US consumer spending show signs of life

WASHINGTON - Consumer spending, the bulwark of economic growth, is showing signs of life as the economy transitions from recession to recovery.

The key question is whether the spending rebound can be sustained while US households face rising unemployment, tight credit conditions and other obstacles.

Economists believe that consumer spending, which accounts for about 70 percent of total economic activity, surged in August, reflecting the success of the government's Cash for Clunkers car rebate program.

While layoffs have slowed, they have not stopped, and many workers remain fearful about what the future holds.

The Conference Board reported Tuesday that its widely watched barometer of consumer confidence dipped to a reading of 53.1 in September, from 54.5 in August, as Americans' worries about job security flared again.

The Commerce Department is scheduled to report on consumer spending for August on Thursday. In advance of that report, economists surveyed by Thomson Reuters expect that spending surged 1.1 percent, up from the 0.2 percent rise in July.

Economic data, after being bleak for months following the financial collapse a year ago, has started to show encouraging signs in a number of sectors.

The Institute for Supply Management is expected to report Thursday that its gauge of manufacturing activity rose further into positive territory in September with a reading of 54. That would compare to an August reading of 52.9, which had marked the first time in 19 months that the manufacturing barometer had flashed an expansion signal. A reading below 50 indicates manufacturing is contracting.

The number of newly laid-off workers filing for unemployment benefits is expected to post a slight rise, climbing to 535,000 last week from 530,000 the previous week, according to analysts surveyed by Thomson Reuters.

In a fourth report, an index from the National Association of Realtors that tracks pending home sales is expected to rise for an eighth straight month in August. If accurate, that would provide further evidence the battered housing sector is starting to rebound following three dismal years.

However, a separate report on construction spending was expected to show a dip of 0.2 percent for August, matching the July drop, as weakness in nonresidential activity offsets a rebound in single-family homebuilding.

The big gain in consumer spending in August is expected to help lift that measure for the third quarter to an annual rate of around 2 percent.

Nigel Gault, an economist at IHS Global Insight, said he expected the overall economy, as measured by the gross domestic product, to rebound to growth of between 3 and 3.5 percent in the July-September quarter.

That would be an improvement from four straight quarterly declines in GDP, including a revised decline of 0.7 percent in the April-June quarter, as the country endured the longest recession since the 1930s.

Most economists are not expecting a double-dip recession, but there is concern that their forecasts for a sustained rebound could prove too optimistic.

The Group of 20 leading industrial and emerging market countries concluded after two days of talks last week in Pittsburgh that it is critical for nations not to halt their stimulus programs too soon for fear the world could repeat mistakes made in the 1930s that prolonged the Great Depression.

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Only 1 percent of Meralco's service area remains without power

Only one percent of Manila Electric Co.'s (Meralco) service area remains without electricity service, five days after the storm Ondoy submerged more than three-fourths of the Philippine capital.

As of two o' clock on Thursday afternoon, only six out of its total 683 distribution circuits in its entire franchise area are still offline since these are still "severely affected by the massive flooding," the company said in a statement.

Although Meralco is doing its best to bring electric service back to the said areas, it may take some time since it is still waiting for floodwaters to subside, Joe R. Zaldariagga, the company's external communications manager.

He also asked Meralco customers whose meters have been submerged in floodwater to report the matter to Meralco. They may call the Meralco hotline at 16211 or text their concerns to 09175592824 and 09209292824.

Meralco will also conduct an inspection of all electric meters within its franchise area, "a precautionary and safety measure...before [restoring] electricity back to our customers’ homes. Many of the meters in the areas heavily hit by “Ondoy" were submerged in floodwaters," Zaldarriaga added.

With the country still reeling from Ondoy’s fury, Meralco continues to extend its assistance to many communities affected by the typhoon.

It has distributed thousands of relief bags in areas such as Marikina, Cainta, Taytay, Pasig and in other flood-hit communities. It also provided generator sets and floodlights in many evacuation centers in its franchise area.

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Meralco issues safety reminders for flooded areas

Manila Electric Co. (Meralco), Metro Manila's lone electricity distributor, issued customer safety reminders as it begins to restore power in nearly all of its service areas, including locations which were previously under water.

Besides asking customers to "exercise caution before plugging and turning on their appliances," the Philippines' largest electric company also told power users to seek advice from licensed electrical practitioners if it would already be safe to run power back on, the company said in a statement.

It also came out with a list of precautionary measures for households which have been recently submerged in floods, including the following:

• 1) Make sure that the main electrical power switch or circuit breaker is turned off. When you need to touch a switch and the floor is still wet, stand on dry board or carton or wear rubber sole boots. Use a dry stick or rubber gloves, or well-insulated pliers or tools to pull handles;
  
  
• 2) Unplug all equipment and appliances. Turn off the switch of permanently connected equipment. Unscrew all light bulbs if possible;
  
  
• 3) Remove mud and dirt from the service equipment or main circuit breaker/fuse and its enclosure with rubber gloves and rubber sole shoes;
  
  
• 4) Allow electrical wires, connectors and other wiring devices to dry completely. Drying may take days, depending on how wet the system is and on external temperature;
  
  
• 5) When all electrical wires and accessories are dry and clean, the wiring system must be checked, and;
  
  
• 6) The appliance itself must be completely dry, serviced or checked by a licensed electrician. Do not turn on damaged electrical appliances.

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Cash donations subject to tax, BIR chief says

Cash donations made to privately-led groups assisting typhoon victims remain subject to donor's tax, the Philippines' tax chief said.

However, Bureau of Internal Revenue (BIR) Commissioner Sixto Esquivias IV failed to provide tax rates while testifying before the Senate sub-finance committee chaired by Senator Miriam Defensor-Santiago.

“Donations done straight to private individuals are subject to donor’s tax," Esquivias said. “Donations to government and charitable institutions are exempt."

Besides emphasizing that donors will not encounter any problems with the tax, Esquivias added that agencies such as the Department of Social Welfare and Development (DSWD) could receive donations from the private sector “tax-free."

Previously, Santiago was attempting to secure BIR approval for a donor's tax waiver to spur more donations for victims of the storm Ondoy.

Although she earlier intended to file a bill exempting cash donations from donor's tax, Santiago opted to file a resolution instead.

Under Section 98 of the National Internal Revenue Code, direct or indirect gifts, real and personal properties, tangible or intangible assets under P100,000 will be exempt from taxes.

However, a tax of anywhere from two to 15 percent will be charged on donations worth anywhere from P100,000 to P10 million.

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Oil falls to near $70 as traders eye US economy

SINGAPORE — Oil prices fell to near $70 a barrel Friday in Asia as signs of a sluggish US economic recovery discouraged stock and crude investors.

Benchmark crude for November deliver was down 63 cents at $70.19 by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract added 21 cents to settle at $70.82 on Thursday.

Crude has weaved around $70 for months amid mixed signals about the strength of the US economic recovery. On Thursday, poor economic data sparked a sell-off in US stock markets.

The Labor Department said new claims for jobless benefits rose last week to 551,000, more than analysts expected. And the Institute for Supply Management said its index of manufacturing activity in September fell when analysts had expected an increase.

The Dow Jones industrial average fell 2.1 percent Thursday while most Asian stock markets slid in early trading Friday.

"At $70 a barrel, investors have priced in a fairly sharp economic recovery," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "That makes it vulnerable to bad economic news."

Investors will be closely analyzing the government's monthly jobs report, which is scheduled to be released later on Friday.

In other Nymex trading, heating oil fell 1.35 cents to $1.81 a gallon. Gasoline for November delivery dropped 1.21 cent to $1.75 a gallon. Natural gas for November delivery lost 3.0 cents to $4.44 per 1,000 cubic feet.

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Philippine shares end flat as losses mitigated by good news

Philippine share prices ended flat during Friday’s trading, as good news mitigated losses from Wall Street’s sharp overnight decline.

The benchmark 30-company Philippine Stock Exchange (PSE) index shed 8.99 points, or 0.31 percent, to 2,820.03 while the all-shares index fell 8.53 points, or 0.4742 points to 1,790.20.

The local equities market traded sideways as positive developments – the International Monetary Fund’s bright forecast for the Philippines, among others – helped curb negative sentiments from the Dow Jones’ plunge, Nikka Maloles, an investment analyst at 2Trade Asia said.

The Dow Jones Industrial Average (DJIA) declined to its lowest in three months as manufacturing and employment reports pounded US stocks, an Associated Press report said.

Losses were also pared because of “bargain hunting" and China’s steadfast commitment to its Philippine investments, especially in the mining sector, she added.

For the past month, the market has been trading sideways and has lacked volatility, Maloles pointed out.

“This is a good sign," she said.

Of the six sub-indices, only holding firms stayed in positive territory, posting a 2.90 point rise to 1,593.44.

Leading the five subsectors in the red was property, which was 13.81 points, or 1.22 percent lower at 1,109.56 points. This was followed by mining and oil and services which fell 85.07 points, or 1.136 percent, to 7,403.27 and 7.43 points, or 0.515 percent, to 1,433.75 respectively.

Market breadth was negative as losers outpaced advancers 78 to 20 while 60 stocks were unchanged.

Volume reached 1.232 billion shares traded with a value of P1.9 billion.

Friday’s top traded stock was the Philippine Long Distance Telephone Co. (PLDT), which ended at P2445.00 apiece, five pesos lower than Thursday’s prices.

Next was Ayala Corp., which rose by P2.50, to P305.00.

Metro Pacific Investments Corp. (MPIC), which has investments in toll roads, hospitals, and a water utility, declined by five centavos to P3.25.

SM Investments Corp. (SMIC) was the day’s fourth-traded stock, rising P2.50 to P327.50.

Ayala Land Inc., the Philippines’ biggest developer, stayed unchanged at P12.00.

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Consumers to keep water connections despite inability to pay bills

Customers of Metro Manila’s two water distributors will continue to enjoy uninterrupted service this October despite their inability to settle their bills for the period.

This was announced by Diosdado Allado, administrator of the Metropolitan Waterworks and Sewerage System (MWSS) on Friday.

Manila Water Co. Inc. (MWCI) and Maynilad Water Services Inc. (MWSI) “have agreed to the initiative of the MWSS to implement a disconnection moratorium for [customers’] October water bill," Allado said in a text message.

Manila Water has even given its customers “the option to pay for their October billing for a maximum term of 12 months," he added.

The option “is to be applied to 79 barangays representing the areas hardest hit by storm Ondoy," he said.

Large parts of Metro Manila remain under water after the storm brought forth record amounts of rainfall to the city.

Manila Water serves the city’s east zone – which include Marikina and Pasig, among the most flooded locations – while Maynilad Water’s area covers the west zone, including Manila and Alabang.

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Energy Prices

Energy Prices

PETROLEUM ($/bbl)

PRICE* CHANGE % CHANGE TIME Nymex Crude Future 66.84 .00 .00 02:13 Dated Brent Spot 65.00 -.32 -.49 02:22 WTI Cushing Spot 66.84 .97 1.47 09/28

PETROLEUM (¢/gal)

PRICE* CHANGE % CHANGE TIME Nymex Heating Oil Future 169.13 .04 .02 23:04 Nymex RBOB Gasoline Future 163.77 -.03 -.02 23:03

NATURAL GAS ($/MMBtu)

PRICE* CHANGE % CHANGE TIME Nymex Henry Hub Future 4.79 -.04 -.77 02:10 Henry Hub Spot 3.53 -.07 -1.94 09/28 New York City Gate Spot 3.77 -.03 -.79 09/28

ELECTRICITY ($/megawatt hour)

PRICE* CHANGE % CHANGE TIME Mid-Columbia, firm on-peak, spot 38.88 2.17 5.91 09/28 Palo Verde, firm on-peak, spot 33.15 -1.27 -3.69 09/28 BLOOMBERG, FIRM ON-PEAK, DAY AHEAD SPOT/ERCOT HOUSTON 32.42 -4.39 -11.93 09/28

*Commodity futures and energy prices are in U.S. dollars.

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Investors don't feel like taking chances with stocks, spending

The way Wendy Hunt spends, saves and invests her money is much different today than it was before the financial crisis wreaked havoc on her personal finances. The economic fallout caused by two pay cuts at her old job, carrying two mortgages for five years and watching the value of her portfolio get sliced in half has resulted in a "permanent change" in her attitude toward money, admits Cincinnati-based Hunt, 36, who landed a new job as an advertising director earlier this month.

Hunt's new financial fitness routine? Spend less. Save more. Invest more conservatively.

"If I can save money, I will," Hunt says. "I value money more than I did before."

It's what economists are calling the "New Normal," a more frugal financial world in which investment risk will be dialed back, savings will be ramped up and stockpiling money in the bank will re-emerge as a legitimate place to park cash as it was following the Great Depression.

Like millions of Americans hurt by the recession and falling stock and home values, Hunt has embraced frugality. In an effort "not to burn through money the way we used to," and save more for retirement and her kids' educations, Hunt is hunting more for bargains. She now shops for dry goods such as cereal, risotto, salsa and muffin mix at Target, where she saves up to $40 a week buying the off-price retailer's private-label brand. She has also cut back her weekly "date nights" with husband Brian, 37, to once a month.

And even though her portfolio has earned back most of the losses it suffered during the downturn, she's also taking a less risky approach to investing. The new financial adviser she hired to help sort out her finances persuaded her to boost her cash holdings to roughly 30% from 5% and slash her stock exposure in search of more consistent returns.

"I will not be as aggressive an investor as I used to be," Hunt says. "I will always strive to have more cash — the one secure security — in the bank ," adds Hunt, a mom with two daughters, Parker, 1, and Presley, 3.

All this angst comes despite an almost 50% rebound for the Dow Jones industrials since the March low and signs that the economy is getting healthy.

After nearly two decades of Americans bingeing on cheap money, living beyond their means and gunning for outsized market returns, today it's all about prudence, security and having cash on hand when things go wrong.

"The new frugality is a secular, not just cyclical, theme," says David Rosenberg, chief economist at Gluskin Sheff. "U.S. consumers are cutting back, and where they are not cutting back, they are scaling back," Rosenberg noted in a recent report.

Many economists fear that penny-pinching consumers will slow the economic recovery and profit rebound of U.S. companies.

Investors spooked by the near collapse of the financial system are also less willing to risk money in stocks, preferring safer investments such as certificates of deposit and money market mutual funds, says Robert Cohen, a New Jersey-based financial planner at Financial Strategies & Wealth Management.

There was $1.21 trillion in CDs at the end of August, the Federal Reserve says, down from $1.38 trillion at the start of the year, but about the same as September 2007, when the collapse of Lehman Bros. intensified the financial crisis. Another $3.48 trillion is parked in money market mutual funds, down from $3.84 trillion at the end of 2008, but most of the shift out of money markets has been by institutions, not retail investors, Investment Company Institute data show.

"Investors are much more risk-averse, and this will most likely affect them for at least the next three to five years," Cohen says. "What's different is clients are focusing more on limiting their downside, whereas before (the financial crisis) the focus was on how much they would make."

A recent poll by the American Association of Individual Investors confirms that individuals are underinvested in stocks. Individuals had just 54% of their money invested in stocks at the end of August, below the long-term average of 60%.

Consider Glenn Salka, a 57-year-old empty-nester from Fair Lawn, N.J. Despite the fact that he and his wife still have their jobs, paid off their mortgage a year ago, and are financially fit thanks to years of "prodigious" budgeting, Salka is still wary of the stock market. He has cut back his allocation of stocks in his 401(k) to 40% of total assets, down from 70%. His wife sold all her stocks earlier this year at a loss.

"I'm just not comfortable with the long-term outlook," Salka says. For now, he's taking a wait-and-see approach to see if the stock rebound is for real. Salka is no longer putting fresh cash into stocks. "100% is going to safe investments," he says. Each month he opens a new six-month CD.

Bart Ruff, 45, a married dad with two kids from Lederach, Pa., is also playing it safe. While he has stayed the course with his investment portfolio, he now spends a lot of time "tracking down the highest-paying money markets and CDs" for new cash. "It's tedious work for little more than a 2% return, but it gives us a sense of security," he says.

Ruff is also staying on the sidelines when it comes to conspicuous consumption: "If the TV isn't broken we won't rush out and buy a new one."

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What to Watch Wednesday: Top Chef, Stegner and More Premieres

Our daily look at a few shows that promise to be among the day’s more interesting, for all the right — or wrong — reasons.

The latest indignity suffered by the culinary contestants of “Top Chef: Las Vegas” (10 p.m., Bravo): cooking for Penn and Teller. As long as they don’t make Padma disappear. The Miami chef Michelle Bernstein (Michy’s, SRA. Martinez) is the guest judge.

“Wallace Stegner” (10 p.m., most PBS stations) is a biography of the Pulitzer Prize- and National Book Award-winning writer, teacher and conservationist, produced by the Utah PBS station KUED. Stegner, the American West’s most lyrical and cogent chronicler and champion, deserves a fuller, richer documentary, but his devotees will be grateful that this film was made at all.

Wednesday’s network premieres: 8 p.m.: “New Adventures of Old Christine,” CBS; “Mercy”, NBC*; 8:30 p.m.: “Gary Unmarried,” CBS; 9 p.m.: “Modern Family,” ABC*; “Criminal Minds,” CBS; “Law & Order: SVU,” NBC; 9:30 p.m.: “Cougar Town,” ABC*; 10 p.m.: “Eastwick,” ABC*; “CSI: NY,” CBS.

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Economy to improve in coming qtrs - Mukherjee

KOLKATA - India's economy will continue to improve in the 2009/10 fiscal year (April-March) as stimulus packages have helped spur demand, but a full economic recovery will still take time, the finance minister said on Wednesday.

Growth for the fiscal year would exceed 6 percent, Pranab Mukherjee told a conference, despite a poor monsoon.

India, Asia's third-largest economy, grew 6.7 percent in 2008/09, slowing from rates of 9 percent or higher in the previous three years as the global downturn hit harder than expected.

"If the present trend continues, second quarter GDP would be better than the first quarter," Mukherjee said.

The economy grew 6.1 percent in the April-June quarter from a year earlier, picking up from an annual rate of 5.8 percent in the previous quarter.

Deficient monsoon runs, which were running 20 percent below average in mid-September, were a risk to growth, but Mukherjee said late rains have eased the drought situation and would help winter crops.

"With the late monsoon, there is less reason for apprehension because the water situation in the centrally monitored reservoirs has improved," he said.

The government has raised farm subsidies to mitigate the impact of drought and is looking to early sowing of winter crops to offset the loss of summer crops.

Mukherjee said the shortfall in the sowing area of the summer crop was between 60 to 65 million hectares, which could translate into an output shortfall of 14-15 million tonnes.

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From Espionage to Sabotage – and the Dirty War (Part 3)

Early this year, the Colombian press reported that the Administrative Security Department (DAS), Colombia's main intelligence agency, which answers to the president's office, had for years been carrying out illegal wiretap activities against opposition politicians, human rights defenders, journalists and even Supreme Court judges, who were described as "targets."

The position taken by the rightwing government of Álvaro Uribe is that a few "rotten apples" took advantage of the culture of secrecy characteristic of the military and intelligence forces, to use it to their own ends. To back up that argument, administration officials point out that the list of individuals who were spied on includes high-level officials and pro-Uribe politicians.

But the DAS agents who leaked the scandal to the press told Semana magazine in February that they had wiretapped several senior officials in order to protect themselves, given the fact that they were following "irregular" orders.

The chief difference between the government officials and other Uribe loyalists on one hand and anti-government or opposition "targets" on the other was that the former were apparently not objects of "offensive intelligence" actions.

Many in Colombia still believe the most serious aspect of the scandal was the illegal invasion of privacy by means of wiretaps and human surveillance, rather than the way the DAS used that information for offensive intelligence against dissidents.

"Surprisingly, there is some disagreement about the definition of these terms," said Steven Aftergood, a senior research analyst at the Washington-based Federation of American Scientists, where he heads the Project on Government Secrecy, whose aim is to challenge excessive government secrecy and promote public oversight.

"Generally speaking, intelligence refers to the collection of information regarding potential threats to the security of the nation. There may be different interpretations of the concepts of 'security' and 'threat.' But intelligence gathering per se does not have an offensive component," he told IPS.

"Sometimes, however, paramilitary or political operations targeted against another country in the form of 'covert action' are included within the definition of 'intelligence.' Such operations may well be considered offensive intelligence operations," he added.

"Offensive information operations seek to deny, degrade, destroy, disrupt, deceive, and exploit adversary command and control (C2) systems," says the July-September 1999 issue of the U.S. Army Intelligence Centre's Military Intelligence Professional Bulletin.

Offensive information "help(s) the commander to seize and retain the initiative by degrading the enemy’s information system…This will slow the enemy’s tempo, disrupting their decision cycles and their ability to generate combat power," the Bulletin adds.

Thousands and thousands of pages were found in the 104 A-Z expanding files turned over by the DAS to the attorney general's office in March as a result of the scandal triggered by press reports on the illegal wiretapping activities of the Special Intelligence Group, a DAS unit known as the G-3, created to gather intelligence on opponents of the Uribe administration.

The G-3 carried out warrantless surveillance and used the information to intimidate its targets and sabotage their activities.

The sabotage included anonymous death threats, as admitted by former counterintelligence chief Jorge Alberto Lagos, who was sacked in February and arrested after warrants were issued Jul. 31 for his arrest and that of nine other former and acting DAS officials.

For example, funeral wreaths were sent to at least three journalists, as indicated by orders appearing in the G-3 files.

One of the targets, Alirio Uribe, the head of the José Alvear Restrepo Lawyers Collective - a human rights group with United Nations consultative status – who suffered the most invasive surveillance, said "intelligence used in the way the DAS has used it is the heart of the country's dirty war," according to the Bogotá newspaper El Espectador.

The G-3, created in 2003, never appeared on the DAS organisation chart, and "in theory, the group was dissolved in November 2005," the attorney general's office concluded. But, it added, "some G-3 activities were continued by the so-called GONI (Grupo de Observación Nacional e Internacional – National and International Observation Group)," another DAS unit, which was in turn supposedly dismantled in March.

Until March, the DAS denied the existence of the G-3.

Privacy – only on paper

The U.S. National Security Agency (NSA) "monitors the telephone, radio and other communications of both friends and adversaries of the United States. Surreptitiously, it reads the world's mail.

"Its daily intercept traffic is huge. In times of tension, vast arrays of NSA personnel fluent in the relevant languages are sitting with earphones, monitoring in real time everything from encrypted commands from the target nation's General Staff to pillow talk.

"For other material there are key words by which computers cull out for human attention specific messages or conversations of current urgent concern. Everything is stored, so that retrospectively it is possible to go back to the magnetic tapes and to trace the first appearance of a codeword, say, or command responsibility in a crisis."

These quotes do not come from a conspiracy theorist, but from famed U.S. astrophysicist Carl Sagan in his book "The Demon-Haunted World", published in 1995, a year before his death.

According to Sagan, "the intercepts are made from listening posts in nearby countries…from aircraft and ships patrolling nearby, or from ferret satellites in Earth orbit."

The NSA's main missions are to protect U.S. national security systems and produce foreign signals intelligence information, by collecting - "including through clandestine means," as its web site says – processing, analysing, producing, and disseminating intelligence information.

The agency has military and civilian personnel stationed all over the world, and complements the work of the Central Intelligence Agency (CIA), the lesser-known Defence Intelligence Agency (DIA), and the National Geospatial-Intelligence Agency (NGA).

After World War II, the NSA continued to work in collaboration with the United Kingdom, the closest U.S. ally, through a pact known as the UK-USA Security Agreement, which later incorporated the governments of New Zealand, Australia and Canada.

ECHELON is a global monitoring system - or signals intelligence (SIGINT) collection and analysis network - run by the UK-USA Security Agreement members.

In 2001, a European Parliament committee presented a report "on the existence of a global system for the interception of private and commercial communications (ECHELON interception system)."

The committee had been set up because of concern on the part of European industry that the spying system was used to the commercial disadvantage of members of the European Union other than the UK.

The committee's report stated that the existence of the ECHELON system – which has not been formally acknowledged by the governments of either the U.S. or the UK, although it has been by Australia and New Zealand – "is no longer in doubt," and that its purpose is "to intercept, at the very least, private and commercial communications, and not military communications".

The committee examined "cases of industrial espionage and/or competitive intelligence which have been described in the press."

The focus, then, is no longer on cooperation among intelligence agencies to fight communism or terrorism, or for national defence, but on economic and commercial espionage against governments and companies, in which one EU member (the UK) was involved against competitors from that bloc.

One of the cases studied by the committee was the award to the French firm Thomson-Alcatel of a 1.4-billion-dollar Brazilian contract for the satellite monitoring of the Amazon Basin. After communications to and from Thomson-Alcatel were intercepted by ECHELON, the contract was awarded to the U.S. firm Raytheon.

According to British investigative journalist Duncan Campbell – who reported the existence of ECHELON in 1988 and provided the European Parliament committee with a document describing the magnitude of the surveillance – the members of the UK-USA Security Agreement were using 120 satellites by 1999.

The European debate over ECHELON has gone on for years, although it never went so far as to jeopardise business deals between EU countries and their main trading partner, the U.S. Nor did it give rise to a confrontation between the rest of the EU countries and the bloc's leading military power, the UK.

Meanwhile, the U.S. government of George W. Bush (2001-2009) found a basis in the 9/11 terrorist attacks on New York and Washington in 2001 to waive the requirement of warrants for routine spying on citizens.

In any case, history is full of illustrations demonstrating that privacy in communications is an illusion, and that it only continues to exist on paper, in constitutions, national laws and international rules and treaties – and sometimes not even there.

The question is what use is made of the information obtained from electronic surveillance. * With additional reporting by Diana Cariboni in Montevideo, Uruguay.

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Communist Resort Makeover Mirrors State’s Populist Shift?

Beidaihe – a seaside resort about two hours’ train ride north of the capital – has surrendered its heavily guarded beaches to throngs of Russian tourists and no longer attracts media attention as the exclusive party resort.

It was here that many important party conclaves were held and some fateful decisions to "stay or go" for political supremos in Chinese communist hierarchy were made before announcing them to the public from the formal party halls in Beijing.

But when the 2,000-odd members of the all-powerful Central Committee of the party convene for their annual meeting next week in Beijing, Beidaihe would be hardly mentioned. Its status as a top leadership retreat has been downgraded by the current party chief, Hu Jintao, who has promoted a more egalitarian approach and wants to nurture the party’s populist image.

The changes the communist resort has gone through reflect somewhat the changes that the world’s largest communist party has seen over the last five years. There are fewer party slogans on its laid-back streets lined up with seafood restaurants and fewer state limousines bringing the whole town to a standstill. And there is a prevailing sense that economic expediency rules the day.

"Back then there were very few foreign tourists and we only served party cadres who had come here for a few days of summer holiday," says shop owner Li Juanxin whose street corner shop sells parasols, sun hats and local souvenirs made of seashell. "But Russian tourists are good for us – they like shopping and spending money."

Russia’s proximity to this northern seaside resort has made its newly affluent tourists Beidaihe’s main patrons these days. Russian tour groups have flooded Beidaihe’s once heavily patrolled streets, carousing late at night, crowding its seafood eateries overlooking the beach and forcing the locals to learn a few phrases in Russian.

Nowadays all street signs, shop names and menus are in both Chinese and Russia, reflecting the fact that Beidaihe is no longer immune from the commercial waves of time.

In August when state leaders still visit – if not for secret party meetings then for relaxation – the streets get lined up with police who occasionally stop cars and demand identifications. But Russian tourists take it all in their stride.

"The security reminds me of the old days in the USSR (the Soviet Union)," says Yuri Gregoriev while relaxing on a chaise-lounge on the beach. "But I don’t mind it at all. We all come from different parts of Russia’s far east, and to get to any other beach with similarly good weather and warm sea, we would have to travel a long time."

"The food is good even if it is not cheap and the locals seem friendly enough," says Yuri’s girlfriend, Masha. "I sort of like the fact that we are guests of a state leaders’ resort," she gushes when asked if she minds the intrusive security on the streets.

Chinese people though have more to say about how modifications of party style have not brought the changes they have hoped for.

"I must not complain because our (Beidaihe’s) fortunes have been tied up to the party’s fortunes, but we have not seen much change in the way party leaders deal with corruption and power abuses," says Lao Luo, chef at one of the seafood restaurants lining the main promenade in town. "Everybody is unhappy about it."

As if taking cue from the public mood, the annual party meeting to be held in Beijing from September 15 to 18 will focus on fighting corruption in the ranks following a series of high-profile cases that have provoked widespread anger.

A document on 'improving party building' will be tabled at the meeting that will lay out policy aimed at helping the ruling communists cope with the demands of China's development and reform, Xinhua news agency said this week.

"The party should make redoubled efforts to improve the party's work style, build a clean government and fight corruption," Xinhua said.

The plenum will be held only weeks before China marks its 60th anniversary of communist rule on October 1 with a grand military parade in central Beijing.

But preparations for the anniversary have been marred by allegations of graft and nepotism among the ruling elite even as Beijing has pulled out all stops to demonstrate its readiness to crack down on abuses.

Last week, Sun Yu, 52, the former vice chairman of the southern Guangxi region, was sentenced to 18 years in jail for taking bribes worth 3.3 million yuan (about 484,000 U.S. dollars) and swindling an equal amount from the regional government.

On Aug. 7, Li Peiying, the former head of the company that owns Beijing Capital International Airport, was executed. Li, 60, was convicted of bribery and embezzlement totaling nearly 109.4 million yuan (16 million U.S. dollars).

In a surprisingly frank editorial this summer, the ‘China Daily’ newspaper suggested that "after 60 years behind the helm and more than 30 years of preoccupation with the economy, the Chinese Communist party needs to take a serious look and adapt to new conditions."

It added that the rising number of "mass incidents" of social unrest demonstrates an alarming level of public anger with the ruling elite.

In 2007 China reported 80,000 cases of "mass incidents," involving sometimes up to thousands of people. Most of them stemmed from public anger about illegal land seizures or evictions of villagers by local officials making way for development. The figure for 2005 was a significantly lower 60,000 cases.

"The explosion in numbers of ‘mass incidents’ can be seen as an indicator of the rise of public expectations towards the government," says Wang Erping, who studies social unrest at the Centre for Social and Economic Behaviour at the Chinese Academy of Science.

The ‘China Daily’ had a proposal for the party plenum: "If the image-sensitive CCP (Chinese Communist Party) can work out some practical cures for such sources of public discontent as corruption, it surely will see fewer ‘mass incidents.’"

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Rich and Poor - One Country but Worlds Apart

Leaving her air-conditioned office at lunch, our executive will pay $100 for lunch in a beachfront café and think nothing of spending $300 on a few items of imported food from an upmarket grocery store.

A few miles away, another woman sits on the verge of a dusty street, one of many selling dented tins of palm oil and bruised tomatoes. They sit on the ground or on upturned plastic water containers, just metres from a trench of rotting rubbish.

Oblivious to the stench and swarms of flies, she braids another woman's hair and watches her malnourished children play in the murky puddles nearby.

Both these women are Angolan, but they will never meet nor are they ever likely understand each other’s reality.

Since the end of Angola’s three decades of civil war in 2002, the country has enjoyed unprecedented economic growth - an average annual Gross Domestic Product (GDP) increase of 15 percent – thanks to high oil prices and billions of dollars of foreign investment, particularly in construction.

Pumping around 1.8 million barrels of oil a day, Angola has overtaken Nigeria as Africa’s largest oil producer and become the world’s fifth biggest exporter of diamonds.

But while the country has gained international recognition for its rapidly expanding economy, two thirds of its population continue to live on less than two dollars a day, according to the World Bank.

The Centre of Studies and Scientific Investigation (known by its Portuguese acronym, CEIC) at the Catholic University of Angola records unemployment at around 25 percent, but notes more than half of the population rely on the informal sector to generate income, and in rural areas most remain dependent on subsistence farming.

No jobs

Angola’s oil boom may have brought millions of dollars into government coffers, but it has created few jobs, and the thousands of construction sites around the country – signs that the country is rebuilding itself after many years of war - mainly use imported labour from China and other Asian countries. As a result, few Angolans have benefited from these job opportunities.

According to Alcides Sakala, spokesman for Angola’s main opposition party UNITA (Union for Total Independence of Angola), the gap between the haves and the have-nots continues to widen.

"What we are seeing is a small minority of people getting richer, while there is a majority of people getting poorer and poorer and poorer," he told IPS.

The chasm between the rich and the poor is evident everywhere, particularly in Luanda, where beggars roam outside city centre apartments which command rents of more than $25,000 a month and land mine victims spend their days helping people park their oversized Sports Untility Vehicles (SUVs) in the hope of a few bucks for an evening meal.

According to the United Nations Human Development Index (HDI), which measures citizens’ wealth, education and life expectancy, Angola is showing little sign of life improvement, despite its oil riches.

The index goes from zero, meaning no human development, to one, meaning full human development.

At the latest count, Angola’s HDI was 0.484, compared to 0.670 for South Africa, 0.664 for Botswana, and 0,541 as the average across all the countries in the Southern African Development Community (SADC).

While there is enough money in the country to build private hospitals for those who can afford the fees, most Angolans struggle to access even basic health care, which lacks trained staff and infrastructure, particularly in rural areas.

And while private schools rake in astronomical fees to educate the children of the elite, one third of the country’s children are outside of the school system. Many are kept at home to work to support their families.

Douglas Steinberg, country director for Save the Children in Angola, explained: "There is an enormous gap between the rich and the poor here, and a lot of people are not really aware of how rich Angola is. People who live in the rural areas or central areas, they don’t see the oil rigs offshore, they don’t know just how much money is there, they don’t see all the new construction and the flash cars and expensive restaurants."

"And I think this is part of the problem – if people don’t know how wealthy the country is, it’s harder for them to hold the government to account for how it spends that money," he added.

In its 2008 Economic Report, CEIC noted a continuing level of poverty, which was in direct contrast to the country’s growing wealth.

"GDP increased fivefold from 2003 to 2008, from $959 to $4961 in 2008," the report said. "But despite this, the large majority of the population remain in a permanent state of poverty, having to survive on little more than two dollars per day."

Widening gap

Sister Domingas Loureiro, runs a charity that helps poor families in Luanda’s crowded Cazenga neighbourhood, a maze of self-built homes with no electricity and little access to water or sanitation.

"People here are literally fighting to survive and many children are being forced to work from a young age. The reality of life and the level of misery in these bairros is not something the government really knows about," she said.

Angola’s president Jose Eduardo Dos Santos, however, claims to know about the poverty in his country. In March, during a speech alongside Pope Benedict XVI, Dos Santos, who marks 30 years in power, acknowledged the "tremendous challenges" the country faces to overcome poverty and unemployment and pledged continued investment to address them.

During the visit of United States Secretary of State Hillary Clinton to Angola in August, foreign minister Assunção dos Anjos was asked by a Washington Post reporter to explain how Africa’s largest oil producer scored so low on the HDI.

The minister responded by saying: "Give us time to resolve this problem. We have mechanisms, we have the will and we have the structures to be able to guarantee to our people that they can live in dignified conditions. Unfortunately poverty can’t just be overcome by waving a magic wand."

For the estimated five million Angolans who live in slum conditions around Luanda, a magic wand may seem like their only hope.

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Electricity Lines Overhead But Never Seen a Light Bulb

These are the words of Georges Bokundu, who works with the Open Society Initiative for Southern Africa (OSISA) in the Democratic Republic of Congo (DRC).

He added: "The people in the Bakongo region have seen lines of electricity being put in. These lines pass over their heads. The electricity will be going to Congo-Brazzaville, Zambia and Zimbabwe. For so many years they have seen these electricity lines but they have never seen a lit electric bulb."

In 2008, the DRC's government announced its intention to privatise a number of public enterprises, arguing that the move will help make them profitable. But the big question that the people of the DRC want an answer to is whether they will benefit from the proceeds of the sale.

"Are we just privatising for the sake of privatising?" Victor Nzuzi Mbembe of the Kinshasa-based social justice organisation, Platform for Development, asked in an interview with IPS in the Congolese capital.

For Nzuzi, the DRC tells the story of Africa in "a very sharp way". Despite the fact that the continent is rich in mineral resources these riches are not benefitting Africans. The same is happening in the DRC.

He said the people of DRC are suffering from "a colonial hangover" as "65 percent of businesses in the DRC are owned by multinational companies".

Nzuzi accused the DRC government of failing to reform public enterprises to make them profitable. Instead of introducing reforms, the DRC government is preoccupied with selling state enterprises to foreign companies which are only interested in plundering DRC resources.

Currently there is growing opposition from civil society groups in DRC over the proposed takeover and joint venture projects that President Joseph Kabila’s government is negotiating with Chinese companies.

The Platform for Development pointed out that the DRC government has already accepted nine billion dollars in investments from China, to be spent on mining and infrastructure, despite the opposition of the International Monetary Fund and civil society groups in the DRC.

According to the deal, the Chinese will take over some of the state enterprises and work in partnership with others. Among some of the state companies that will work with the Chinese companies are Sicomines Sarl, a joint venture between state-owned metals producer La Générale des Carrières et des Mines (Gécamines) and various Chinese mining companies.

This new joint venture -- to become operational in 2011 -- is reportedly set to produce up to 400,000 tons of copper and 19,000 tons of cobalt per annum. Several other DRC companies will also work in joint ventures with China Railway Engineering Corporation and Sinohydro Corporation. These received funding from China Exim Bank.

Bokundu told IPS he is not satisfied with this arrangement: "It’s privatisation under the cover of joint ventures." His organisation wants a review of laws that guide the privatisation of public enterprises.

"When we demand reform of public enterprises there is a reason why we do that. Our constitution says we must safeguard our resources and all things that are done in Congo must be for the benefit of the people," Bokundu argued.

"The laws are clear on how and when public enterprises can be reformed but they are not followed." Bokundu said some of the companies in investment, telecommunications, finance, energy, transport and mining sectors, which have been privatised since 2002, are making huge profits of billions of dollars.

"These organisations are said to be paralysed when they are making money. The private sector in the DRC and government officials are working in cahoots with big international firms to plunder the resources of the Congo through the privatisation of state property," exclaimed Bokundu.

He said the existing legal framework is more favourable to international firms to exploit the DRC economy than to benefitting the people of DRC. "Our demand is that nothing should be done for us without us."

The system of monopoly capital should be addressed and the DRC government should cancel all contracts issued to private companies before the setting up of the DRC unity government in 2006.

The DRC government is currently reviewing mining contracts awarded foreign companies during war time which many people believe were acquired in a fraudulent way but many foreign companies in the DRC are refusing to co-operate.

When state-owned mines were privatised during the mid-1990s, large international mining companies rushed to stake a claim to Congo's mineral wealth, which includes cobalt, copper, diamonds, gold, silver, tin and coltan, essential for use in cell phones.

The trail of tainted minerals has been well-documented in the DRC's most recent wars. Fighters on all sides got supplies of food, money, and military hardware in exchange for smuggled resources. (END/2009)

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Cementing a Southern Alliance

JOHANNESBURG, Sep 19 (IPS) - Major developing countries are again preparing to stand together on critical issues at the G20 heads of government meeting in Pittsburgh Sep 24-25.

But Southern solidarity may need to move beyond the strategic common front presented at such summits to include a strengthening of continuing ties.

A big test case could be IBSA - a grouping of India, Brazil and South Africa, which brings together major developing democracies across three continents.

Many believe IBSA holds greater possibilities than does BRIC, the grouping of Brazil, Russia, India and China, which is seen more as a strategic negotiating coalition than as a solid bloc of rapidly emerging economies.

"I think IBSA is an association of countries which is built on a very solid reality," Ron Davies, South African trade and industries minister tells IPS.

"That we are the bigger developing countries on different continents, and that we have a series of cooperation agreements which at least for South Africa have some real meaning."

But amidst his enthusiasm for new South-South links, Davies acknowledges it's early days yet. "I think there is work ahead to consolidate and deepen IBSA. And that's one of our very significant priorities here in South Africa."

For the moment, the immediate sense of presenting a single negotiating face is clearer than the future dimensions of the trilateral initiative.

"To some extent I think IBSA is a bit of a romantic idea in the sense that linking up the three countries through common air links or shipping links is a long way into the future," says Prof. Stephen Gelb, executive director of The Edge Institute, an independent economic policy centre in Johannesburg.

"I think there is a lot of scope for political alliances in multilateral fora like the WTO or the United Nations but actual links between the three countries lie somewhere in the future."

And that push will come, Gelb says, not at political gatherings but in company boardrooms.

"Business links that happen, or would have happened, would help to build the IBSA idea rather than the other way round," he says. "Businesses find each other when they need (to), they find markets that help to create linkages that then take on a political expression."

What the three countries need is more trade with each other, and joint activities in third markets, Gelb says. "What I think is very important to make it a reality is that links between each pair of countries becomes much more substantial," he says.

One instance could be the merger deal being negotiated between two major telecom companies, Bharti in India and South Africa-based MTN, looking to create a merged entity worth 23 billion dollars with more than 200 million subscribers.

The merged company would service markets in Africa, the Arab world and in Asia. Several managers are already speaking of looking further afield to Latin America, where Brazil, the third pillar of IBSA, has itself the potential to be a big market.

There are besides several other agreements being worked out between companies from the three countries, and trade among the three is picking up rapidly.

The fourth IBSA summit was held in Brasilia, the Brazilian capital, in early September - usefully before the G20 summit. Visiting Brazil in early in September in preparation for the October's IBSA Business Summit, Indian external affairs minister S. M. Krishna underlined common opportunities, and also common threats arising from the financial crisis.

The crisis will push millions in developing countries back into poverty for another generation, he said ahead of the summit in Brasilia. IBSA, he said, "can be a game-changer in today's circumstances."

IBSA is now considering ways of opening up opportunities beyond the three-nation base. Officials are exploring increased trade links now between India and MERCOSUR (the South American group comprising Brazil, Paraguay, Uruguay and Argentina), and between India and the South African Customs Union.

The three IBSA countries have a population of close to 1.5 billion (mostly in India), and a combined GDP of about 3.2 trillion dollars, officials say. One way of beating the crisis arising in developed countries, they say, is for IBSA nations to sell far more to one another.

Foreign ministers Celso Amorin of Brazil, Krishna of India and Maite Nkoana-Mashabane of South Africa have set a target more than doubling trade among the three countries to 25 billion dollars by 2015. The total trade among the three last year was 10 billion dollars.

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Warm Words For Investors at Mines Summit

HARARE, Sep 19 (IPS) - Desperate for investment to lift its moribund economy, the Zimbabwe government welcomed hundreds of prospective mining investors to a conference in Harare this week.

Zimbabwe has the world's second-biggest platinum reserves after South Africa and large unexplored deposits of diamonds, coal and nickel; the conference attracted strong representation from major multinational mining concerns.

Uppermost in the minds of investors was the need for guarantees that their assets would be protected.

In 2007, a law was passed allowing Zimbabwe's government to seize a majority share in all mines, in some instances without paying a cent. Niels Kristensen, a senior executive with Australia-based mining multinational Rio Tinto wanted to know that government will guarantee that such asset seizures would not be repeated.

"Until we see some certainty, there won't be significant investment in mining," said Kristensen.

The country's Mines and Mineral Act, presently under review, states that locals must hold at least 51 percent of any mining venture. Government's message to investors was that royalties and taxes on mining will be simplified and lowered, but that companies would be expected to invest in local communities.

Elton Mangoma, minister of economic planning and investment promotion, told IPS that "it is important to balance these competing interests in a manner that benefits both the investor and the country. Mining royalties should be viewed as compensation for exploitation of finite resources and not as tax."

Which way forward?


Profit sharing

In Zimbabwe, royalties on precious stones such as gold and diamond are calculated at 10 percent, platinum 3 percent, coal 2 percent, lithium 2 percent and ethanol 2 percent.

Companies pay no duty on equipment imported for mining exploration. They can also sell all minerals direct to buyers although gold and silver was subjected to special approval until recently when it was also liberalised.

Investors are now free to extract to outside the country. Exchange controls - previously complicated by the enormous gap between the official and black market value of the Zimbabwe dollar - are now based on international exchange rates. A moot point, given the suspension of use of Zimbabwe's own currency.

When investors sell their stake in a Zimbabwean mine, they are now free to take the full value of their investment out of the country and the profits accruing.
The Affirmative Action Group (AAG), an organisation with interests in advancing the participation of Zimbabwean blacks in business, told IPS that whatever mining deal the government enters into, it must make sure that it significantly benefits local people.

"Minerals are not a renewable resource. It is important to make sure that a significant portion of mined resources go to local people. Government must insist on a quota that benefits local people because the majority of mining investors have generally behaved like wheelbarrows," AAG President Supa Mandiwanzira told IPS.

"If they are not pushed, they will not move. So we believe government must stipulate up to 50 percent ownership in mining by locals so that 50 percent of benefits go to Zimbabweans."

But the wind is blowing in a different direction. Prime minister Morgan Tsvangirai assured mining industry players that "rational" royalties and taxes would be implemented.

Tsvangirai said he sees mining as the best opportunity to attract substantial investment in the immediate term, and added that any laws concerning ownership of mines by Zimbabweans would be in line with what he called "international norms".

Elsewhere in Africa...

Emmanuel Jengo, president of Tanzania's Chamber of Minerals and Energy, told IPS that his country's mining sector picked up after the introduction of a raft of mining policies beginning in 1992.

Among these were measures aimed at stimulating small-scale mining operations as part of raising mining's contribution to the economy to 25 percent of the country's GDP.

The 1998 Mining Act sought to eliminate bureaucracy in licensing procedures, something Zimbabwean mines minister Obert Mpofu also pledged to do at the conference. Tanzania also introduced reforms providing improved fiscal terms for the mining sector and guarantees to allow companies to trade minerals freely.

A report published earlier this year by Tax Justice Network Africa and ActionAid questioned the terms on which mining multinationals operate in Tanzania and elsewhere in Africa. It found that favourable legislation has set low royalty rates, which combines with mining contracts - often negotiated behind closed doors - to routinely grant companies further tax concessions and holidays of up to 25 years.

Sharply critical of the "international norms" that have shaped mining laws on the continent, the report suggested that Tanzania lost 30 million dollars of revenue in 2008 as a result. South Africa lost 359 million.

"African governments have enacted laws giving tax subsidies to the industry and mining companies have been pushing for tax breaks in secret mining contracts, amounting to an aggressive tax avoidance strategy," says the publication. Among many recommendations, the report called for legislation that ensures mining contracts are scrutinised by parliaments, to guard against corruption.

Investor friendly

The permanent secretary in Zimbabwe's ministry of mines and mining development, Thankful Musukutwa, who is spearheading reforms of Zimbabwe’s Mines and Minerals Act, told IPS that he is looking at coming up with a proper balancing act.

"Foreign investors will pay royalties to government treasury and it is the government which will spearhead development in areas that the mining companies are operating in," said Musukutwa.

In the past the government of Zimbabwe has received these royalties but channelled the money for use in other areas, but Musukutwa said "we had to do that because of the economic problems that the country was facing."

He said the government is looking at improving infrastructure in areas that the foreign investors are looking to invest in by building dams and increasing electricity generation to boost production.

He added that the government has liberalised the marketing of gold and now guarantees foreign mining investors the option to repatriate profits and investment and profits when they decide to disinvest.

The years to come will reveal in whose favour - citizens' or mining multinationals' - the balance being struck by the government of national unity will tip.

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