In this issue:

China's Li Peng To Visit Philippines, Indonesia

Malaysia Moves Ahead with Golden Dinar Plan

Probe of Assassination of Afghan VP Yields No Results

Northern Alliance Battles Among Itself

Musharraf's Claim of an al-Qaeda Regrouping Is Contested

Poppy Cultivation Surging in Afghanistan

Abu Sayyaf Alive and Well on Jolo

Japan, North Korea Agree on Family Reunion Project

From the Vol.1,No.25 issue of Electronic Intelligence Weekly
Asia News Digest

China's Li Peng To Visit Philippines, Indonesia

According to the New Straits Times of Aug. 21, Chinese leader Li Peng will visit both the Philippines and Indonesia, two economies on the brink of the abyss. The Philippines trip had been long planned for the first week in September, but the Indonesian stop has been added suddenly, in part because of Taiwan Vice President Annette Lu's visit there last week.

Lu was at first denied access to Jakarta, and went on to her vacation in Bali, but was then allowed to stop in Jakarta, where she is reported to have agreed to buy 3 million tons of liquid natural gas (LNG) from Indonesia over 25 years. China just awarded a huge contract to Indonesia to supply gas to Fujian Province, but gave a larger contract for LNG for Shanghai to Australia, rather than Indonesia.

Li Peng's visit indicates that the Lu visit (which was opposed by Beijing) will not be allowed to disrupt relations. China's role in Indonesia is increasingly critical as the Indonesian economy faces South American-style debt problems.

Malaysia Moves Ahead with Golden Dinar Plan

Malaysia will start using the golden dinar in its trade with some fellow Islamic countries by the middle of next year, Special Economic Adviser to the Prime Minister Tan Sri Nor Mohamed Yakcop told reporters this past week. He was speaking, following his address to a two-day international conference on a "Stable and Just Global Monetary System: Viability of the Islamic Dinar," held in Kuala Lumpur on Aug. 18-19. Tan Sri Nor Mohamed said the government has started talks with a number of countries on adopting the medium of a bilateral payment arrangement (BPA).

The conference attracted over 300 participants, and was hosted by the Islamic University of Malaysia, which has enjoyed support from Saudi Arabia.

Tan Sri Nor Mohamed told reporters, "The process has started..., we'd like to promote the use of gold dinar and anchor it." He did not identify the countries with which Malaysia has begun negotiations, but said response has been good. Morocco, Libya, and Bahrain are reportedly among the North African/Middle Eastern countries to have expressed keen interest. Malaysian Prime Minister Datuk Seri Dr. Mahathir Mohamad first proposed in 2001 that the gold dinar be adopted as a substitute currency for international trade because, he said, it is more stable and less prone to speculation than the dollar.

Dr. Mahathir, who is also Finance Minister, had suggested the gold dinar initially be used to settle bilateral trade payments, thence widening its adoption progressively. Malaysia has signed BPAs with 24 countries, but the government is ready to extend the use of gold dinar in trade with any other interested party. In his conference keynote address, Nor Mohamed said the gold dinar will start with BPAs but will eventually cover multilateral payment arrangements (MPAs).

In the early stages, the gold dinar will not exist in physical form, and will be assigned a value in gold. "For example, if 1 gold dinar is equivalent to 1 ounce of gold, and the price of 1 ounce of gold is US$290 (US$1 = RM3.80), then the value of 1 gold dinar will be US$290 or equivalent in other currencies, based on prevailing exchange rates," he said. Actual settlement of trade can be done through the transfer of equivalent amounts of gold; however, this will not involve physical transfer, but rather, assigning beneficial ownership in respective accounts.

Taking trade between Malaysia and Saudi Arabia as an example, Tan Sri Nor Mohamed said trade balances under their BPA will be settled every three months. Malaysian exporters will be paid in ringgit by Bank Negara Malaysia on the due date of exports based on the prevailing ringgit/dinar exchange rate.

Similarly, importers will pay Malaysia's central bank, Bank Negara Malaysia, the ringgit equivalent of their imports. In Saudi Arabia, its central bank will do the same for the country's exports and imports. By the end of the three-month cycle, Malaysia's exports to Saudi Arabia total, say, 2 million gold dinar and Saudi Arabia's exports to Malaysia, 1.8 million dinar.

For the particular cycle, the Saudi central bank will pay Bank Negara 200,000 gold dinar. Nor Mohamed said this can be done by the Saudi central bank transferring 200,000 ounces of gold in its custodian's account with the Bank of England in London to Bank Negara's account with the same bank. "The important point to note is that, under this mechanism, a relatively small amount of 200,000 gold dinar is able to support a total trade value of 3.8 million gold dinar.

"In other words, we optimize on the use of foreign exchange," he said. This way, countries that do not maintain large foreign exchange reserves can still participate significantly in international trade. On the use of dinar on an MPA basis, Nor Mohamed said it works the same way as with BPA, but it will be even more efficient, as it involves many countries and not just two.

The mechanism can be refined further, for example, whereby the credit or debit outstanding at the end of each quarter can be carried forward, and final settlement is made only at the end of the year, thus further reducing payment flows.

Probe of Assassination of Afghan VP Yields No Results

According to Aug. 18 reports in the Washington Post and from AP in Kabul, the investigation into last month's assassination of Afghan Vice President Haji Qadir is yielding no result. The International Security Assistance Force (ISAF) has released 26 people arrested in connection with the murder of Haji Abdul Qadir, who in addition to being one of the country's Vice Presidents was also a powerful Pushtun leader from the eastern province of Nangarhar.

The release of the suspects indicates that the investigation has come to an end, meaning that the assassinations of two members of interim leader Hamid Karzai's government will go unsolved. It is evident that the situation is too dangerous for Karzai to name any one, and it is also evident that whoever killed Haji Qadir (and, earlier, Abdur Rahman) is powerful and dangerous.

No matter what the investigators say (they say Qadir did not have adequate security), Afghanistan's Pushtuns have come to the conclusion that the Panjshiri-Tajiks, under the leadership of the trio of Defense Minister and Deputy Prime Minister Gen. Fahim, Interior Minister Yunoon Haqqani, and Foreign Minister Abdullah Abdullah, are eliminating Pushtun leaders, and that Hamid Karzai, under orders of Washington not to rock the boat, is allowing these killings to take place.

Karzai, himself, meanwhile has changed all his bodyguards, who were under Gen. Fahim, and replaced them with U.S. troops. Failure to punish the assassins will further lower Karzai's status, not only inside the Pushtun community, but among Afghans more generally.

Northern Alliance Battles Among Itself

Low-level clashes between the rival Uzbek, Tajik, and Hazara factions, which comprise the Northern Alliance, are being reported every day from Mazar-e-Sharif. According to The Dawn of Aug. 21, the situation has gotten to the point where all-out war may break out any time.

Of most concern is a long-standing rivalry between Uzbek Gen. Abdur Rashid Dostum and his Tajik rival Usted Atta, who enjoys the support of powerful Tajiks in Kabul, including Defense Minister Gen. Mohammad Qaseem Fahim. "The situation is serious and has the potential to become even more serious," said one Western observer, The Dawn reports.

What caused the conflict is that Mazar had long been under control of the Dostum-led Jumbish-e-Milli, a bunch of thugs and rogues. Since the Pajshiri-Tajiks took virtual control of Kabul, the Usted Atta-led Jamiat-e-Islami movement has begun to spread its wings in Mazar. Reports indicate that Jamiat forces now dominate the city of Mazar, traditionally the key to north Afghanistan and supposedly shared among Tajiks, Uzbeks, and Hazaras. The risk is that Dostum, still extremely powerful and popular among Uzbeks and Turkmens, will feel backed into a corner. Incidentally, Fahim reportedly draws support from Teheran, while Dostum is clearly close to Ankara.

Musharraf's Claim of an al-Qaeda Regrouping Is Contested

The recent claim by Pakistani President Pervez Musharraf that the al-Qaeda is re-grouping in Afghanistan, has been strongly rejected by both the Afghans and the U.S. Commanders based in Kabul.

Afghan Defense Minister Gen. Mohammad Qaseem Fahim described as "irresponsible," Musharraf's statement that Hamid Karzai's government lacked control over much of Afghanistan, and that this could lead to re-emergence of the Taliban and al-Qaeda. "If al-Qaeda and Taliban are reorganizing, it is on the southeastern borders of Afghanistan with Pakistan," Fahim told reporters."On both sides of that border there are tribal zones which the Taliban and al-Qaeda are crossing into."

There is no question that both President Musharraf and Gen. Fahim are partly correct. But the vivacity with which Musharraf's statement was rejected by the Afghans and the Americans seems peculiar.

Poppy Cultivation Surging in Afghanistan

Poppy cultivation has surged under the government of President Hamid Karzai, despite a ban and steps to entice farmers to stop planting the crop, says the United Nations Food and Agriculture Organization (FAO). The FAO report indicates that the Afghan opium crop is close to record levels, a year after being nearly wiped out under the Taliban regime. The fact is, however, that the Taliban had harvested a bumper crop the year before and kept the poppy fields uncultivated the following year, in order to keep the opium/heroin price high. Following last October's invasion of Afghanistan, the Pakistani intelligence service the ISI moved most of the opium from the warehouses into Pakistan. Now, the warehouses are empty and the opium price is very high.

According to the FAO report, the Karzai government was offering $350 per quarter of a hectare to farmers, not to grow poppies. On the other hand, the opium traders were offering ten times as much. To begin with, the Karzai government could not pay the amount it promised and Kabul soon found out that the farmers were claiming they had eradicated poppy fields—after they had harvested the crop! The program became a fiasco and Kabul had very little muscle to control the situation.

The Karzai government has claimed to have eradicated about 25% of the crop, but the figure seems too high, considering the financial outlay Kabul made to pay the farmers.

In reality, about 175,000 hectares have been planted with opium poppies. On an average, a hectare would give close to 35 pounds of opium. Thus, this year's harvest would translate into close to 3,100 tons. Indeed, the FAO report indicates that the Afghan opium traders will have some 3,000 tons of opium by the end of this fall. The highest ever reached was 4,400 tons during the Taliban regime.

Abu Sayyaf Alive and Well on Jolo

Combined Philippines and U.S. press reports of Aug. 22 say that the terrorist grouping Abu Sayyaf is alive and well on Jolo in the southern Philippines, a fact demonstrated by the beheading of two Jehovah's Witnesses who were part of a group of eight travelling through the area, allegedly selling cosmetics door to door. The rest of the group of six (five of whom are women) are presumed held hostage by Abu Sayyaf. The two slain group members were men.

Philippines military spokesman Col. Jose Mendoza told reporters that four army battalions, or 2,000 soldiers, are in hot pursuit of this band of Abu Sayyaf, while the Washington Post points out that several hundred U.S. troops remain on Basilan Island, about 60 miles from Jolo, conducting civic action and medical missions. Later reports said that Philippines military had begun bombing areas of Patikul town on Jolo to flush out the gang, but a senior officer admitted they had no sure fix on the whereabouts of Abu Sayyaf and the hostages.

Japan, North Korea Agree on Family Reunion Project

Japan and North Korea on Aug. 18 reached important agreements in the first day of a series of bilateral talks being held this month. During the talks, Japan and North Korea agreed on a program allowing Japanese spouses of North Koreans to travel to Japan for family reunions in the fall, Japanese delegation officials said. The visit would be the fourth such trip. In the first three trips, a total of 43 Japanese spouses visited Japan. The second trip took place in January and February 1998.

Red Cross officials were to wrap up their two-day talks in Pyongyangahead of a two-day meeting between government officials of the two countries slated for Aug. 25-26, also in the North Korean capital. The two societies plan to release a joint statement after their talks conclude. North Korea reportedly showed a rare friendliness to the Japanese delegation in the Aug. 18 Red Cross talks, the first since April.

But the two sides are unlikely to make a significant breakthrough in the immediate future over allegations that some Japanese nationals were abducted by Pyongyang in the 1970s and 1980s, an issue Tokyo says is key in the series of bilateral talks.

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