga Rusmana and Michelle Nichols in Jakarta and Paul Tait in Sydney)

© 2006 ABC News Internet Ventures

Across The Border From Britain's Troops, Taliban Rises Again

Guardian

May 27, 2006

This has been Afghanistan's bloodiest week for five years, and in the Pakistani city of Quetta, insurgents roam at will

Declan Walsh & Bagarzai Saidan

Azizullah, the serious-minded son of a Pakistani farmer, yearned for martyrdom, his family said. This week the Taliban made his wish come true.
The zealots inspired him to jihad, trained him to shoot and dispatched him to fight the infidel Americans across the border in Afghanistan. So it was fitting that after he died last Sunday night, trapped under a hail of American firepower, that a procession of black-turbaned men brought him home.

"He always wanted to die like this, a heroic death. We are very proud of him," said his brother, Gul Nasib, a solemn looking man with a drawn face, at their home in Bagarzai Saidan, a village on a yawning plain in Pakistan's Baluchistan province. The Afghan border lay 30 miles north.

Now all that remained was a picture of Azizullah on the picture on Nasib's mobile phone, his eyes closed and flowers garlanded around his face. Hushed mourners streamed to the grave, a mound of stones draped with a green cloth. A waft of incense clung to the evening air.

The Taliban flag fluttered at one end of the grave; the black and white standard of Jamiaat Ulema Islam (JUI-F), an extremist Pakistani religious party that helps to rule Baluchistan, protruded from the other.

An hour earlier a radical cleric, Maulana Abdul Bari - who also happens to be Baluchistan's minister for public health - addressed the village from a mosque. "Azizullah was a true martyr, his place in paradise is guaranteed," he said, his words echoing through a loudspeaker and across the village. "His blood will not be lost. It will strengthen Islam like water feeds a tree."

Azizullah died in Panjwayi, a violent district of Kandahar province where US A-10 "warthog" planes pounded a religious school filled with Taliban. The Americans claimed to have killed up to 80 fighters; yesterday a human rights group said 34 civilians perished too.

The battle was the climax of Afghanistan's bloodiest week since 2001. A succession of firefights raged across Kandahar and Helmand, where 3,300 British troops are being deployed as part of an ambitious Nato mission. By yesterday an estimated 339 people were dead, most of them Taliban fighters like Azizullah.

What worries western commanders and their Afghan allies is not just the intensity of the storm but its direction.

The Taliban recruit, resupply and coordinate their war effort from Pakistan, according to western and military officials. The insurgents slip across at several points along the 930-mile border, a largely unpatrolled stretch of sand, rock and mountain. But the weakest - and most controversial - blindspot is in Baluchistan.

A vast and largely lawless province, Baluchistan offers a range of hiding places. Returning from Azizullah's funeral service, the Guardian passed young men sauntering down the road or hunkered over tea at roadside cafes. All were dressed in inky black shalwar kameez and roughly tied black turbans - dress that is not native to Baluchistan but in Afghanistan is unambiguously associated with the Taliban.

Some insurgents melt into the camps that house more than 231,000 Afghan refugees in Baluchistan. Others shelter in madrassas run by local sympathisers such as JUI-F and funded with Middle Eastern money. North of Pishin, a bustling market town, teenage boys with jewelled skullcaps sat cross-legged outside a mud-walled madrassa. The sign at the gate read "Zia ul Uloom Al Arabiya" - "the Light of the Knowledge of Arabia".

Headquarters

But the Taliban nerve centre is allegedly 30 miles south in the provincial capital Quetta, which a British officer, Colonel Chris Vernon, recently described as "the major headquarters".

Once a British colonial garrison town, Quetta has long been a home to spies, smugglers and fighters. During the 1980s it was a base for Afghan mujahideen battling Soviet troops inside Afghanistan.

Today it still has a pungent air of intrigue. Police at checkposts guard for Baluch nationalist guerrillas who have dramatically escalated a bombing campaign against the state. Government intelligence agents sit indiscreetly in the lobby of the largest hotel, the Serena, carefully tracking the movements of visiting foreigners.

Diverted western aid, such as American vegetable oil and United Nations sheeting, are on sale in the main bazaar. For those interested, so are guns, heroin and hashish smuggled across the border from Afghanistan.

The Taliban move through the town like a dark whisper. Yesterday morning in Pashtunibad district, small groups of young men with kohl under their eyes and silky white or black turbans on their heads strolled between the vegetable stalls and clothes traders. By midday many had pushed into the city's mosques, where preachers dished up the usual fiery fare.

At the central mosque, Maulana Abdul Wahid railed against a Jewish and Christian "conspiracy against Muslims" and spoke admiringly about the suicide bombers. "Regardless of the cost to their lives, at least some Muslims are struggling," he told worshippers.

The largely low-key Taliban presence occasionally bursts into the open. On May 8 motorcycle-riding assassins gunned down Mullah Samad Barakzai, a one-time Taliban official from Helmand who had shifted his support to the US-backed Karzai government. Yesterday his son, Hafiz Shabir Ahmed, cancelled an arranged interview with the Guardian. "I've been told not to talk about it," he said.

The Taliban presence is also a matter of sensitivity for the Pakistani government. Relations with Afghanistan are at their lowest level in years following unfiltered criticism that Islamabad is doing little to close down the Taliban war machine.

Last week President Hamid Karzai told a provincial gathering: "We know very well that in Pakistani madrassas, boys are being told to go to Afghanistan for jihad. They're being told to go and burn schools and clinics."

Col Vernon's allegation that Quetta was a Taliban headquarters caused Pakistani official to lodge furious complaints with the British high commission, which hurriedly issued a statement distancing itself from the officer's "personal views".

'Martyrs'

Pakistan argues it is being unfairly blamed for an Afghan problem. Officials say it is is impossible seal a border which is populated on both sides by Pashtun tribesmen who consider it a colonial anachronism. Up to 15,000 people pass through the main checkpost at Chaman every day, said a military spokesman, Major General Shaukat Sultan. "Everyone has a black or white turban, a shalwar kameez and a beard. Everyone looks like a Taliban. You can't arrest them all," he said.

Pakistan has also taken other steps to address western and Afghan concerns. Posters, calendars and audio cassettes celebrating Taliban "martyrs" and Osama bin Laden have been removed from the city centre shops. Four months ago police arrested over 50 radical clerics who defied a ban on broadcasting sermons over loudspeakers. But many believe it could do more. Suspicions linger that elements within the country's intelligence services take a lacklustre approach to clamping down on the Taliban fighters that they once helped to arm and indoctrinate. Such an idea was "rubbish", said Maj Gen Sultan.

A western intelligence source said that several Taliban leaders are living in Quetta, possibly including Mullah Dadullah, a one-legged cleric close to the monocular leader, Mullah Muhammad Omar. But although Pakistan has killed or detained more than 1,000 al-Qaida suspects since 2001, according to one recent report, it has only picked up a handful of Taliban militants. Until his arrest last October Taliban spokesman Abdul Latif Hakimi openly spoke with reporters from Quetta.

The Taliban's true strength, however, is felt across the border. Over the past six months the insurgents have ratcheted up their campaign to overthrow President Karzai's western-backed government - an idea that once appeared quixotic but has now acquired some potency. At least 32 suicide bombs and almost daily roadside bombs so far this year reveal an enemy that is better organised, funded and motivated than ever before

"It hasn't been this bad since 2001," said one westerner with several years' experience in Kandahar. "And I think it's going to get worse before it gets better."

Corruption

The Taliban are not the only enemy facing the 7,000-strong Nato force. Four years and billions of pounds later, the Karzai-led government and its western backers have dismally failed to draw the southern provinces into the central government. Now they are haemorrhaging support rapidly.

The parlous state of central authority is most evident in Helmand. The police are corrupt, government departments defunct and, despite years of disarmament, guns are everywhere.

The Taliban rule the night. Abdul Qadeer, a 38-year-old teacher, angrily brandished his work papers as he fruitlessly sought help. The Taliban had burned down his school months earlier, he said. When he started teaching again from a tent in the yard they sent another letter that read: "We kindly request you not to attend school any more or we will kill you."

Mr Karzai's failure to bring real change has caused great disillusionment among the "swing voters" that the British mission hopes to woo.

Last week Ghulam Sarwar, a weary looking farmer, sat in the shade of a trellis of hanging grapes as his 10-year-old nephew Abdul served tea.

The central government was all but invisible in his life, he said, having failed to deliver promised irrigation systems and fertiliser irrigation to grow legitimate crops. "They have given us nothing so the poppy is a kind of revenge," he said.

When poppy eradication teams took to the fields, slashing down crops, they sidestepped farmers with bribe money or political connections. But over half of Sarwar's crops were destroyed.

"If they are going to destroy our fields there should at least be some alternative. It seems this government is against its own people."

Guardian Unlimited © Guardian Newspapers Limited 2006

Sri Lanka Foes 'Agree To Talks'

BBC News Tamil Service

May 27, 2006

By Ethirajan Anbarasan

Sri Lankan officials and the Tamil Tiger rebels have agreed, in principle, to hold talks in Norway next month, a Norwegian peace envoy has said. But the political leader of the Tamil Tigers told the BBC Tamil Service that a final decision had not been taken.

Jon Hannsen-Bauer met senior Tamil Tiger leaders in the rebel-held town of Kilinochchi in northern Sri Lanka.

The latest diplomatic efforts follow an escalation of violence in Sri Lanka's northern and eastern provinces.

"We have agreed that the LTTE will meet in Norway on the 8th and 9th of June to discuss the security of peace monitoring efforts," Jon Hannsen-Bauer, told journalists after meeting senior LTTE leaders in the rebel-held town of Kilinochchi in northern Sri Lanka.

Sri Lankan officials will also participate in the Norway meeting, he said.

Mr Bauer made the announcement after holding talks with the political wing leader of the LTTE , Mr S P Thamilselvan.

The Norwegian envoy also claimed that, in principle, they had resolved the issue of transporting LTTE leaders from the eastern province to the Tigers' northern headquarters to discuss the ground situation prior to talks.

Details unclear

However, Tamil Tiger rebels played down the Norwegian claims saying a final decision has not been taken about the talks.

"We are considering the Norwegian proposal at the moment and a decision will be taken soon," Thamilselvan told the BBC Tamil Service

Details of how the LTTE leaders will be transported to Norway or how they will reach Colombo have not been disclosed so far.

Mr Thamilselvan said the Tigers had expressed their strong condemnation for attacks on Tamil civilians in the north and the east and have warned that Tamil people will be forced to defend themselves, if the violence continues.

Commenting on reports that the European Union plans to impose a ban on the Tamil Tigers, Thamilselvan said the move would have a negative impact on the peace process.

He also accused the Sri Lankan government of spreading "false propaganda" against the Tamil rebels which has turned international opinion against the Tigers.

"It was the international community which forced the Sri Lankan government to establish the Tsunami Joint mechanism to help tsunami affected victims. But the situation has now changed," he said.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/south_asia/5022982.stm

Published: 2006/05/27 10:45:32 GMT

© BBC MMVI

Balls And Chains

SPIEGEL ONLINE

May 26, 2006, 12:35 PM

Football and Globalization

By Uwe Buse

The world's footballs are made in Sialkot, Pakistan. But the city's relative prosperity is under threat - from rival producers in the Far East and human rights activists in the West.

The buildings huddle on the city's outskirts, at the end of the road where the stubbled fields begin. Water is in short supply. The grass is tough and lean. As are the goats, the sheep, the buffalo - and the people. A picture of monotony.

The houses are rudimentary; some made of dung, the better ones of brick. They consist of two rooms, sometimes three. The floors are bare concrete. Wooden shelves on the walls hold stacks of old newspapers, a few odd cups and plates.

Sehzadi Akhtar has lived in Sialkot for years, ever since she was married off to a man who is now no longer able to support his family. He broke his arm and the bone didn't set properly. Akhtar's husband remained crippled, so she now shoulders a twin burden: she looks after the household and pays for the family's upkeep. Like her neighbors, she sits in the yard for seven or eight hours a day, stitching balls. Soccer balls.

Their handiwork sells under the brand name "Derbystar" - a quality product; it takes strength to drive the needle through the thick plastic. A ball like this can cost €99 in European stores. It takes Akhtar three hours and 750 stitches to piece together the 32 separate panels with waxed thread, to produce a ball she will deliver to a downtown manufacturer. Her reward will be 40 rupees, some 60 cents. Akhtar manages three balls a day, then her housework duties call. She is gaunt, tired and deeply devout. And, some would say, one of the city's losers - a casualty of a well intentioned but poorly conceived attempt to make the world a better place.

This experiment was launched in northeastern Pakistan. In Sialkot, a sprawl of a city growing unchecked and out of control. New housing, new huts, mushroom daily on its fringes. In the center people choke in the traffic: a jungle of donkey carts, buses belching black exhaust fumes, compact cars and motor scooters that transport entire families.

The newcomers hail from the western provinces bordering on Afghanistan - and the war. And from the southern provinces too, a region where the realities of life are even harsher. They dream of finding work, a future in Sialkot. If not here - in Pakistan's industrial heartland, the world's football production capital - where else can they hope to eke out a living?

People flock to this city from far and wide; 60 percent of the world's footballs are made here, by more than 200 producers. They sport names like "Laser," "Estrella International," "Ali Trading Company" and "Fox & Associates." Some are one-room setups equipped with a telephone and a few files. Others are headquartered in towers of glittering glass and concrete that would slot smoothly into European cityscapes. As a rule these companies ship their output overseas. They are integrated in the global economy, links in the international value chain. The owners are subcontractors for Nike, Adidas and other corporations marketing "lifestyle" products. Their earnings have transformed the region into Pakistan's El Dorado. People here make about $1,000 a year, nearly twice the national average.

The balls are all made by hand - in 2,000 workshops, sheds and backyards where 40,000 men and women stitch away, each subcontracting to a Pakistani company, each an entrepreneur in his or her own right. Workers are paid by the ball. Families with no fields to cultivate and no buffalo to milk need at least two full-time stitchers to put three square meals a day on the table. These people are members of the global proletariat. Their poverty makes products affordable for the rich. And enables the brands to run exorbitantly expensive image campaigns.

This is the way things are today. And the way things were in 1996, when England hosted the European Championships: an opportune moment to change the world. The initiative was born in the United States. Zakauddin Khawaja still recalls the moment vividly: it all began with a phone call from his agent in America. Incensed, the caller described what he viewed as a scandal, an assault by the U.S. media on the economy of Sialkot, on Pakistan's good name. Immediate action was called for, he said.

Back then, Khawaja was CEO of Capital Sports. He employed some 2,000 stitchers: men, women - and children. He neither disputes this fact nor apologizes for it; after all, his company was scarcely the only offender. At the time, at least a quarter of his workforce was underage.

Putting a stop to child labor

According to Khawaja's agent, human rights groups were instrumentalizing the Pakistani premier's visit to the U.S. Their mission: to alert the football world that its top stars were kicking balls tainted with the sweat of child labor.

Television newscasts paraded representatives from Nike and the other feel-good brands feigning surprise. Their spokespeople claimed there had been no reports of child labor, but they would look into the allegations. Shortly afterwards the brands presented an ultimatum to their Asian business partners. Either the children vanished from the factories or the orders would vanish from their books. The human rights activists rejoiced. Khawaja did not.

"We had no alternative," Khawaja says today. He sits in his office chair, a 72-year old man bowed by age and sapped by cancer. He no longer needs to mince his words or sugarcoat a bitter truth. "We didn't ban child labor out of the goodness of our hearts. We did it because it would have put us out of business."

Before the ultimatum ran out, Sialkot's manufacturers, the United Nations Children's Fund (UNICEF) and the International Labour Organization (ILO) had signed an agreement. The corporations wanted no direct part in the negotiations. The whole affair was too ugly.

The Atlanta Agreement, as it was known, was heralded as a breakthrough by human rights organizations. It marked the first time they had wrested a binding concession from an entire industry - to ban child labor from its factories. The manufacturers had 18 months to satisfy the conditions laid down in the eight-page covenant, a document that spelled unconditional surrender. When Khawaja talks about it today, he can still barely control his anger.

"Our only concern was to satisfy our customers," he says. The actual work was handled by intermediaries, who supplied the personnel, rented the workshops and were responsible for delivering on time, he adds.

"If anyone was to blame, it was the middlemen," argues Khawaja - and, of course, the children's parents. After all, they were the ones who schlepped their sons and daughters along to work. "Nobody was forcing them," says Khawaja. "We didn't encourage them." Having children in the factories hadn't benefited the companies an iota, hadn't increased their profits by a single rupee: "We pay by the ball, not by the hour." He makes no mention of the starvation wages his workers receive. He still feels he was treated unfairly; he's just another businessman trying to make a living. And that is hard enough in a global economy where you have to compete with the likes of China. A country where wages are lower, working weeks longer and conditions even worse than in Pakistan. Where machines produce balls ten times faster than manual stitchers and where mechanized production is protected by patents - and therefore beyond the reach of Sialkot's companies. Khawaja whines on like a small business owner in Germany.

The "meddling" by self-appointed human rights advocates from abroad is uncalled for, he feels. Yet again these latterday colonial overlords were imposing their own values and norms on other countries. Khawaja doesn't say this in so many words, but recrimination reverberates between the lines. The foreigners have forced him to think about the day laborers and acknowledge their plight. He would rather not know. What it all boils down to, he mutters in disgust, is just another of these "save the children"-style crusades.

His tone turns dismissive and he terminates the interview, saying he is tired, the chemotherapy has drained him. Leaning heavily on his cane, he heads through the corridors of the Chamber of Commerce to his office. The people he passes in the hall greet him respectfully, with a bow. They see him as a visionary, the man who saved the industry from collapse.

Khawaja's most important ally has always been a union official, a pragmatist who shares his world view: Nasir Dogar, a dapper, Victorian figure who wears frameless glasses perched on his nose and an ascot tucked into his collar. Dogar cultivates a measured cadence and speaks in low tones to command attention, frequently answering his own questions. Long retired from active duty in the class struggle, the good fight against exploitation, he has now settled back in his black leather chair, from which he orchestrates IMAC's activities.

IMAC, the Independent Monitoring Association for Child Labor, is a commercial police force. Its investigators are charged with keeping children in Sialkot out of the football workplace. IMAC's creation was one of the conditions of the Atlanta Agreement, and Pakistani manufacturers are required to fund the organization. Their customers, the global players, do not pitch in - although they profit from the image boost. The World Federation of the Sporting Goods Industry is an exception. It made a donation. Once.

IMAC is an uncomfortable hybrid. It is not as independent as its name suggests, being funded by the companies that it monitors. Thus far no corruption scandals have rocked the organization; apparently the inspectors are still playing by the book. To ensure they continue to do so, Dogar has a computer containing all the relevant data on the production centers, and software that randomly selects locations to be checked.

The computer is installed in an office where, every morning, he draws up the daily plan of action. A mouseclick is Dogar's way to curb corruption by individual inspectors, to prevent manufacturers from buying immunity from his system. The visitations occur unannounced. They are short and to the point, the inspectors about as cordial as the highway patrol during spot checks. The officials move swiftly around the premises: halls where stitchers sit in long rows or small rooms holding up to five people. The workers sit on rugs or squat on hassocks. On the wall is invariably a poster from Adidas or Nike or some other big brand - detailing employment regulations, minimum wages and maximum hours. In some rooms TV sets hang from the ceiling showing cricket matches. Pakistan versus India is always the biggest hit.

The stitchers acknowledge the inspectors' presence but do not address them. For their part, the inspectors do not fraternize with the workers. They verify their ages and check IDs if someone looks too young. But no underage workers have been discovered in recent years. Violating a basic principle of the Atlanta Agreement would constitute grounds for cancelling the contracts - and certain bankruptcy. The inspectors check the condition of the toilets and the drinking water supplies; they estimate the space provided for each employee: one square yard is the legal minimum. Dogar prefers not to disclose when the last child was found. Before the 2002 World Cup, pictures of child laborers from Sialkot surfaced in the media. "Forgeries!" Dogar fumes. The children weren't sitting properly, the tools weren't right, and the background was always the same - although the photos were allegedly taken at different locations. Now, on the eve of the next tournament, even an interview with a former child laborer could do permanent damage. The past is history, says Dogar. He is still in his office, on the floor is a pile of citations and awards. The one on top is from Texas. Dogar is a good speaker, a much sought-after guest at international conferences. He helps assuage the guilt that hounds his audiences at the thought of buying products made by children.

Of course child labor is wrong, says Dogar; of course it needs to be abolished. Yet he never ceases to be astonished by one unanimous assumption of foreign visitors, namely that child labor is a product of impoverishment. Dogar describes himself as a pragmatist rather than a social romantic. The real cause of child labor, in his view, is not parental poverty but parental greed. In the villages it was readily apparent that the families who sent their children to work lived in the nicest houses, the brick ones, not those made of dung. Many had TV sets. And he's heard that the fathers - Dogar leans forward and lowers his voice - spend most of the money on porno films or gamble it away at billiards.

A glance at his watch; time has flown. He heads out back to the garden, dumps charcoal on the grill and arranges lamb kebabs over the flames. Today Dogar is hosting his monthly barbecue, an event designed to foster team spirit among the inspectors. It is 4 p.m. and the officers are returning from their routes. They seem relaxed, satisfied: they are the winners in the Sialkot experiment. Their lives are as orderly as those of German civil servants. Their jobs are secure - with a little luck until the day they retire.

From Dogar's vantage point the experiment might qualify as a success. But his is not the only perspective.

A mother's dilemma

With a crippled husband at her side, Sehzadi Akhtar - the family's sole breadwinner - sometimes wishes her daughter could make footballs, too. Akhtar admits as much softly, apologetically. Her neighbors sitting next to her in the yard pretend not to hear. You don't say that kind of thing in Sialkot; it could cost you your job. Akhtar doesn't fit into Dogar's scheme of things. Neither she nor her husband squander their money; it's all they can do to make ends meet. Their income suffices for flour, sugar, salt, and fruit - the bare essentials. Her neighbor Abida reluctantly concedes that one of her sons worked in the industry as a child. She still misses his income. It's hard to feed the family, she says, because the companies refused to increase the piecework rate for adults when child labor was prohibited. They don't care about their employees' financial woes, she adds. Although wages have gone up in the intervening years, inflation has risen even faster and gobbled up the difference. The bottom line: football industry workers now earn less than five years ago.

When told that children are allowed to work in Germany, that farmers' sons traditionally help with the harvest, Akhtar and her neighbors are outraged. How can that possibly be? You steal part of our income, they say, you ban our children from making a single ball after school, and then allow your own children to work?

"It's the large corporations' doing. They don't want pictures of child workers in the media," says Dogar. Their mantra has always been "school not work" - never "school and work."

The parents of former child laborers did the obvious. Instead of sending their offspring to one of the new schools, they dispatched them to the brickyards and metalworking plants. The work was harder and more dangerous, but it was beyond the reach of the Atlanta Agreement - which only applies to Sialkot's football industry.

The attempt to make the world a better place didn't only deprive families of their children's incomes. Prior to Atlanta the balls were manufactured locally, in the villages. The women could tend to their children and households and make a few balls on the side. The new regimen put an end to this. The Atlanta Agreement delivered a compelling reason to centralize production: supervision. To help ensure compliance manufacturers had to reduce the number of stitching locations. Some built large halls, others rented vacant buildings. The stitchers had to leave their neighborhoods and villages, and commute to their workplaces - something that many husbands refused to tolerate. Some women created neighborhood sewing circles, but not everyone was able to join. The number of workers declined.

Akhtar and her friends have been fortunate; they work in their own neighborhood center. And another stroke of luck may be in the offing. They might be getting help from a man who had sufficient drive, power and money to break with the customs that tie them to their villages and undermine their industry's ability to compete globally. They may soon be quitting their houses and backyards and - like women in Europe and America - going to work in factories.

The future football

The man who wants to help them is Masood Akhtar Khawaja. His company, Forward Sports, is located in one of the imposing mirrored-glass structures that look so out of place alongside Sialkot's brickbuilt huts.

Khawaja is a football manufacturer and the son of a football manufacturer. Should the future and global market permit, the next generation will carry on this tradition. Khawaja's son now manages the company's research and development activities - which are geared toward securing both the dynasty's future and the family's comfortable lifestyle.

The R&D facilities are located in the basement, behind thick walls. In cabinetlined rooms, beyond a glass door, men in white lab coats - they look like doctors - stand at metal tables and fiddle with oddlooking contraptions. Khawaja is paying these men to perfect a seemingly simple object: the football.

How can you reduce water retention, stabilize the ball's shape, optimize its aerodynamic properties? How smooth or rough should the surface be to allow a winger to flight a perfect cross, and how does that affect the cover's resistance to wear and tear?

These are the questions that busy Khawaja's scientists. They search for answers using immersion baths, sanding machines and fully automated ball-shooting devices. They measure elasticity, fire the balls against steel plates at 50 mph and record when they go flat. After 24, 48 or 72 hours.

These tests are designed to assure quality and ensure the company's future. Like everyone else in his industry, Khawaja is in a jam. Chinese competition is threatening from below, bombarding the market with cheap, mechanically stitched balls. The Thai producers are bearing down from above, whittling away at Khawaja's market share with their hightech, glued product. His competitors have already scored a major victory. This year's World Cup stadiums will not be sporting hand-stitched Adidas balls from Sialkot. Glued balls from Thailand will be taking pride of place.

If he wants to keep in business, and stay on the winning side in the globalization game, Khawaja will need to be better and cheaper. Sialkot once produced four-fifths of the world's footballs; already this share has shrunk by a quarter. Khawaja expects the pressure to mount in the years ahead. The cheap balls from China will get better; the high-tech balls from Thailand cheaper. He needs to convert every chance he gets, or the game will be up.

In one of his factory halls, a hundred stitchers are working at machines that keep the thread at a constant tension. This guarantees a consistent quality - even late in the shifts when the workers have begun to tire. Another hall boasts a fully automated production line for laminating the covers, a technology Khawaja has imported from Europe. And a third hall is still waiting for the future to begin.

This hall is reserved for stitchers. Lots of them, and all of them women. Khawaja has found women more conscientious - and less prone to distraction - than men. Khawaja wants to start work here as soon as possible. To pacify their husbands, he will bus the women to the factory and back home again. If necessary, he will pay them more than the men. Traditionalists in the city are enraged by these proposals. Khawaja couldn't care less.

The most vocal critics are peers of Zakauddin Khawaja - Masood's uncle. They were the ones who rescued the industry from ruin in the decade past. Their duty is done. The time has now come for them to step aside. And let Masood Khawaja take the lead in shaping Pakistan's new century.

© SPIEGEL ONLINE 2006

URL: http://service.spiegel.de/cache/international/spiegel/0,1518,418139,00.html

Peace Broker Fears Sri Lanka Violence May Deepen

Reuters

May 26, 2006

By Simon Gardner

COLOMBO, May 26 (Reuters) - Sri Lanka risks sliding deeper into violence that some fear could reignite civil war unless Tamil rebels stop killing and the government reins in armed groups opposed to them, Norway's peace broker warned on Friday.

Erik Solheim, who brokered a four-year-old ceasefire, appealed to both sides to take a hard look at how they can defuse a "very, very serious" situation. The Liberation Tigers of Tamil Eelam (LTTE) say it could escalate into a high-intensity war.

More than 270 soldiers, police, civilians and rebels have been killed in a rash of attacks from suicide bombings to naval clashes since February. Sporadic killings continued on Friday as Solheim met President Mahinda Rajapakse.

"We are worried, no doubt. We are worried that this will continue or even grow worse," Solheim told Reuters in an interview as he headed for the airport en route to Japan for a crunch meeting of Sri Lanka's main international donors.

"The situation is grave -- many people are killed more or less every day now. To sum it up by month or year, it would be a very high number," he added.

"People all over the north and east are living with fear," said Solheim, who is also Norway's International Development Minister.

The minister said there had been no breakthroughs during what he described as a routine visit. His special peace envoy, fellow Norwegian Jon Hanssen-Bauer, is due to visit the rebels' northern stronghold on Saturday.

The Tigers -- who want the de facto state they run in the island's north and east recognised as a separate Tamil homeland -- have pulled out of peace talks indefinitely.

They accuse the military of helping a band of former comrades led by a renegade rebel commander called Colonel Karuna to attack and kill their fighters, and say the attacks must stop before any talks can resume.

The government denies any involvement with the Karuna faction and says it cannot find any gun-toting fighters in its territory to disarm. But analysts, truce monitors and the international community are sceptical.

"The main issue at the moment is that a) the LTTE should stop assassinations, claymore attacks etcetera, and b) the government should deliver on what they promised at Geneva (talks in February) to stop all attacks by armed groups operating from their territories, including Karuna," Solheim said.

The Tigers have warned that continued attacks could restart the two-decade civil war that killed more than 64,000 on both sides and displaced hundreds of thousands before the 2002 truce.

"At the moment I take every statement seriously," Solheim said. "The eye-for-eye logic which is there now, where both sides are reciprocating to what they see as attacks from the other side ... must be stopped."

Firefights and mortar fire are now commonplace near forward defence lines in the north and east, and many fear escalation will deter investment in the $20 billion economy and dent growth that has averaged nearly 6 percent a year since 2003.

Diplomats say the European Union is poised to ban the Tamil Tigers as a terrorist organisation following a series of deadly ambushes on the military, including the worst naval clash since the ceasefire.

The Tigers have said that the ban, expected to be rubber-stamped later this month, will only "exacerbate the conditions of war".

"Very clearly there is impatience from everyone in the international community. Everyone wants Sri Lanka to restart the peace process," Solheim said.

Nepal Maoists Begin Peace Talks

BBC News

May 26, 2006

The Nepalese government and Maoist rebels have begun peace talks in the capital, Kathmandu to resolve the 10-year-old insurgency. It is the first time in three years that the sides are meeting.

Hopes for peace have been raised since a new multi-party government took power in Nepal last month after weeks of street protests against King Gyanendra.

Thirteen thousand people have died in Nepal during the decade-long insurgency which has also hit the economy.

The talks are being held at a luxury hotel in a forest just outside Kathmandu.

The government team is led by Home Minister Krishna Prasad Sitaula, while the rebels are represented by senior leader, Krishna Bahadur Mahara.

"We are 100 percent hopeful that the talks will succeed," Mr Sitaula is quoted as saying by the Associated Press.

Mr Mahara told the BBC that the initial discussions will focus on how to consolidate a 12-point agreement reached between the Maoists and a seven-party alliance which now runs the government.

These include:

preparing for the election of an assembly to write a new constitution
both sides agreeing to respect human rights
releasing Maoist detainees, a process already under way
listing of people who have disappeared from detention.

Meeting

Earlier on Friday, Mr Mahara informally met Prime Minister Girija Prasad Koirala.

The current talks will prepare ground for a final round of negotiations in which Mr Koirala and Maoist leader Prachanda are expected to take part.

Two earlier round of talks in the past five years had failed because of differences over elections for a constituent assembly to draw up a new constitution.

But the current government, which took office after King Gyanendra ended direct rule following widespread pro-democracy protests, have agreed to hold elections for a constituent assembly.

The rebels hope the elections will pave the way for achieving their goal of abolishing the monarchy.

However, the BBC's Sushil Sharma in Kathmandu says many of the mainstream parties who constitute the present multi-party government are non-committal on the future of the monarchy, despite taking part in the anti-king protests.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/south_asia/5018832.stm

Published: 2006/05/26 11:31:51 GMT

© BBC MMVI

Atop Hedge Fund, Richest Of The Rich Get Even More So

The New York Times

May 26, 2006

By JENNY ANDERSON

Talk about minting money. In 2001 and 2002, hedge fund managers had to make $30 million to gain entry to a survey of the best paid in hedge funds that is closely followed by people in the business. In 2004, the threshold had soared to $100 million.

Last year, managers had to take home — yes, take home — $130 million to make it into the ranks of the top 25. And there was a tie for 25th place, so there were actually 26 hedge fund managers who made $130 million or more.

Just when it seems as if things cannot get any better for the titans of investing, they get better — a lot better.

James Simons, a math whiz who founded Renaissance Technologies, made $1.5 billion in 2005, according to the survey by Alpha, a magazine published by Institutional Investor. That trumps the more than $1 billion that Edward S. Lampert, known for last year's acquisition of Sears, Roebuck, took home in 2004. (Don't fret for Mr. Lampert; he earned $425 million in 2005.) Mr. Simons's $5.3 billion flagship Medallion fund returned 29.5 percent, net of fees.

No. 2 on Alpha's list is T. Boone Pickens Jr., 78, the oilman who gained attention in the 1980's going after Gulf Oil, among other companies. He earned $1.4 billion in 2005, largely from startling returns on his two energy-focused hedge funds: 650 percent on the BP Capital Commodity Fund and 89 percent on the BP Capital Energy Equity Fund.

A representative for Mr. Simons declined to comment. Calls to Mr. Pickens's company were not returned.

The magic behind the money is the compensation structure of a hedge fund. Hedge funds, lightly regulated private investment pools for institutions and wealthy individuals, typically charge investors 2 percent of the money under management and a performance fee that generally starts at 20 percent of gains.

The stars often make a lot more than this "2 and 20" compensation setup. According to Alpha's list, Mr. Simons charges a 5 percent management fee and takes 44 percent of gains; Steven A. Cohen, of SAC Capital Advisors, charges a management fee of 1 to 3 percent and 44 percent of gains; and Paul Tudor Jones II, whose Tudor Investment Corporation has never had a down year since its founding in 1980, charges 4 percent of assets under management and a 23 percent fee.

They may charge such amounts because they can. "In the end, what people want is the risk-adjusted performance," said Gordon C. Haave, director of the investing and consulting group at Asset Services Company, a $4 billion institutional advisory business. "As long as the performance is up there, in the end the investors do not care about the high fees."

If there is a downside to being so rich, it is that the money is flooding in at a time when hedge fund performance, even for some of the greats, has been less than stellar over all. Six managers made the top 25 even while posting returns in the single digits.

"You would think someone would be a little embarrassed taking all that money for humdrum returns," said John C. Bogle, founder of the Vanguard Group. "I guess people don't get embarrassed when it comes to money."

Many of the funds have gotten so big that the management fees alone are the source of much wealth, perhaps leaving some managers without the fire to try to outdo the broad market. Institutions like pension funds and endowments, whose money is fueling a significant part of the hedge fund boom, continue to flock to these managers for their track records and name recognition.

Bruce Kovner's Caxton Global Offshore fund returned 8 percent last year while his Gamut Investments, an offshore fund he runs for GAM Fund Management, returned 6.4 percent. The survey said 2005 was the third year that he had posted single-digit returns. Still, Mr. Kovner took home $400 million, according to the list. He did not return calls to his office.

The average take-home pay for the 26 managers in 2005 was $363 million, a 45 percent increase over the top 25 the previous year. Median earnings surged by a third, to $205 million last year, from $153 million in 2004.

Included on the list were both familiar names and new stars. Mr. Cohen of SAC Capital, who while shunning publicity has become known as an avid art collector, landed in fourth place in 2005, taking home $550 million. For the year, his various funds were up 18 percent on average. A spokesman for Mr. Cohen declined to comment.

New to the list are two managers from Atticus Capital, a fund that was among the investor activists that opposed Deutsche Börse's attempted takeover of the London Stock Exchange for $2.5 billion. That campaign led to the ouster last year of the Deutsche Börse chief executive. Atticus is also a major participant in the battle for Euronext, the pan-European stock and derivatives exchange, which is being courted by the New York Stock Exchange and by Deutsche Börse.

Making his debut at 14th place, Timothy Barakett made $200 million in 2005. His Atticus Global Fund was up 22 percent net of fees, while the European Fund, managed by 33-year old David Slager (No. 20 on the list with $150 million), soared 62 percent. Atticus officials did not respond to requests for comment.

A fellow investor activist, Daniel Loeb of Third Point, made $150 million in 2005. According to Alpha, only 10 percent of the firm's $3.8 billion is dedicated to activism, an unexpectedly small slice considering his reputation as management's worst nightmare.

A value- and event-driven manager, Mr. Loeb posted returns of 18 percent, largely from bets in energy, including a 140 percent gain on McDermott International. Mr. Loeb's spokesman declined to comment.

Another debut on the list was by William F. Browder, founder and chief of Hermitage Capital Management and the largest foreign investor in the Russian stock market. He tied for 25th place by taking home $130 million.

Mr. Browder, 42, grandson of Earl Browder, onetime leader of the Communist Party of the United States, has been barred from returning to post-Communist Russia since November, when immigration officials revoked his visa. The fund had $4.3 billion under management and in 2005, his flagship Hermitage Fund was up 81.5 percent.

A shareholder activist, he has challenged management at Russian state giants including Gazprom and Lukoil. Mr. Browder could not be reached for comment.

A Plea For Open Borders

The News

May 26, 2006

By Kanak Mani Dixit

Flying back into South Asia in the middle of the night, it becomes a ritual to look down at the India-Pakistan border nearly 40,000 ft below. And before long, the lights of Lahore become visible in the north, even as the pilot of Air India flight 112 comes on the intercom to announce the arrival of the frontier. Far south of Lahore and southwest of Amritsar, the border is a lit-up fine line in the darkness of the desert and one can imagine the concertina wire, the service road, the watchtowers and the gun-toting border guards. The calamity that this border represents is so heart-rending that this columnist cannot but repeat the refrain every time he flies over it.

It should not be the task of romantic peaceniks alone to bemoan the rigidity of this border, but that is how it is for now. Economists, political analysts, professors and editors, not only of India and Pakistan but of the larger South Asia, should be continuously agitated by the 'hardness' of this frontier. Why? Because it is a symbol and also a very physical presence highlighting the lost possibilities through the decades.

The opinion makers of South Asia should be working overtime to convert the closed India-Pakistan border into a porous frontier but the reality of realpolitik keeps our imagination at bay. We are at business-as-usual when we should be helping build a groundswell demand for the opening. If Jawaharlal Nehru and Jinnah did not foresee a distancing between the populations of India and Pakistan, why should succeeding generations follow the dictates of geopolitics this mindlessly?

As things stand, foreign ministry bureaucrats in Islamabad and New Delhi are on the job, working gingerly on the India-Pakistan rapprochement, doing what little they can in the absence of the groundswell from civil society. We do have, therefore, the Muzaffarabad-Srinagar bus route and the Khokropar-Munabao rail link restored, but these are modest achievements unable to generate momentum for the larger opening. Bigger initiatives have not been taken because the analysts and opinion makers are willingly locked into the unimaginative, self-preserving conservative agenda of their respective national elites. This sense of self-preservation keeps the gentlemen from going excitedly against what is considered the 'national' agenda, and so the demand from the citizenry fails to arise

Would India and Pakistan as nation states be compromised in their national identity and manoeuvrability if the border were to be opened up and visas freely given out to feed the demand on both sides? Of course not. Would 'cross-border terrorism' increase or decrease with such an opening? For sure, it would not increase? Would a border opening and the revival of economic and cultural linkages after five decades of cruel closure promote the cause of peace even more? Without a doubt, because many layers would thus be added to the peace constituency. Then why are the elite commentators not speaking along these lines, why are the mullahs and the pundits quiet about rapprochement, and why are the leaders of industry so subdued on the matter?

It is the atmosphere of distrust created over the decades, encompassing three-and-a-half wars and fuelled by the anger of the Partition refugees on both sides, stoked by the Islamist and Hindutva forces, the militarist takeover of Pakistani society, the imperiousness of the Indian state machinery, and the Kashmir issue which holds all Southasia hostage in its intractability.

From up here on AI 112, the frontier runs north-south like a pretty necklace but it is an obnoxious presence nonetheless. The Nepal-India border, let it be repeated, stands up as the ideal frontier of South Asia. It is open, porous, respectful of identical demography and sensibilities on the two sides, allows unimpeded commerce -- and yet keeps national identities and respects sovereignties. Transferred to the India-Pakistan sphere, the consequences for the economies are mind-boggling.

The advantage of an open border would naturally accrue first to the people of the neighbouring regions of Punjab-Punjab and Sindh-Rajasthan-Gujarat. Each state or province is a powerful part of its respective national union or federation, so the reason they have not been able to force Delhi and Islamabad to ensure a thaw at the border is hard to fathom. With the receding memories of Partition, with the India-Pakistan rapprochement despite the vicissitudes, it is time for the chief ministers in Amritsar, Ahmedabad, Jaipur, Karachi and Lahore to respectfully inform Islamabad and New Delhi of their intention to meet to discuss loosening the bilateral frontier.

Let the chief ministers do what is good for their people. Only then will we see the end of the caricature that is the lowering-the-flag ceremony at the Wagah-Atari border point, where army men on each side stomp their boots and provide crass examples of what is said to be the national attitude, which we know is not so. It is time that those lights at the border are switched off.

The writer is a journalist based in Kathmandu Email: kanakd@himalmag.com