New global currency wars warning!

The recent money-pumping measure by the United States has been criticised by Brazil as a protectionist move which will adversely affect developing countries.

THE recent announcement by US Federal Reserve chief Ben Bernanke that the United States would be renewing its pumping of money into the banking system has been acclaimed by some parties as a move to revive its faltering economy.

But the Fed’s measure to revive “quantitative easing” is not being welcomed by all. It has instead caused anxiety in some developing countries.

Their fear is that a large part of the massive amounts of money being unleashed into the financial markets may fail to boost the US economy but will find its way as unwanted capital flows into some developing countries.

Bernanke announced that the Fed would purchase US$40bil (RM124bil) per month of mortgage-linked assets from the market, and do so continuously until the jobs situation improves.

The hope is that cheap and abundant money will encourage entrepreneurs and consumers to spend more and spark a recovery.

However, previous rounds of such quantitative easing did not do much for the US economy.

A large part of the extra funds were placed by investors not in new US production but as speculative funds in emerging markets or in the commodity markets, in search of higher returns.

In developing countries that received the funds, adverse effects included an inflation of prices of property and other assets, as well as appreciation of their currencies which made their exports less competitive.

On the other hand, the US dollar depreciated because of the increased supply of US dollars and the reduced interest rates, making US exports more competitive.

Brazil has been in the forefront of developing countries that are critical of the US money pumping. Last week, the Brazilian finance minister Guido Mantega called the US Fed measure a “protectionist” move that would re-ignite global currency wars.

Mantega told the Financial Times that the third round of quantitative easing would only have a marginal benefit in the United States as the already high liquidity in the United States is not going into production.

Instead, it is really aimed at depressing the dollar and boosting US exports.

Japan has also decided to expand its own quantitative easing programme in response to the US move, and this is evidence of tensions and a currency war, said Mantega.

In previous rounds of liquidity expansion in recent years, Brazil has been one of the developing countries adversely affected by sharp currency appreciation, which reduced its export competitiveness and facilitated import increases.

Recently, Brazil’s currency, the real, has weakened from the high of 1.52 real to the dollar to the present two real, which has improved its competitiveness.

But the new liquidity expansion in the United States may again cause a flood of funds to enter Brazil and reverse the currency trend.

In such a situation, Brazil may be forced to take measures to stop the real from appreciating, said the minister.

Previously, the country had taken capital controls to discourage inflows of foreign funds.

What has irritated Brazil even more is an accusation by the US Trade Representative Ron Kirk that Brazil has become protectionist in raising some tariffs, even though the Brazilian measures were within its rights in the WTO framework.

Brazil’s Foreign Minister Antonio Patriota last week wrote to Kirk pointing out the unfairness of a protectionist US accusing Brazil of protectionism.

“The world has witnessed massive monetary expansion and the bailout of banks and industrial companies on an unprecedented scale, implemented by the United States and other developed countries,” said Patriota.

“As a result, Brazil has had to cope with an artificial appreciation of its currency and with a flood of imported goods at artificially low prices.”

He pointed out that the United States was a major beneficiary, as it almost doubled its exports to Brazil from US$18.7bil (RM58bil) to US$34bil (RM105bil) from 2007 to 2011.

“While you refer to WTO-consistent measures adopted by Brazil, we, on our side, worry about the prospect of continued illegal subsidisation of farm products by the United States, which impact Brazil and other developing countries, including some of the poorest countries in Africa.

“The US has managed in a short period to remarkably increase its exports to Brazil and continues to reap the benefits of our expanding market. But it would be fairer if those increases took place in an environment not distorted by exchange rate misalignments and blatant Government support”.

As the quantitative easing from the United States and Japan is only going to take effect in future, it remains to be seen whether history will repeat itself – it will have minimal effect on the United States and Japanese economic recovery but will cause problems for developing countries – or whether it will be different this time.

GLOBAL TRENDS By MARTIN KHOR

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Dr Mohamad Tajuddin holds memories of unity

Being the only Malay among a class of Chinese students holds special memories of unity.

IN these months of Merdeka and the formation of Malaysia, I wish to pay tribute to my old school, SMJK Hua Lian in Perak.

Why was my school experience so special? I was the only Malay boy in a sea of Chinese students, yet I felt no racial or religious pressures. I sailed through four years of education making friends, having fun and learning lots of things from my mostly non-Malay teachers.

While I take a few moments to recollect some incidents, why don’t we also take this time to ask just what is wrong with our country – to the point that racial and religious mistrust still prevails after half a century.

My childhood days from Standard One to Six were spent at the police barracks in Butterworth, Penang, where I would walk about half a kilometre every day to St Mark’s Primary School. My childhood friends at the barracks were mostly Malays, but there were several Chinese boys and the two sons of a burly Sikh sergeant major.

My father was only a police constable with the rank of “private” despite his 30 years of service. Mother tells of his reluctance to move too far away from his family in Pantai Besar and Batu Kurau (both in Perak), which resulted in his stagnant position. Though my father was educated only up to Standard Three, he could scold me effortlessly in Queen’s English!

But the most important thing that I remember is that he NEVER uttered a single harsh word against any Chinese or Indian, unlike the fathers of my friends. He had many Chinese friends whom he visited occasionally, with me tagging along on his Vespa.

At St Mark’s, I had many friends who were Indians, Sikhs and Chinese. I remember one particular boy, the “soft” kind who was always jeered at for being feminine. We both got on well because of our one common interest – Enid Blyton story books! We would exchange comics and books all the time.

At the police barracks, I flew kites and played gasing, football and hide-and-seek among the wreakage of armoured police vehicles.

One day, I was greatly saddened to learn that my father was retiring from the police force and that we had to move to Taiping. The family moved in June of 1976 to the police barracks in Taiping. At 14, it was difficult to make friends at the barracks, so I was hoping it would be better in the new school. Little did I realise that my life was about to take a sharp turn.

There was no school that offered Industrial Arts in the English medium of instruction. St George’s Institution was agriculture based and King Edwards was commerce based. We finally found a school … next to the oldest prison in Malaysia. SMJK Hua Lian at Jalan Lumba Kuda had two sessions and 99.7% of its 2,000 students were Chinese!

I had been in Form 2A in St Mark’s, so when I transferred to Hua Lian, the headmaster asked which class I wanted to be in. I asked if there were any other Malay boys and if so, in which class? He said yes, but the two other boys were in Form 2D1 – the last class with the naughtiest students! I said okay and stepped into the most interesting period of my school life.

Try to imagine me at 14, a scrawny, bespectacled four-foot-something guy amidst burly Chinese five-footers who were all a year older than me as they had been to Remove class. I was an “A” student among those who got Cs and Ds. Every time the teacher stepped out to go to the toilet during the monthly exams, the whole class would crowd around me for answers to all the subjects, except my weakest subject, Mathematics.

I excelled in English and Bahasa Malaysia (BM) and it was wonderful to see pandemonium breaking out among my classmates whenever it was announced at assembly that I had obtained the highest marks for English in the whole form, beating those nerds from 2A1 (all boys) and 2A2 (all girls). My old form teacher was all smiles when he told the class that he was pleased to have at least one student who passed all his subjects.

Two recollections are worth highlighting here. Once, a Malay teacher who taught BM was so incensed with some students for being rude to him that he threw everyone out of the classroom and we had to stand in the hot sun for the whole period. That included me. It wasn’t fair because I was always a “teacher’s pet”. So there we were, all 42 of us, being stared at by the girls in 2B2, 2C2 and 2A2.

The other thing that has stayed with me is how my Chinese friends loved to gamble. They would bet almost every single day on Malaysian football, sports or even whether it would rain that day. Once I saw a boy win RM1,000 in a football pool! I rarely saw a RM50 and had never even seen a RM100 note. My mother gave me RM10 a month as allowance but she cooked and packed food for me every day.

I was moved up to 3B1 after that year and left my colourful friends at 3D1. After the LCE exams (the equivalent of SRP today), I was placed in the top science class, which was co-ed. One thing about Hua Lian – I had never had any puppy love problems because of the racial difference. I was not interested in the girls and I was not much to look at anyway.

For me, the most memorable thing about being in 4Sc1 was that we put up a play during Teacher’s Day and was asked to restage it in front of the whole school.

Another fun thing was that I joined the Police Cadet Force with my tall Chinese friends, about 40 of us. We learnt to march and practise arms drill and withstand the verbal abuses of our drill masters. With our smart uniforms, and knowledge of security details during special occasions in school, we impressed the girls – one of the perks of being in that hot and sweaty, brown get-up.

In 5Sc1, we had a lot of class parties. I had never been to a party before, especially one with a mix of boys and girls. My Chinese friends were very tolerant of my faith and endeavoured to make sure all the food was “halal”, or so they told me. I had absolute faith in their sincerity. We played games at these parties and joked around. It was great fun and I had never felt accepted as much before.

The other great thing was the formation of the first ever multi-racial sepak takraw team. I loved the game and played the “killer” position. There were only three other Malay boys in school and we had to find five Chinese boys because of the compulsory three-team rule. We sought good football players and basketball players as takraw requires agile footwork, springing and ball-handling.

We managed to form the team and went on the inter-school competition league. We went up against three schools and, of course, lost all the games. But everywhere we went, we were the talk of the day as no one had ever seen a Chinese-Malay takraw team.

I was one of the top 10 students in the MCE examination (the equivalent of SPM), securing 6As. I was the only Malay candidate in the Science stream and all my Chinese and Indian teachers were most proud of me. I was the only one who had scored a distinction (A2) in the Overseas English Exam, finally beating that lanky nerd of nerds, the head prefect.

After a short stint in Lower Six, I left to study in the United States for six years on a government scholarship. By then, most of my friends had gone to Canada, Britain or Australia, sponsored by their parents. Some who did not make it to Lower Six or the local universities had to look for work.

I would like to take this opportunity to thank all my Hua Lian teachers from 1976-80 for their dedication and commitment. I used to joke that I was the best and worst Malay MCE student because I was the only one.

My Chinese friends and I studied, played (I never gambled although almost all my friends did), partied, took part in sports, marched in the cadet corps, went girl-watching at the Taiping Lake Gardens, had ice kacang at the Larut Matang Supermarket and talked about our future.

I sincerely believe that if narrow-minded politicians were to leave our multi-racial communities alone, we would probably live in better harmony than we do now. I not only survived, but thrived, at SMJK Hua Lian with my Chinese friends and teachers.

Happy Malaysia month!

By PROFESSOR DR MOHAMAD TAJUDDIN MOHAMAD RASDI

Source: The Star/Asian News Network

Are Malaysian salaries enough to draw our talents back?

 Click on graphic for larger view.

FOR Daniel Chew, Brisbane a city of modern skyscrapers but known for its laidback lifestyle has been “home” for the last 10 years.

Even before graduating with a degree in Commerce from the University of Queensland, Chew, 29, remembers having secured a job offer. The fact that his qualifications entitled him for permanent residence in Australia only made his decision to stay on so much easier.

His career path was set out in 2005, with him joining KPMG as an auditor, and later moving on to its corporate finance division where he specialised in business valuations. His years in professional practice also saw him qualify as a chartered accountant.

Today, Chew is a commercial analyst in the oil and gas industry, and he says the salary range for such a role can be anywhere from A$80,000 (about RM255,000) to A$140,000 (about RM446,000) per annum, “depending on the level and type of experience”.

“I don't think I could be earning in Malaysia what I earn here. Just the exchange rate alone already makes the salary here three times more than what it is in Malaysia,” he says.

Opportunity and lifestyle are two other factors that are keeping him Down Under, but he does not discount the possibility of returning to Kuala Lumpur if a good opportunity presents itself.

“Right now I have a girlfriend here, which means that if I were to go back, it must also mean that there is a good job prospect for her as well.

“Having a good salary package would definitely be a good motivator (to move back), but I'm also looking at career growth opportunities. And being close to my family would be a plus point,” he says.

Norman: ‘Salaries in Malaysia in the mid-tier management are generally about 10% to 30% lower compared with that found in our Asia Pacific counterparts such as Singapore, Hong Kong and Australia.’

Another Malaysian, who only wants to be known as Justin and who has been in London for about nine years, says he is apprehensive about coming back.

Justin works in the finance department of an investment bank. The market rate for his role is roughly between £50,000 (about RM248,000) and £60,000 (about RM297,000) per annum, one which he isn't sure Malaysia can match.

“I don't know if Malaysia would be able to offer a better salary package but for me, the main question is whether Malaysia will be able offer the same opportunities.

“London is a world hub for foreign exchange (FX) and other investment banking products such as credits, equity, rates, etc, whereas the products traded in Malaysia are considered vanilla'. What I do in investment banking is quite specific. Even if I were to move into a different product area, there might not be a lot of opportunities for my career development in Malaysia,” he says.

However, Justin adds that taking care of his ageing parents in Kuala Lumpur is also an important consideration, and if push comes to shove, “Singapore might be a feasible option”.

Chew and Justin are just two examples of the many Malaysian talents living abroad, and to pull them back, salary and career opportunities are two factors which need to be seriously looked into. It has been reported that at present, as many as one million Malaysians are living abroad.

Interestingly though, according to Kelly Services managing director Melissa Norman, salaries in Malaysia in the mid-tier management are generally about 10% to 30% lower than that in our Asia-Pacific (Apec) counterparts such as Singapore, Hong Kong and Australia.

“It varies depending on the functions and skills, but for the mid-tier level, the difference is between 10% and 30%. When it comes to the C-suite executives, the difference could be much higher (where salaries overseas could double that in Malaysia),” she says, adding that the exchange rate alone is a pull factor for Malaysians to work overseas.

Money issues: It has been reported that as many as one million Malaysians are living abroad. To pull them back, salary and career opportunities are two factors which need to be seriously looked into.

 

(Refer to the chart, which is derived from the Kelly Services Asia Pacific Professional and Technical Salary Guide 2012. The salary guide is based on the actual transactions between Kelly's clients and candidates.)

Currently, positions that are in high demand in the Apec region are in the engineering and information technology industries.

“Where it shows (in the chart) that Malaysia is offering a higher salary compared to, say, Singapore, it means that those are skills which are highly in demand. They are niche skills, and companies are willing to pay a higher salary to bring in talent from abroad,” she says.

Generally, Norman says, fresh graduates in Singapore are commanding a starting salary of about S$2,500 (RM6,200), while many Malaysian graduates are “still hovering between RM1,800 and RM2,000”.

“You need to go one step further and ask Why are they getting paid a little more, and why are we paid a little less?' This brings you to the quality of the students. The majority of graduates here come out lacking in skills.

Sure, Malaysia is moving towards a high-income economy, but if wages go up and productivity remains the same, it would be a recipe for disaster. - Shamsuddin Bardan, MEF executive director

“When you talk about Singapore graduates, you're talking about universities like NTU (Nanyang Technological University), which are the cream of the crop. So the package they earn is warranted based on the quality of their background.
 
“Over here, you have the cream of the crop too, but naturally they get picked by all the big boys' (major firms and MNCs) even before they graduate. And you will have a pool of students who study overseas, but they don't come back,” she says.

Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan adds that when it comes to salaries, one has to look at the productivity aspect as well.

“When you talk about whether Malaysian salaries are competitive, you have to factor in productivity. According to the MPC's (Malaysia Productivity Corporation) 2012 report, Malaysia's productivity is 3.8 times lower than Singapore's productivity.

“In simple terms, what takes one employee to do in Singapore takes 3.8 employees here to accomplish the same task,” he explains.

According to the report, Malaysia's employee productivity value (the value of productivity of one Malaysian employee) is at US$14,217, lower than Hong Kong at US$65,174 and Singapore at US$55,702.

“So to look at wages on its own, that would not be fair. Sure, Malaysia is moving towards a high-income economy, but if the wages go up and productivity remains the same, it would be a recipe for disaster,” Shamsuddin says.

But the fact remains that brain drain and talent scarcity in Malaysia are very real issues that challenge employers.

Norman says that organisations are definitely “feeling the pinch of scarcity of skilled talent” which is prevalent today as people are very open to the idea of changing jobs and moving countries.

Since 2010, the Government has also been trying to woo talent back via TalentCorp, and more recently, Prime Minister Datuk Seri Najib Tun Razak announced the Talent Roadmap 2020, a nine-year time frame designed to address the underlying issues affecting talent availability in Malaysia.

So what will it take to bring our Malaysian talents back?

“Motivation is different for different people, but I would say the top three things would be the total package (salary, compensation plus benefits), the type of role these talents will have here (roles will have to be better, as no one moves laterally), and the policies that are involved (how easy it will be for talents to come back with foreign spouses, for example),” Norman says.

She adds that in trying to attract Malaysian talents back, the “rewards and the opportunities must be fairly presented so there's a nudge for people to make that move”. “To a certain extent, having Malaysians abroad is good for Malaysia, because of the exposure that they will have. But if we can bring them back, they can do so much for the country.

“Today when you look for talent, organisations need to pitch. If the talent is extremely great, some companies even have an attraction bonus just to get them to sign on. Package jumps when you're doing head hunting is fairly high,” she says.

Talent retention is equally important.

“We must recognise the fact that we must do something to retain the talent we already have here, so we don't also lose them eventually,” she says, likening it to a leaking bucket.

Ultimately, Norman says, the talent that Malaysians want back are “skilled workers who are in demand with niche expertise”.

To bring them back, the question which will need answering is “What's in it for them?”

BY LISA GOH  lisagoh@thestar.com.my/Asian News Network

One new teen-mom every day in Malaysia

With teenagers becoming more sexually active, doctors are sounding the alarm over the rising number of pregnancies. Experts are urging concrete measures, including proper sex education and a wide range of sexual reproductive health services for teenagers.

KLANG: More Malaysian teenage girls are getting pregnant, with a major hospital recording at least one case every day.

According to Dr Mohamad Farouk Abdullah, senior consultant and head of Obstetrics and Gynaecology at the Tengku Ampuan Rahimah Hospital here, about 14% of the 12,000 babies delivered annually at the hospital were by teenage mothers with many of them unwed.

“We thought such numbers of teen pregnancies were only in Klang, but I am also hearing of similar scenarios in the other six specialist hospitals in Selangor,” he added.

“The youngest girl to give birth at our hospital was a 12-year-old girl,” Dr Mohamad Farouk said at the “Pregnant by Choice, Not by Chance or Force” seminar. It was organised by the hospital in conjunction with its Family Planning month.

The Health Ministry recorded 18,652 births by girls below the age of 19 last year compared with 5,962 in the second half of 2010.

Tengku Ampuan Rahimah Hospital's medical social welfare officer Nurul Azira Mahamad Jafar said she had been handling at least one case of an unwed mother every working day of this year.

“The highest number of referrals I have had in a day so far was 14. These are our children who are pregnant in their teens,” said Nurul Azira, who has been handling cases of unwed mothers as well as rape and sex abuse victims at the hospital for the past six years.

Most of the pregnant girls are referred to the hospital by clinics.

This is because teenage pregnancies are considered “high-risk cases”. A teenager is twice more likely to die from pregnancy or childbirth complications than women in their 20s.

Most of the girls come to the hospital complaining of discomfort such as stomachache and spotting.

As part of the hospital's protocol, the doctors screen them for pregnancy and once confirmed, they would be admitted and the family notified.

It is also part of the hospital's policy to provide antenatal care and treatment to them, regardless of their marital status.

Nurul Azira said pregnant teenage girls under 18 and their babies were protected under the Child Act 2001 and would be referred to the Social Welfare Department.

In most cases, the girls became pregnant because they were in relationships and had consensual sex.

“They are also from broken homes and low-income families. Some are runaways,” she said.

“We have to establish rapport with these girls. Out of fear, they won't even confide in their family, so we need to gain their trust to be able to get their family's contact details,” said Nurul Azira.

She said many parents expressed shame when told of their daughter's condition.

“They are afraid their neighbours will know,” she said. “There are also those who are numb to the fact because they feel they are unable to control their daughters.

“We will usually refer these girls and their parents to the department for counselling,” she added.

Nurul Azira said if the parents were unable to take care of the unwed mothers and babies, they could surrender them to the department.

She cited the case of a 13-year-old girl, who gave birth at the hospital recently.

“Her parents said they could not ensure that the girl would not get pregnant again as the father of the child was still living in the same community,” said Nurul Azira.

“So the parents agreed to the girl and her baby being sent to a department home.”
  
By IVY SOON newsdesk@thestar.com.my/Asian News Network

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Foreign funding for political purposes in Malaysia

Investigations to determine source of its foreign funding

KUALA LUMPUR: Investigations are being conducted on Suara Inisiatif Sdn Bhd, the company linked to non-governmental organisation Suaram, to determine the source and extent of its foreign funding.

So far, the “money trail” dates back to 2005 with the amount totalling over RM2mil.

The two main contributors are the American-based National Endowment for Democracy (NED) and the George Soros-linked Open Society Institute (OSI), which have been financing groups supporting its interests and objectives around the world.

The NED supposedly provided US$535,000 (RM1.605mil) to Suaram while OSI gave about US$248,000 (RM744,000).

Suaram's No 3 funder was identified as the South-East Asia Centre for e-Media (Seacem), with the German Embassy as the fourth.

The investigations centred on financial transactions conducted with Suara Inisiatif to counter-check “misleading information” and “suspicious transactions” in the company's accounts.

The NED dedicates itself to the growth and strengthening of democratic institutions and awards grants to organisations with programmes consistent with its (political) objectives.

Among others, it was reported to have provided funds to groups in Xinjiang and Tibet opposed to the Chinese Government.

OSI, started by financier Soros in 1984 to help countries make the transition from communism, is active in more than 50 countries in Eastern Europe, the former Soviet Union, Africa, Latin America, Asia, and the US.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob had said that legal action would be taken against Suaram and Suara Inisiatif by various government agencies for reporting a “misleading” account in its annual report.

He revealed that CCM's investigation had allegedly detected serious violations of at least five sections of the Companies Act by Suaram and Suara Inisiatif.

The minister also called for an investigation into an American NGO's alleged funding of Suaram and urged Bank Negara to investigate the matter under the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.

On Wednesday, the Attorney-General's Chambers directed CCM to further check accounts and other related offences under the Companies Act.

By PAUL GABRIEL paulnews@thestar.com.my

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U.S. has responsibility to rein unruly allies for Asia-Pacific stability

WASHINGTON -- U.S. Defense Secretary Leon Panetta on Sunday began his three-nation Asia-Pacific tour, during which he will pay his first visit as Pentagon chief to China to deepen military ties, a visit overshadowed by rising tensions in the region.

To prevent the tense situation from further escalation, the U.S. government should take the responsibility to rein in its unruly allies in the region including Japan and the Philippines.

Washington should discourage Japan's provocations and rectify its own wrong position of applying the U.S.-Japan security treaty to China's Diaoyu Islands in the East China Sea. It also should warn Manila against making further provocations in the South China Sea, and urge it to return to the negotiating table.

When Panetta made remarks before reporters aboard ahead of his landing in Tokyo on Sunday evening, the first stop of his trip, the U.S. apparently was attempting to play a "detached" arbitrator of the territorial disputes, a role that hadn't been invited by any concerning parties.

Panetta said, "I am concerned that when these countries engage in provocations of one kind or another over these various islands, that it raises the possibility that a misjudgement on one side or the other could result in violence, and could result in conflict."

He even alarmed that provocations over the territorial disputes could blow up into a war unless governments exercised more restraint.

To be frank, the U.S. isn't qualified to behave as a judge for the disputes, because it hasn't played a constructive role in the process.

Instead, it shoulders certain historical responsibilities for the chronic disputes, and has, more or less, fanned relevant countries' provocative moves with its biased words or actions and added instability to the region.

Both Japan and the Philippines have been making reckless provocations against China this year in an attempt to obtain undeserved territorial gains in the East China Sea and South China Sea, emboldened by the U.S. "Pivot to Asia" policy, which has featured increased military deployment and involvement in the region.

In the past week, the world witnessed one of the most blatant acts of sabotaging Asian peace and stability by Japan, the staunchest ally of the U.S. in the region, with its completion of the so-called "nationalization" of the Diaoyu Islands that are inherently part of China's sovereign territory. China totally rejects Japan's act of theft, and is taking necessary steps to protect its sovereignty and territorial integrity.

On the dispute, Washington cannot shake off its responsibility for sowing the seeds of conflict. The U.S., through a backroom deal with Japan in 1971, transferred the administration of Ryukyu Islands (known as Okinawa today) and Diaoyu Islands, which were then under the U.S. trusteeship after World War II, to Japan. China has firmly opposed this deal from the very beginning.

Earlier this year, the Philippines, partially encouraged by U.S. support, also sparked a tense standoff with China in the South China Sea by sending a naval ship to harass Chinese fishermen operating legally in China's territorial waters around the Huangyan Islands.

Panetta's China visit, on the bright side, symbolizes the continuation of a good momentum in the U.S.-China relations, which feature regular high-level dialogues and exchanges of visit by senior political and military leaders.

The visit was reciprocal to the one paid by his Chinese counterpart Liang Guanglie to the Pentagon in May.

The visits have helped increase mutual understanding and advance the China-U.S. cooperation partnership and military-to-military ties.

On the other side, due to the current rising tensions in the Asia-Pacific region, the success of Panetta's visit will be judged by how he will reassure Beijing that Washington is willing to do more things conducive to regional peace and stability, which are now threatened by some of the U.S. allies.

The U.S. should understand that, if it continues to allow its allies to fish in troubled waters in the Asia Pacific and let the tensions spin out of control, no countries in the region can escape unscathed.

The U.S. must know better than other countries what it should do to benefit Asia-Pacific stability. 

By Zhi Linfei (Xinhua)

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Who owns Diaoyu Islands?

Historical documents dating back to the Ming Dynasty establish Diaoyu Islands as Chinese territory. The challenge to Chinese ownership came from Japanese annexation of the islands in 1894-5 following the first Sino-Japanese War.

TENSIONS are rising in the dispute between China and Japan over the Diaoyu Islands — five tiny islands and three rocks covering a mere 7sq km in the East China Sea.

It is a pity that this is happening especially when Chinese-Japanese economic ties have reached a new level since the end of last year with the two countries agreeing to use their respective currencies in their bilateral trade, instead of the US dollar.

To de-escalate tensions, Japan should make the first move. It was the Japanese government’s purchase of three of the islands from the Kurihara family on Sept 11, 2012 that ignited the present crisis. That decision should be rescinded immediately.

In fact, Japan has been upping the ante on Diaoyu — which Japan calls the Senkaku Islands — for some time now. It will be recalled that on Sept 7, 2010 when a Chinese fishing boat collided accidentally with a Japanese patrol vessel near Diaoyu, the captain and the crew of the Chinese boat were detained by the Japanese Coast Guard for a few days.

Though they were all released in the end, the incident revealed a new toughness on the part of the Japanese. The Chinese have been reacting to this and other such incidents.

What explains this new toughness? Some analysts attribute it partly to the growth of the political right in Japanese politics.

Japanese economic stagnation for more than two decades and China’s success in replacing Japan as the world’s second-most important economy have increased the influence of conservative nationalist forces in the country who are now targeting China.

Impending elections within the ruling Democratic Party and the forthcoming general election have also widened the berth for conservative politics.

It is also not a coincidence that the Japanese right-wing has become more vocal — especially vis-a-vis China — at a time when the United States is seeking to re-assert its presence and its power in the Asia-Pacific region. In the last couple of years, US political and military officials have on a number of occasions underscored the significance of US-Japan security ties.

Even on the Diaoyu dispute, the US government, while professing to remain neutral, has through the Pentagon made it clear that the Japan-US Security Treaty would come into force in the event of a military conflict between Japan and China.

This stance has to be viewed in the larger context of the US’ active military alignment with the Philippines in its recent clash with China over the Huangyan Island in the South China Sea and its support for Vietnam in its long-standing tiff with China over parts of the Spratly Islands and the Paracels.

For both Japan and the US there may also be other reasons why the Diaoyu Islands are important.

In 1968-9, a United Nations agency, it is reported, had discovered potential oil and gas reserves near Diaoyu. The US military, it is not widely known, also uses one of the five islands — Kuba — as a practice range for aircraft bombing.

Whatever the reasons for holding on to Diaoyu, Japan’s claim to ownership is weak. There are books, reports and maps from the 15th century, during the period of the Ming Dynasty, that establish in no uncertain terms that Diaoyu is Chinese territory. The books Voyage with a Tail Wind and Record of the Imperial Envoy’s Visit to Ryukyu bear testimony to this.

Even writings by Japanese scholars in the late 19th century acknowledged this fact. The challenge to Chinese ownership of Diaoyu came from Japanese annexation of the Islands in 1894-5 following the first Sino-Japanese War. China under the Ching Dynasty was too weak to fight back and regain lost territory. But annexation through military force does not confer legitimacy upon the act of conquest.

This is why when Japan was defeated in the Second World War the victors who included China and the US recognised that Diaoyu was Chinese territory.

Both the Cairo Declaration and the Potsdam Declaration acknowledged this though for administrative purposes Diaoyu was placed under US control as part of its governance over the Ryukyu Islands. The US was then the occupying power in Japan following the latter’s surrender.

However, when China was taken over by the Chinese Communist Party in 1949, the US changed its position and began to treat the Islands as part of Japan. The Chinese communist leadership protested vehemently.

In 1971, the US Senate returned the Diaoyu Islands, together with Okinawa, to Japan under the Okinawa Reversion Treaty. Again, the Chinese government in Beijing objected, as did the Taiwan government which also regards the islands as part of China.

Since the normalisation of relations between China and Japan in 1972, both sides have agreed to allow their fishermen to operate in the waters surrounding the islands without resolving the issue of ownership.

Of course, neither China nor Japan has relinquished even an iota of its claim in the last 40 years. Recent incidents have, however, forced this unresolved issue into the open.

Apart from taking the first step by abrogating its purchase of the islands, as we have proposed, Japan should also come to terms with undeniable historical, legal and ethical facts. It must accept the irrefutable reality that the Diaoyu Islands belong to China.

We realise that there are powerful vested interests that will not allow Japan to embrace this truth.

Nonetheless, we should all try to persuade the Japanese government and the Japanese people that it would be in their best interest to do so.

Governments in Asia should convey this message to Japanese elites through quiet diplomacy. Citizen groups throughout the continent should speak up in a firm and courteous manner.

The media too should play its role by laying out the arguments for an amicable resolution of the dispute which respects truth and justice.

Comment by CHANDRA MUZAFFAR

>Dr Chandra Muzaffar is the President of the International Movement for a Just World (JUST)

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