Yangtze disaster: Operation begins to lift Chinese ship
OSAMA AL SHARIF
I
JIANLI COUNTY, CHINA— Chinese salvagers have begun to right an upturned ship on which more than 400 people are thought to have died. The Eastern Star sank in the Yangtze River on Tuesday after being caught in what was said to be a freak storm. Just 14 of the 456 mostly elderly passengers are known to have survived the accident, which looks likely to be China’s worst boat disaster in decades. The beginning of the operation to right the stricken ship seemed to signal the end of hopes of finding more survivors. Rescue workers on the upturned hull, which was just barely visible over the brown waters of the Yangtze, were towered over by two cranes. Hooks were welded onto the ship and a net stretched around the entire structure in preparation for lifting it. As the ship is righted, the focus of emergency workers at the site in Jianli, Hubei province will switch from attempting to find survivors to searching the ship’s 150 cabins for bodies. About 80 bodies have so far been recovered, some after three holes were cut into the vessel’s upturned hull. The holes were later welded closed in order to preserve the ship’s buoyancy. Chinese president Xi Jingping promised a thorough investigation into the cause of
Houthis left with one option
Salvagers on Thursday started to right the ship after rescue teams failed to find any more survivors. the disaster, after angry relatives protested at the scene. Authorities tightly controlled access to the site, leading family members and journalists to complain about a lack of information. Most of the 14 people known to
have survived jumped from the ship as it began to sink. Three were rescued by divers from air pockets in the upturned hull. The cause of the sinking is not yet known, but survivors have spoken of an intense
storm which flipped the boat over in minutes. The captain and chief engineer, who were among those who escaped, have since been detained. Maritime agency records showed the ship was investigated for safety violations two
years ago. It was held alongside five other vessels in 2013 over safety concerns. China’s deadliest maritime disaster in recent decades was in November 1999, when the Dashun ferry caught fire and capsized in the sea off
Blast at Ghana petrol station kills 90 seeking shelter from storm ACCRA, GHANA—An explosion at a petrol station in Ghana’s capital killed around 90 people sheltering from a storm early on Thursday, emergency services said, in the worst disaster to strike the West African state in more than a decade. The force of the blast gave few a chance to escape. People were burned beyond recognition where they stood under the station’s awning, or trapped in the charred wreckage of cars and minivans parked on its forecourt. The accident was caused by a fire at a nearby lorry terminal. Flames spread to the state-run GOIL (GOIL.GH) petrol station via spilt fuel floating on flood water, fire brigade spokesman Prince Billy Anaglate said. “It was an explosive fire and so the people sheltering at the filling station did not have an opportunity to escape,” Anaglate said. It was Ghana’s worst disaster since more than 120 people died in May 2001 in a stampede at the national
stadium during a soccer match, a police spokesman said. The incident exposed Accra’s vulnerability to storms, given poor drainage and weak infrastructure that has failed to keep pace with population growth after years of rapid economic expansion. Low-wage workers struggling to get home through the storm, with roads closed and minivan buses not running, formed the bulk of those caught in the explosion, witnesses said. Several other people were swept away by the seasonal storm in the coastal city and thousands more were made homeless as flood waters rose, officials said. Ghana is one of Africa’s most stable democracies and for years its exports of gold, cocoa and oil made it one of the continent’s fastest-growing economies. But since 2013 it has wrestled with a fiscal crisis and lower commodity prices, and growth this year is projected to fall to below the average for sub-Saharan Africa. By morning, Ghana’s security forces had doused the
Shandong province, killing about 280. The Eastern Star could become China’s deadliest boat accident since the SS Kiangya sank off Shanghai in 1948, killing somewhere between 2,750 and 4,000 people.—Agencies
Chinese FM urges bigger role for SCO in regional security
flames and secured the area, pegging back anxious crowds. Rescue workers wearing face masks retrieved the remaining bodies, including that of a small child, and piled them onto a truck. Some cars were still smoldering. President John Mahama said he was heartbroken by the loss of life. He blamed the floods partly on people building homes and businesses on waterways, blocking the city’s drainage systems. “This loss of life is catastrophic and almost unprecedented,” Mahama said as he visited the scene. “We must sit down and strategize to make sure this doesn’t happen again.” Opposition leader Nana Akufo Addo, who also went to the site, described the disaster as a “dark day in the history of the city”. Some officials said many new Accra gas stations had sprung up without proper permits, but noted that the destroyed GOIL station had been there for years. Ghana’s meteorological service forecast more rain on Thursday.—Reuters
MOSCOW—Chinese Foreign Minister Wang Yi on Thursday called on the Shanghai Cooperation Organization (SCO) to play a more constructive role in safeguarding regional security and stability. During an SCO meeting on regional security and stability in Moscow, Wang noted that in the face of the complicated global and regional situation, the SCO has the obligation and ability to play a more constructive role and make greater contributions to regional security and stability.—Xinhua
T has been more than two months since a Saudi Arabia- led Arab coalition intervened in Yemen in order to restore the legitimate government, force the Houthi militias and soldiers loyal to former President Ali Abdullah Saleh to withdraw from key Yemeni cities and provinces and put an end to Iran’s meddling in that country’s affairs. The air campaign has achieved some objectives but not all. Saudi Arabia and its Gulf allies were able to pass UN Security resolution number 2216, under Chapter 7, which gave the rebels few days to withdraw from the capital Sanaa and other cities, accept the outcome of the national dialogue that was achieved last year and join a political process to agree on the future of the country. But the Houthi-Saleh alliance rejected the resolution and stepped up its attacks against Aden and other southern cities and provinces effectively dragging Yemen into a protracted civil war. It also boycotted a reconciliation meeting that took place in Riyadh last month. Meanwhile, the air campaign continued after a five-day humanitarian truce, which the rebels did not observe, and while the renegade militias continued to press with their assault, local resistance groups began to retaliate and were able to liberate some areas.A new UN envoy to Yemen, Ismail Ould Cheikh Ahmad, has tried to hold a meeting of all Yemenis in Geneva. But President Abed Rabbo Mansour Hadi has made it clear that the rebels must first accept and implement resolution 2216 before such a meeting could take place. Politically as well as militarily the conflict in Yemen is reaching a deadlock. Among the immediate objectives that Arab coalition was able to achieve was to cut off Iran’s supply lines to the Houthi rebels. The air strikes have hurt the rebels and loosened their grip over some areas, but they have not repulsed them or forced them to yield. In the absence of a political formula to bring all parties to the negotiation table the Yemeni conflict will drag on for many months to come. The people of Yemen are paying a heavy price for the blind ambitions of both the Houthis and Saleh. The humanitarian cost has been enormous and UN organizations are warning of a catastrophe. The rebels have committed major war crimes in Aden, Taaz and Al Dale’. They have kidnapped journalists, human rights activists and opposition figures and used them as human shields. As Ahmad tries to mediate between all parties involved, including Iran, in a bid to convene the Geneva conference, there are news that Oman has stepped in with its own initiative; holding a meeting between American, Houthi and Iranian officials at the request of the US. While Saudi Arabia and the Yemeni government will not support such meetings, it is hoped that the Houthis will seek a political way out. If they accept to implement the UN resolution then the door will be open to hold a bigger conference in Geneva as soon as possible. If not then the Arab coalition has no option but to continue with its air campaign. It cannot afford to be seen as giving up on Yemen and its legitimate government. There are reports that a Houthi delegation has also traveled to Moscow to seek political support from the Kremlin. After all is said and done the Houthis, who are still being viewed as part of the political landscape in Yemen, must decide that their gambit to take over the country will not work. Simply said Saudi Arabia is committed to restore the legitimate Yemeni government. They need to accept the UN resolution and end their partnership with the former president and his gang. In return they will receive certain assurances and will be encouraged to join an inclusive political process based primarily on the outcome of the national dialogue and the GCC initiative on Yemen. They must also sever relations with Iran, whose interference in Arab affairs has become a major challenge for the Sunni world as sectarian wars rage in Iraq and Syria and threaten the stability of Lebanon. The fact that they are viewed as agents of Iran in Yemen has undermined their credibility. One person who should not be exempted or given assurances should be the former president, whose role in encouraging the Houthis to take over the capital and derail the political process has caused death and destruction to the country. He must be brought to justice for the crimes that he has committed. The coming few days will be crucial for the future of Yemen. Saudi Arabia and its allies continue to support a political solution to the Yemeni conflict. The Houthis will have to make their position clear away from the ploys of Saleh and his renegade generals. They can still be part of a political process that aims at ending the war and achieve reconciliation. —Courtesy:Arab News
Limits of freedom of expression need to be ascertained: OIC SG
The liquidity time bomb
JEDDAH—More 90 experts on human rights, law, that the international human rights community at-
The charred wreckage of a minivan is seen at a gas station that exploded overnight killing around 90 people in Accra, Ghana.
politics and minorities, including UN special procedures as well as representatives of UN Member States, met at the OIC headquarters in Jeddah on the other day as part of a two-day meeting on how to effectively implement UN Human Rights Council Resolution 16/18 on combating religious intolerance, discrimination, incitement to violence and violence against people due to their religion or beliefs. The meeting, the 5th Session of the Istanbul Process, is the second of its nature to be held in the Muslim world and follows previous meetings in Washington, London, Geneva and Doha to promote the full and effective implementation of UN Resolution 16/18. In his opening speech, OIC (Organisation of Islamic Cooperation) Secretary-General Eyad Ameen Madani thanked the participants for attending and said the meeting reflects the importance
taches to combating religious intolerance. Madani said that religious hatred needs to be addressed at all levels, including the need to ascertain the limits of freedom of expression to determine where it ends and transforms into incitement to hatred. “The impact of news of discrimination or violence based on religion not only affects the targeted people or community but also impacts the broader international community as well as evinces corresponding reactions,” he said while expounding on the issue of globalisation and its impact. Madani also gave details about Resolution 16/ 18 and the Istanbul Process that was formed to action it. “All stakeholders must stand united, reaffirm their commitment to the global policy framework and redouble their efforts to fully and effectively implement this consensus Action Plan at all levels,” he said.—PR
Why investors who bet big on Ukraine should shoulder their own losses JOSH COHEN
U
KRAINE is flat broke. Kiev is running out of hard currency reserves to pay its foreign debts. Inflation is at 60 percent due to huge increases in gas prices. The country’s economy collapsed at an annualized rate of 17 percent last quarter. A full-scale economic depression is unfolding. There may be only one way out of this mess for Ukraine: to default on its international debts and tell its foreign creditors to take a hike. While some argue that government debt restructurings are akin to theft from “powerless” creditors, Ukraine’s foreign bondholders are sophisticated investors — including one of America’s biggest investment firms — who knew the risks of investing there. No money from the International Monetary Fund (IMF), which is injecting cash into the Ukrainian economy, should go toward repaying Ukraine’s debts to foreign creditors. To assist Ukraine, the IMF and other Western donors recently agreed to lend Kiev $40 billion to stabilize its economy. This number, while huge, is deceiving. A good chunk of the $40 billion was already promised to Ukraine in an earlier IMF loan. More importantly, the IMF requires $15 billion of this assistance to come from the restructuring of Ukraine’s international bonds — in essence, demanding that Ukraine’s foreign creditors accept a loss
on their investments. Kiev and its creditors, however, disagree on how to achieve this savings. Ukraine is demanding that its creditors accept a “haircut” — or loss in the face value of the bonds. Creditors such as Franklin Templeton — the country’s largest creditor, which reportedly owns almost half of the government’s foreign debt — assert a “haircut” is not necessary, and that reducing interest payments and extending the maturities of the bonds yields the necessary savings that the IMF demands. If Ukraine cannot negotiate a debt reduction plan with its investors by June 15, when the next IMF review of Ukraine’s bailout program occurs, its IMF loan could collapse — sending Ukraine’s economy into an even deeper tailspin. In response, Ukraine’s parliament just passed a law authorizing the government to impose a moratorium on bond payments to its foreign investors if negotiations fail. Some of Ukraine’s foreign creditors buy assets in struggling countries at low prices, hoping to sell at a big profit when prices recover later. They seem to be savvy at finding one-way bets. For example, as the value of Templeton’s Ukrainian bonds dropped from 80 cents on the dollar to 50 cents when the war in Ukraine’s east began, the head of the firm’s Global Bond Fund spoke publicly about Ukraine’s merits as an investment destination, explaining to nervous investors that billions
in IMF cash backstopped his Ukrainian bond holdings. Counting on the IMF has worked so far. Ukraine received almost $10 billion from the IMF in the last 12 months, some of which went right back out to pay foreign bondholders. While it’s natural that foreign creditors want to limit their losses, Ukraine’s collapsing economy and massive defense expenditures makes it likely that Kiev’s $40 billion aid program will not be sufficient. Kiev should therefore stick to its guns and insist that foreign creditors share in the pain of its citizens and take a loss on the principal of their investments. If foreign creditors continue to refuse this “haircut,” then the government should stop paying interest on these bonds until its creditors agree to accept one. The aim is not to forgo repaying its creditors indefinitely, but to push its investors to accept better terms than they are offering. Citigroup argues that prices of Ukrainian bonds indicate markets already expect a 20 percent haircut — and Kiev has an obligation to its citizens to secure the best deal it can. Indeed, Ukraine’s citizens are already suffering. The average monthly salary in Ukraine is only $186, and skyrocketing inflation is decimating the purchasing power of ordinary citizens. Kiev is also implementing a painful IMFmandated economic austerity program involving massive cuts in social spending programs
of nearly $30 billion. While Ukraine’s current unemployment rate is just shy of 10 percent, if the results of the Greek economic crisis are any guide, both the unemployment and poverty rates could easily double. The Ukrainian government’s first responsibility is to its people, and if Kiev implements the painful social spending cuts mandated by the IMF, then at a minimum Ukraine’s IMF money should not be used to protect sophisticated foreign bondholders from the consequences of their poor investment decisions at the expense of ordinary Ukrainians. While Ukraine’s central bank governor worries that Ukraine risks becoming a “pariah country” if it does not meet its obligations, she needn’t be concerned. There have been 187 sovereign debt restructurings between 1970 and 2013, and recent IMF research found that emerging market governments almost always come to terms with their creditors eventually and return to international markets with a clean bill of health. Moreover, once a country’s debt load becomes manageable, inflation drops substantially while economic growth rates at least double — exactly what Ukraine desperately needs after years of economic crisis. Ukraine does not control its own destiny on the battlefront. On the financial front, however, Kiev holds a strong hand — and should not hesitate to play it. —Courtesy: Reuters
NOURIEL ROUBINI
A
paradox has emerged in the financial markets of the ad vanced economies since the 2008 global financial crisis. Un conventional monetary policies have created a massive overhang of liquidity. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity. Policy interest rates are near zero in most advanced economies, and the monetary base has soared — doubling, tripling, and, in the United States, quadrupling relative to the pre-crisis period. This has kept short-and long-term interest rates low, reduced the volatility of bond markets, and lifted many asset prices (including equities, real estate, and fixed-income private- and public-sector bonds). And yet investors have reason to be concerned. Their fears started with the “flash crash” of May 2010, when, in a matter of 30 minutes, major US stock indices fell by almost 10 percent, before recovering rapidly. Then came the “taper tantrum” in the spring of 2013, when US long-term interest rates shot up by 100 basis points after then-Fed Chairman Ben Bernanke hinted at an end to the Fed’s monthly purchases of long-term securities. Likewise, in October 2014, US Treasury yields plummeted by almost 40 basis points in minutes, which statisticians argue should occur only once in three billion years. The latest episode came just last month, when, in the space of a few days, 10-year German bond yields went from five basis points to almost 80. These events have fueled fears that, even very deep and liquid markets may not be liquid enough. So what accounts for the combination of macro liquidity and market illiquidity? For starters, in equity markets, high-frequency traders (HFTs), who use algorithmic computer programs to follow market trends, account for a larger share of transactions. This creates, no surprise, herding behavior. Indeed, trading in the US nowadays is concentrated at the beginning and the last hour of the trading day, when HFTs are most active; for the rest of the day, markets are illiquid, with few transactions. A second cause lies in the fact that fixed-income assets are not traded in more liquid exchanges, as stocks are. Instead, they are traded mostly over the counter in illiquid markets. Third, not only is fixed income more illiquid, but now most of these instruments are held in open-ended funds that allow investors to exit overnight. Fourth, before the 2008 crisis, banks were market makers in fixedincome instruments. They held large inventories of these assets, thus providing liquidity and smoothing excess price volatility. But, with new regulations punishing such trading (via higher capital charges), banks and other financial institutions have reduced their market-making activity. So, in times of surprise that move bond prices and yields, the banks are not present to act as stabilizers. As a result, when surprises occur the re-rating of stocks and especially bonds can be abrupt and dramatic: Everyone caught in the same crowded trades needs to get out fast. Herding in the opposite direction occurs, but, because many investments are in illiquid funds and the traditional market makers who smoothed volatility are nowhere to be found, the sellers are forced into fire sales. This combination of macro liquidity and market illiquidity is a time bomb. So far, it has led only to volatile flash crashes and sudden changes in bond yields and stock prices. But, over time, the longer central banks create liquidity to suppress short-run volatility, the more they will feed price bubbles in equity, bond, and other asset markets. As more investors pile into overvalued, increasingly illiquid assets — such as bonds — the risk of a long-term crash increases.This is the paradoxical result of the policy response to the financial crisis. Macro liquidity is feeding booms and bubbles; but market illiquidity will eventually trigger a bust and collapse.
—Courtesy:The Guardian