profit.com.pk

Global stocks,dollar rise after US data Page 02

Wednesday, 02 May, 2012

ISLAMABAD

ONLINE

DeSPITe claims by theCabinet Committee onRestructuring (CCOR),the government has

failed to reform the Public Sectorenterprises (PSe) during 2011-12.The government had earlierannounced the managementwould be replaced withprofessionals to make the entitiesprofitable.Prime Minister Yusuf Raza Gilaniannounced in December last yearto form a task force headed byFinance Minister Dr Abdul hafeezSheikh, to address the issue ofenergy crisis and for thetransformation of public sectorentities, including PakistanInternational Airline (PIA),Pakistan Railways and PakistanSteel Mills (PSM).According to Finance Minister,hafeez Shaikh, the governmentspends an estimated Rs 250 billionas PSe bailout cost every year. Atotal of Rs 30 billion has alreadybeen doled out to the PSM to coverits financial losses. Much of thereduction in expenditures from20.5 per cent of the GDP in 2010to 18.9 in 2011, came at theexpense of developmentexpenditures, which will “dampenfixed investment” and lower futuregrowth prospects. The federalsubsidies were three times higherthan envisaged in the budgetleading to resource misallocation.Pakistan Railways, PIA andPakistan Steel are classicalexamples of the heavy cost of poorgovernance to the economy.Pakistan Railways, nationalpassenger carrier is into ruin,ending all goods haulage, and

leaving millions of passengersstranded. In the almost last fouryears since the currentgovernment took power, Pakistanrailways has retired 64 of its 104trains, leaving just 40 left for acountry larger than Britain andGermany combined. With expected losses of 35 billionrupees $390 million in fiscal yearJuly 2011 to June 2012 thecompany relies on governmenthandouts of 2.5 billion rupees$2.8 million a month to paysalaries and pensions. In 2007-08-Pakistan Railways have facedRs16.9 billion, 2008-09, the losswent to Rs23 billion, in 2009-10,Rs25 billion while in 2010-11 theloss of national flag carrier went toRs31.1 billion that makes theaccumulated debt of PakistanRailway to Rs 132 billion in lastfour years.During first six months of currentfiscal year; Pakistan InternationalAirline (PIA) suffered a loss of Rs10.7 billion. The CabinetCommittee onRestructuring (CCOR)has said that itmight use 20billion rupees onthe condition ofrestructuring theairline. One of themain reasonswhy the debt isincreasingevery year forthenationalflagbearer isits Rs15billionlong termdebt,

on which it has had to pay billionsof dollars of interest every year.Along with the long term debt, theshort term liabilities for PIA arealso increasing at an alarming rateand if not dealt with soon, willlead to more liquidity problems. In2008, the airline’s accumulatedlosses stood as high as Rs73 billionand have risen to over Rs107billion at present. Financially, it is this long termdebt, and the losses that are notdealt with which is causing mostother problems for the airline.There are a number of variedopinions regarding why this doesexist; politics, global economy andinefficiency are cited as a few, andthey all hold true.The Pakistan Steel with itsprevailing inefficiencies is due tothe centralized, bureaucraticstructure with considerablegovernment intervention.however, with elections justaround the corner, privatizationdoesn’t top the list of solutions

for saving PSM. PSes likePakistan Railways and

PIA

have social service provisionresponsibility and thereforeprivatization may not be aplausible solution for them. SteelMills, on the other hand, is freefrom such restrictions but politicalhegemony comes in the way tomake it a profit-making entity.The solution to these problems isclearly missing in the announcedplan, without which any actionwill fail to achieve the desiredresults. even if the governmentopposes privatization,independent boards comprising ofprivate sector experts who arecredible and dedicated to work inthe interest of the company aremuch needed.With no government influence inthe running of the entity,bureaucratic inefficiencies willcease to exist. Such plans,however, have seldom seen thelight of the day. Action andimplementation, the key toensuring the success of such plans,is something that the governmentlacks. Whether this developmentwill prove the general mindsetwrong or will it strengthen ourbelief about the fate of the PSes as

a tool for political patronageremains to be

seen.

RAWALPINDI

ONLINE

ChAIRMAN NationalLiteracy PromotionProgram (NLPP) Mr. AsifIrshad Satti has

demanded allocation of substantialfunds for next fiscal year budget topromote better education facilitiesin the rural and urban areas. Talking to a ceremony of teachershere Tuesday, he said budgetary

allocation for expansion ofeducational facilities out of thetotal Gross Domestic Product(GDP) is very low and if thegovernment does not pay anyattention to improve the currentsituation, the on-going educationbetterment projects instituted atFederal and Provincial level wouldbe badly damaged, he remarked. Mr. Asif Satti pointed out that inthe far flung areas, there are still anumber “Ghost Schools” exists and

the influential persons normallyuse these school building foranimal farming. he said thatdedicated sincere efforts arerequired to upgrade the standardof education in the country besidesenhancing rate of literacy byundertaking effective and positivesteps.The Chairman (NLPP) stressed theneed for addressing the difficultiesbeing faced by the teaching staffand said that adequate raise in

salaries should be announced inthe forthcoming budget 2012-13. he stated that private sector hadplayed significant role inpromotion of education anddespite of various difficulties andnon professional attitude of policymakers, remarkable performancehas been achieved in setting highstandards of education during lastfew years. Mr. Asif Satti asked theintelligentsia to highlight the

issues relating to education andencourage such organizationswhich had been contributing forpromotion of quality education inthe country. he said achievementsof teachers and well as studentsshowing outstanding performanceshould be acknowledged. he askedthe teachers to discharge theirresponsibilities with national zealand pay full attention in thecharacter building of youngstudents.

Govt’s three-pronged slipup

g Substantial budget to promote education demanded g A number of ghost schools still exist

ISLAMABAD

ONLINE

The Federal Minister for Finance Dr.Abdul hafeez Shaikh stressed the needof increasing the momentum of revenue

collection to achieve the target of Rs. 1952billion. Finance Minister while addressing theTax Reforms Coordination Group (TRCG) atFederal Board of Revenue (FBR) expressedhope that after achieving the ProvisionalCollection upto April was about Rs. 1424 billionfigures, FBR would achieve the Rs 1952 billiontarget. Chairman FBR Mumtaz haider Rizvi, inhis opening remarks informed the Ministerabout the discussions so far held between theTRCG and FBR. exclusive discussions onpolicies and strategies to improve the tax policywith a view to increase the revenue were heldalong with presentations by FBR. Budgetproposals for the upcoming budget to bepresented in May 2012 were extensivelydiscussed and strategized. Shaikh expressedconfidence and hope that the assigned budgettargets would be achieved through sustainedefforts. he desired that the detailed collectionunder various heads be sent to him on dailybasis. The day-long meeting continued till lateevening. The Tax Reforms Coordination Groupcrystallized the current proposals on theforthcoming budget, with the objective tofacilitate business, reduce cost of doing thebusiness, avoid economic burden, harmonizetax laws and promote industry and commercewhile improving tax collection. The meeting wasattended by Deputy Chairman PlanningCommission Dr. Nadeem ul haque, FederalSecretary Finance Abdul Wajid Rana, SecretaryeAD Dr. Waqar Masood, DG (eRU) Dr. KhaqanNajeeb and Members TRCG Mr. Irfan Nadeem,Arshad Zuberi, Bashir Ali Mohammad,ShabbaMs. Riffat Shaheen Qazi Member(FATe),Shahid hussain Asad Member (IR),Sardar Amimullah Khan Member (enforcement& WhT), Raza Baqir Member (Admin), AzraMujtaba Member (SP&S) and NisarMuhammad Chief Collector (North) FBR.

The Doctor conjuresup another hardpill to swallow

BUDGET BASH

NLPP highlights fund allocation need for education

IT’S GOING DOWN…

g Railways, PIA, PSM continue to spiral down in 2011-12 as govt fails to cut down losses

MAYBE WE NEED APPLES

g Hafeez reviews tax reforms,peddles unrealistic numbers

g Claims provisional collectionup to April was Rs 1,424billion, FBR would achieve Rs 1.952 billion target

PRO 02-05-2012_Layout 1 5/2/2012 12:30 AM Page 1

news02Wednesday, 02 May, 2012

NEW YORK

REUTERS

WORLD stocks and theUS dollar rallied onTuesday after datashowed US

manufacturing unexpectedly pickedup last month, soothing recentworries about the global economy.The Australian dollar fell nearly 1percent against its U.S. counterpartafter the Reserve Bank of Australiaslashed rates by a deeper-than-expected 50 basis points. Domesticgovernment bond yields hit 60-yearlows. U.S. factory activity expandedin April, the Institute for SupplyManagement said, with its index ofnational factory activity rising to54.8 from 53.4 in March, aboveexpectations of 53.0. World stocksposted a loss of about 1.5 percentlast month as worries about globaleconomic growth resurfaced afterdata showed the U.S. economycooled in the first quarter and theeuro zone recession is deepening. “Itshows we may be coming out of thislittle bit of a lull that manufacturinghas had here over the last couple ofmonths,” said Peter Jankovskis, co-chief investment officer of OakbrookInvestments in Lisle, Illinois.“europe (recently) flared up andour numbers slackened, but if thistrend can be continued the focuswill come back to the U.S. economyand that should be a positive for themarket.” The MSCI’s world equityindex .MIWD00000PUS gained 0.4percent to 329.89. Trading waslimited with many markets in Asiaand europe closed for the May Dayholiday. On Wall Street, the NasdaqComposite was up 1 percent and theS&P 500 hit a 1-month high. TheDow Jones industrial average .DJIwas up 87.72 points, or 0.66percent, at 13,301.35. The Standard

& Poor’s 500 Index .SPX was up12.80 points, or 0.92 percent, at1,410.71. The Nasdaq CompositeIndex .IXIC was up 31.39 points, or1.03 percent, at 3,077.75. Adding tobullish sentiment were signs ofrecovery in Chinese manufacturing.China’s Purchasing Managers’ Indexrose to a 13-month high in April,suggesting the world’s second-largest economy has found a footingand may be recovering from a first-quarter trough. The FTSeurofirst300 index of top european shares.FTeU3 was up 0.4 percent at1,047.62. emerging marketshares .MSCIeFgained 0.1percent. Thedollar

rose 0.5 percent to 80.20 yen,rebounding from a low of 79.62, itsweakest point since February. Thestronger yen hit Japan’s export-related equities, sending the Nikkeiindex .N225 down 1.8 percent to a 2-1/2-month closing low. The euroslipped 0.1 percent to $1.3221. In thecommodities market, Brent cruderose 47 cents to $119.95 a barrelwhile U.S. crude rallied $1.36 to$106.22. Gold inched up to a two-week high and last traded around$1,662 an ounce. The benchmark 10-year U.S. Treasury note was down

9/32, with the yield at1.9488

percent.

KARACHI

ONLINE

The Securities and exchangeCommission of Pakistan (SeCP) and theKarachi Centre for Dispute Resolution

(KCDR) have agreed on signing of aMemorandum of Understanding for futurecooperation. The Chairman of the (SeCP),Muhammad Ali, along with his team including,Deputy Director Law Natasha Jahangir,Commissioner Insurance, Muhammad AsifArif, visited KCDR to discuss futurecooperation between SeCP and KCDR. TheChairman SeCP directed to interact andcoordinate with Director officials to point outthe sectors in which SeCP can take benefitfrom the services of KCDR. President KCDR,Mr. Justice (Retd.) Saiduzzaman Siddiqui, Mr.Anwar Mansoor, Vice President KCDR, Mr.Moin Fudda, member Board of GovernorKCDR and Director KCDR, Dr. Zafar AhmedKhan Sherwani welcomed the Chairman SeCP

at KCDR. Mr. Muhammad Ali, Chairman SeCP,was briefed about the role of KCDR and theDirector of KCDR highlighted the role ofmediation in corporate good governance andpresented the statistics of the number of casesreferred to and resolved by KCDR since itsestablishment. he emphasized various benefitsof mediation such as inexpensive costs, speedyresolution time as well as a win-win solution. Itwas highlighted that mediation brings easy andquick relief to both parties involved in adispute. Dr. Zafar Ahmed Khan Sherwaniapprised the Chairman SeCP that the KarachiStock exchange and other exchanges can takebenefit of mediation services of KCDR underRegulation 26 of the Karachi Stock exchangeregulation “Dispute to be referred toArbitration” for amicable settlement of disputebefore going to arbitration. The ChairmanSeCP appreciated the services provided by theKarachi Centre of Dispute Resolution andassured full support for the promotion of KCDRas well as referral of cases.

ISLAMABAD

ONLINE

The Pakistan economy Watch(PeW) on Tuesday lauded thegovernment for taking steps

aimed at addressing the genuineconcerns of rice farmers andexporters. The concerns of growers,exporters and other stakeholderscame to limelight following thedecision of the government toliberalise the import ofagricultural products from India.

Trade liberalisation could haveresulted in onslaught of cheap rice

from India hurting local sector whichis employing millions and generating

around two billion dollars per annumfor country, said Dr. Murtaza Mughal,

President PeW. he said that Pakistan isfollowing free market economy rules in rice

trade while India is heavily subsidisingmany agricultural products including rice.Dr. Murtaza Mughal said that Indiaagricultural subsidies surpass USD 30billion while subsidies in Pakistan are saidto be around 500 million dollars. Keeping

the situation in view, the Commerceministry has taken all the stakeholders onboard and proposals are being finalisedwhich would be soon sent to National TariffCommission to impose countervailing dutyon Indian rice. Such a decision will mitigatethe negative effect of import of Indian ricein Pakistan and ensure level playing field forall stakeholders, Dr. Murtaza Mughalobserved. earlier, government had refusedto include Indian rice varieties in thenegative list despite several requests fromconcerned quarters which resulted inuncertainty among rice stakeholders, hesaid. Pakistan rice sector needs governmentsupport to survive and retain their share inmarkets of Afghanistan, Iran, Central Asia,and some other destinations, he said. It isunlikely that India, despite criticism byWorld Bank and other bodies, wouldwithdraw subsidies reaching to 14 per centof GDP. Similarly, Pakistan has no plans topay any grants to farmers or ensureprovision of inputs like fertiliser, diesel, andelectricity on rates matching that of India,therefore every facet of trade liberalisationneeds thorough study, he demanded.

SECP, KCDR to sign MoU

COLOMBO

ONLINE

FOLLOWING launch ofthe Grand Made inPakistan - Single countryexhibition in Colombo;

Pakistan’s Rawalpindi Chamber ofCommerce and Industry (RCCI)signed a Memorandum ofunderstanding (MoU) with theCeylon Chamber of Commerce(CCC) of Srilanka under thepatronage of the highCommission of Pakistan in SriLanka, the Pakistani highCommission said Tuesday.The MoU aims to encouragemutual understanding andpromote business and friendlyrelations between the industrial,trade and business communities ofPakistan and Sri Lanka. TheRawalpindi Chamber ofCommerce and Industry (RCCI) isthe premium business associationof Pakistan which was establishedin 1952. The RCCI is affiliatedwith the Federation of Pakistan

Chambers of Commerce andIndustry, which itself is themember of the InternationalChamber of Commerce andIndustry.The RCCI has more than 4000members comprising businessestablishments from largemanufacturers to home basedsmall businesses. The Chamberhas played a vital role in thedevelopment of commercial,industrial and economic activitiesin the region. The Ceylon Chamberof Commerce (CCC) of Srilankawas founded on March 25, 1839under the British Rule. Theagriculture based servicesprovided by the CCC to itsmembers, has gradually elevatedto value added services. Over aperiod of years, CCC which plays acatalytic role in the developmentof the business sector, changed itsfocus on identifying key issues toassist in the development ofstrategic plans to meet newchallenges and opportunities.Pakistan is the 2nd largest

trading partner of Sri Lankawithin the South Asian region.The level of bilateral tradebetween Pakistan and Sri Lankaincreased as a result of the FreeTrade Agreement (FTA).Trade between the two countriesincreased from US$ 225 million toover US$ 390 million during thelast four years, with the positivesupport gained from the FTA.Sri Lanka was the first country tosign a Free Trade Agreement(FTA) with Pakistan. FTA betweenPakistan and Sri Lanka isoperational since 2005. UnderFTA, Sri Lanka and Pakistan haveagreed to offer preferential marketaccess to each others’ exports byway of granting tariff concessions. Sri Lanka enjoys duty free marketaccess on 206 products in thePakistani market, while Pakistan,gained duty free access on 102products in the Sri Lankan market.The aim of a free trade agreementis to reduce barriers, to facilitateexchange so that trade can grow asa result of specialization, divisionof labor, and most importantly viacomparative advantage. The twobrotherly countries have alsosigned the Bilateral Investmenttreaty in December 1997, whichcame into force in January 2000after ratification. In addition amemorandum of understandingbetween Board of InvestmentPakistan and Board of InvestmentSri Lanka has also been signed inFebruary 2007 for strengthening ofcooperation in all the sectors ofinvestment of both countries.

Someone actually thinks the govt is doing a good job

Global stocks, dollarrise after US data

KARACHI

APP

SINDh is a resource rich province ofPakistan with every potential tobecome economic and power hub,Chief Minister of Sindh, Syed Qaim

Ali Shah was quoted to have said during apress conference arranged at the residence ofCounsel General of UAe. According to a pressrelease issued on Tuesday a high poweredofficial delegation headed by Syed Qaim AliShah is attending the second annualinvestment conference scheduled beingopened in Dubai on Tuesday. Syed Qaim AliShah in his press conference appreciated theUAe government for organizing the event andsaid Pakistan is a country of tremendousopportunities. he said such events will makeUAe a destination for business collaborations.Focusing on Sindh’s potential he said Allahhas blessed Sindh with all the resources tobecome regional power house. “Karachi, thelargest city, and finance and trade hub of thecountry is Sindh’s capital,” he was quoted tohave said. The chief minister said his provincehas proven reserves of 175 billion ton coal,that can produce 100,000 MWs of electricity,good enough 300 years.Moreover, it also has a 180 km long windcorridor and produces over 70% of country’sgas and 51 % of oil. Sindh has over 5.4

million hectares of cultivable land andcontributes about 23% to country’sagriculture that enhances its scope for foodprocessing and agri-businesses. The Sindhchief minister said the province also has asignificant competitive edge in production ofhorticulture especially dates, mangoes guava,banana, onions and red chilies. In addition, Sindh also has huge potential forlivestock including dairy and halal meatproduction. Sindh has 350 kms coastline andaccounts for 71 % of country’s marineresources including fish and shrimp. SyedQaim Ali Shah emphasized that thegovernment of Pakistan and the provincialgovernment of Sindh were participating in theevent to explore possibilities of increasingforeign direct investment. he said both thefederal and provincial governments haveevolved a very attractive policy regime forforeign investment carrying range benefits forforeign investors. The chief minister of Sindhparticularly referred to Thar coal and windprojects with attractive tariff complimented byfacility for dollar based repatriation of profitsplus a zero rated import duty on import ofmachinery. Syed Qaim Ali Shah said thatgiven Sindh’s mineral resources andrenewable energy resources coupled with anattractive incentive package, it was a greatopportunity for international companies toinvest in this sector.

Love thy neighbour… andtheir chamber of commerce

Sindh could be Pakistan’s CaliforniaTRADE BONDING GOING ON DOWN SOUTH CALIFORNICATION

g RCCI, Sri Lanka’s CCC sign MoU on bilateral tradeg MoU to promote Pakistan-Sri Lanka business, friendly ties

g Sindh has every potential to become our economic andpower hub: Qaim Ali Shah

g PEW lauds govt’s move to address concerns of rice farmers, exporters

PRO 02-05-2012_Layout 1 5/2/2012 12:30 AM Page 2

news

Wednesday, 02 May, 2012

03

LONDON

REUTERS

eUROPeAN stockssnapped a four-sessionrally on Monday, withnews of a recession in

Spain putting the euro zone’s eco-nomic and debt problems back inthe spotlight and charts pointingto more market weakness as longas a key resistance level holds.

Spain’s IBeX index finishedApril down 12.5 percent in itsworst monthly showing in nearly1-1/2 years. Investors braced formore turbulence in May, when thesecond round of presidential elec-tions in France and parliamentarypolls in Greece could shake theeuro zone’s ability to reach a con-sensus on how to deal with debtsand clamber out of recession.

“On a macro front, or politicalfront, in europe things aren’tlooking so great ... I am cautiousin the short term,” James Butter-fill, equity strategist at Coutts,said. The euro STOXX 50 index ofeuro zone bluechips closed down1.6 percent at 2,306.43 points onMonday. The pan-european FT-Seurofirst 300 fell by a moremodest 0.8 percent, cushioned bythe presence of Nordic stocks.

Strategists at JPMorgan saidthat Spain would likely remain theunderperformer in europe, whileGermany - which is up 15 percentfor the year-to-date - and Britain

would do well.euro STOXX 50 has lost 8.2

percent in April, its worst monthlyshowing since August 2010.

Volumes on Monday were atjust 74 percent of the 90-day dailyaverage, with some investors ex-tending their weekend in anticipa-tion of a holiday on europeanbourses on Tuesday.

A run of relatively solid corpo-rate reports had enabled the indexto stage a tentative recovery lastweek, but it stumbled againsttechnical resistance at the 200-day moving average which -around 2,348 - also acted as itsceiling on Monday.

“It still has a strong obstacle inthe form of 200-day moving aver-age ... In order to change (the out-look) to the positive side we needto break above,” Dmytro Bondar,technical strategist at RBS, said,adding that weakness would likelybe limited by the bottom of the re-cent range, at 2,280.

Data from ePFR Globalshowed outflows from europeanequities totaling $4.6 billion lastweek - the biggest in eightmonths. Spain, Italy, Greece andthe Netherlands, however, en-joyed small inflows, suggestingthat some bargain hunters believethe region will manage to resolvethe three-year-old crisis.

“Our european equity mu-tual fund flow sentiment indica-tor fell sharply ... into the region

that, in our view, reflects verydepressed sentiment levels andhistorically has acted as a usefulcontrarian buy signal,” Nomurastrategists wrote.

One thing that could persuadeinvestors back into europe is cor-porate profits, with strong resultsdriving sports goods maker Adi-das 5.3 percent higher on Monday.

Of the STOXX 600 companieswhich have reported first quarterresults so far, 58 percent beat ormet earnings forecasts, up from52 percent for full year 2011, ac-cording to Thomson ReutersStarMine data. Butterfill atCoutts noted that the beats cameagainst a fairly low base of expec-tations, but said that overall theearnings picture was supportivefor the market.

“If the markets begin to pricea euro zone breakup, but ulti-mately avert this scenario, as wasthe case in September 2011, thenwe could see a further downside of8.7 percent, bringing the euroSTOXX 50 to 2,115 level,” he said.

“however, the markets havealready priced for disappointmentin Spain and a less favourable out-come in the France/Greek elec-tions. This, supported with betterthan expected corporate resultsmeans unless the markets seegreater probability of a euro zonebreakup then the recent correc-tion doesn’t have much furtherdownside.”

BRAHMA CHELLANEY

Afavorite theme ininternational debatenowadays is whether Asia’srise signifies the West’s

decline. But the current focus oneconomic malaise in europe and theUnited States is distracting attentionfrom the many serious challenges thatcall into question Asia’s continuedsuccess.To be sure, today’s ongoing globalpower shifts are primarily linked toAsia’s phenomenal economic rise, thespeed and scale of which have noparallel in world history. With theworld’s fastest-growing economies,fastest-rising military expenditures,fiercest resource competition, andmost serious hot spots, Asia obviouslyholds the key to the future globalorder.But Asia faces major constraints. Itmust cope with entrenched territorialand maritime disputes, such as in theSouth China Sea; harmful historicallegacies that weigh down its mostimportant interstate relationships;increasingly fervent nationalism;growing religious extremism; andsharpening competition over water andenergy.

Moreover, Asia’s political integrationbadly lags behind its economicintegration, and, to compoundmatters, it has no security framework.Regional consultation mechanismsremain weak. Differences persist overwhether a security architecture orcommunity should extend across Asia,or be confined to an ill-defined “eastAsia.”One central concern is that, unlikeeurope’s bloody wars of the first halfof the twentieth century, which madewar there unthinkable today, the warsin Asia in the second half of thetwentieth century only accentuatedbitter rivalries. Several interstate warshave been fought in Asia since 1950,when both the Korean War and theannexation of Tibet started, withoutresolving the underlying Asiandisputes.To take the most significant example,China staged military interventionseven when it was poor and internallytroubled. A 2010 Pentagon report citesChinese military preemption in 1950,1962, 1969, and 1979 in the name ofstrategic defense. There was alsoChina’s seizure of the Paracel Islandsfrom Vietnam in 1974, and the 1995occupation of Mischief Reef in theSpratly Islands, amid protests by thePhilippines. This history helps to

explain why China’s rapidly growingmilitary power raises importantconcerns in Asia today.Indeed, not since Japan rose to world-power status during the reign of theMeiji emperor (1867-1912) hasanother non-Western power emergedwith such potential to shape the globalorder. But there is an importantdifference: Japan’s rise wasaccompanied by the other Asiancivilizations’ decline. After all, by thenineteenth century, europeans hadcolonized much of Asia, leaving inplace no Asian power that could rein inJapan.Today, China is rising alongside otherimportant Asian countries, includingSouth Korea, Vietnam, India, andIndonesia. Although China now hasdisplaced Japan as the world’s secondlargest economy, Japan will remain astrong power for the foreseeablefuture. On a per capita basis, Japanremains nine times richer than China,and it possesses Asia’s largest navalfleet and its most advanced high-techindustries.When Japan emerged as a worldpower, imperial conquest followed,whereas a rising China’s expansionistimpulses are, to some extent, checkedby other Asian powers. Militarily,China is in no position to grab the

territories that it covets. But itsdefense spending has grown almosttwice as fast as its GDP. And, bypicking territorial fights with itsneighbors and pursuing a muscularforeign policy, China’s leaders arecompelling other Asian states to workmore closely with the US and eachother.In fact, China seems to be on the samepath that made Japan an aggressive,militaristic state, with tragicconsequences for the region – and forJapan. The Meiji Restoration created apowerful military under the slogan“enrich the country and strengthen themilitary.” The military eventuallybecame so strong that it could dictateterms to the civilian government. Thesame could unfold in China, where theCommunist Party is increasinglybeholden to the military for retainingits monopoly on power.More broadly, Asia’s power dynamicsare likely to remain fluid, with new orshifting alliances and strengthenedmilitary capabilities continuing tochallenge regional stability. Forexample, as China, India, and Japanmaneuver for strategic advantage, theyare transforming their mutualrelations in a way that portends closerstrategic engagement between Indiaand Japan, and sharper competitionbetween them and China.The future will not belong to Asiamerely because it is the world’s largest,most populous, and fastest-developingcontinent. Size is not necessarily anasset. historically, small, strategically

oriented states have wielded globalpower.In fact, with far fewer people, Asiawould have a better balance betweenpopulation size and available naturalresources, including water, food, andenergy. In China, for example, waterscarcity has been officially estimatedto cost roughly $28 billion in annualindustrial output, even though China,unlike several other Asian economies,including India, South Korea, andSingapore, is not listed by the UnitedNations as a country facing waterstress.In addition to its growing politicaland natural-resource challenges, Asiahas made the mistake ofoveremphasizing GDP growth to theexclusion of other indices ofdevelopment. As a result, Asia isbecoming more unequal, corruptionis spreading, domestic discontent isrising, and environmentaldegradation is becoming a seriousproblem. Worse, while many Asianstates have embraced the West’seconomic values, they reject itspolitical values.So make no mistake. Asia’s challenges aregraver than those facing europe, whichembodies comprehensive developmentmore than any other part of the world.Despite China’s aura of inevitability, it isfar from certain that Asia, with itspressing internal challenges, will be ableto spearhead global growth and shape anew world order.

Courtesy: Project Syndicate

NEW YORK

REUTERS

TReASURY pricesrose, while the eurofell and the dollarslipped to a more

than two-month low againstthe yen as anxiety overeconomies on both sides ofthe Atlantic led investors tofavor lower-risk investmentsover stocks and other riskyassets.Spain, the euro zone’sfourth-largest economy,slipped into recession in thefirst quarter as domesticdemand fell, joining Italy,Portugal, Ireland,Greece,Belgium and the Netherlandson the list of countries withshrinking economies.In the United States,consumers boosted spendingonly modestly last monthand a gauge of Midwesternbusiness activity fell sharplyin April, suggesting theeconomy entered the secondquarter with less steam.“Growth is beginning to fadearound the world,” saidJustin hoogendoorn, fixedincome strategist at BMOCapital Markets in Chicago.The MSCI world equity index.MIWD00000PUS slipped0.2 percent to 328.66. Forthe month, the index wasdown 1.4 percent, thoughstill up nearly 10 percent thisyear to date.On Wall Street, the S&P 500posted its first monthlydecline since November. TheDow Jones industrial average.DJI ended down 14.68points, or 0.11 percent, at13,213.63. The Standard &Poor’s 500 Index .SPX closeddown 5.45 points, or 0.39percent, at 1,397.91. TheNasdaq Composite Index.IXIC was down 22.84 points,or 0.74 percent, at 3,046.36.

Still, analysts said thepicture was notoverwhelmingly negative.Last week brought four daysof back-to-back gains thathelped the index erasesteeper losses for the month.The S&P closed above 1,400for the first time in threeweeks on Friday, spurred bybetter-than-expectedcorporate earnings.“On the trading front, inequities, we stepped back toneutral several weeks ago,”Goldman Sachs said in aresearch note. “Our generalview is that the U.S. seems tobe slowing - though howmuch and for how long is anopen question - while equitymarket domestic growthviews remain elevated.”In the euro area, trading waslight ahead of May Dayholiday on Tuesday, electionsin France and Greece at theweekend and a europeanCentral Bank meeting onThursday wherepolicymakers will have toconsider the region’sworsening economic health.The FTSeurofirst 300 indexof top european shares.FTeU3 ended down 0.8percent to 1,043.28.emerging market shares.MSCIeF however, gained0.5 percent.eURO ZONe STReSSThe euro fell 0.1 percent to$1.3236, off a near one-month high of $1.3270 hit onFriday. It was on track for itsworst month sinceDecember.Signs of a deepening euro-zone recession raised worriesthat governments couldsoften their approach totackling budget deficits.Several countries in theregion are under intensepressure to cut spending tohelp reduce their debt to

sustainable levels.Growing opposition toausterity measures isexpected to be a large factorin weekend elections inFrance and Greece afterdisputes about austeritybrought down center-rightcoalition governments in theNetherlands and Romanialast week.“In short, the news fromeurope continues to point tofurther structural stress inthe system,” said BorisSchlossberg, director of FXresearch at GFT in JerseyCity, New Jersey.The dollar lost 0.5 percent to79.82 yen after falling as lowas 79.71 yen, the lowest levelsince February. The pair wason track for its worst monthsince July 2011. Thegreenback briefly touched atwo-month low against abasket of currencies .DXY at78.638, its lowest sinceMarch 1, before recovering to78.796, up 0.1 percent on theday. The benchmark 10-yearU.S. Treasury note was up5/32, the yield at 1.93percent. Yields on 10-yearnote fell from 2.31 percent inthe earliest trading sessionsof the month to 1.93 percentlate on Monday, a fall ofnearly 40 basis points and itsbiggest monthly drop sincelast September. Incommodity markets, goldprices steadied above $1,660an ounce on speculation of athird round of liquiditystimulus from the FederalReserve. For the month,bullion dropped about 0.3percent, posting a thirdstraight monthly decline forthe first time since 2000.Brent June crude futuressettled down 36 cents at119.47 a barrel. U.S. crudesettled down 6 cents at$104.87 a barrel.

Europe stockssuffer as Spainin recessiong FTS Eurofirst 300 down 0.8 pct, Euro STOXX 50 down 1.6pctg Spain’s IBEX has worst month in 1-1/2 yrs, GDP data hurtsg Corporate offer some relief from a low base

Stocks, euro fall inApril on Europe stress

The resistible rise of Asia?

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