[Kabar-indonesia] NYT/Stiglitz: How to Fix the Global Economy [+WP: Cellphones Transform Manila]

[JoyoNews at aol.com]

5 reports: 

- NYT by Joseph Stiglitz: How to Fix 
  the Global Economy 

- JP Op-Ed: It's time for Indonesia 
  to focus on the economy

- WP: Cellphones Transform Manila
  [New Conductors Speed Global 
  Flows of Money]

- Three Gorges dam to displace 
  1.4 million - Xinhua

- Aid to Africa rises, but millions 
  still on edge: CARE

The New York Times
Tuesday, October 3, 2006

Op-Ed Contributor

How to Fix the Global Economy 

By JOSEPH E. STIGLITZ

THE International Monetary Fund meeting in Singapore last month came at a 
time 
of increasing worry about the sustainability of global financial imbalances: 
For how long can the global economy endure America’s enormous trade deficits 
-- the 
United States borrows close to $3 billion a day -- or China’s growing trade 
surplus 
of almost $500 million a day? 

These imbalances simply can’t go on forever. The good news is that there is a 
growing consensus to this effect. The bad news is that no country believes 
its policies are to blame. The United States points its finger at China’s 
undervalued currency, while the rest of the world singles out the huge American 
fiscal and trade deficits. 

To its credit, the International Monetary Fund has started to focus on this 
issue after 15 years of preoccupation with development and transition. 
Regrettably, however, the fund’s approach has been to monitor every country’s 
economic policies, a strategy that risks addressing symptoms without confronting the 
larger systemic problem. 

Treating the symptoms could actually make matters worse, at least in the 
short run. Take, for instance, the question of China’s undervalued exchange rate 
and the country’s resulting surplus, which the United States Treasury suggests 
is at the core of the problem. Even if China strengthened its yuan relative to 
the dollar and eliminated its $114 billion a year trade surplus with the 
United States, and even if that immediately translated into a reduction in the 
American multilateral trade deficit, the United States would still be borrowing 
more than $2 billion a day: an improvement, but hardly a solution.

Of course, it is even more likely that there would be no significant change 
in America’s multilateral trade deficit at all. The United States would simply 
buy fewer textiles from China and more from Bangladesh, Cambodia and other 
developing countries.

Meanwhile, because a stronger yuan would make imported American food cheaper 
in China, the poorest Chinese — the farmers — would see their incomes fall as 
domestic prices for agriculture dipped. China might choose to counter the 
depressing effect of America’s huge agricultural subsidies by diverting money 
badly needed for industrial development into subsidies for its farmers. China’s 
growth might accordingly be slowed, which would slow growth globally. 

As it is, however, China knows well the terms of its hidden “deal” with the 
United States: China helps finance the American deficits by buying treasury 
bonds with the money it gets from its exports. If it doesn’t, the dollar will 
weaken further, which will lower the value of China’s dollar reserves (by the 
end of the year, these will exceed $1 trillion). Any country that might benefit 
from China’s loss of export market share would put its money into a strong 
currency, like the euro, rather than the unstable and weakening dollar — or it 
might choose to invest the money at home, rather than holding more reserves. In 
short, the United States would find it increasingly difficult to finance its 
deficits, and the world as a whole might face greater, not less, instability.

Nothing significant can be done about these global imbalances unless the 
United States attacks its own problems. No one seriously proposes that businesses 
save money instead of investing in expanding production simply to correct the 
problem of the trade deficit; and while there may be sermons aplenty about why 
Americans should save more — certainly more than the negative amount 
households saved last year — no one in either political party has devised a fail-proof 
way of ensuring that they do so. The Bush tax cuts didn’t do it. Expanded 
incentives for saving didn’t 
do it.

Indeed, most calculations show that these actually reduce national savings, 
since the cost to the government in lost revenue is greater than the increased 
household savings. The common wisdom is that there is but one alternative: 
reducing the government’s deficit. 

Imagine that the Bush administration suddenly got religion (at least, the 
religion of fiscal responsibility) and cut expenditures. Assume that raising 
taxes is unlikely for an administration that has been arguing for further tax 
cuts. The expenditure cuts by themselves would lead to a weakening of the American 
and global economy. The Federal Reserve might try to offset this by lowering 
interest rates, and this might protect the American economy — by encouraging 
debt-ridden American households to try to take even more money out of their 
home-equity loans to pay for spending. But that would make America’s future even 
more precarious. 

There is one way out of this seeming impasse: expenditure cuts combined with 
an increase in taxes on upper-income Americans and a reduction in taxes on 
lower-income Americans. The expenditure cuts would, of course, by themselves 
reduce spending, but because poor individuals consume a larger fraction of their 
income than the rich, the “switch” in taxes would, by itself, increase 
spending. If appropriately designed, such a combination could simultaneously sustain 
the American economy and reduce the deficit. 

Not surprisingly, these recommendations did not emerge from the International 
Monetary Fund meetings in Singapore. The United States retains a veto there, 
making it unlikely that the fund will recommend policies that aren’t to the 
liking of the American administration.

Underlying the current imbalances are fundamental structural problems with 
the global reserve system. John Maynard Keynes called attention to these 
problems three-quarters of a century ago. His ideas on how to reform the global 
monetary system, including creating a new reserve system based on a new 
international currency, can, with a little work, be adapted to today’s economy. Until we 
attack the structural problems, the world is likely to continue to be plagued 
by imbalances that threaten the financial stability and economic well-being of 
us all.

Joseph E. Stiglitz, a professor of economics at Columbia and the author, most 
recently, of “Making Globalization Work,” was awarded the Nobel in economic 
science in 2001.

----------------------------------

The Jakarta Post
Tuesday, October 3, 2006

Op-Ed

It's time for Indonesia to focus on the economy 

A'an Suryana, College Park, Maryland

Vice President Jusuf Kalla shared good news about the country with the 
American public during his recent visit to the United States: Indonesia, which was 
once beleaguered by economic and political crises, is now recovering and back 
on the right track. 

Earlier, before members of the United States-Indonesia Society (USINDO), 
presidential spokesman Andi Mallarangeng highlighted the government's success in 
restoring peace in Aceh, which paved the way for stability in Indonesia. 

The convincing speeches, conveyed in two different functions, signaled a 
shift in Indonesia's domestic and international diplomacy. While in the past the 
government tended to take on a defensive stance on the back of the country's 
poor economic and political performance, the present government is brimming with 
confidence when talking about its achievements in public. 

On politics, Kalla asserted Saturday that Indonesia was enjoying 
unprecedented stability. Almost all soldiers have been sent back to the barracks, he told 
the Indonesian community in Washington. In the early period, the number of 
troops deployed for security operations made up almost 75 percent of the total 
number of soldiers in the country. 

On the anticorruption drive, both Kalla and Mallarangeng asserted that 
Indonesia was far more serious than any other country in the world in stamping out 
graft. Law enforcement authorities have been investigating numerous corruption 
cases and jailed lawmakers, governors and other active and retired government 
officials. The move, they say, provides assurance to the people that no one is 
above the law. 

On the international front, the government has been more active in helping 
preserve world peace. The plan to send a peace keeping force under the UN flag 
to Lebanon is the latest diplomatic effort to raise Indonesia's stature in the 
international community. 

Overall, the government has been doing quite well in ensuring stability and 
combating corruption, which are prerequisites for faster economic growth. But 
the achievements should not give room for complacency. 

The government still has a lot of homework to do, including tackling 
sectarian conflicts, highlighted by a recent riot in East Nusa Tenggara. The riot, 
which was sparked by the execution of three Christians convicted of leading a 
massacre of Muslims in the Central Sulawesi town of Poso, signaled the people's 
low confidence in the government's attempts to ensure justice is adequately 
served. 

The execution came as the law enforcers declined to arrest people whom 
Fabianus Tibo, one of the three who were executed, claimed were the masterminds of 
the mass killings. 

The failure to investigate the case thoroughly and punish all the people 
involved in the sectarian conflict in Poso between Christian and Muslim groups 
will not bring about lasting peace in the town. A transparent investigation into 
the prolonged violence would instead demonstrate to the public that justice is 
served. 

The government's ongoing fight against corruption deserves recognition, but 
it also raises the question: Is the move being used by some to discriminate 
against certain groups of people, let's say political rivals? How about 
corruption cases involving people who are close to the center of power? 

The government is said to have worked hard to root out corruption but 
bribery, collusion and corruption are still widespread as found by the Transparency 
International, which ranked Indonesia 140 of 159 countries in its 2005 
Corruption Perception Survey. 

Basic services, meanwhile, are still disappointing and the quality of 
education lags behind other countries in the region. 

On top of that, infrastructure projects have been going nowhere. The 
government says development of infrastructure to support the economy will cost it 
about Rp 700 trillion, but it can only provide Rp 100 trillion or a mere 15 
percent of the fund needed (Kompas, Sept. 16, 2006). The private sector is expected 
to fill the gap. 

The first infrastructure summit last year offered 91 projects, but only 13 
have materialized so far (Kompas, Sept. 16, 2006). 

Although the government has succeeded in establishing political modality, it 
has yet to excel in the economic field. Attracting foreign investment is the 
key to efforts to spur economic growth in the years to come. Kalla's visit to 
the U.S. can be seen from that perspective. 

The writer is a staff writer with The Jakarta Post and currently a Fulbright 
scholar studying journalism and management at the Philip Merrill College of 
Journalism, the University of Maryland, U.S. 

-----------------------------------

The Washington Post
Tuesday, October 3, 2006

New Conductors Speed Global Flows of Money

Cellphones Make Transfers Faster, Cheaper

By Mary Jordan
Washington Post Foreign Service

photo: Eugene Bandoy, a Filipino architect in London, pays a small fee 
for Gen Ashley, of Twilight Express remittance company, to send cash 
home quickly to his niece via a Philippine phone company. (Photos 
By Mary Jordan -- The Washington Post) 

MANILA -- It was 10:33 p.m. when Dulce Amor Bandoy's cellphone beeped with 
her favorite kind of message.

"You have received 1,321.00 of G-Cash," read the text on her phone's glowing 
screen.

That meant her uncle in London had just deposited 1,321 Philippine pesos -- 
about $26 -- into her Globe Telecom cellphone account, which Bandoy uses like a 
bank. "My phone is now my wallet," said Bandoy, 29, a cheerful woman with a 
sparkling smile.

The cellphone-based system that conveys cash between Bandoy and her uncle has 
the potential to revolutionize the way hundreds of billions of dollars are 
moved around the world, according to experts who study global cash flows.

Cash that relatives working abroad send home is not only vital support for 
millions of families but a cornerstone of national economies from Mexico to 
Lesotho. The World Bank estimates that global remittances last year topped a 
quarter of a trillion dollars, with $13 billion flowing into the Philippines alone.

But traditional methods of moving money in small, personal amounts can be 
slow and costly. Western Union, the world's largest money-transfer business, 
would charge $22 in fees on a $26 transfer from London to Manila. Banks also 
demand substantial fees and often take two or three days to complete a transfer.

With cellphone use booming across the developing world, from the open deserts 
of Africa to Bandoy's densely populated neighborhood in sultry Manila, 
handsets that cost as little as $30 are enabling struggling nations to leapfrog past 
the need for land-line phones and ATMs.

The money transfer to the four-inch gold Nokia in Bandoy's hip pocket is a 
glimpse of the future, said Dilip Ratha, an economist and remittance expert with 
the World Bank in Washington. "I really think this is the way forward," he 
said. "In three years I would expect to see this all over the world."

Eugene Bandoy, 50, is a Filipino architect who lives in London and helps 
other expatriates buy property back home. When potential buyers want to take a 
look at condominiums or houses in the Philippines, his niece shows them around. 
He sends her cash to cover her expenses. But that can be frustrating and 
expensive, because the fees for wiring small sums can nearly equal the amount being 
sent.

So in November, when Bandoy heard at a Filipino community event that he could 
send up to $200 through his cellphone for as little as $7, he eagerly signed 
up.

"It's not just cheaper for me," he said, wearing a whimsical tie covered with 
drawings of Volkswagen bugs and a white cap spun from Scottish cashmere. 
"It's more convenient for Dulce -- she can pick up the money at a shopping mall 
late at night long after banks are closed." She could also use any of 1,500 
other locations, including department stores and licensed pawnshops.

Last month, Bandoy needed his niece to go to Quezon City, just outside 
Manila, to show a condominium to a woman who works in London but was home on 
vacation and interested in buying. But Dulce, like so many people struggling to get 
by in this country of almost 90 million people, said she didn't have the $1 for 
a bus or train ride to meet the client.

She called her uncle and told him, "I need money or I can't meet her."

So on the afternoon of Sept. 11, Bandoy walked up the steps to a second-floor 
office in a stately office building in Kensington, central London. There, Gen 
Ashley was waiting in the one-room office of her remittance company, Twilight 
Express.

Ashley, a sharp, friendly businesswoman, has thousands of customers, who 
among them send about $2 million a month home to the Philippines. Recently, she 
said, several hundred of them have begun asking her to send money through the 
two giant Philippine phone companies, SMART and Globe Telecom.

"It is definitely growing," she said.

Ashley pointed out that some banks are responding with more competitive 
prices. And, she said, many people prefer to continue sending money the way they 
always have; for some, that means paying money-transfer services to have cash 
hand-delivered to their parents' doorsteps. "People are not used to getting 
money through their phone," Ashley said. "Some are uncomfortable with the idea. 
They worry, 'What if I lose my phone?' "

In recent years, growing numbers of people in the Philippines, as well as in 
countries as diverse as Japan and Zambia, have begun using new features on 
their mobile phones to pay bills, buy goods and transfer cash to relatives in the 
same country.

But international money transfers by this method have been slower to 
flourish, in part because regulators are trying to assure this new channel won't be 
used to launder money. Tightening the monitoring of international cash flows has 
become a prime goal of U.S. authorities who are trying to prevent terrorist 
attacks.

The Philippines, noted for embracing cellphone innovations and heavily 
reliant on remittances, has plowed ahead on its own. For now, however, phone 
companies are limiting international transfers to relatively small amounts, such as 
$200.

Globe Telecom officials said Filipino workers in 17 countries, including the 
United States, can now use their phones to send money home. In the United 
States, they said, the service recently linked up with remittance centers in 
California, Nevada and Texas.

In the London office, Bandoy turned over the cash in the pound equivalent of 
the amount he needed to get to his niece, plus a $7.50 commission (Globe says 
that it collects 50 cents of that). Ashley began twirling her fingers across 
her computer keyboard. Bandoy had already registered with her, producing his 
passport as identification, an anti-laundering precaution.

She clicked on his name and up popped his account information. Dulce Amor 
Bandoy was listed as his recipient, and Ashley scrolled down to her cellphone 
number and clicked.

She typed in the amount he was sending and the day's exchange rate for the 
British pound and Philippine peso. Then she hit the "send" button to move the 
order to the phone company. Seconds later, a message appeared on her screen, 
confirming the transfer.

It was 3:32 in the afternoon in London -- 10:32 p.m. in Manila.

At that moment, 7,000 miles away, Dulce Amor Bandoy was sitting in the rented 
room she shares with three other women. A charcoal sketch of herself -- a 
self-portrait -- hung on her little slice of the wall.

Bandoy, who stands 4-foot-11, has recently tried to turn her savvy with 
cellphones into an informal repair business. At 10:33 p.m., she was intently 
focused on reprogramming a customer's black Nokia cellphone when her own phone, 
sitting on her bedside table, pinged with the much-anticipated message.

Ashley's order in London had flowed over a computer network to a Globe 
Telecom office in the Philippines. There it generated the local text message to her 
phone. "I was so relieved when I read that the money had arrived," she 
recalled. "I was thinking, 'What am I going to do if it doesn't?' "

Next morning, she tucked her phone into her cream-colored cargo pants and 
headed to Robinsons Mall, walking past a supermarket advertising that customers 
could pay for their groceries via their phone accounts. She climbed up to the 
third level, past McDonald's, T.G.I. Friday's and Starbucks, and walked into 
the glitzy Globe phone store, where customers can browse the flashiest new phone 
models and pick up G-cash, as the company calls money transferred via phone.

The music and lights of the place were much more to Bandoy's taste than the 
numbing silence of a bank lobby, she said, noting that this store stayed open 
as late at 10 p.m., while many banks close at 3.

She quickly wrote her name, phone number and address on a "cash-out" form and 
handed it to the clerk. She would take out only 1,200 of the 1,321 pesos and 
use some of the remainder to pay her phone bill. The clerk looked up her 
account on his computer and then sent a text message to her phone that read, "To 
Cash out 1,200.00 of G-Cash from Globe Robinson's Place, Reply with your MPIN."

She typed her four-digit mobile personal identification number into the phone 
pad and hit reply. The clerk had the confirmation he needed. Less than five 
minutes after arriving at the store and after paying 26 cents -- a 1 percent 
fee -- she walked out with about $24 worth of Philippine pesos.

She hurried out of the mall and hailed a taxi to rush her to the train 
station.

By 10:30 a.m., she was walking a potential buyer through new condominiums in 
a middle-class area of Quezon City.

"She loved it! She signed the contract!" Bandoy recalled later.

That night, she said, she treated herself to a celebratory dinner of fried 
fish, rice and a Coke in her room. Before she dropped off to sleep, she said, 
she did what she does every night: She placed her cellphone right next to her on 
her pillow.

-------------------------------------

Three Gorges dam to displace 1.4 million - Xinhua

BEIJING, Oct 2 (Reuters) - The number of people relocated to make way for 
China's massive Three Gorges dam could top 1.4 million, above previous estimates 
of 1.13 million, Xinhua news agency said.

More than 1.2 million people have already been resettled, Xinhua said, citing 
Pu Haiqing, head of the Office of the Three Gorges Project Construction 
Committee under the State Council, China's cabinet.

The $22.5 billion hydro-power project will be completed a year early in 2008, 
creating a reservoir 175 meters deep, Pu said.

The dam will provide power and flood control for energy-hungry China, but its 
creation has flooded historic cities and sites and further endangered rare 
creatures, including a type of fresh-water dolphin.

Many of those moved from prime agricultural land have received little 
compensation or job prospects in the hastily-built cities above the waters, human 
rights groups charge. 

---------------------------------------

Aid to Africa rises, but millions still on edge: CARE

By Andrew Cawthorne

NAIROBI, Oct. 2 (Reuters) - Emergency aid to Africa has more than tripled in 
recent years, but more than 120 million people still live "on the edge of 
emergency" because of a lack of long-term solutions, CARE international said on 
Tuesday.

Aid to tackle starvation, malnutrition and other immediate crises rose from 
500 million pounds ($940 million) in 1997 to 1.58 billion in 2003 "and is still 
growing," the aid agency said.

But the cycle will only be broken if money is channeled early and effectively 
to tackle the underlying causes of emergencies like AIDS, lack of local 
markets, climate problems, and poverty, it added.

"There is no excuse, when by spending money more intelligently, we can bring 
an end to all but the most unpredictable food crises," said Geoffrey Dennis, 
chief executive of the aid agency's UK branch.

Like other agencies working on the ground across Africa, CARE's new report 
"Living on the Edge of Emergency" expresses frustration with the disparity 
between huge international responses to crises and lack of funding for long-term 
projects.

By 2020, the world will have spent more than 165 billion pounds this century 
fighting emergencies in Africa, while less than that -- 132 billion pounds -- 
would, if spent differently, have actually halved hunger by 2015, it said.

"It is a disgrace that money is still given too late and for such short 
periods," Dennis said.

Among cases cited by the report were:

* Ethiopia has faced a food crisis 93 percent of the time from 1986 to 2004, 
yet U.S. spending on long-term aid in Ethiopia is less than 1 percent of 
emergency aid.

* An early response to the 2005 Niger famine would have cost $1 a day per 
child to prevent malnutrition, while instead by the peak of the crisis it was 
costing $80 to save a child's life.

* In Kenya in 2006, 83 percent of funding applications for non-food aid 
projects were rejected.

More than one in 10 of Africa's estimated 925 million people are living in 
constant threat, CARE said.

"Over 120 million people in Africa are living permanently on the edge of 
emergency because of a flawed and failing system of funding emergency responses," 
it said.

"CARE is calling for a drastic overhaul of the international community's 
funding of emergencies which crucially saves lives, but does little more, 
sometimes leaving people worse off than they were before."

------------------------------------------
Joyo Indonesia News Service
------------------------------------------