Kenya’s military had one of its biggest victories this past weekend when two of its helicopter gunships attacked an al Shabaab convoy in Southern Somalia, killing more than 100 militant fighters, according to Kenyan Military spokesman Emmanuel Chirchir. This comes after the January 21 announcement that Kenya’s military incursion passed the halfway point in its “battle to crush the al Qaeda-linked insurgency in southern Somalia.”

This conflict has raged on for months. Many hope that the Kenyan offensive in the South and the African Union (AU) force in Mogadishu will quell the violence and stabilize Somalia after years of death and destruction.

Al Shabaab announced a ‘tactical withdrawal’ from the Somalia capital in August after an offensive by AU and government forces.

The main players on the Kenyan side have to be the Americans and the French. In October, the US revealed that it has sold military equipment and offered logistical support and training, although this has been taking place for sometime now. The US is also supporting the AU mission in Somalia (AMISOM), providing drones, body armor and night vision capability.

This equipment has been put to good use. In Late January, an alleged al-Qaeda member from London was killed in a missile attack on his car from an American drone on the outskirts of Mogadishu.

France, like Washington, is also providing logistical support to Kenyan forces. Col Thierry Burkhard said in late 2011 that French planes would transport military equipment to Kenyan soldiers near the Somali border. However, he denied Kenyan military claims that a French warship had shelled a Somali town.

With the help of both the French and the US, the Kenyan military is definitely no Mickey Mouse fighting unit. The Kenyan Air Force is well-armed with F-5 Tiger Attack jets, MD-500 and Chinese-made Harbin Z-9 helicopters.

In early January, F5 air strikes killed at least 60 Al-Shabaab militants in southern Somalia. The combination of air strikes by the jets and attack helicopters has helped pave the way for the Kenyan army and their tanks and armored personnel carriers to advance. This includes Vickers Mk3s, T72s, Humvees and the South African Puma M26.

Al Shabaab, or the ‘Youth’ in Arabic, has been using guerilla tactics to thwart the Kenyan firepower and they have been successful. Besides utilizing the typical terrorist group arsenal of AK-47’s, RPGs and hand grenades, they have become masters of the Improvised Explosive Device or IED.
A typical example of how Al Shabaab uses the IED is as follows: “when they need to target a suicide attack to its opponents, first they arrange a single person to carry out this attack as to be the suicide man, they put on his body a number of explosive belts and then they dress the person with the uniform of a TFG military soldier, which they are capable to find. They then load the vehicle with the explosive materials mostly containing eminent flammable items, and they also pack with the vehicle mixture of gun powder, car batteries, acids, a number of mobile phones, and sometimes a missile is put inside the vehicle to cause destructive power to the entire vehicle.”

Al Shabaab does have allies. First and foremost are their Yemeni counterparts, who recently shipped two boats loaded with military logistics, light weapons, Kalashnikovs and ammunition, and hand grenades. It is also believed to have the support of Eritrea, but this is something that the Eritrean government denies.

Sticks and stones may break my bones but words will never hurt me. This old saying might not ring true for Al Shabaab or does it? It is believed that al-Shabaab is losing political support in Somalia due to the famine and its preventing humanitarian aid from reaching those who desperately need it. There are also accusations of internal divisions within the al-Qaeda faction.

In retaliation, al-Shabaab is using a similar campaign of propaganda with the use of social media like twitter. They joined in December (@HSMPress) and now have over 10,000 followers. The Kenyan Defence Force joined about a month earlier, in November (see KDF spokesman Emmanuel Chirchir @MajorEChirchir who has over 21,000 followers). Al-Shabaab trys to persuade the Somalian people by saying Kenyan troops are violating the sovereignty of their country and that they are the main line of defense against the hostile foreign invaders.

The BBC’s East Africa correspondent Will Ross says it is increasingly hard to know who is telling the truth in what is a hard-fought propaganda war (http://www.bbc.co.uk/news/world-africa-15559584). And this will not change over the coming months.

Photo 1- Courtesy of Reuters (Al Shabaab militants parade new recruits after arriving in Mogadishu October 21, 2010, from their training camp south of the capital of Somalia). Available at: http://www.ibtimes.com/articles/235664/20111021/at-least-10-peacekeepers-killed-in-somalia-battle.htm
Photo 2- Courtesy of Daryl Chapman, Bauhinia Photography (Z9 Helicopter, taken on July 6th, 2010). Available at: http://www.flickr.com/photos/darylchapman/4768078868/

The cold snap that has frozen most of Europe solid has created some tensions over Russia’s role as supplier of natural gas to its neighbors. On Friday, a Gazprom official claimed that Ukraine was taking more than its share from the pipeline that runs through its territory. For those who remember the unpleasantness between Moscow and Kiev in 2006 and 2009 over natgas prices, this came as an awkward reminder that when demand soars, it’s still every nation for itself.

CFO of Gazprom, Andrei Kruglov, admitted yesterday that the fault lay not with Ukraine but rather with his company’s export capacity. “Gazprom at the moment cannot supply the extra volumes our West European partners are asking for,” he told President Putin according to Reuters. Moreover, the cold in Russia has increased demand there. So, for a few days, Russia reduced the amount of gas it was putting into the pipeline in the first place.

The good news here is that many of Gazprom’s customers have increased with stockpiles, and so the 10% decrease many experienced did not cause any enduring hardship. With gas from the pipeline selling at record prices (more than US$400 per 1,000 cubic meters), alternatives are coming on line, which will help diversify supply, including liquefied natural gas. And Russia is not the only source of natgas. For example, Norway is maintaining its reputation as a reliable supplier to the UK. Because of the cold, UK demand was just shy of 378 million cubic metres (mcm) on Saturday, about 63.5 mcm higher that usual. Still, flows from Norway continued at 380 mcm.

Russia sees that it must improve its ability to service customers, Reuters has reported, “Gazprom increased its gas supplies to Europe to 150 billion cubic metres (bcm) from around 138.6 bcm in 2010. It is aiming to ramp up those volumes to around 164 bcm this year thanks partly to the underwater Nord Stream pipeline commissioned last November. Nord Stream’s initial capacity stands at 27.5 billion cubic metres a year, which may be doubled by the fourth quarter. Russia is also pushing for a South Stream pipeline to rival the EU-backed Nabucco and other supply lines. Moscow plans to ship over 60 bcm of gas to Europe via South Stream starting from 2015.”

However, you have to wonder if this is going to be sufficient given that some countries in Western Europe (e.g., Germany) have decided to end their nuclear power generation. While the ideal replacements are renewables, it’s so very easy to buy gas from Russia and elsewhere that the additional capacity envisioned may not be good enough.

Many of us already know about the spectrum auction curruption case in India. A year back we did a post on the lessons we can learn from the case India. Now when the PTA are all set to kick the specturm launch in March end the Supreme Court accros the border has given its rulling, cancelling 122 Telecom Licenses of worlds second larget mobile subscirber market.

This is a big setback for international investers, let’s see how this will effect the upcoming license auctions in Pakistan.

More from Reuters below:

India’s Supreme Court on Thursday revoked all 122 telecoms licences issued under a scandal-tainted 2008 sale, a fresh embarrassment for the government and plunging the mobile network market of Asia’s third-largest economy into uncertainty.

The ruling is a setback for Prime Minister Manmohan Singh’s government, which oversaw the sale of the licenses at below-market prices, costing the exchequer up to $36 billion in lost revenues.

The licences affected by Thursday’s ruling include all of those held by Unitech Wireless, the Indian joint venture of Norway’s Telenor and Unitech.

“We have been unfairly treated as we simply followed the government process we were asked to,” the Telenor joint venture said in a statement. “We are shocked to see that Uninor is being penalised for faults the court has found in the government process.”

The telecoms scandal is the biggest of several that have emerged during Singh’s second term and triggered massive street protests last year. Two ministers, including former telecoms minister Andimuthu Raja, who presided over the 2008 grant process, have resigned. Raja is in jail awaiting trial.

“This country is no longer willing to allow these corrupt corporations and these corrupt public officials to retain the benefits of their illegal and corrupt actions,” said Prashant Bhushan, a lawyer and petitioner in the case.

India is the second-largest cellular market in the world by subscribers, with 894 million at the end of December, although the market is crowded with more than a dozen operators, making call rates among the lowest in the world and squeezing margins.

Investors and operators have long been calling for consolidation in the crowded industry, and Thursday’s ruling stands to benefit the country’s biggest operators, including Bharti Airtel and Vodafone.

“Players like Bharti Airtel and Idea Cellular with popular brands and strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase market share,” said Jagannadham Thunuguntla, Head of Research, SMC Investments and Advisors, Mumbai.

Stocks in telecoms companies including Reliance Communications and Unitech fell after the verdict, but shares in Bharti Airtel jumped.

“For foreign investors, it is a very bad news. What mistake did they do? They partnered with Indian companies, invested lots of money and followed the process of that time,” said Rishi Sahai, director at consultancy firm Cogence Advisors in New Delhi.

The Supreme Court said the current licenses will remain in place for four months, in which time the government should decide fresh norms for issuing licenses, a lawyer involved in the case said.

India’s image as an investment destination was dented over the past year as the economy slowed, government reforms stalled and the telecoms scandals along with other high profile graft cases heightened concerns about government policies.

“This is a collective failure of the government of India, said S ubramanian Swamy, an opposition politician who brought the petition to revoke the license. ” The court has said that the government must now get the market value of these licenses .”

Loop Telecom Pvt Ltd and Videcon Telecommunications, part of India’s Videocon group are also affected, along with Etisalat DB, the joint venture between Abu Dhabi’s Etisalat and India’s DB group; and S-Tel.

Thirteen licences held by Idea Cellular and three held by Tata Teleservices are also affected.

via Reuters

Zhang and Harper meet in Ottawa on February 1. (c) Reuters

The Chinese Ambassador to Canada, H.E. Zhang Junsai, spoke at a luncheon at the Montreal Council on Foreign Relations today. The Montreal Gazette has an article on his talk, emphasizing the fact that he twice affirmed that China is committed to peace in the Arctic.

A member of the audience that the newspaper reported to be a “specialist in Arctic and northern security issues” asked Zhang about the region, and he responded, “We hope that this will be solved by peaceful means. I don’t know much about this but we would like to participate and be (an) observer. We hope that the countries (on the council) would support China’s request.”

CBC quoted Zhang: “My understanding, not of my government, is we should have a joint scientific research in this area because a lot of things are unknown.” Scientific research has been one area in which China has been able to contribute a lot, whether with its research expeditions on its icebreaker or its station on Ny-Alesund.

China seeks to gain permanent observer status on the Arctic Council, which Canada will begin chairing next year. There are a number of other countries on the Arctic Council, but all of them are European; none from the Far East have been admitted. Currently, Denmark supports China’s bid. This is not surprising given the recent increase in trade between the two countries and China’s high hopes for investing in Greenland’s minerals. Yet Norway dropped its support of Chinese observer status after Beijing cut off political and human rights dialogues with Oslo when the Nobel Committee awarded imprisoned Chinese activist Liu Xiaobo with the Nobel Peace Prize in October 2010. Beijing also took other retaliatory measures such as enforcing stricter controls on Norwegian salmon imports, causing their sales to fall dramatically. Though the Nobel Committee is made up of five members appointed by the Storting, Norway’s parliament, they are not beholden to it, so it is somewhat misguided for Beijing to take out its displeasure on Oslo.

This excerpt, taken from the Nobel Committee’s website, describes Alfred Nobel’s vision in setting up the committee and the prize.

“Nobel may also have feared that the highly political nature of the Peace Prize would make it a tool in power politics and thereby reduce its significance as an instrument for peace. A prize-committee selected by a rather progressive parliament from a small nation on the periphery of Europe, without its own foreign policy and with only a very distant past as autonomous military power, may perhaps have been expected to be more innocent in matters of power politics than would a committee from the most powerful of the Scandinavian countries, Sweden.”

The awarding of a Nobel Peace Prize to a Chinese activist has altered not just Chinese-Norwegian relations, but also Arctic relations. This is a world a century away from that of Nobel, indeed.

In the Guardian, Karsten Klepsvik, the senior Arctic official at the Norwegian Ministry of Foreign Affairs, was quoted as saying, “I can neither confirm nor deny this story, but I can say bilateral contacts between Norway and China are at a low level.” Norway’s decision to counteract China’s snubs by blocking it in the Arctic Council shows that it is upping the stakes in the dispute by moving the chess pieces north. The Arctic, and membership in the region’s most important multilateral body, are now important enough to be used as bargaining chips. If China doesn’t back down, it will need to shore up support with other countries, like Canada, instead. Prime Minister Stephen Harper will be visiting China next week, so the government will have another opportunity to convince the leader of the upcoming Arctic Council chair of its merit.

China has already invested millions in the Athabaska oil sands. It is also planning to invest in Quebec’s Plan Nord, the province’s strategy for developing its northern half. Last August, Quebec Premiere Jean Charest traveled to China and Japan to promote Asian investment in his province. On January 12, Wuhan Iron and Steel Co., China’s third-largest steelmaker, successfully closed the deal to create a joint venture with Adriana Resources, a Canadian iron ore producer, to develop deposits in Lac Otelnuk, in Nunavik, Quebec. Jilin Jien Nickel also recently announced a CAN $400 million investment in a nickel mine near Kangiqsujuaq, Nunavik, and it has signed agreements with three Inuit communities to pay royalties. An in-depth article that examines “la grande séduction Québec-Asie,” or Quebec’s attempts to attract Chinese and Indian investment, is a great read from Cyberpresse (in French).

China needs resources, and it will get them from the Arctic. But it might not receive a helping hand from Norway anytime soon unless it changes tack.

Well, the Global Fund has had a big week.  It’s been ten years since the creation of the Global Fund to Fight AIDS, Tuberculosis, and Malaria, and the recent news about the fund has not been great: internal divisions, questions about improper funding allocations, missing money, and financial shortfalls.  On the other hand, the Global Fund has been key, along with PEPFAR, to incredible gains against HIV/AIDS, TB, and malaria in the last decade.  In November of last year, the Global Fund stated that it was canceling its latest round of funding and would not disburse funds for new programs and projects until 2014.  The global health community was understandably alarmed, especially in the climate of the global economic recession.  As of last week, however, the fortunes of the Global Fund may be turning around.

First, the Global Fund announced that Executive Director Michel Kazatchkine would step down in March.  He cited the recent executive-level re-organization for his decision.  A General Manager, Gabriel Jaramillo, has been appointed to manage day-to-day operations for the fund.  Following reports of financial mismanagement and alleged fraud last year, some donor countries canceled or suspended funding.

The re-organization and other internal changes have restored confidence, and coupled with the fund’s impact over the last ten years, it remains key to rolling back the deleterious effects of malaria, TB, and HIV.  In an opinion piece for Reuters, Natasha Billmoria of the Friends of the Global Fight Against Aids, Tuberculosis, and Malaria argued that more must be done to bolster the Global Fund’s coffers, writing: “We’re in a tough global economy, to be sure, but we’re also primed to beat back AIDS, tuberculosis, and malaria.”  She cited the success of the Global Fund, which has put 3.3 million people living with HIV on antiretroviral treatment, provided PMTCT services to more than one million pregnant women living with HIV, detected and treated 8.6 million cases of tuberculosis, and distributed 230 million bed nets to prevent malaria.  The fund itself estimates that it has saved 7.7 million lives in ten years.  The International HIV/AIDS Alliance released a report last week discussing the potential impact of the Global Fund’s cancellation of its funding round in November, studying the effects this lack of funding would have in five countries.  The report called for donors to provide an estimated $2 billion to fill the funding gap.

“The internal checks and balances have worked in every case…but if you’re going to do business in Africa, you’re going to have some losses.” -Bill Gates

Ask and ye shall receive, it seems.  At the World Economic Forum, Bill Gates announced that his foundation had pledged a $750 million “promissory note” to the Global Fund.  Mr. Gates said that the economic recession was “no excuse for cutting aid to the world’s poorest.”  This announcement marks a bit of a shift for the Gates Foundation, which in the past has disbursed $650 million to the Global Fund for vaccines and innovations, rather than ARV distribution and day-to-day operations.  In his annual letter on behalf of the foundation, Mr. Gates supported the Global Fund’s efforts and pointed out that despite some reports, the fund had had less than five percent of its funding misused and had instituted further internal reforms that will decrease those problems.  Mr. Gates also argued that some financial mismanagement was a cost of working in the developing world.  He was quoted by AP as saying: “The internal checks and balances have worked in every case [at the Global Fund]…but if you’re going to do business in Africa, you’re going to have some losses.”

Although $750 million is not a trifling sum, it is not the $2 billion or more needed to finance grants at the Global Fund.  With his announcement, Mr. Gates has demonstrated his confidence in the Global Fund, which might inspire bilateral donors to honor their pledges and/or restore interrupted funding.  Recent internal changes at the Global Fund may also prompt donors to donate.  We are certainly witnessing a turning point in the fight against some major diseases, such as HIVand malaria, and it is a shame that these partial successes have arrived in tandem with a global recession that shows few signs of turning around soon.  With a strong, well-financed Global Fund, we may, with hope, see  an HIV-free generation and the further curbing of malaria and TB.  Mr. Gates’ support of the Global Fund should give it the much-needed shot in the arm that will help us achieve these goals.

Header photo available here, via USACE Europe District, CC BY 2.0.

Last week, Ertharin Cousin was named by the United Nations to replace Josette Sheeran as the head of the World Food Programme (WFP).  Cousin currently serves as the U.S. ambassador to UN food agencies based in Rome, which include WFP and the UN Food and Agriculture Organization (FAO).

Cousin, described by Reuters as a “a stalwart of the U.S. Democratic Party…worked in the retail food sector and served as an executive of Feeding America, the largest U.S. domestic hunger organization. She led that organization’s response to Hurricane Katrina in 2005.”

CBS News described her previous work in government in the “Clinton Administration for four years, including as deputy chief of staff for the Democratic National Committee and White House Liaison at the State Department. In 1997 she received a White House appointment to the Board for International Food and Agricultural Development.”

Cousin will begin her post in April, when Josette Sheeran’s five-year term expires.

Photo credit: WFP/Giulio D’Adamo

As Reported by Reuters

The death of a senior Al-Qaeda leader in a US drone strike in Pakistan’s tribal badlands, the first strike in almost two months, signaled that the US-Pakistan intelligence partnership is still in operation despite political tensions. The Jan 10 strike-and its follow-up two days later- were joint operations, a Pakistani security source based in the tribal areas told Reuters. They made use of Pakistani “spotters” on the ground and demonstrated a level of coordination that both sides have sought to downplay since tensions erupted in January 2011 with the killing of two Pakistanis by a CIA contractor in Lahore.

“Our working relationship is a bit different from our political relationship,” the source told Reuters, requesting anonymity. “It’s more productive.” US and Pakistani sources told Reuters that the target of the Jan 10 attack was Aslam Awan, a Pakistani national from Abbottabad, the town where Osama bin Laden was killed last May by a US commando team.

They said he was targeted in a strike by a US-operated drone directed at what news reports said was a compound near the town of Miranshah in the border province of North Waziristan. That strike broke an undeclared eight-week hiatus in attacks by the armed, unmanned drones that patrol the tribal areas and are a key weapon in US President Barack Obama’s counter-terrorism strategy.

The sources described Awan, also known by the nom-de-guerre Abdullah Khorasani, as a significant figure in the remaining core leadership of al Qaeda, which US officials say has been sharply reduced by the drone campaign. Most of the drone attacks are conducted as part of a clandestine CIA operation.

The Pakistani source, who helped target Awan, could not confirm that he was killed, but the US official said he was. European officials said Awan had spent time in London and had ties to British extremists before returning to Pakistan. The source, who says he runs a network of spotters primarily in North and South Waziristan, described for the first time how US-Pakistani cooperation on strikes works, with his Pakistani agents keeping close tabs on suspected militants and building a pattern of their movements and associations. “We run a network of human intelligence sources,” he said. “Separately, we monitor their cell and satellite phones. “Thirdly, we run joint monitoring operations with our US and UK friends,” he added, noting that cooperation with British intelligence was also extensive. Pakistani and US intelligence officers, using their own sources, hash out a joint “priority of targets lists” in regular face-to-face meetings, he said. “Al-Qaeda is our top priority,” he said. He declined to say where the meetings take place. Once a target is identified and “marked,” his network coordinates with drone operators on the US side. He said the United States bases drones outside Kabul, likely at Bagram airfield about 25 miles (40 km) north of the capital. From spotting to firing a missile “hardly takes about two to three hours”, he said.

It was impossible to verify the source’s claims and American experts, who decline to discuss the drone program, say the Pakistanis’ cooperation has been less helpful in the past. US officials have complained that when information on drone strikes was shared with the Pakistanis beforehand, the targets were often tipped off, allowing them to escape. Drone strikes have been a sore point with the public and Pakistani politicians, who describe them as violations of sovereignty that produce unacceptable civilian casualties. The last strike before January had been on Nov 16, 10 days before 24 Pakistani soldiers were killed in what NATO says was an inadvertent cross-border attack on a Pakistani border post. That incident sent US-Pakistan relations into the deepest crisis since Islamabad joined the US-led war on militancy following the Sept 11, 2001 attacks. On Thursday, Pakistani foreign minister Hina Rabbani Khar said ties were “on hold” while Pakistan completes a review of the alliance.

Filed under: Afghanistan, Nuclear, Pakistan, Pakistan Army, Pakistani Taliban, Pakistanis, United States, US Army, US-Pakistan Relations Tagged: Afghanistan, al-Qaida, Aslam Awan, Drone Attacks, Hina Rabbani Khar, NATO, Pakistan, Pakistani Spotters, Taliban, US-Pakistan Intelligence Partnership

Carlos Garcia Rawlins/REUTERS

The International Energy Agency has reduced its forecast for growth in oil demand in 2012 to 1.1 million barrels per day from 1.3 million bpd. The lower demand will stem from the weak economic conditions in the OECD nations, off-set in part by continued heavy demand from Asian consumers. As a result, global demand for oil will be roughly 90 million bpd.

Noting that European consumption in November fell by 4.6%, the IEA stated, “Against a backdrop of weakening economic performance, regional oil demand looks particularly sluggish in Europe.” Meanwhile, non-OECD countries “will continue to dominate growth looking forward”, with their demand climbing 3.2%, rising by roughly 1.4 million bpd. Yet “this is 130,000 bpd less than assumed in last month’s report, following a modest downward adjustment for growth prospects in China,”

Looking at the supply side of the equation, non-OPEC supply declined by 140,000 bpd to 53.2 million bpd, stemming from Middle East unrest and other unplanned outages. The IEA expects a rebound to 340,000 bpd growth in first quarter 2012 and 1.0 million bpd for 2012 as a whole.

At the same time, OPEC oil output in December rose by 240,000 bpd to 30.89 million bpd. This is the highest output by OPEC in more than three years and slightly above the 30 million bpd target the cartel has set for its members. Saudi and UAE increases are partially responsible for this rise, but much is due to Libyan oil returning to the global system.

The organization noted that geopolitical risks remain in Nigeria, Iraq, and “most pressingly, Iran.”

The license for the 3G spectrum is announced to be held on March 29, 2012 reports Reuters. On the same subject PTA today conducted an Investors Conference in Islamabad attended by the Chairman PTA, Secretary Cabinet Division and Finance Minister.The tentative auction schedule and brochure have been uploaded on PTA website. You can also check them here:

• Auction Schedule
• Auction Brochure

Pakistan will hold an auction for its first licenses for third-generation (3G) mobile telecom services on March 29, an official at the country’s telecoms authority said on Tuesday.

Pakistan Telecommunication Authority (PTA) Chairman Mohammed Yaseen said the base price for the auction would be $210 million.

“We’re expecting 10 to 15 potential investors in the initial bidding process,” Yaseen told Reuters.

He said the amount bidders would deposit with initial expressions of interest — to indicate the seriousness of a bid — would be $31.5 million and licence terms would be from eight to 15 years.

Pakistan had more than 111 million mobile phone users in October 2011, according to the PTA, equivalent to around 65 percent of all Pakistanis.

Pakistan’s existing operators include Mobilink, a unit of Egypt-based Orascom Telecom, Norway’s Telenor , Warid Telecom, a joint venture between Abu Dhabi Group and SingTel Group, China Mobile Communication Cooperation’s Zong, and Ufone, owned by the Emirates Telecommunication Corporation Group, Etisalat, according to the PTA website.

Yaseen said existing licence operators could start offering 3G services immediately after being awarded a licence, while new operators would be able to provide 3G services from March 2013.

Update:

According to the tentative auction schedule, some important dates for the 3G auction are:

March 2, 2012 – Pre-Bid Conference in Islamabad

March 9, 2012 – End Date for Submission of EOI along with Application

March 12, 2012 – Qualification of Bidder Before Auction

March 22, 2012 – Receipt of Earnest Money in PTA’s Bank Account

March 29, 2012 – 3G Spectrum Auction

Picture Courtesy: Parvez Iftikhar

Last year was the Year of the Rabbit for the Chinese – promising among other things good luck!  However, China which came out of the global financial crisis almost unscathed (or at least better off than most major world economies) hit one too many ‘speed-bumps’ in 2011.  Last year’s inflation is threatening a significant slow-down of the Chinese economy, and the housing market is in such collapse that it could lead to real civil unrest.

Overall, in 2011 China assumed a more assertive role on the global stage.  China’s new posture was reflected in an aggressive trade agenda, a push for a larger role in international institutions, and provocative moves in the South and East China Seas.  These actions were both a reflection and a consequence of China’s growing economic prominence and resource needs, as well as China’s view that the United States is in decline while China is ascendant.

China continued the backsliding from market reforms in favor of an increased role of the state in the economy.  China continues to subsidize its state-owned enterprises to the detriment of both private Chinese firms and international competitors.  Despite promises by President Hu Jintao and other Chinese officials to ease a policy of discriminating against foreign companies in government procurement decisions; however, real change remains elusive, particularly among the provincial and local governments.

Currency Liberalization

China continued its aggressive capital controls during 2011, a policy which pegs the renminbi (RMB) to the dollar, restricts the flow of foreign capital in the domestic market, and investing foreign reserves in U.S. Treasury bonds.

By the end of 2011, China’s foreign exchange reserves are projected to be over $3.2 trillion, up nearly one trillion from $2.4 trillion back in January of 2010.  China’s foreign exchange reserves are now roughly three times greater than that of Japan, which has the second-highest foreign exchange reserves in the world.  Roughly two-thirds of China’s foreign exchange reserves are generally thought to be denominated in U.S. dollars, although the exact makeup of the reserves is unknown, because the Chinese government considers it to be a state secret.

Somewhat better known is the volume of China’s foreign exchange reserves that are made up of U.S. Treasury securities.  As of July 2011, the official estimate by the U.S. Treasury Department

stood at $1.2 trillion, up slightly from the same period one year before.  The real amount is considerably higher, since the $1.2 trillion does not take into account any purchases made on the secondary market nor does it factor in purchases made by intermediaries or made through tax havens, such as the Cayman Islands.

On the positive side, the Chinese government allowed the RMB to rise by roughly 6% in nominal terms over the last year, from 6.641 RMB per dollar at the beginning of the year, to 6.30 RMB per dollar by the end of December 2011.  This is the second-fastest rate of appreciation since the Chinese government eliminated its hard peg to the dollar in 2005.

The 12^th Five-Year-Plan

In March 2011, China ratified its 12th Five-Year Plan (2011– 2015), a government-directed industrial policy that focuses on the development and expansion of seven ‘‘strategic emerging industries.’’  The central and local governments will likely continue to combine targeted investment with preferential tax and procurement policies to ensure that Chinese firms emerge as global leaders, or ‘‘national champions,’’ in these industries within the next five years.

One of the main objectives of the 12th Five-Year Plan is to redirect China’s economy to one more focused on domestic consumption and less on exports and investment.  The plan assumes that China’s growth would therefore be more balanced and sustainable.  The plan also emphasizes higher value-added production and increased government support for domestic high-tech industries.

Increasing household consumption, a major goal of the 12^th Five-Year Plan, and the subsequent emergence of a more assertive consumer class, may be in direct contradiction to the Chinese government’s policy of keeping economic power firmly in the hands of the state and may compromise lending to many vested interests, including SOEs and the export sector.

Analysts and foreign business leaders fear that the emphasis on industrial upgrading will lead to the introduction of new government subsidies, which in turn will disadvantage foreign competitors.

In particular, the government’s new growth model includes such goals as:

• Setting a GDP growth target of 7% (down from the current actual GDP growth rate of 10%).  To do that, the government will have to divert money away from construction and corporate subsidies, and instead use public funds to increase household incomes.
• Cutting import tariffs to reduce input-costs, while boosting consumer demand and reducing China’s reliance for growth on exports which generates trade surpluses and contributes to the global trade imbalance.
• Improving the income of farmers and migrant workers, who have benefited the least from China’s phenomenal economic growth, by increasing minimum wages.  In particular, provinces across China have announced a string of double-digit wage increases this year as part of the government desire to increase incomes among the rural regions and migrant workers in the cities.
• Increasing spending on healthcare and full nationwide social welfare insurance to reduce the need for “precautionary savings” and encourage more Chinese consumer spending.
• Raising the minimum threshold for personal income tax.  This could exempt hundreds of millions of people from having to pay taxes, and boost household spending.

The most important short-term priority for the government is to address increases in food price, which Beijing intends to do through price controls.  In order to control inflation, the government intends to keep using the tools and methods that it has been employing thus far: manage liquidity, use price controls, curb real-estate speculation, and “adjust and improve” property tax policies.  Furthermore, the budget for this year shows a 35% increase in spending on low-income housing.

(For more, read: China’s 12th Five-Year-Plan – Will It Help With the Global Trade Imbalance?)

Inflation

While China has taken an externally assertive posture, it faces many internal challenges. The Chinese Communist Party (CCP) relies on economic growth, combined with strict authoritarian rule, to maintain control over a factious and geographically vast nation.  Sharp increases in consumer prices, a pivotal factor in the early days of the student protests in Tiananmen Square in 1989, are once again a problem for the Chinese economy.

Inflation is the Achilles heal of the CCP; inflation is what precipitated the Tiananmen Square demonstrations back in 1989, is what fueled the Arab youth discontent for the status quo, and is what is caused by China’s undervalued currency and current account restrictions.  What was but a prospect of inflation in 2010, turned to a serious threat to the longevity of the Chinese economy in 2011, forcing the government to impose price controls to a number of goods.  The rise in property values during the year, led to fears of a bubble market, and a significant drop of values by the end of 2011.  In the middle of the year, inflation was as high as 6.5%; the second highest level in the past 10 years.

Property Bubble

Following a decade-long boom and nearly two years of attempts by the central government to cool the overheated sector, the housing market in China appears to have turned.  In order to cool the overheating residential-property market, the central government has restricted purchases of multiple homes, demanded larger down-payments and curtailed opportunities for speculators to “flip”, or quickly sell on, properties.  It has curbed developers’ access to bank lending and cut off credit from new trust companies.  It is also encouraging the use of property taxes like those introduced in Shanghai and Chongqing last year.

Taken together, these measures have certainly slowed down the market.  Price growth has been slowing since early 2010.  Analysts suggest that prices fell during December 2011 in 60 of the 100 cities it monitors.  Land prices are falling fast, too.

In 2010, property construction accounted for 13% of Chinas GDP, and for more than 25% of all investment in what is the most investment-dependent economy of the world.  Property directly accounts for 40% of Chinese steel use; the country itself produces more steel than the next 10 producing countries combined, making it by far the most important buyer of inputs such as iron ore.  Construction in China is also important for a host of other industries, from copper, cement and coal to power generation equipment.  Most analysts agree that the sector matters to an extraordinary degree for the overall Chinese growth, for commodity demand, household expenditures, external trade and underlying heavy industrial profitability.

According to government figures, which most analysts believe understate the reality, average housing prices more than doubled in the last four years nationwide, while in Beijing and some other regions the price increase was more like 150%.  Data are incomplete but analysts say the price of an average apartment in a Chinese city is now about 8-10 times the average annual income nationwide; in cities like Beijing and Shanghai the ratio is closer to 30 times.  Now, by some estimates, property prices might fall by as much as 25% in the near future, and by another similar amount in the following two to three years.

However, its impost to remember that before 1998 China did not have a residential real estate market to speak of.  In urban areas, all housing was built and allocated by the state through the ubiquitous “work unit”.  In the countryside, peasant farmers built their own homes on land allotted to them by the state or the collective.

The real estate market that now plays such an important part in China’s overall economy was born when the Communist party decided in the late 1990s to begin transferring ownership of the vast majority of housing to individuals.  It is easy to forget that the market is just over a decade old and, apart from a brief dip in the midst of the 2008 financial crisis when transactions dried up, most Chinese have only seen prices double every couple of years and never seen them fall.  Besides, China is a country where speculative bubbles have been a constant phenomenon since market-based reforms picked up pace in the 1980s.

(For more, read: China Property – A lofty ceiling reached)

WTO – 10 Year Anniversary

In December of 2011, China celebrated 10 years since its entry into the World Trade Organization (WTO).  Last year also marks the end of China’s probationary period, under the terms of its Accession Agreement to the WTO.  The probationary period required China to lower its tariffs to levels below those of many other developing countries.  But compared with most industrialized countries, China was allowed to impose considerably higher tariffs (on average around 25%, while U.S. tariffs are mostly under 5%) — tariffs China has retained even as its economy has subsequently grown to No. 2 in the world.

Practices such as forced technology transfer and the creation of joint venture companies as a condition to obtaining access to the Chinese market; the adoption of unique, Chinese-specific standards for high-tech equipment; and extensive intellectual property rights violations are among the faulty policies designed to help China achieve its economic and development goal, while blatantly violating the spirit and often the letter of WTO law.

In the ten years since China joined the World Trade Organization (WTO), China has maintained a steep growth trajectory, outpacing both Germany and Japan to become the second largest economy in the world. China’s gross domestic product (GDP) has grown from $1.32 trillion in 2001 to a projected $5.87 trillion in 2011 (an increase of more than 400%).  Concurrently, China has lifted 400 million of its citizens out of poverty and has experienced the largest rural-to-urban migration in history.

However, 2011 has been a particularly confrontation year in terms of trade disputes with the U.S., China’s most important trade partner.  The U.S. initiated consultations with the Chinese government on a number of cases (chicken products, subsidies, and internet restrictions), and China followed suite in the case of imports of U.S. cars.  Currently, three previous WTO cases involving U.S.-China trade are both open and active.  The Raw Materials case, which resulted in a decision favorable to the United States, is under appeal as of August 31, 2011.  The Flat-rolled Electrical Steel case and the Electronic Payments case have both advanced to formal dispute settlement, though no decision has been reached.

(For more, read: Sino-American Trade Relations – A heated exchange)

Soft Power – Climate Change

In December 2011, the World Climate Change Summit in Durban, South Africa, was considered a (at least very promising) success, thanks in part to the new found commitment of China to the cause.  More specifically, for the first time since the Kyoto agreement back in 1997, large emerging economic powers such as China, India and Brazil agreed to legal constraints on their emissions (unlike their previous resistance in 2007 and 2009, which clearly doomed past climate change efforts).

In the past, a familiar stalling point has been the refusal by emerging powerhouses such as China to agree to legal targets.  That has prompted others – most notably the US – to insist that they could not sign up to such pledges.  China, which in 2007 overtook the US to become the globe’s largest emitter, was one of the largest obstacles. However, China is still classed as a developing country under UN climate conventions and therefore not subject to legally binding constraints.

Having been blamed for wrecking the 2009 Copenhagen talks, Beijing went to Durban eager to promote its green credentials.  In a series of side events, its delegates boasted of China’s rising dominance of renewable energy markets and a five-year plan that for the first time includes plans for emissions trading and carbon intensity reduction targets.

There is still a lot of follow-up needed to make these new commitments real, but it seems that climate change (and the profitable side of this issue: development and marketing of green energy sources) is one area where China is willing to ‘play ball’ with the rest of the world and stretch its ‘soft power’ muscles.

(For more, read: Climate Change – The great regrouping)

Taiwan Strait

Despite the continuing improvement in economic and diplomatic relations across the Taiwan Strait, China deploys some 1,200 short-range ballistic missiles against the island.  In 2011 we saw the sale by the U.S. to Taiwan of a new $5.8 billion package of upgrades to its aging fleet of F–16 fighter jets.  In response to that, China indicated that it might suspend a series of military-to-military engagements.

However, as much as military build-up and confrontation across the Taiwan Strait will always define the China-Taiwan relationship, the upcoming Taiwanese Presidential election overshadowed developments at the end of last year.  China’s strategic planners are very alarmed by the uncertainty over the outcome of this month’s presidential election in Taiwan.

President Ma Ying-jeou, the Beijing government’s preferred candidate who has steered a path of warmer ties and direct economic links with the mainland, is suddenly in a tough race for reelection.  Ma’s chief opponent is Tsai Ing-wen, chairwoman of the Democratic Progressive Party, which officially backs the independence of Taiwan.  Tsai has raised the Beijing government’s ire for her refusal to publicly support an informal, unwritten, 20-year-old agreement between the two sides stipulating that there is just “one China.”

For months, the election was expected to hand an easy reelection victory to Ma, from the ­Kuomintang, or Nationalist Party, after he steered the island through the worst of the global recession and secured a new trade deal with China.  But the race became more unpredictable with the entry of a third candidate, James Soong, a former Nationalist Party stalwart who founded the People First Party.

For China, a victory by the DPP will be considered a setback to cross-strait relations, and could lead to an military escalation as China is preparing for its own leadership transition.

China in South-East Asia

To the consternation of its neighbors, China asserts its expansive territorial claims in the South and East China Seas.  China is increasingly capable of pursuing its own interests at the expense of regional, perhaps even global, stability.  David Gordon of the Eurasia Group recently argued that China has overplayed its hand in Asia, and its rapid growth and aggressive posturing (both economic and military) “is inadvertently driving Asian states to build closer economic and strategic ties with the U.S. and each other.”

Over the past 18 months China has taken a very aggressive tone towards territorial disputes in the South China Sea and elsewhere.  Mr. Gordon further argues that Beijing has miscalculated its ability to cater to nationalist feelings domestically without alarming its neighbors, and is now (inadvertently) driving Asian nations to build closer economic and strategic ties with the U.S. and each other.

The Chinese leadership is very concerned with developments with the Trans-Pacific Partnership, a U.S. led effort for freer trade among Pacific economies which the Chinese press often casts it as an aggressive U.S.-led ploy to squeeze China out of South East Asia.  During the fall, the U.S. formally accede to the East Asia Summit (the ASEAN+3 – just like China did back in 2005), a move that the other SE Asian nations welcome, as they hope that the U.S. could provide a counterweight to China in the region.

Last but not Least – Domestic Unrest

Every year, China experiences some kind of public unrest, be it because of food product contamination that was not handled properly by the authorities, or some natural disaster that was not remedies properly afterword’s, or some transportation accident that could have been averted.  Last year was no different.  However, what happened during the fall in a couple of rural places could have greater ramifications for this year.

In the Southern village of Wukan, protests began on 21–23 September 2011 after officials sold land to real estate developers without properly compensating the villagers.  Several hundred to several thousand people protested in front of and then attacked a Chinese Communist Party building, a police station and an industrial park.  Residents of Wukan had previously petitioned the national government in 2009 and 2010 over the land disputes.

In an apparent attempt to ease tensions, authorities allowed villagers to select 13 representatives to engage in negotiations.  Security agents abducted five of the representatives and took them into custody in early December.  The protests strengthened after one of the village representatives, Xue Jinbo, died in police custody in suspicious circumstances.  The villagers forced all Communist Party officials and police to flee the village, which came back with reinforcements and laid siege to the village, preventing food and goods from entering the village.

Eventually, the village representatives and provincial officials reached a peaceful agreement, satisfying the villager’s immediate requests.

During December, protests in the town of Haimen, of Guangdong province, which drew thousands of participants were ignited over plans to expand a coal-fired power plant in the town—a plan that residents opposed, arguing that existing coal-fired plants had caused environmental and health damage.  Demonstrations began on 20 December when thousands of residents barricaded a freeway and surrounded government offices in an attempt to block the project.

Riot police fired tear gas into the crowd and beat protesters with riot sticks.  Tensions cooled by 23 December, after Communist Party officials declared that the plant expansion plans would be temporarily suspended, and authorities agreed to release detained protesters.  Although the protests in Haimen were unrelated to demonstrations in nearby Wukan, Haimen residents told Reuters that they had followed developments in Wukan closely, regarding it as a good model of how citizens might negotiate with authorities.

This is not the beginning of China’s ‘Arab Spring’ moment.  China is a very large and very diverse country.  But when the people at the bottom of the ‘food chain’ can justify physical confrontation with the authority as the only viable way of ‘negotiating’ with the government, then everyone should be paying very close attention!

I wonder, what will the year of the Dragon bring…  more assertiveness by local people, or more resolve by the government in Beijing?

Photo Credit: Reuters

A Malaysian judge has ruled today that fiery opposition leader Anwar Ibrahim is not guilty of sodomy charges brought forth by a former male aide. The verdict opens up the possibility for Ibrahim to stand in the next general election and challenge the ruling Barisan Nasional (BN) party which has held political power in the country for the past five decades.

The ruling from the presiding High Court judge, Mohamad Zabidin Diah, was rather unexpected, and Ibrahim stated that he was “pleasantly shocked” by the verdict. This was not the first time Ibrahim has faced allegations of sexual misconduct. In 1998, he was convicted of a similar charge and spent six years in prison before the ruling was overturned. One year prior, Ibrahim was the Deputy Prime Minister and looked poised to be the next leader of the country. However, after campaigning on an anti-corruption platform, he was sacked by then-Prime Minister Mahathir Mohamad. Ibrahim has consistently maintained that the subsequent sodomy charges levied against him were politically motivated.

After emerging from prison, Ibrahim put together a coalition of three opposition groups in the 2008 elections and scored the biggest political victory against BN in Malaysia’s democratic history. The BN lost five out of the nation’s sixteen states and also lost its traditional two thirds majority in Parliament. Not long after the elections, new charges appeared against Ibrahim, this time from his former male aide, Saiful Bukhari Azlan.

Exiting the courthouse today surrounded by his supporters, Ibrahim now seems poised to mount the strongest challenge yet to BN’s longtime control of Malaysia; the next elections are scheduled to be held no later than 2013. Ibrahim’s message is one of populism: in the wake of the Arab Spring and other myriad occupy movements across the globe this past year, Ibrahim is seen as the reformist candidate who has pledged to rollback several harsh laws which have served to curtail many political and civil rights within Malaysia. Moreover, he is seen as the voice of the country’s various ethnic minorities — such as Han Chinese and Indian — who have long been left out of the political process.

http://www.campeche.com.mx/noticias/nacional/pan-y-pri-marcan-ruta-del-2012/6942

Mexico’s presidential election, to be held July 1, looks like a foregone conclusion. President Felipe Calderón’s right-wing National Action Party (PAN) has fallen far out of favor due to Mexico’s terrible drug violence. In the past 5 years, the drug wars have killed over 45,000 people. The Northern border city of Ciudad Juarez had 300 murders in 2007; in 2010, the figure was 3,622, giving this place the highest murder rate in the world. As Mr. Calderón’s critics like to point out, Juarez’s murder rate is higher than anywhere in Iraq or Afghanistan. With the PAN’s national security policy in disarray, Enrique Peña Nieto of the rival Institutional Revolutionary Party (PRI) led a recent presidential poll by 25%. Seeing these numbers reminds me of last time around in 2005, when President Calderón and the PAN trailed but went on to win the election, and wondering if the upcoming result will be as everyone expects.[1][2]

Is it truly unthinkable that the PAN could win again? Polling evidence says it is indeed unthinkable. Mitofksy’s November 2011 poll of voter preferences gave 44.6% to Peña Nieto (EPN), 19.7% to the PAN’s Josefina Vázquez Mota (JVM), and 16.1% to Andres Manuel López Obrador of the left-wing Party of the Democratic Revolution (PRD). PAN optimists observe that at the same point before the 2006 election, Mr. Calderón was third place in the polls before coming back to win. The difference is that the PAN’s current deficit is much higher at 25%, versus the 5% deficit Mr. Calderón faced in November 2005. However, not all commentators agree that a PRI victory is inevitable. I will discuss three reasons the PAN has a shot: EPN’s recent campaign gaffes, Mexico’s growing economy, and the Vázquez Mota factor.

Enrique Peña Nieto, the PRI’s man in 2012, is photogenic, well-known, and liked. At age 45, he has already served 6 years as Governor of Mexico State, the country’s most populous. While his image is attractive, some are questioning his ability to relate to ordinary Mexicans. At the 2011 Guadalajara International Book Fair, EPN was asked to name three books that had influenced his life. He struggled with the answer in an awkward speech eerily similar to Sarah Palin’s inability to name her own preferred newspapers.[3] In another gaffe, EPN was unable to state the price of the tortilla, a staple food in Mexico. EPN explained that he was not “the lady of the house.”[4] While these are hardly political killers, it is unimaginable that the President of Mexico could not know the price of a tortilla. EPN’s party has also suffered from disgrace at the leadership level. On December 2, PRI President Humberto Moreira resigned due to a debt accounting scandal in Coahuila State, where Moreira had been Governor. The PRI led Mexico for 71 years until 2000, and its detractors call it a bastion of corruption. The Moreira scandal provides more ammunition.

Another concrete issue where the PAN can directly challenge the PRI is Mexico’s economic progress. Duncan Wood of the Center for Strategic and International Studies writes “it is undeniable that successive PANista governments have been successful in…preparing the way for long-term prosperity.”[5] According to data from the IMF and government sources, real GDP grew 5.4% in 2010 and about 3.8% in 2011, after falling 6.2% during the 2009 recession. On January 3, the Mexican Government sold $2 billion in 10-year bonds at lowest-ever coupon and yield rates. This means that the bonds pay lower interest rates than past issues, and that investors demanded a very small discount when buying them. There has also been progress on unemployment, which soared up to 6.41% in September 2009, but had declined to 4.97% in November 2011 (Source: INEGI). Inflation will be a challenge due to the recent depreciation of the peso, which declined in value from 11.5 per dollar in May to around 13.7 per dollar currently. However, analysts are confident that the Central Bank has both the reserves and the strategy to stabilize the peso. Mexico is also expected to run a negative trade balance of around $4 billion and a current account deficit of $7 billion for 2011. However, the current account deficit will be easily offset by foreign direct investment, projected at around $20 billion annually for the next couple of years. The PAN can use its record to show that it is best poised to help the economy take next steps. These include liberalizing the labor market, widening the tax base, and incentivizing private companies to invest in state-owned oil producer PEMEX. The latter reform is necessary because PEMEX’s refining capacity has lagged domestic demand, forcing the government to subsidize imported gasoline. This reform is also controversial, as PEMEX’s unionized workers are extremely opposed.

The third factor that should keep EPN up at night is the woman to whom The Economist attributes “a flash in the PAN.” Josefina Vázquez Mota, most recently PAN leader in the Chamber of Deputies, served as Education Minister under President Calderón (2006-2009) and Minister of Social Development under President Fox (2000-2005). She is now in the driver seat to become the PAN’s candidate for the highest office. The popularity of JVM’s party has waned – public opinion of the PAN was 27% favorable and 30% unfavorable in November according to Mitofsky. However, she has solid anti-establishment credentials. As Education Minister she argued with the head of Mexico’s powerful teachers’ union, Elba Esther Gordillo, a political ally of President Calderón. Calderón has also endorsed a competitor, former Finance Minister Ernesto Cordero, to be the PAN’s nominee.[6]

Separation from Calderón has not hurt JVM within the party where 52% of members prefer her to be the nominee as of November, up from 38% in August. She is also making strides with the public at large: in the 3 months from August to November, the percentage of the public that recognizes JVM increased from 56.4% to 67.4%. In the same period her share of preference in a head-to-head contest with EPN and López Obrador (AMLO) increased 3%. JVM’s campaign may have more potential to win supporters through advertising than her competitors, who are both known by over 90% of the public. The PAN’s official primary in February will give her a boost through media exposure. Her key issues, strengthening education quality and the justice system, will be used to accuse the PRI of failing to develop Mexican institutions during the PRI’s long period in power. JVM may be the breath of fresh air the PAN needs, and the PRI should be concerned: its polling lead over the PAN has declined from a gargantuan 42% in November 2010, to a less gargantuan 25% one year later.

Source:PKKH

ISLAMABAD: Al Qaeda, the Afghan Taliban and Pakistani militants have held a series of meetings aimed at containing what could soon be open warfare between the two most powerful Pakistani Taliban leaders, militant sources have said.

Hakimullah Mehsud, the head of the Pakistani Taliban, also known as the Tehreek-i-Taliban (TTP), and his deputy, Waliur Rehman, were at each other’s throats, the sources said.

“You will soon hear that one of them has eliminated the other, though hectic efforts are going on by other commanders and common friends to resolve differences between the two,” one TTP commander said.

Any division within the TTP could hinder the Afghan Taliban and al Qaeda’s struggle in Afghanistan against the United States and its allies, making it more difficult to recruit young fighters and disrupting safe havens in Pakistan used by the Afghan militants.

Despite multiple reports of the Rehman-Mehsud split, Rehman told Reuters on Tuesday there was no problem between the two.

“There are no differences between us,” Rehman said.

The TTP, formed in 2007, is an umbrella group of various Pakistani militant factions operating in Pakistan’s unruly northwestern tribal areas along the porous border with Afghanistan.

It has long struggled with its choice of targets. Some factions are at war with the Pakistani state while others concentrate on the fight against the United States and its allies in Afghanistan.

There has been a noticeable decrease in militant attacks in Pakistan, but there continue to be random acts of violence across the country.

Al Qaeda and Afghan Taliban commanders are asking the TTP to provide more men for the fight in Afghanistan and are looking to smooth over the dispute between Mehsud and Rehman.

Long-standing feuds

Taliban sources said Rehman had ordered his fighters to kill Mehsud because of his increasing closeness with al Qaeda and its Arab contingent.

Mehsud’s former deputy has also confirmed that the TTP chief received money from Pakistan’s arch-rival, India, to kill former ISI official Colonel Imam, who was acting as a mediator between the Pakistani Taliban, Afghan insurgents and the Pakistani government.

The reported enmity between Mehsud and Rehman is not the only conflict within the TTP ranks.

Mehsud has a long-standing feud with militant commanders Maulvi Nazeer in South Waziristan and Hafiz Gul Bahadur in North Waziristan, both of whom have non-aggression agreements with the Pakistani military.

Mehsud’s men have also fought with the militia under the control of Fazal Saeed Haqqani, the former TTP head in the Kurram tribal region. He has accused Mehsud of killing his commanders and innocent people and kidnapping for ransom.

Haqqani, who is close to the militant Afghan Haqqani network, broke away from the TTP last year.

A pamphlet distributed by militants in North Waziristan this week announced the formation of a council to try to resolve the conflicts.

“All jihadi forces have jointly, on the recommendation of the Islamic Emirate of Afghanistan, formed a five-member commission which will be known as the Shura Muraqba,” the pamphlet said, using the term by which the Afghan Taliban describe themselves.

“The Shura Muraqba will be working to resolve differences and problems between mujahideen.”

It said that any “mujahideen” found to have committed an “unlawful” killing or kidnapping would be punished under Islamic law. It is likely any attack on a fellow “mujahideen” commander would be considered “unlawful”.

“All mujahideen should respect the decisions of the council that has been set up,” a senior commander of the Haqqani faction in Kurram said.

“If people continue to do as they like, the situation will not improve. Things will instead get much worse.”