Executive Magazine

Regional equity markets

by Executive Editors April 3, 2011

written by Executive Editors

Beirut SE

Current year high: 1,180.99 Current year low: 923.19

> Review period: Closed March 24 at 934.33 points Period Change: -0.28%

Beirut stocks inked an 18-month low on March 14, following a large demonstration in Beirut demanding Hezbollah’s disarmament. It also didn’t help that Premier-designate Najib Mikati remained unable to form a government. Still, stocks rebounded in the second half of the month following confirmations that no other banks in Lebanon would be targeted by the US Treasury Department following the merger of LCB and SGBL. Performance was mixed on the BSE, with Bank Audi ticking up 5.5% as Solidere and Byblos closed 2% and 2.1% lower, respectively.

Amman SE

Current year high: 2,648.36 Current year low: 2,149.11

> Review period: Closed March 24 at 2,182.48 points Period Change: -3.1%

In the absence of any notable supporting news, ASE stocks continued their trip south driven partly by political uncertainty as fresh protests in Jordan demanded reforms. The banking sector shed 2.7% during the review period, although Arab Bank, the exchange’s largest stock by market capitalization, inched up 0.2%. Other sectors were also weak, with mining and extraction down 3.5%, including a 2.4% decline by Arab Potash.

Abu Dhabi Exchange

Current year high: 2,925.42 Current year low: 2,471.70

> Review period: Closed March 24 at 2,632.95 points Period Change: 1.7%

A recovery in the real estate and construction sectors led the positive showing of the ADX during the review period, as Aldar and RAK Properties rose 12.3% and 14.3%, respectively. Some of the positive news that supported the upward trend in March came from Taqa which positively surprised markets with a 460% increase in 2010 profits on higher oil and gas prices. In addition, UNB announced a 10% dividend while NBAD approved a 30% cash dividend, reflecting confidence in the banking sector’s prospects.

Dubai FM

Current year high: 1,859.96 Current year low: 1,352.24

> Review period: Closed March 23 at 1,552.81 points Period Change: 10%

Stocks on the DFM staged a massive comeback in March, after Saudi authorities confirmed that the political and security situation was under control and appeased markets by buying stock through state-run pension funds and announcing large welfare spending plans. A boost also came when Arabtec postponed plans to raise capital, sending the builder’s shares up 25.3% during the review period. Investors found renewed confidence in the UAE’s political establishment and were buoyed by several earnings and dividend postings at Dubai Islamic Bank and Du, among others.

Kuwait SE

Current year high: 7,575.00 Current year low: 6,134.60

> Review period: Closed March 24 at 6,285 points Period Change: -3%

The quick quashing of dissent in Saudi Arabia only marginally supported stocks on the KSE as pessimistic investors quickly booked their gains on continued fears of political unrest in the Gulf. A wave of negative sentiment set in as many companies failed to submit their financial statements and were suspended from trading. However, the government offered some glimpses of hope by launching the long-awaited Capital Markets Authority.

Saudi Arabia SE

Current year high: 6,929.40 Current year low: 5,323.27

> Review period: Closed March 23 at 6,362.42 points Period Change: 7.1%

Investors went home March 2 bitten by a cold 15% decline in one week, but by March 12, a roaring 18.3% spike had restored the warmth to Tadawul, the region’s largest stock exchange. Positive comments by the Finance Minister, who called stocks tempting, sparked the rebound, but it was effectively the announcement of massive additional government spending worth an estimated $150 billion that overshadowed any possible political risk from demonstrations.

Muscat SM

Current year high: 7,027.32 Current year low: 6,058.11

> Review period: Closed March 24 at 6,402.17 points Period Change: 4.2%

Political tensions and a grim outlook for equities, coupled with some strong earnings news, were a recipe for jittery trading on the MSM. Kuwait-based Global estimated that MSM-listed firms saw their profits dip 17.8% in 2010, with Omani banks and petrochemicals coming out on top. As part of the strong performance, BankDhofar, the third-largest listed company, saw a record growth of 31% in 2010 profits, but rose only 3.2% during the review period. Several finance services stocks lost ground during the period, including Bank Sohar, down 9.8% since March 1.

Bahrain Bourse

Current year high: 1,605.98 Current year low: 1,361.19

> Review period: Closed March 24 at 1,422.57 points Period Change: -0.6%

Although out of sync with spiking neighboring exchanges, BB stocks remained steady considering the developing security situation in the country. GCC countries sent some 1,500 Saudi-led troops to Bahrain, widening the circle of political and civil confrontation. To make things worse, S&P downgraded counterpart ratings on several banks including AUB and Arab Bank, citing risk of additional pressure on the sovereign. On the bright side, the GCC decided to establish a $20 billion fund to finance development projects in Bahrain and Oman.

Qatar SE

Current year high: 9,242.63 Current year low: 6,647.18

> Review period: Closed March 24 at 8,307.85 points Period Change: 4.7%

Like other Gulf exchanges, the QSE regained its lost ground following positive news from Saudi Arabia, but Qatari firms had plenty to offer too. Several listed companies, including Mawashi, Zad and Qatar General Insurance reported strong 2010 results and estimates showed 34 of 43 listed companies collectively declared some $3.02 billion for the year. It was business as usual, with several acquisition announcements and virtually no impact from regional unrest. Heavyweights Industries Qatar and QNB were up 5.3% and 4.6% respectively during the review period.

Tunis SE

Current year high: 5,681.39 Current year low: 4,058.53

> Review period: Closed March 24 at 4,459.48 points Period Change: 9.9%

Stocks gained momentum on the Tunis stock exchange after trading resumed on March 7 following one week of suspension. Still, S&P downgraded the country’s sovereign credit rating, but affirmed the credit ratings of five Tunisian banks, restoring confidence in the sector despite a negative outlook. Tunisia continued to take solid steps toward establishing a democracy in the country with a first round of elections scheduled for July, but political and economic uncertainty remain. Some stocks advanced steadily, including Carthage Cement at 12.7% during the review period.

Casablanca SE

Current year high: 13,397.47 Current year low: 11,331.57

> Review period: Closed March 24 at 12,581.71 points Period Change: -1.7%

A surprising increase in February was followed by a minor decline in early March, then stocks drifted through the rest of the month without a clear direction, and without any noticeable impact from the NATO-led military campaign on Libya. Casablanca and other cities hosted large rallies calling for reform, with little impact on market performance thus far, as the US hailed Morocco’s king’s pledge for reforms. Banking stocks gave back 1.2% during the review period with Attijariwafa Bank retreating 2.4%.

Egypt SE

Current year high: 7,603.04 Current year low: 5,647.00

> Review period: Closed March 24 at 4,951 points Period Change: -12.3%

The EGX resumed trading on the exchange on March 23 two days ahead of a deadline that could have seen the market removed from MSCI’s Emerging Markets Index. The freedom to sell cost shareholders a 9% decline by the end of the first trading session with investors seeking to escape a steep plunge that reflected the sharp drops in Egyptian stock GDRs on the LSE seen since late Jan. But the second day brought some hope with 97 companies increasing in value compared to only 44 decliners.

April 3, 2011 0 comments

Banking & Finance

For your information

by Executive Editors April 3, 2011

written by Executive Editors

Life’s good in insurance

Lebanon’s life insurance industry should see significant growth in the coming four years, says Business Monitor International (BMI). Between 2011 and 2015 the independent research and analysis firm expects double-digit growth for Lebanon’s life insurance market, as well as those of other Middle Eastern countries. The underdeveloped nature of the regional insurance market has kept growth estimates high for years. BMI estimates that Lebanon’s insurance premiums totaled $1.26 billion last year, with non-life premiums amounting to $859.7 million and life premiums $399.3 million. Further, the company extrapolates that by 2015, premiums will total $2.1 billion with $1.4 billion in non-life and $691.4 million in life premiums. BMI’s report further predicts that the penetration of life insurance should increase to $155.63 per capita by 2015, from $95.28 per capita in 2011. The BMI report touted the success of companies like MedGulf and Arabia Insurance, which have expanded into multiple countries in the Middle East.

Lebanese commercial bank deposits fall

Lebanese commercial bank deposits witnessed a 1 percent month-on-month decrease in January 2011, according the latest figures from Banque du Liban, Lebanon’s central bank. Deposits totaled $106.13 billion in the first month of 2011, dropping from $1.08 billion at end-2010, compared to a $225 million growth over the same period a year earlier. Withdrawals by non-residents, amounting to $779 million, accounted for most of the decrease in deposits, while residents’ deposits fell by $297 million. The dollarization rate increased 2.1 percent since end-2010, as significant local currency withdrawals of $2.55 billion offset an increase of $1.48 billion in foreign currency deposits. Lebanese banks’ overall consolidated balance sheet also contracted by 0.4 percent in January 2011, as deposits made up 82.7 percent of the balance sheet. The contraction was also accompanied by a 1.1 percent expansion in lending activity. Loans grew by $377 million in the first month of 2011 as those extended to non-residents rose by $616 million. Meanwhile, a $239 million drop in loans granted to residents reflected a prevailing wait-and-see mood amongst Lebanese consumers and investors, amid escalated political tensions in the country and in the region.

Multi-billion dollar Etisalat-Zain deal falls through

Abu-Dhabi based Etisalat has scrapped plans to acquire a 46 percent stake in Kuwaiti telecom company Zain, estimated at $12 billion. Etisalat’s statement on March 19 mentioned due diligence results, political turmoil, disagreement among Zain shareholders and new Kuwaiti bylaws binding offers as reasons behind the company’s decision. The deal has been beset with obstacles since talks were initiated in November 2010. In late February 2011, National Investments Company ended its commitment as the deal’s architect after Zain had rejected three bids for a stake in its Saudi Arabia unit, valued at $750 million. The sale of the 25 percent stake was a term for the merger as regulatory authorities prohibited Etisalat from concurrently owning its Saudi affiliate Mobily and Zain KSA. At the time, Etisalat reiterated interest in the deal, offering a maximum of $6.11 per Zain Group share. On March 13, Zain’s board accepted a joint offer by Kingdom Holding and Bahrain Telecom Company (Batelco) for its Saudi assets, reviving hope for the separate deal with Etisalat. The offer is worth a total of $5 billion, out of which Kingdom and Batelco will pay $950 million in cash, and cover $3.8 billion of debt. Zain KSA will pay for the remaining $250 million. Both Kingdom and Batelco are still committed to buying Zain’s Saudi operations. All three were slated to sign a preliminary contract, including a breakup fee, at the end of March.

BDL cleans up

Established for anti-money laundering purposes by Banque du Liban (BDL), Lebanon’s central bank, the Special Investigation Commission (SIC) issued its 2010 annual report this month. The report revealed 254 suspected money-laundering cases, out of which 65.3 percent were local and 34.7 percent were referred from abroad. The results indicate a 25.7 percent increase in alleged dirty money cases since 2009, and a record since 2003, when 272 cases were suspected. Out of the 189 cases investigated by the SIC, 119 were referred to judicial authorities while 70 cases did not fall under the framework of Law 318, the anti-money laundering law. Accordingly, BDL lifted banking secrecy on 23 cases, 21 of which were domestic. Forgery accounted for 21.16 percent of the investigated cases, followed by terrorism and financing of terrorism at 12.7 percent, trade of narcotics at 4.23 percent, organized crime at 1.59 percent and embezzlement of private funds and illegal arms trading, at 0.53 percent each. The remaining 56 percent were not categorized. Local sources, financial investigative units as well as the United Nations and foreign embassies provided a combined 103 names for 22 cases related to terrorism. Institutions including commercial banks, insurance companies, brokerage firms and financial institutions were also examined by the SIC to monitor compliance with Law 318.

Big banks investigated over LIBOR Rate

American, Japanese and British authorities are focusing on major international banks as part of an investigation into the manipulation of the London Interbank Offered Rate (LIBOR) during the 2008 financial crisis. Japanese and US regulators have subpoenaed Barclays, UBS, Citigroup and Bank of America, while WestLB has also received requests for information. Swiss UBS’s 2010 annual report shed light on the investigation, disclosing that the US Securities and Exchange Commission (SEC), the US Commodity Futures Trading Commission (CFTC) and the Japanese Financial Services Authority (FSA), had subpoenaed the bank. Regulators are probing into whether UBS and other major borrower banks have colluded to set their interbank rates too low during the financial crisis to comfort spooked investors and downplay their borrowing costs. LIBOR is calculated by Thompson Reuters for the British Bankers’ Association (BBA), pooling interest rates that banks expect to charge or pay each other for dollar and other currency loans, and calculating their average. The rate is considered a global benchmark rate to price derivatives and financial instruments, and is referred to by more than $350 trillion worth of financial products worldwide. Data reviewed by regulators initially lead to the investigation, signaling a divergence between banks’ low offered rates and their high credit risks during the financial crisis.

Port profits surge, Dubai World reaches debt deal

Dubai World, which announced in November 2009 a standstill on nearly $24 billion in debt, said on March 23 that a final agreement has been signed with almost 80 creditors to restructure its debt, now totaling close to $25 billion. The agreement divides Dubai World’s bank debt into two tranches, with $4.4 billion to be repaid over a five-year period and the remaining $10.3 billion over eight years, with a fixed interest rate of 2.4 percent, described by Bloomberg as “below market.” The remaining debt, owed to the Dubai government, will be converted into equity. On the same day, DP World, a ports operator subsidiary of Dubai World, said its 2010 profits rose 35 percent to $450 million, driven by volume growth in the second half of the year and cost controls. This year is also shaping up nicely for one of Dubai World’s largest holdings, according to DP World executives. “In the first two months of 2011 we have seen 12 percent volume growth across our consolidated portfolio with further margin improvement from the full year 2010,” disclosed DP World’s CEO Mohammed Sharaf.

QIIB to buy out Islamic Bank of Britain

Qatar International Islamic Bank (QIIB), a Qatar-based sharia-compliant bank, announced on March 17 that the bank is undergoing negotiations to complete the purchase of a minority stake in the Islamic Bank of Britain (IBB) with assets of $350 million. QIIB, which boasted assets of $5 billion at the end of 2010, already holds a 80.95 percent stake in the British Islamic lender, and is offering one pence per share for the remainder in a deal that values the IBB at $40.9 million. According to QIIB, the board of directors of IBB has already approved the terms of the offer, although it represents a 70 percent discount on the British bank’s market price. The IBB’s official website listed Qatar’s Sheikh Thani bin Abdulla with a 6.44 percent equity stake as a shareholder and the bulk of the remaining 12 percent in public hands. QIIB’s growth is expected to accelerate following the Qatari central bank’s decision to prohibit Islamic banking branches at conventional lenders by the end of 2011. Earlier in March, QIIB received approval from its shareholders to issue sukuk (Islamic bonds) to boost capital if needed, giving the bank more capacity to potentially acquire Islamic assets from conventional counterparts.

Egypt’s banks get bumped

Moody’s Investor Services, a global credit ratings agency, on March 21 downgraded by one notch from Ba3 to B1 the foreign-currency deposit ratings of Egyptian state-owned banks National Bank of Egypt, Banque Misr, Banque du Caire, as well as privately-owned Commercial International Bank, and Bank of Alexandria. Local-currency deposit ratings for the three state-owned banks were also dropped two notches, from Ba1 to Ba3, and by one notch to Ba2 for Commercial International Bank. Exposure to lower-rated government debt along with deteriorating economic conditions prompted a decline in the standalone credit strength of the affected banks. Furthermore, the ratings agency pointed out that the downgrade of Egypt’s sovereign rating limits the country’s capacity to support its banking system. But the government is taking action to bolster its financial position. According to an EFG-Hermes report, Egyptian Finance Minister Samir Radwan told Egypt’s Al Mal newspaper that the country has requested a $5 billion loan from the International Monetary Fund.

April 3, 2011 0 comments

Economics & Policy

Executive Insight – Carbon neutral skies in Middle East Aviation

by Alessandro Borgogna April 3, 2011

written by Alessandro Borgogna

Like many other industries, the global aviation sector is preparing for a future in which increasing financial and political pressureswill be brought to bear on the issue of climate change.

Airline operators are putting together plans to cut emissions of carbon dioxide and other greenhouse gases, and these changes may squeeze consumers and businesses in the Middle East, through higher fares, reduced routes and fewer services. But focusing only on these short-term pain points ignores the tremendous economic opportunities the industry’s transformation could bring to those nations that act first to reposition themselves for competition in a carbon-constrained world. Developing countries have unprecedented access to financial support to help them begin this transition and offset rising costs. The extent to which they take advantage of these funds may determine whether the region can capitalize on the new industries and jobs that will likely result.

The European ETS deadline

The carbon conversation has been slow to reach the aviation sector, due to its relatively small contribution to global emissions (some 2 percent, according to the United Nations), but a near-term deadline has captured the industry’s attention. In January 2012, aviation will be held accountable for its emissions under the European Union Emission Trading Scheme (ETS). The only global effort so far to attempt to include the aviation sector in a carbon-compliance trading system, the ETS mandates that any airline operators flying in and out of the continent — regardless of where they are based — will have to offset their related carbon emissions above a fixed allowed amount.

Air transport emission growth

If extension of the ETS goes on as planned, Middle Eastern airline operators will have to choose between passing on their higher costs to passengers, mitigating them through voluntary offsets purchased by passengers or reducing their profits for the sake of price competitiveness. The global air transport industry has filed a legal challenge to the EU’s plan — but regardless of its outcome, Middle Eastern airlines are still likely to face pressure due to growing global recognition of the sector’s rising importance in the fight against climate change. In 2009, the International Air Transport Association (IATA) pledged to achieve carbon-neutral growth beginning in 2020; the International Civil Aviation Organization (ICAO) followed last year with a similar goal.

While the 1997 Kyoto Protocol exempted aviation when it affirmed the ETS as the most efficient and effective way to achieve global greenhouse emission reductions, consistent 4 percent to 5 percent annual growth in global air passenger traffic over the last decade has put the sector very much in the spotlight as countries work toward a post-Kyoto agreement.

Opportunities in low-emission

Fortunately, the international accords reached in Copenhagen in 2009 and Cancun in 2010 supported low-carbon investments in developing nations. The platforms for these initiatives are called low-emission development strategies (LEDS), which involve short-term mitigation steps (called ‘nationally appropriate mitigation actions,’ or NAMAs) and more structural mid-to-long-term changes (‘national adaptation programs of action,’ or NAPAs). The LEDS platform represents a tremendous opportunity for the Middle East, and particularly for its aviation industry. Airline operators can now implement emission-reducing projects and receive marketable carbon credits in return, or they can coordinate a larger scale transformation and apply for funding through the NAMA framework. Thanks to these new efforts, emissions-reducing projects don’t have to break the bank. Projects can either be co-financed or fully financed through a growing pool of internationally available funds. The Copenhagen accord of 2010 established $30 billion in fast-start financing for such projects, and delegates meeting in Cancun last year committed to expanding that amount so that $100 billion in new and additional funds are made available every year by 2020.

Plan of action

Rather than wait to see if they will be forced to comply with the European ETS next year, aviation operators in the Middle East should start laying the groundwork now to get ahead of coming regulations and to investigate the possibilities of breakthrough changes in the fast-growing market for alternative fuels. This can be accomplished through three broadsteps:

Take short-term actions to “clean house”

Fleets operated by Middle East airlines are newer, and hence more efficient, than their European counterparts’, which will help to blunt the impact of the ETS if it is enforced. Still, there is ample room to improve the overall efficiency of the air-traffic system and ensure that all carbon waste is eliminated. Flight delays and aircraft congestion are principal contributors to the aviation sector’s inefficient energy use; these can be dramatically reduced by enhanced cooperation between civil and defense aviation organizations, alongside other regional efforts to optimize aircraft routing. In addition, existing aircraft lease contracts should be reviewed to eliminate the most inefficient parts of the fleet.

Enhance government-industry ties

Operators should engage their governments to ensure that they assume an active role in formalizing a LEDS for the sector that is focused on activities that qualify for NAMA or NAPA support. This will allow the industry to realize carbon credit returns on capital invested and, where applicable, access international carbon finance funds. Ideally, designing a LEDS should be a country’s first step, laying the foundation for future activities, but this may not always be possible. Developing a LEDS is a long and evolving process, and it may make more sense to weave the LEDS approach into existing carbon-reducing activities and use it as the basis for future growth.

Define the business case for bio-fuels

Barring any quantum-leap breakthroughs in aircraft design, the most promising opportunity for emissions reductions in the aviation sector is in bio-fuels, which produce up to 80 percent fewer carbon emissions than fossil fuels over their lifecycle (provided they are grown locally). At least 10 airlines outside of the region have already conducted successful flight tests with feedstocks ranging from sugarcane to jatropha (a type of shrub) to coconuts. Jatropha, in particular, holds immense promise for the region, as it is a non-food crop that can grow in desert climes and does not require much irrigation. Middle East airline operators are right to be concerned about their profits and competitiveness as the deadline looms next year for compliance with the European ETS. But there are bigger forces in play, and focusing on this factor alone may cost them the chance to seize the opportunities that are emerging with the evolution of carbon finance markets. Middle Eastern airlines have been growing at a much faster pace than global benchmarks, if that growth is to continue then the region’s operators and regulators will need to plot a course for competing —and prevailing — in a carbon-constrained future.

April 3, 2011 0 comments

Economics & Policy

Executive Insight – OIF

by Fabio Scacciavillani April 3, 2011

written by Fabio Scacciavillani

For those eager to engage in predictions as to where the events that have rocked North Africa, the Middle East and beyond will lead, it would be wise to remember that these are uncharted political waters, and the long wave of repercussions will run for decades as the old post-colonial order crumbles.

Our perceptions and expectations are somewhat distorted by history books that condense in a few pages an account of events that took years to develop and fully come to fruition. Even upheavals which some of us witnessed during our lifetimes leave memories that focus on the climax and exclude the lull. So when our internal equilibrium is shaken, we unrealistically expect a swift ending.

The collapse of the Soviet Union and the Warsaw Pact started with Gorbachev’s ascent and perestroika, then the break-up throughout Eastern Europe and finally the indelible image of Yeltsin on a tank declaring the end of the Empire. But it took several years. And the aftermath was not a smooth transition, but years of hyperinflation, mass unemployment, subsidy cuts, institution building, uprooting of state monopolies and judicial reforms.

In essence, historical processes so profound to reshape entire continents often follow a “drunkard’s walk” — two steps forward, one step back and maybe a few sideways. The vicissitudes of the “Arab Spring” will likely follow such a pattern. Hence in the months and years to come we will need a framework to evaluate the direction, the pattern and the likely outcome of this process. As economic exclusion leads to the mounting resentment that caused the turmoil, fiscal interests and redistribution will be dominant factors in shaping the course of history.

The convulsions have been especially acute in countries which depend on earnings from renting energy commodities (and also tourism). Rents provide the state with a cache of resources, but little incentive to build modern institutional capital, a pre-condition for social and material advancement. When governments can obtain conspicuous resources without having to resort to taxation it is hard for them to resist the temptation to eschew checks and balances; officials feel immune to scrutiny, deeming a partial distribution of these resources to powerful interest groups sufficient to retain power.

In the long run, the lack of modern public institutionsa trophies the ability of a society to progress, wastes the energies of the youth, spreads bitterness and often spurs a withdrawal toward tribal or sectarian splits. Resources are rarely eternal and in any case their size tends to shrink relative to the growing population. Unless the revenues are invested to diversify the economy into new sectors and enlarge the pie for all, eventually hand outs alone will not be enough ensure decent living standards.

Protests and riots should be interpreted not only by a call for redistribution but also for a social contract which fosters economic inclusion, upward social mobility and betterment opportunities. Unfortunately, this transformation cannot be delivered overnight and so the undercurrent of unrest will not abate instantly.

Still, it is a very positive sign that at least in the Gulf Cooperation Council the rulers have grasped what is at stake and have launched the so-called ‘Gulf Marshall Plan.’

One hopes that it will constitute the first step in a new economic strategy which desists from adding cadres to an already bloated and often utterly inefficient bureaucracy and focuses on skill creation and entrepreneurial talent. Likewise, one hopes that awareness spreads among decision makers that political survival is not only a matter of throwing a few handouts around, but devising a set of rules hinging on rights and not on privileges, on fairness and not on proximity to elites, on competence and not on favors. It will be a long road because it will clash with entrenched bad habits and long-established traditions — a good reason not to delay the journey and stick to newfound determination.

Fabio Scacciavillani is chief economist at the OmanInvestment Fund

April 3, 2011 0 comments

Finance

Harvesting higher prices

by Vanessa Khalil April 3, 2011

written by Vanessa Khalil

If anything can be reliably forecast amid the growing upheaval in the Middle East and North Africa, it is the direction of global food prices. They have currently settled at record highs and are certain to increase in the future.

According to the United Nations Food and Agriculture Organization (FAO), an index of 55 food commodities rose 2.2 percent in February, the eighth consecutive month that food prices have increased and a record high since 1990. FAO’s cereal price index, which includes main food staples such as wheat, rice and maize rose 3.7 percent in the same month, the highest increase in one month since July 2008. Meanwhile, the International Monetary Fund’s statement that “the world may need to get used to higher food prices” did little to downplay concerns about further price increases. Soaring food prices were among the factors playing into the uprisings in Egypt and Tunisia, further unrest elsewhere in the Middle East and North Africa is only helping to push these prices upward. Sifting through the wider implications of the unrest, among other factors, is crucial in understanding the current world food situation and to get a sense of what is to come.

What goes up…

Food is not the only commodity that’s getting more expensive; one side effect of the “Arab Spring” has been the recent crude oil price-jump to more than $100 per barrel, which will likely serve only to drive up food prices even higher.

Crops were among the commodities that beat stocks, bonds and the dollar in gains for a third straight month. “Probably the most important implication of this oil shock is on financial markets,” said Abdolreza Abbassian, senior economist at FAO.

If oil supply disruption concerns persist, food prices will continue to set records. Uprisings in Libya have already led the African nation to halt its production of 1.6 million barrels per day. Saudi officials’ statements that the country would compensate for Libya’s oil shortfalls calmed markets to some extent but the price impact was limited on fears that Saudi Arabia might exhaust its spare capacity.

“The problem is that transportation costs are up, which trickles down to food prices”, said Simon Neaime, section chief of economic analysis at the Economic and Social Commission for Western Asia (ESCWA).

For grain producers, the oil shock automatically implies higher costs of production. According to a recent report by the Organization for Economic Cooperation and Development, energy accounts for over one-third of grain production cost.

On the macro-economic level, however, it is tightened supply and unforeseen demand that moves food prices upward. The first three months of 2011 saw MENA governments hoarding staple crops in bulk in anticipation of the trouble ahead. In February 2011, the Egyptian government bought 175,000 tons of wheat from the United States and Australia, while Saudi Arabia stockpiled a year’s worth of wheat.

Yet the MENA’s frantic purchases to boost stockpiles had a one-time impact on the market. “All that these countries did was stay on the safe side rather than wait a month or two when food prices would be much higher, or when they [might not] have governments,” FAO’s Abbassian said.

Currency exchange rates are also contributing to high food prices, specifically for imports in the MENA region. “Another factor we are talking about here is the euro,” said ESCWA’s Neaime, who adds that the euro won’t be going down anytime soon. “Many North African countries trade mostly with the [Eurozone]. Whenever the euro is appreciating, they are importing inflation.”

Fickle weather also remains a long-term driving force behind high food prices. Russia’s ban on grain exports that had started in summer 2010might be extended until year-end 2011. Climate threats are also a factor for 2011; at a March conference on Near East, FAO raised concerns of drought, floods and soil degradation in the region. Meanwhile, the La Nina weather pattern is forecasted to lead to heavier rainfall in the northern United States and Canada, possibly washing out harvests and tightening supplies on corn andwheat.

Weather aside, Japan’s triple disaster is also curbing food supply. The 8.9 magnitude earthquake and the tsunami that followed destroyed close to 20 percent of the agricultural and food industry in Northeast Japan. Meanwhile, the nuclear crisis that resulted from Japan’s Fukushima reactor meltdowns led to food restrictions on Japanese exports. The US, Australia, Singapore and Hong Kong banned food imports from some regions of the country after high levels of radioactive iodine were detected in some samples.

…Must come down?

Among the downward price pressures on food are the expectations that spring wheat crops will boost supply. “Wheat is one crop that is easier to predict right now because plantings have just taken place this spring. We do see a strong expansion,” Abbassian said. Likewise, the US Department of Agriculture’s “Supply/Demand” March report forecasts world wheat crop to reach 668 million tons for 2011-2012, up 21 million tons on the yearearlier.

Cereal production

As supply increases, the stockpile in the MENA region could damper demand, namely in Egypt and Saudi Arabia. “That could take away some of the spring and summer purchases and correct prices,” said Abbassian.

Meanwhile, some experts in the foodstuffs industry exporting to Gulf Cooperation Council countries expect lower demand through the rest of the spring, as a wait-and-see mood prevails among consumers and government buyers.

Preemptive government subsidies in the MENA may also hold down prices consumers pay on the shelf. As an example, the United Arab Emirates recently agreed with the Union Cooperative Society supermarket chain to reduce prices, mainly on rice and bread, back to their 2004 figures starting this April and running until year’s end.

“Higher prices now pressure macroeconomics rather than consumers who are poor and still receiving subsidies. OPEC [Organization of Petroleum Exporting Countries] can afford to help consumers,” Abbassian said. But Neaime has his doubts about less wealthy Middle Eastern countries following the trend. “Countries like Lebanon and Egypt don’t have enough fiscal space to deal with price shocks and subsidies. They have their debts and deficits to worry about,” he said.

Growing pains

But, natural disasters and political turmoil are pieces of a much bigger mosaic. The world’s population is growing at an alarming rate, and resources are getting scarcer. “It’ll take a lot to feed nine billion people in the future,” said Neaime. The IMF asserted that record food prices would persist in line with economic growth and rising living standards.

The pain will be felt especially by the poor, particularly in Africa’s most impoverished countries. According to Neaime, despite economic progress in the developing world, the benefits have not been distributed throughout.

“Economies are growing and so is GDP [gross domestic product] but nothing is happening on a social level,” said Neaime. This means severe repercussions for those who can’t afford food at the current price levels, let alone at future ones. “If you are poor, then that 50 or 60 percent of your income will suddenly not be enough,” added Abbassian.

The repercussions of rising food rises are that they tend to foster greater general social inequity and instability, given that the poor are less able to afford their daily bread while the wealthy cash in on rising food prices through investing in commodities. This often leads to further price hikes and the perpetuation of a cycle that becomes more unpleasant and unsustainable the longer it persists; in the absence of a global calamity to stunt future growth prospects in emerging economies, food price increases seem all but foretold.

So, while the unrest sweeping the MENA region came unexpectedly to many, the unrest down the road, both here and beyond, should not.

April 3, 2011 0 comments

Finance

Executive Insight – Only real demand counts

by Bertrand Carlier April 3, 2011

written by Bertrand Carlier

Behind the current short-term fluctuations linked to shifting growth prospects lies a powerful uptrend in commodity prices. A deep-seated change in lifestyles in emerging countries is creating new needs in a self-sustaining process that generates ever more demand.

At its latest plenary session at the beginning of March, China’s National Assembly confirmed the direction in which markets are moving: industrial metal prices are likely to continue a rally that started a decade ago.

Nobody can or should invest in commodities unless they are convinced of the potential demand for capital goods and infrastructure needed to underpin endogenous economic growth, as opposed to export-driven expansion alone.

According to the Appliance Manufacturers and China Building Association, copper consumption already amounts to 41 kilograms per home. Looking at China’s 12th five-year plan, the proportion of the country’s population living in urban areas will expand from 47.5 percent today to 51.5 percent in 2015; this urbanization will require tens of thousands of kilometers of railways, roads and piping. It will also require new power stations to meet energy demand, and copper and copper derivatives will be needed here as well.

Whatever the sector, requirements are staggering and the figures speak for themselves. According to the International Copper Study Group, China accounted for 7.87 million tons of the 22 million tons of copper used worldwide in 2009. By comparison, Western Europe, the planet’s second-largest consumer, accounted for “only” 3.13 million tonnes. A few figures from the production side put this trend in perspective: Escondida, the biggest copper mine in Chile, can produce a maximum 1.3 million tonnes per year, and 1.09 million tonnes were actually extracted in 2010. Chile’s total output increased 0.5 percent last year.

Urbanization & income, country comparisons

The 8 percent increase seen in world demand in 2010 should be compared with a 4 percent increase in output. “Shortfall” is a euphemism, and prices are bound to rise further even without consideration of strategic stocking. Having surged to almost $10,200 per ton, copper prices are now fluctuating just above the $9,000 mark. This level looks attractive in the long term.

The emerging-country demand argument may be a cliché, but it represents the stark reality of the situation, especially given China’s latest development plans. Identifying demand factors is the best means of evaluating changes in prices.

Cashing in on calamity

Since February 15, 2011, issues relating to world growth have weighed on all commodity prices. The Japanese disaster has followed instability in the Middle East and North Africa (MENA), clouding the prospects for activity and fuelling price volatility. Yet while instability effectively creates a tax on consumption via crowding-out effects, Japan’s predicament actually strengthens the upswing in commodity prices. After all, reconstruction efforts will require purchases of copper over and above the country’s 1.22-million-ton consumption in 2010. Short-term volatility should not mask a long-term trend bolstered by rising demand for a product of limited supply.

Copper use by region in 2009 (millions of tons)

Copper use by country 2009

In terms of the upheaval currently rocking the MENA region, the outcome is uncertain due to the social factors that are contributing to these crises. The movement of revolt, which derived its power from the ever-widening gaps within these societies, has taken a turn that could threaten stability across the region. None of the main producers has been affected for the time being. The action taken by the Gulf Cooperation Council and conciliatory gestures in the form of handouts are sure signs that the regimes in place are feeling the pressure and acknowledging the risk of social unrest.

Copper use by business sector and region in 2009

The increase in real demand masks a political dimension, too. Just imagine the social unrest if, for want of basic materials, China fails to deliver the 38 million new homes it has promised under the current five-year plan. Access to such resources is vital and readily explains Chinese and Indian commodity-related acquisitions and equity stakes.

That said, premia for high-probability events are rising, as the case of the insurance market shows. Soaring oil prices against a backdrop of instability in the Middle East and North Africa are a salutary reminder of that fact. In an inversion of the usual relationship on the commodity markets, volatility recently rose in line with a sharp increase in crude oil prices. This insurance premium is apparently $10-$15 per barrel, a stark pointer toward geopolitical uncertainty.

The synchronization of growth cycles is reflected in a combined surge in energy demand. As with copper, the factors driving up energy prices depend above all on growth. Commodity prices are often set by marginal demand, with the disappearance of a few hundred barrels of oil per day out of a total of around 87.5 million barrels consumed per day triggering immediate price adjustments to the upside, with the size of the move depending on the quality of the oil concerned.

The 2008 crisis probably boosted awareness among major consumers such as India and China that they have to invest if their populations are to benefit from endemic growth. In the present recovery phase, demand for commodities is now increasing among the major developed countries. This amounts to a long-term demand shock in the context of insufficient pre-crisis investment, compounded recently by geopolitical risk.

This is an explosive mixture that is likely to drive commodity prices higher still, amid heightened volatility that reflects wavering growth expectations.

Bertrand Carlier is the manager of Bel Air Fixed Income & Commodity Funds at Credit Agricole Suisse

April 3, 2011 0 comments

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No queen for the tribes

by Peter Speetjens April 3, 2011

written by Peter Speetjens

These are not the easiest of days for Jordan‘s King Abdullah II. The “Arab Spring” has reached Amman and is putting his throne under pressure from two sides. Every Friday, which has been dubbed the national “day of rage,” thousands of leftists and Islamists of mainly Palestinian descent take to the streets to demand political reform. On the other side of the spectrum, the Jordanian tribes have grown ever more vocal in their demands to curb the growing Palestinian influence in the country.

The focal point of their criticism has been none other than Queen Rania, herself of Palestinian descent. In February, 36 tribal representatives sent an open letter to the king in which they accused his wife of “building power centers for her interests that go against what Jordanians and Hashemites have agreed on in governing, and [she] is a danger to the nation, the structure of the state and the political structure of the throne.”

The letter furthermore criticized her frequent presence in the international media, and even accused her of having registered former tribal land in the name of her family. The letter hit the country like a bomb. After all, it is by law forbidden to criticize any member of the royal family. Yet the royal court could do little against the signatories, as they represented some of the country’s largest tribes, including the Bani Sakhr, which in early March blocked the airport road in protest against the state’s ongoing confiscation of tribal lands.

The royal court did act, however, when Agence France Presse Bureau Chief Randa Habib dared share fragments of the letter with an international audience. Habib had to bear the brunt of the royal anger. The court threatened to sue both her and the press agency for “slander,” as she had referred to “tribal leaders,” when in fact they were only representatives. Habib was also fired as columnist for the state-owned daily The Jordan Times.

Among the signatories was the well-known right-wing dissident and former Member of Parliament Ahmad Ouweidi Abbadi, the chairman of the Jordan National Movement, who in 2007 was sentenced to two years in jail for accusing former Interior Minister Eid el-Fayez of corruption. According to him, the “true” Jordanians are today second-class citizens within their own country.

While some of letter’s accusations seem exaggerated, the fundamental sentiment behind the criticism is shared by a considerable part of the population and touches upon the very essence and split nature of Jordan. The country’s original inhabitants mainly consist of tribal Bedouins. It was only after the establishment of Israel in 1948 and the 1967 Six-Day war that hundreds of thousands of Palestinian refugees entered the kingdom.

Many received passports and, on paper at least, are today full-fledged Jordanians. Some 1.2 million among them, however, only have a residency permit. The tribes are extremely worried that the royal court aims to offer them the Jordanian nationality. “King Abdullah must choose: Rania or the throne,” Abbadi told me bluntly. “If she will not disappear we will sooner or later have a civil war.” Harsh words from a bitter man, yet Abbadi is not alone. Some analysts have described the current tense situation as “a Black September without arms,” referring to the 1970 fighting between the PLO and King Hussein’s troops.

Former general Ali Habashneh, the widely respected chairman of the National Committee for Retired Servicemen (NCRS), did not sign the petition. Nor did he accuse Queen Rania of improper behavior or transaction. However, he too believes she has too much of a say at the Royal Court. As early as May 1, 2009, Habashneh offered the King, on behalf of the NCRS, a petition expressing the organization’s concerns. On March 15 this year NCRS again made headlines by publicly claiming that the royal court over the past decade has issued some 130,000 passports to Palestinian refugees.

Habashneh furthermore accused the government of being “weak” in the face of “United States and Israeli pressures to settle Palestinian refugees in Jordan.” According to him, Israel’s right-wing government has killed the idea of an independent Palestinian state, with the (financial) help of Washington, by turning Jordan into Palestine. In this scenario, he warned, the Black September without arms would likely begin to gather weapons.

Peter Speetjens is a Beirut-based journalist

April 3, 2011 0 comments

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Resistance on the high seas

by Nicholas Blanford April 3, 2011

written by Nicholas Blanford

The stakes are growing in the looming confrontation between Lebanon and Israel over the suspected existence of massive fossil fuel deposits in the eastern Mediterranean. The delight in Israel at the recent discovery of two large gas fields off its northern coastline has given way to concerns that it could provide the pretext for a new war with Hezbollah.

That anxiety has hardened with the uncertainties regarding Israel’s arrangement to purchase Egyptian gas following the collapse of Hosni Mubarak’s regime and calls in Cairo to annul the agreement. The upshot is that the potential oil and gas wealth in the eastern Mediterranean could provide an economic windfall for the countries in the area — Lebanon, Israel, Syria and Cyprus — but it also represents a colossal security headache.

The two gas fields off the northern Israel coast — Tamar and Leviathan — contain an estimated 237.8 billion cubic meters and 453 billion cubic meters, respectively, sufficient to satisfy Israel’s energy needs for the next half century. Last year, the United States Geological Survey estimated that the Levantine Basin Province, which encompasses parts of Israel, Lebanon, Syria and Cyprus, could contain as much as 122 trillion cubic feet of gas and 1.7 billion barrels of recoverable oil.

Key to the tensions between Lebanon and Israel over the gas deposits is that their joint maritime border has never been delineated. Beirut has asked the United Nations to help mark a temporary sea boundary between Lebanon and Israel, a maritime equivalent of the “Blue Line” established by the UN in 2000, which corresponds to Lebanon’s southern land border. The UN has agreed to assist and the Israelis are studying the proposal. But the UN faces a potentially thankless task. The demarcation of the Blue Line 11 years ago was mired in mutual distrust and wrangling with neither the Lebanese nor the Israelis willing to concede an inch of territory to the other. Without goodwill from both sides, the maritime boundary could be even more difficult to define given the complicated geography of the coastline. Some have described the dispute over the gas fields along the Lebanon-Israel border as another “Shebaa Farms” — a source of manufactured tension with Israel.

But one European diplomat in Beirut said that parallels between the Shebaa Farms and the off-shore gas fields are misplaced. “Forget the Shebaa Farms,” the diplomat said, “the Lebanese are not being difficult [over the maritime boundary], because they have real economic interests here. Unless there is a pragmatic arrangement you could have a confrontation.” It is perhaps no surprise then that the sudden interest in the potential fossil fuel wealth off the Israeli and Lebanese coastline has turned the Mediterranean into a potential new theater of conflict between the Israelis and Hezbollah.

Hezbollah’s ability to target shipping — and possibly offshore oil and gas platforms — was demonstrated in the month-long war with Israel in 2006 when the militants came close to sinking an Israeli naval vessel with an Iranian version of the Chinese C-802 missile. Hezbollah fighters have since hinted that they have acquired larger anti-ship missiles, double the 72-mile range of the C-802 variant. Last year, Hezbollah Secretary General Sayyed Hassan Nasrallah warned that his organization now possesses the ability to target shipping along the entire length of Israel’s coastline. In January, Israeli Prime Minister Benjamin Netanyahu described the offshore gas fields as a “strategic objective that Israel’s enemies will try to undermine,” and vowed that “Israel will defend its resources.”

In February, the Israeli navy reportedly presented to the government a maritime security plan costing up to $70 million to defend the gas fields. Upping the ante even further, Nasrallah promised in March that if Israel threatens future Lebanese plans to tap its oil and gas reserves, “only the Resistance would force Israel and the world to respect Lebanon’s right.”

Then there is the recent passage of two Iranian navy vessels through the Suez Canal into the Mediterranean and the Israeli navy’s subsequent discovery in March of a smuggled consignment of arms and ammunition, including six C-704 anti-ship missiles believed destined for Hamas in the Gaza Strip. The missiles, though smaller than the C-802, could target Israeli shipping off Gaza as well as Israel’s Yam Tethys oil rig off the coast of Ashkelon. The oil and gas fields off the Lebanese and Israeli coasts look set not only to become a potential long-term source of wealth — but also a source of conflict in the years ahead.

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

April 3, 2011 0 comments

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Time to rethink a nuclear Middle East

by Paul Cochrane April 3, 2011

written by Paul Cochrane

Three days after an earthquake measuring 9.0 on the Richter scale critically damaged Japan’s Fukushima Daiichi nuclear power plant (NPP), the president of South Korea and the crown prince of Abu Dhabi attended a ground-breaking ceremony of the Braka NPP in the United Arab Emirates; it is the first of four to be built under a $20 billion contract inked in 2009 between the Emirates Nuclear Energy Corporation and a consortium of South Korean and American companies.

The inauguration celebration could hardly have been more inopportune. In the course of a week the incident at the Fukushima NPP went from being rated four on the International Atomic Energy Agency’s (IAEA) International Nuclear and Radiological Event Scale, “an accident with local consequences,” to level five, “an accident with wider consequences.” The Fukushima disaster is the only level five rating since the Three Mile Island meltdown in the United States in 1979. There has only been one level seven, the highest rating, in Chernobyl in 1986, which, according to research by New York’s Academy of Sciences published last year, resulted in the deaths of 985,000 people from cancer and related diseases.

The global “nuclear renaissance” touted just a few years ago seems far less secure, a fact reflected in investor sentiment: uranium prices on the spot market following the Japanese calamity plunged 27 percent to $50 per pound as countries started reconsidering the construction of new NPPs.

If there were ever a time to rethink nuclear power it is now, certainly before the dozen Middle Eastern and North African countries that have signed nuclear cooperation agreements start building NPPs. And the risks need to be seriously assessed, not just in terms of security, the logistics of storing spent fuel for thousands of years and so on, but also in terms of earthquake risk.

The Middle East is chock full of tectonic plates, with the Arabian plate in the middle flanked by the Eurasian, African and Indian plates. One of the most seismically active continental regions on earth is just across the sea from the United Arab Emirates, the Zagros Thrust in Iran. Of equal concern is the fact that modern systems to measure seismic activity have only recently been introduced in Saudi Arabia and Oman, while the UAE set one up just this year.

While there is little chance of a tsunami, an earthquake of a magnitude of 5.1 shook the emirate of Fujairah in 2002, and repeated seismic activity in the locality suggests that other, more sizable earthquakes are likely in the future. “When?” is of course the question, and the world can only hope that those building NPPs will do so with the worst-case scenario in mind; the Fukushima NPP was built at a time when the thought of it having to withstand a 9.0 magnitude earthquake was considered unlikely.

Braka was chosen as the site for the UAE’s first NPP as it is “an area with a very low probability of earthquakes — what is called low seismicity,” Ambassador Hamad al-Kaabi, UAE Permanent Representative to the IAEA, told the press after the Fukushima disaster. Yet it is not just unexpected earthquakes that are a concern when it comes to nuclear power. Transparency has been a major issue in the nuclear industry globally; in a 2008 US diplomatic cable released by WikiLeaks, a Japanese politician said the country’s Ministry of Economy, Trade and Industry, the department responsible for nuclear energy, has been “covering up nuclear accidents and obscuring the true costs and problems associated with the nuclear industry.”

The UAE hardly has a sterling reputation for transparency and accountability — think back to how the Dubai debt imbroglio was handled in 2009. If the Japanese, with 54 nuclear reactors, cannot be relied upon to be transparent, can we be sure the UAE will be?

Let us hope the UAE’s decision to go ahead with nuclear power, just as news of Fukushima’s fallout was dominating headlines, will not be retold through history as the epitomic example of a warning unheeded.

Paul Cochrane is the Middle East correspondent for International News Services

April 3, 2011 0 comments

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Dialogue of the deaf

by Peter Grimsditch April 3, 2011

written by Peter Grimsditch

The clash between journalists and the establishment in Turkey has descended into a dialogue of the deaf. The ruling Justice and Development Party (AKP) is noted for its dedicated acquiescence to George W. Bush’s philosophy that the press is either “for us, or against us.” On the other side of this Mexican standoff is an equally dedicated press — though printing credible stories with detailed evidence to support the narrative is not necessarily part of that dedication.

As the battle now stands, dozens of journalists are in jail, accused of taking part in a vast conspiracy — dubbed the Ergenekon case — to overthrow the government. The mere fact that they have been accused is enough for organizations like Amnesty International to declare that the government is guilty of a low blow and is intent on curbing press freedom; the possibility that some of them may actually have something to answer for does not arise.

An impartial referee would do well to remember that the accused are journalists, not paragons of virtue who can do no wrong. In March the government introduced a draft bill purportedly to protect journalists from prosecution over articles related to judicial investigations. Foul play again, according to Ercan Ipekçi, a spokesman for the Freedom for Journalists Platform, who says the law would effectively ban journalists from reporting on judicial investigations altogether. Well, not quite.

The preamble to the draft law talks of a “clarification about the circumstances in which reporting on investigations would break the law,” meaning press campaigns demanding the release of suspects detained by the police would be illegal.

“This is a retreat from the current situation and is thus unacceptable,” said Ipekçi. Journalists might not like to admit it, but it is not their function to represent a defendant or to put up the arguments of a lawyer seeking a dismissal of the charges, in this or any other case.

Turkish journalists ought to have no interest in prejudicing the cases of those under arrest, so why would they want to try a case in print ahead of an actual hearing? Whether or not journalists should divulge early on the discovery of supposedly manufactured evidence underpinning the charges is a moot point; in a well-ordered system there is recourse for lawyers to present such findings to a judge for a timely ruling on alleged skulduggery by the police or prosecutors.

The Turkish judicial system is in a state of flux and reform, however, and defense lawyers in the Ergenekon case have not been able to follow this path. Even if the journalists do provide the only forum in which to raise issues of official impropriety, they do not earn many plaudits for persistence. Among the failings of a press that, with exceptions, frequently prevents detail from getting in the way of telling a good story, is that it has yet to learn the virtues of doggedly pursuing its investigations until it gets a result.

There have been many stories in the past few months alleging faked “evidence” adduced against some of the Ergenekon suspects. Yet once the initial flurry of excitement inherent in exposing such alleged corruption had subsided, there were few attempts to follow up and force the issue to a conclusion. Yesterday’s good story is tomorrow’s lining on the floor of the birdcage.

There may well be serious doubts about the freedom of the press in Turkey — certainly the AKP in general, and Prime Minister Recep Tayyip Erdogan in particular, are very sensitive to criticism and shower the press with a confetti of writs — but interfering in judicial trials is not the battleground on which to fight.

The answer is that if a complementary set of laws safeguarding defendants’ rights were in place, these questions of interfering in the judicial process wouldn’t arise. In the developed world, for the most part, there is a time limit for detaining suspects without charging them and subsequently providing defense lawyers with copies of the evidence against those who do face trial. But in Turkey, under certain circumstances, a suspect can be held in jail for up to 10 years without facing a charge.

The government’s real sin may be its procrastination in reforming a judicial system still emerging from the dark ages. Instead of introducing contempt of court legislation, it might be better engaged in creating a judicial system that ought not to be held in contempt.

Peter Grimsditch is Executive’s Istanbul correspondent

April 3, 2011 0 comments