Bankrupt, USA: Why our cities aren't too big to fail

by Kit R. Roane, September 15, 2010: 5:48 AM ET

FORTUNE -- Harrisburg, Pennsylvania, has dodged a debt bullet. The only problem is that the gun is still loaded.

The Keystone State's cash-strapped capital was scheduled to default on a $3.3 million bond payment on Wednesday. It avoided that debilitating fate when Pennsylvania's governor, Ed Rendell, pledged to resolve the problem with $4.4 million from the state's own challenged coffers.

This gives Harrisburg a chance to fight again another day. But its problems are far from over, and that's bad news for investors in the $2.8 trillion muni-bond market.

States from California to Illinois have been in deep crisis since the recession began, hammered by drastic cuts in tax revenue and inflexible spending demands for things like health care, debt service and pension plans. Forty-eight states grappled with fiscal shortfalls in their 2010 fiscal budgets. Totaling $200 billion, or 30% of state budgets, this fiscal shortfall is the largest gap on record, according to the DC-based Center on Budget and Policy Priorities, which sees at least 46 states facing shortfalls this fiscal year.

Some cities are in even worse shape than Harrisburg. Central Falls, Rhode Island, recently went into receivership when it couldn't pay its bills. San Diego is said to be considering bankruptcy to get out from under its pension obligations. Miami's city council, hoping to avoid Harrisburg's fate, recently used emergency powers to slash city salaries and pensions and is now instituting hefty traffic fines and garbage fees. This year, ratings agencies have cut the debt in several cities -- including Littlefield, Tex., Detroit, Mich. and Bell, Calif. -- to junk.

Harrisburg's default on bond payments for its ill-fated $288 million incinerator project would have given it the dubious distinction of birthing the second-largest default on general-obligation municipal bonds this year. The largest default was on $227 in municipal warrants issued by Jefferson County, Alabama. Given that general obligation bonds are backed by the full faith -- and taxing power -- of the issuing government, and aren't supposed to default, even the hint of strain with such a bond is worrisome.

Buffett's prediction: Stiffing creditors 

The growing perceived risk has sent a few municipal bond buyers in search of safer pastures. Warren Buffett's Berkshire Hathaway (BRK-A), which doubled its municipal bond holdings as investors fled the sector between June 2008 and March 2009, was more recently selling its municipal bond investments and moving to shorter maturities. The reversal followed Buffett's February 2009 investor's letter, where he noted that city councils were much more likely to skin bond insurers and bond investors than their own constituents.

He said the trend will begin when "a few communities stiff their creditors and get away with it." His municipal bond insurer, Berkshire Hathaway Assurance Corporation, also quickly pulled back from the market that year, insuring less than 8% of the $600 million in municipal bonds it guaranteed in 2008.

The problem, he told the US Financial Crisis Inquiry Commission this June, is that nobody really knows what state and major city municipal bonds are worth. Calling the municipal debt market "troubled," he opined: "If the federal government will step into help them, they're triple-A. If the federal government won't step in to help them, who knows what they are?"

Many participants in the municipal bond market, which is made up of more than 50,000 different issuers and more than 1.5 million issues, see concerns like those voiced by Buffett as overblown. After all, most states are likely "too big to fail" in the federal government's eyes. And, no matter how you slice it, defaults have remained exceedingly rare over the last thirty years.

According to Moody's, the ten-year default rate for investment-grade municipal bonds in recent decades has hovered around six-tenths of a percent. Dominic Frederico, the CEO of Assured Guaranty (AGO), a bond insurer, told attendees at an investment conference last week he calculates there have been only 60 municipal bond defaults through August 2 and that most of these defaults were not investment grade. The numbers, he said, show no evidence of a crisis at hand.

Defaults on the rise

That's just the sort of data that has kept a multitude of yield-hungry and tax-averse investors flocking to the sector. In August, investors plowed more than $1.2 billion a week into municipal bond funds. They invested a record $69 billion in new money there in 2009, up from just $7.8 billion in 2008 according to the Investment Company Institute. High-yield --or "junk" -- bonds have been exceedingly popular too.

But defaults on municipal debt have been rising, according to the Distressed Debt Securities newsletter, which says defaults rose from $349 million in 2007 to $7.77 billion in 2008. They have breached $4 billion so far this year, according to Bloomberg, despite heavy stimulus injections and other dollops of federal aid. Also, while AAA-rated bonds rarely go down the drain, the more speculative grades don't always stand up so well, with bonds rated B to C having ten-year cumulative default rates of 11% to 13% even in good times.

Municipal bond defaults could continue to rise even if the economy gains a footing. According to the US Government Accountability Office, despite the federal help, state and local governments continue to operate in the red. Without massive austerity, the GAO predicts their fiscal positions will continue to worsen for the next fifty years.

The problem is that the vast majority of municipal bond investors these days tend to be of the mom and pop variety and they are not generally being compensated much for risk. As Bond Buyer notes, heavy investor demand last month pushed "10-year tax-exempt yields below 2.20% and 30-year munis lower than 3.70% for the first time in history."

Despite the Pollyannaish view expressed by such a yield, critics fear that you don't need another Panic of 1873 -- when ten states, including Alabama, Arkansas, Tennessee, Michigan and Minnesota, defaulted on their municipal debts -- to seize up the system.

Drop dead

Perhaps not even something like the famed default of New York City during the Gerald Ford administration in 1975 would be needed to instigate a panic. Rapidly rising interest rates would be enough to wipe the smile off many retail investors in muni-bond funds. A few smaller but well-known municipalities threatening default could send them fleeing for crowded exits.

And crowded they would be. Despite the liquidity of municipal bond mutual funds and ETFs, their underlying bond holdings trade far less often. The "new normal" hasn't helped matters, noted bond giant Pimco this January, explaining that many of the major broker dealers in the municipal space -- Bear Sterns and Lehman Brothers for instance -- are no longer with us, while many of the major liquidity providers there, such as single strategy municipal hedge funds, "collapsed or were shut down."

Nor is a wave of defaults off the table just because they have not occurred in recent decades. Before the housing downturn, real-estate bulls saw housing prices laddering to the sky and often noted that real-estate prices had never declined nationwide -- until they finally did.

As Richard Bookstaber, the senior policy advisor at the Securities and Exchange Commission wrote in a blog post this April, the municipal market is massive, leveraged and opaque, blessed by questionable analyst ratings and backed by revenues already mortgaged off to someone else.

In other words, it bears all the hallmarks of a crisis in waiting.

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Shaolin warrior monks take a leap of faith

Bryce Hallett

Leaps of faith ... Belgian choreographer Sidi Larbi Cherkaoui and one of the 17 Shaolin monks demonstrate their acrobatic skills in Sutra. Photo: Hugo Glendinning

A troupe of high-flying Buddhist monks cured a renowned choreographer's creative fatigue, turning modern dance on its head in the process, writes BRYCE HALLETT. 
 
In the political arena, cultural exchange suggests a formal diplomatic arrangement aimed at broadening horizons or engendering a level of mutual understanding and trust. In the arts world, it is more about loosening stereotypes, creative leaps of faith and breaking down barriers to achieve original and adventurous forms.
An unlikely cross-cultural partnership, and one of the big touring success stories of recent years, is the acclaimed contemporary movement piece Sutra, which was commissioned by the British dance house Sadler's Wells in 2007. It opens in Sydney this week for the Spring Dance season at the Opera House.

Directed, choreographed and performed by the Moroccan-Belgian dancer Sidi Larbi Cherkaoui, the East-meets-West collaboration fuses contemporary European dance, the martial arts feats of 17 Buddhist monks from the Shaolin Temple in China, an ingenious set of wooden boxes by the British sculptor Antony Gormley and an original score by the Polish composer Szymon Brzoska.

Leaps of faith ... Shaolin monks demonstrate their acrobatic skills in Sutra. Photo: Hugo Glendinning

Cherkaoui, 34, came to notice when he won a Belgian dance contest in 1995 by creating an energetic jumble of hip-hop, classical ballet and African moves. The judges were reportedly spellbound. His strength, agility and vulnerability caught the eye of the visionary Alain Platel, whose Compagnie C de la B has trained and influenced many of the world's leading dancers.

Cherkaoui says creating Sutra was a rewarding but daunting experience, not least because it meant earning the trust and involvement of the young warrior monks, who are aged between 20 and 22. "They follow a strict Buddhist doctrine and the challenge was to gain their acceptance, then inspire them to expand their perspective about the role of martial arts," says Cherkaoui, who began his career as a hip-hop dancer. "Kung fu and tai chi are integral to their faith and it was important to observe their culture from within."

The innovative and prolific choreographer, who performed Zero Degrees with his friend and kindred spirit Akram Khan at the 2007 Sydney Festival, spent months in the remote mountainside monastery near the city of Dengfeng in Henan Province. He observed a religious life that puts the individual in a system of ritual and discipline, and joined the increasingly receptive monks for meals, exercise and meditation.

Shaolin monks demonstrate their acrobatic skills in Sutra. Photo: Hugo Glendinning

"I didn't go in [to the temple] with a plan but with an open mind and heart. I remember saying to a friend who encouraged me, 'But what could I be doing?' I couldn't see the outcome but when I was there I saw the potential. The monks were intrigued by me and I was intrigued by them. I realised I could apply my knowledge to their rituals and adapt their precise movements – the powerful kicks and daring backflips – into something transformative, dramatic, mysterious and exciting."

Ever curious and open to ideas (Cherkaoui is a big fan of Bruce Lee's high-flying virtuosity), the loquacious choreographer says his pilgrimage was both personal and practical, and motivated by a desire to regenerate his ideas and overcome creative fatigue.

"At the time I was looking for a new way of expressing myself," he says. "The Shaolins were wonderfully open and relaxed around me. During our initial encounters, we spoke a lot about how their kung fu training and mastery connects with the outside world and how they relate spiritually to animals and the environment."
Despite the lack of heating and other comforts, Cherkaoui says he felt at home and was tempted to stay for as long as he could. It helped, of course, that he doesn't drink, smoke or eat meat.

He says Sutra's gradual blossoming into a multi-faceted movement piece was unforced, well-organised, rigorous and mutually engaging. "It was fascinating to see how much common ground we had and, amazingly, their way of expressing some things turned out to be similar to my own Belgian humour. There was lots of laughter."

Meanwhile, Gormley, who also collaborated on Zero Degrees, was busy designing the 21 open-sided spruce boxes that would eventually adorn the stage and be used to create an array of striking images, including lotus flowers, skyscrapers, mazes and burial grounds.

The Turner Prize-winning sculptor's work is as much about the body as it is about the incongruous landscapes in which he locates his figures. He relished furthering his artistic partnership with the supple and strong Cherkaoui. He also spent time at the Shaolin Temple. Working on Sutra allowed him to nourish his spirituality while returning to the vocabulary of dance.

"To me, dance is one of the most direct art forms there is and one of the most poetic and vulnerable," Gormley says. "The monks have a wonderful freedom of spirit and they're as interested in hip-hop and contemporary culture as they are in the Buddhist sutras."

Gormley, who had spent two years in India living in monasteries and practising meditation in his youth, quickly responded to the physicality of the monks and the austerity of their environment. His coffin-like boxes were partly inspired by his earlier travels to China, where he was astonished by the compartmentalised domestic arrangements for young girls at a factory he visited. The image of five or six beds stacked on top of the other came to mind when he saw the dormitory arrangements in the monastery. It got him thinking, then creating a set design he imagined would be static. Cherkaoui, who grew up enchanted by the expressive and liberating movements of Kate Bush and Madonna, had other ideas.

No sooner had the boxes arrived than the super-fit Shaolins attentively responded to the choreographer's playful instructions as they manipulated the set pieces to form a variety of patterns and forms in which they could hide, spring out, make walls or topple them like dominoes.

"It reminded me of when I was a child playing with Lego," he says "The monks don't speak English and communicate through gesture; they are soulful and talented. Some are naturally artistic while others don't know how to separate performance and life. Their whole Shaolin philosophy is based on discovery and self-discovery and a healthy sense of how to handle suffering."

Cherkaoui says his time in the monastery recalled the hothouse environments of Les Ballets C de la B and the Royal Danish Ballet. For someone who has spent much of his career exploring notions of identity and the role of the collective, he found much in common with the monks. "The monks all commit to the Buddhist way, to the same thing, and their shared ritual assumes profound meaning when set against all the communities that are divided and where people are either oppressed or trying to break free."

Having grown up Muslim in Belgium, Cherkaoui is acutely aware of what it is like to be an outsider and he says becoming a choreographer was his response to this. "It's given me the freedom to explore my own language and [to] blur the lines of gender. My education was always as an individual and having to find your own thing . . . I'm still looking for purpose and it has a lot to do with my family. My parents were very divided people. They loved each other but [they] were struggling with each other in a culture of two extremes. It's that continual ping-pong: do you stay true to yourself or do you abandon yourself to the other; there is no real happiness either way."

Sutra is at the Sydney Opera House from Thursday to Sunday, September 19.

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Renovation Under Way: China Property Developers Making Longer-Term Investments

By RUSSELL FLANNERY

 

Many of the entrepreneurs that today rank as China’s richest real estate developers made their early money from selling apartments to the country’s growing middle class. Focusing on apartments and residential property made sense: residential projects generated cash quickly for then-young businesses that didn’t have much financial staying power when the government first opened up the industry more than a decade ago.
Yet as successful companies have built up their resources and even gone public, they are increasingly looking to make longer-term investments in commercial property such as office buildings and malls that can generate long-term income from rents. “A lot of big local developers have emerged in the last five years or so, and they want to build a stand-alone portfolio of office buildings and malls,” Steven McCord, associate director of research at Jones Lang LaSalle said in a meeting of the Shanghai Foreign Correspondents Club on Thursday.

The speed of that push varies across different markets in China, but the longer-term trend is clear, McCord said. Companies that once focused on residential property that have become more active in commercial investments include China Vanke, Shimao Property Holdings, CR Land and Greentown China, he says.

The change is part of an evolution of the real estate industry in China since the country launched its economic reforms three decades ago. When government opened the way for the private capital in the 1990s, young local developers didn’t have the money to make long-term investments. So in Shanghai, for instance, many of the office buildings put up in that era were built by relatively well-off overseas Chinese, especially from Hong Kong. Among them: iconic Plaza 66 along Nanjing West Road, which was developed by Hong Kong’s Chan family. Younger domestic private sector developers focused on housing projects that would generate cash flow quickly.

Over time, however, they added mixed-use residential-commercial sites that at a minimum included retail space for shops to serve the nearby residents and were able to produce long-term income from rents, rather than just one-off revenue from selling the space. Now, some are even in the process of building office towers, McCord says.

Growing single-investor ownership of buildings would be good for the stability of property markets in the country. Sole owners of whole buildings usually have the financial wherewithal to make it through market downturns, McCord says.

Shanghai’s Lujiazui office district, for instance, a decade ago had a vacancy rate of more than 40%, but it didn’t turn into a full-blown financial crisis because the owners could ride out the storm and carry the property on their books.

Growing interest in commercial property may also be good news for real estate consulting companies like Jones Lang LaSalle that help manage property. It would also benefit companies such as E-House of Shanghai, which recently set up a property management subsidiary.

Previous Post: China Real Estate Needs ‘Cap’ To Avert Full-Blown Bubble: Executive

Next Post: Hewlett-Packard: A Company Without A Master, Lenovo’s Chairman Says

 

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China’s Homegrown Success Stories

Posted by Joel Backaler

Lenovo can be a role model for foreign companies.

What is the best way to approach China’s many markets? How do I effectively identify and build relationships with local distributors to gain access to markets outside of China’s central hubs?

These questions resonate from the offices of the vast majority of foreign executives charged with selling consumer goods in the Greater China region. Multinational companies that have successfully imported their international brand to China’s major metropolises are struggling to understand what it will take to reach the next tier of Chinese consumers. The China Observer has previously written about this topic and has spoken with fellow China consumer insiders such as Oxford’s Karl Gerth and McKinsey’s Vinay Dixit to gain additional perspective into what approach foreign multinational companies should adopt to succeed in China’s next tier.

While there is no standardized approach, the following examples demonstrate how selected domestic firms have been able to achieve success in more remote Chinese markets.


Li Ning – Athletic Apparel

Li Ning, founded in 1990 by a former Chinese Olympic gymnast of the same name, has turned up the competition against top foreign multinationals like Nike and Adidas in higher-end markets. However, much of Li Ning’s success to date can be attributed to its operations outside of tier one cities. Tom Doctoroff explains in this article, that “Li Ning and Anta are not competing directly with Adidas and Nike, but the pie they are eating is growing larger and larger, while Adidas’ and Nike’s pie is not growing at the same rate.” Doctoroff is referring to the fact that Li Ning’s strength in China’s smaller cities is propelling it forward much faster than competitors in tier one cities which are not seeing the same rate of growth which led to their initial success in China.

Lenovo – Consumer Electronics

Lenovo is best known for its expanded international presence after it acquired IBM’s ThinkPad line of notebooks for roughly $1.75 billion in 2005. Lenovo is increasingly focusing on what it defines as China’s ‘emerging markets.’ Since early 2009, desktop sales in the emerging markets cluster has increased from 45 percent to 70 percent of Lenovo’s total desktop sales. Over the same period of time, notebook computer sales in these markets increased from 30 percent to roughly 50 percent of total notebook sales. It has been just 5 years, since Lenovo first began to focus on China’s rural markets, but the company will likely continue to move forward in this direction as China is expected to become the world’s largest PC market in the next year.

CR Snow – Food & Beverage

When outside observers hear that China is the world’s largest beer market, they often assume the top selling beer is Tsingtao. Even those of us in China find it surprising that the top beer in China is Snow beer. The case of Snow beer differs slightly from the two previously discussed here, because CR Snow is a joint venture between China Resources Enterprise Ltd and South Africa’s SABMiller. However, the key to CR Snow’s success has been its focus on lower tiered cities in China’s regionalized beer market. CR Snow implemented a Greenfield expansion program in 2006 through successive acquisitions of breweries in Dongguan, Lanzhou, Harbin, Yanjiao, Nanjing, Anhui, Lioaning and other locations.

As executives at companies like Li Ning, Lenovo, CR Snow and even Haier will tell you, the market opportunity presented by China’s next tier of consumers is too big to pass up. Yet, these markets tend to be quite regionalized with fierce local competition, and there is no set methodology to win. It will be up to each company to come up with their own distinct strategy to expand beyond China’s first and second tier to realize the opportunities presented in this next “frontier.”

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What a superpower wants

Why bother with bigots? Koran burning, Racist Perkasa !

 Why bother with bigots?

On The Beat
By WONG CHUN WAI

For the first time ever, media organisations are asking themselves whether religious extremists deserve space and air time in their newspapers, online portals and television.

IT’S a lesson for media organisations all over the world: Does a pastor of a tiny church who threatens to burn copies of the Quran deserve the kind of coverage that has now provoked so much anger?

The unheard of pastor, who is said to make a living selling furniture online, has achieved international notoriety because he was given the soapbox by the media.

He has cleverly, if not deviously, played the media with his well-crafted statements. He has now decided to call off the burning.

But the damage has been done. Pastor Terry Jones has stoked up enough emotions, especially among radical Muslims in countries like Pakistan and Afghanistan, who have seized the opportunity to stage riots.

Now, some news organisations are saying they would not cover Jones if he decides to proceed with his original plan. Even CNN commentators have said that this rabble-rouser does not deserve media coverage.

They have described him as an idiot and a jerk and that they (the media) should simply switch off the microphones and lighting outside his church. Well said.

Jones’ hysterical plan has placed minority Christians in many countries in a precarious position. Their lives are in danger if the government in their countries remain indifferent to angry Muslims who lump any Christian in the same category as Jones.

President Barack Obama is right in saying that the plan by Jones has been a “recruitment bonanza” for al-Qaeda.

In Malaysia, we have our fair share of extremists who fan racial emotions with their hurtful words and statements.

Obviously, these egomaniacs enjoy reading about themselves in newspapers and online portals but the question is whether the media need to encourage these communal champions by giving them the platform.

Some would say that they are entitled to express their views, no matter how much we disagree with them, in the name of freedom of speech. It’s a tough call to make, some leaders admit, when it comes to question of expression.

That was precisely the initial argument forwarded by many on the position of Jones. Even the US president was totally helpless in dealing with the situation since the right to freedom of expression is clearly stipulated in the US Constitution.

The consequences of Jones’ actions were never thought of until angry reactions broke out worldwide. Only then did the Americans realise that their lives could be in danger if there was a backlash from Muslims.

In short, terrible things could happen and the thought of standing up for an idiot’s right of expression no longer seemed so noble and practical.

Suddenly, it dawned on the media that the idea of giving Jones the platform wasn’t so clever after all, no matter how good his sound bites have been, particularly in giving the annual Sept 11 anniversary coverage a fresh spin.

For sure, Jones has made good copy for the media and right-wing politicians have also been quick to jump on the bandwagon. But the point is that extremists, religious fanatics and racial bigots must never be allowed to hijack the platform.

No level-headed Christian would agree with the Florida pastor. It is good that the majority of Christian groups have spoken up clearly and strongly against him.

We must stand together to speak for what we believe in. There is no need to be apologetic even if those that we speak up against could be members of our faith or race. There is only right and wrong.

The extremists in Malaysia are the same. We need to dissociate ourselves unequivocally from those who preach hatred and trample on goodwill instead of building bridges to bring Malaysians together.

It is encouraging to hear top leaders from Umno openly saying “no” to Perkasa on the eve of Hari Raya. It is the strongest ever statement from Umno leaders in distancing themselves from the group that has caused much concern among Malaysians.

Malaysia was built on the politics of moderation and accommodation. It has kept the nation glued even during times that we seem so flawed.

But we have managed race relations reasonably well and Malaysians live amicably together, taking better care of this themselves than politicians and the self-appointed champions of our races.

Similarly, it is good to hear the majority of Christians saying that they would not condone Quran-burning pastors and churches.

And certainly, for the first time ever, media organisations are asking themselves whether religious extremists deserve space and air time in their newspapers, online portals and television.
Most of us would agree – don’t encourage them.

Racism Malaysia NAH!!! ...

9/11 Koran burning: pastor exploited freedoms his countrymen are fighting to protect

As far as David Gergen, a former adviser to Ronald Reagan was concerned, Pastor Terry Jones was worse than a mere publicity seeker.

By Alex Spillius, Washington

Rev. Terry Jones at the Dove World Outreach Center in Gainesville, Fla Photo: AP

 

“He’s a jerk for putting his country through this,” Mr Gergen said on television as news broke that the book-burning had been cancelled.

There will have been many agreeing in the corridors of power. The administration watched dismayed as a nobody from a tiny church in Florida threatened to further endanger the lives of US troops and indeed Americans everywhere.

In the flames of a few burning books, the pastor could have extinguished what little progress President Barack Obama had made in building bridges with the Muslim world. Though the sigh of relief in Washington at the pastor’s climb-down was almost audible, he has already caused enough damage to keep American forces and embassies on heightened alert for some time.

To enemies of the United States, it was a gift. In the age of the internet, the fact that it was a gift provided by a pastor who cannot pay his mortgage and had a congregation of only a few dozen was irrelevant. It was a controversy that could only happen in United States. There are few, if any, countries in the world with constitutional protections that allow someone to burn holy books, or the American flag for that matter.

There are few if any countries with sufficient ease of assembly to allow thousands of fire-breathing pastors to preach across the nation. Mr Jones endangered the lives of his countrymen by exploiting the freedoms they are striving to preserve on the battlefield.

It must be puzzling for the people of Iraq and Afghanistan. Perhaps in the bazaars of Kabul and Kandahar his actions may start a debate on the limits of free speech. We can only hope.

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   Don’t give face to bigots who go too far

  September 14, 2010
  

  I WISH to commend Datuk Seri Wong Chun Wai and The Star for the enlightening article, “ Why bother with bigots?” (Sunday Star, Sept 12) which argues that rabble rousers do not deserve media coverage.
  
  True Malaysians and indeed all right thinking people all over the world will support a new global mindset that will discourage the mass media from highlighting radical and inflammatory views of bigots such as non-entities like Pastor Terry Jones.
  
  Indeed, our mass media should not put our own racists and religious bigots on a soap box. They should not be seen to glorify bigots. The mass media should instead condemn and the public should castigate them for posing serious threats to national security and national unity.
  
  Such people are dangerous and governments all over the world should not condone their extremist views by remaining silent and not taking punitive action to protect the rights of the majority of the people.
  
  Fortunately for Malaysia, our Government’s main political party Umno has courageously, although somewhat belatedly, disassociated itself from a disruptive rightist group in our country. Similarly, it is hoped that the mass media will adopt or include in a code of ethics, a new principle of disdain and non coverage, in regard to individuals and groups that preach racism and religious bigotry.
  
  And, Malaysians should similarly isolate these extremists who spread hatred and disunity by boycotting the news media that sensationalise these extremist views that can destroy our well-being and national unity, security and stability.
  
  The Christian Church in Malaysia has taken an inspiring lead in condemning the likes of ugly American Terry Jones. It is hoped that more religious and civic groups will unite in isolating this callous behaviour of extremists even at home.
  
  It is hoped that all true Malaysians will reject these extremists and identify them as ugly Malaysians, who must be regarded as enemies of and detrimental to, a united 1Malaysia. And only then can Malaysia prosper and progress to benefit all its citizens.
  
  TAN SRI RAMON NAVARATNAM,
  Chairman,
  Asli Centre of Public Policy Studies.

U.S. faces "Americanization" of terror threat

A man purported to be Faisal Shahzad is seen in this Al Arabiya television footage released to Reuters TV on July 14, 2010.

Credit: Reuters/Al Arabiya via Reuters TV/Handout

By Phil Stewart

WASHINGTON | Fri Sep 10, 2010 6:11pm EDT
 

WASHINGTON (Reuters) - Nine years after the September 11 attacks, the United States faces a growing threat from home-grown insurgents and an "Americanization" of al Qaeda leadership, according to a report released on Friday.

Former heads of the 9/11 Commission that studied the 2001 attacks on New York and Washington presented the 43-page study, describing it as a wake-up call about the radicalization of Muslims in the United States and the changing strategy of al Qaeda and its allies.

"The threat that the U.S. is facing is different than it was nine years ago," said the report, released by the Washington-based Bipartisan Policy Center.

"The U.S. is arguably now little different from Europe in terms of having a domestic terrorist problem involving immigrant and indigenous Muslims as well as converts to Islam."

The report comes at a sensitive time for the United States.

President Barack Obama made a plea for religious tolerance on Friday as passions simmered over a Florida Christian preacher's threat to burn copies of the Koran, Islam's holy book, and plans to build an Islamic cultural center and mosque near the so-called Ground Zero site in New York City.

U.S. officials warn such cases could lead to a recruiting bonanza for al Qaeda.

The report said al Qaeda and its affiliates in Pakistan, Somalia and Yemen had minimally established an "embryonic" recruitment infrastructure in the United States.

It pointed to convictions last year of at least 43 American citizens or residents aligned with militant ideology, and high-profile cases of recruits who went abroad for training.

"In the past year alone the United States has seen affluent suburban Americans and the progeny of hard-working immigrants gravitate to terrorism," the report said. "There seems no longer any clear profile of a terrorist."

Americans were also increasingly forming part of the leadership of al Qaeda and its allies. It cited the cases of:
* U.S.-born Muslim cleric Anwar al-Awlaki, who is now one of the top figures in al Qaeda in the Arabian Peninsula. He is linked to the failed attempt to blow up a passenger plane over Detroit on Christmas Day 2009 as well as a deadly shooting spree at Fort Hood military base in Texas a month earlier.

* Adnan al-Shukrijumah, a Saudi-born operative who grew up in Brooklyn and Florida, who is considered to be a senior leader of al Qaeda's external operations.

* Chicagoan David Headley, who played a role in scoping out targets for the 2008 Mumbai attacks on behalf of Pakistan-based Lashkar-e-Taiba.

"There is little precedent for the high-level operational roles that Americans are currently playing in al Qaeda and affiliated groups," the report said.

SMALLER SCALE ATTACKS

Much of the report highlights fears that U.S. intelligence officials have been flagging for years, including the rising prominence of al-Awlaki and other American recruits.

The Obama administration has authorized operations to kill or capture Awlaki and a secret CIA memo, leaked to the media last month, spoke extensively about how U.S. citizens were of great value to terrorist groups.

American intelligence officials also have agreed with another key point in the report that sees an increased risk of small-scale attacks on hard-to-protect U.S. targets.

In the wake of the September 11 attacks, which killed nearly 3,000 people, the report said the intelligence community had wrongly believed that al Qaeda was intent on "matching or besting the loss of life and destruction" it had caused.

It is now clear that militants see operational value in conducting more frequent and less sophisticated attacks, which are harder to detect and require less high level coordination.

"American officials and the wider public should realize that, by the law of averages, al Qaeda or an affiliate will succeed in getting some kind of attack through in the next years," said the report.

Even the Pakistani-born American Faisal Shahzad's failed attempt to set off a car bomb in Times Square in May was extremely effective from a propaganda standpoint, given the enormous amount of media coverage it received.

"The best response (to an attack) would be to demonstrate that we as a society are resilient and are not being intimidated by such actions," the report said.

(Editing by Christopher Wilson)

U.S. 

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Comments

Sep 10, 2010 7:51pm EDT

Yes. We will show them that we will not be intimidated. We will continue immigrating muslims by the thousands, and we will leave them alone until they blow us up, and then we will get them. After that, we will wait until they blow us up again ad infinitum. See how unintimidated we are? We will even smile while our heads are being sawn off. It is the American Way!

cecil91 Report As Abusive

 

 

Sep 10, 2010 9:51pm EDT

Don’t they understand that the US thrives on violence and war, each attack emboldens the warhawks. We make more bombs kill more people, create more terrorists. The only way to stop our war machine is to quit fueling it.

UK Spending watchdog warns over academies' finances

By Hannah Richardson BBC News education reporter

 
The study said many academies were "performing impressively"
 

The rapid expansion of England's academies programme risks being poor value for money, the spending watchdog has warned.

With one in four existing academies needing extra financial help, the National Audit Office said much tighter monitoring was needed.

It also found poorer pupils did less well in academies than in regular state schools.
The government said academies performed well and that it was reducing risks.

The NAO said these state-funded, privately-run schools begun in disadvantaged areas by Labour had performed impressively in their efforts on improving attainment.

But since coming to power, the coalition government has encouraged schools rated outstanding by Ofsted to apply for academy status, saying they would be fast-tracked.

'Bailouts' 

Many have been tempted to express an interest by the promise of more money and greater freedoms.

Academies operate outside of local authority control, often with business-based sponsors, and have greater financial freedom than regular state schools, which are audited by their local council partners.

The NAO report found academies were not only spending significantly more per head of pupil, but that one in four were likely to require extra financial support.

And the agency that now monitors them, the Young People's Learning Agency, is expecting to pay £8.5m to bail 10 of them out of financial difficulties.

Meanwhile, one in 20 of open academies are forecasting deficits.
The NAO also pointed out that in 2007-8 and 2008-9, there were half as many senior academy staff on salaries of more than £80,000.

The department had already recovered £4.1m in overpayments from academies because of an over-estimation of pupil numbers.

The NAO said: "The expansion of the programme increases the scale of risks to value for money - particularly in the areas of financial stability, governance and management capacity.

"With greater numbers of academies opening in recent years, the department's capacity to administer and monitor the programme has been stretched particularly, as funding is administered on an individual basis."
It also found potential conflicts of interests over academy sponsors providing services to the school they sponsor.

A quarter of academies surveyed said their sponsor was providing paid services.
The study warned that academies' performance to date was not an "accurate predictor" of how the model would perform when generalised over a wider range of schools.

Amyas Morse, head of the National Audit Office, said: "Existing academies have been primarily about school improvement in deprived areas, while new academies will often be operating in very different educational and social settings."

Real power

  There was a need to re-state the aims of the new-style academies programme so that its performance could be measured against them.

The report also found that children from disadvantaged homes were doing slightly less well in academies than those in regular state schools.

The report suggested it was pupils from more advantaged backgrounds who were driving the fast-improving results at academies.

But Education Secretary Michael Gove said the report underlined the fact that academies programme was working well.

"We have already taken prompt action on the NAO recommendations, as we strive to strengthen the programme even further.

"The academies programme is helping children from all backgrounds to get a better education, that is why we are allowing more schools to become academies, and giving real power and autonomy back to schools and teachers."

Outstanding sponsorship 

  Chair of the Public Accounts Committee Margaret Hodge said: "Where schools are given more freedom, we need to know they are using it well.

"We will want to be assured that, as the programme is expanded, the controls to provide sound financial management and good governance are firmly in place.

"The department faces major challenges as it takes over from local government the responsibility for directly funding many more schools.

"We will want to know that it has the capacity to meet these challenges.
She added that it was is telling that some of the substantial sums of money originally promised by academy sponsors were yet to be collected.

Shadow education secretary Ed Balls said the new government's programme was a "complete distortion" of Labour's successful policy to turn around struggling schools.

"Michael Gove's rush to turn schools with more advantaged intakes and which are already thriving into academies, rather than under-performing schools in more deprived areas, is not only a perversion of a successful policy but risks becoming an expensive failure."

“Start Quote

Where schools are given more freedom, we need to know they are using it well”

End Quote Margaret Hodge Chair of public accounts committee
 

The NAO said: "The expansion of the programme increases the scale of risks to value for money - particularly in the areas of financial stability, governance and management capacity.

"With greater numbers of academies opening in recent years, the department's capacity to administer and monitor the programme has been stretched particularly, as funding is administered on an individual basis."
It also found potential conflicts of interests over academy sponsors providing services to the school they sponsor.

A quarter of academies surveyed said their sponsor was providing paid services.
The study warned that academies' performance to date was not an "accurate predictor" of how the model would perform when generalised over a wider range of schools.

Amyas Morse, head of the National Audit Office, said: "Existing academies have been primarily about school improvement in deprived areas, while new academies will often be operating in very different educational and social settings."

Real power There was a need to re-state the aims of the new-style academies programme so that its performance could be measured against them.

The report also found that children from disadvantaged homes were doing slightly less well in academies than those in regular state schools.

The report suggested it was pupils from more advantaged backgrounds who were driving the fast-improving results at academies.

But Education Secretary Michael Gove said the report underlined the fact that academies programme was working well.

"We have already taken prompt action on the NAO recommendations, as we strive to strengthen the programme even further.

"The academies programme is helping children from all backgrounds to get a better education, that is why we are allowing more schools to become academies, and giving real power and autonomy back to schools and teachers."

Outstanding sponsorship Chair of the Public Accounts Committee Margaret Hodge said: "Where schools are given more freedom, we need to know they are using it well.

"We will want to be assured that, as the programme is expanded, the controls to provide sound financial management and good governance are firmly in place.

"The department faces major challenges as it takes over from local government the responsibility for directly funding many more schools.

"We will want to know that it has the capacity to meet these challenges.
She added that it was is telling that some of the substantial sums of money originally promised by academy sponsors were yet to be collected.

Shadow education secretary Ed Balls said the new government's programme was a "complete distortion" of Labour's successful policy to turn around struggling schools.

"Michael Gove's rush to turn schools with more advantaged intakes and which are already thriving into academies, rather than under-performing schools in more deprived areas, is not only a perversion of a successful policy but risks becoming an expensive failure."

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Related Internet links

• National Audit Office
• Independent Academies' Association
• Young People's Learning Agency - Welcome to the YPLA