www.brunei-online.com

On the first anniversary of the federal No Child Left Behind Act, President Bush in the White House East Room reflects on the progress of the sweeping education reforms, Wednesday, Jan. 8, 2003. Bush promised anew last Wednesday that the law's emphasis on school and student accountability will improve academic performance. AP WASHINGTON (AFP) - President George W. Bush has a packed policy agenda from preparing a possible war with Iraq, to handling the North Korean crisis and tough talks with Congress to push his controversial economic stimulus plan.

While Iraq for some time has been topping his priorities, North Korea has become an increasingly painful thorn the side of his administration.

Named a year ago by Bush as one of the countries he called an "axis of evil," Pyongyang has now threatened to renew nuclear military tests and has pulled out of the nuclear non-proliferation treaty.

North Korea said it has no plans to build nuclear weapons and is ready to talk to Washington about monitoring its suspect atomic program, US go-between Bill Richardson said Saturday after three days of talks with Pyongyang envoys.

But the US State Department in Washington immediately countered by saying the North Korean diplomats had failed to address any of their concerns in the crisis over their nuclear programme during the informal talks in Santa Fe.

Washington has been scrambling to stress that a diplomatic solution is needed with North Korea, while rattling its sabres increasingly loudly in Iraq's case.

US forces in the Gulf region will be bolstered this month by around 35,000 more troops, bringing the total to 120,000. But unlike his father George Bush in 1990's Gulf war, this Bush has not yet been able to muster much of an international coalition to fight.

Bush promised this week that if Iraqi President Saddam Hussein does not give up weapons of mass destruction he says Baghdad has, the United States and others would disarm Iraq and "free the Iraqi people." Baghdad denies having such arms.

Turkey has been pressed to allow US forces access to its bases and the European Union said Friday it did not want a war in Iraq, noting that any warfare should be decided by the UN Security Council.

Russia believes the report by chief UN weapons inspector Hans Blix Thursday confirms that a politial solution remains a possibility.

But Washington said the report, which did not offer proof that Iraq has weapons of mass destruction, also did not prove it does not have them.

With Pyongyang, Washington has pulled out all the stops, from calling for dialogue with North Korea, and Bush's telephone call to Chinese President Jiang Zemin for consultations.

North Korea has continued to harden its stand, arguing that Washington is not sincere. It has sought to reopen diplomatic channels, such as the talks with Richardson, a former US ambassador to the United Nations.

The potentially explosive situation in Venezuela -- a key US oil supplier -- has landed on a back burner. But the White house is worried, and Friday said it would support mediation efforts by OAS Secretary General Cesar Gaviria and an electoral solution as a general strike against President Hugo Chavez drags on.

On the domestic front Bush's economic stimulus package unveiled earlier this week has crashed into fierce opposition from Democrats and even some of Bush's fellow Republicans, with many arguing the tax cuts proposed heavily favor the wealthy and worsen the budget deficit.

Bush said Friday he was concerned by news that December's jobless rate had hit an eight-year high of six percent with the loss of 101,000 jobs.

His father lost the 1991 presidential election largely as Americans were underwhelmed by the state of the economy and less interested in his foreign policy achievements.

www.gulf-news.com Dubai |By Manoj Nair | 13-01-2003

Despite the economic risks involved, India should still take "sequential" steps towards full capital account convertibility, according to a senior economist.

"India's banking system is still weak and fiscal deficit is not under control. This is why small, incremental steps towards convertibility are what is required," said Jairam Ramesh, who, according to many in the know, could be a future Indian finance or commerce minister.

He later yesterday spoke at a meeting organised by the India Today group and the Indian Business Council in Dubai.

During his earlier tenure with the finance ministry - in 1997 -as a consultant, Ramesh was instrumental in putting together a position paper on India's road map towards full convertibility. According to it, the status was to be achieved by 2007.

Then, the Asean crisis sprang up, which slowed the momentum. This was followed by general elections which brought a new coalition government to power.

In recent months, a debate has sprung up in certain quarters about whether it was indeed advisable for the country to follow such a course. There were many who were cautioning a slower approach, or none at all.

Those who favour it point out to India's strong foreign exchange reserves position - of $70 billion. "There is still a lot of risk - Brazil lost $50 billion in just three weeks when it allowed convertibility during 1999. However, hot money represents only 20 to 15 per cent of India's overall foreign exchange reserves, which represents a far more stable situation than in other cases," said Ramesh, presently secretary in the economic affairs department of All India Congress Committee, the main opposition party.

"But, from the political perspective, India does not go in for big reforms unless there is a crisis." On India's economic situation, Ramesh said 2002-2003 has been bad with industrial growth not more than 5 to 6 per cent. "I do not think it is possible to achieve a 4 per cent GDP growth. Agriculture too has been badly affected."

On the plus side, "Many Indian companies are in the process of restructuring and getting results. Tisco is the lowest cost steel producer in the world, but not many know that. Telco was written off a few years ago, but is now a success story of transformation. There is a growing universe of Indian companies that are globally competitive.

"But we still have many issues - poor infrastructure tops. In balance, India has many macro successes, while having its large share of micro failures."

On the impact of possible war with Iraq and its fallout on India's oil bills, "Most of our calculations are based on an oil price of $25 a barrel. With $70 billion in reserves, the import scene is not what's worrying.

"What is of concern is the economic and social cost of the dislocation of a huge number of expatriate Indians in the Middle East back to the country.

"The recent global NRI summit in New Delhi made no effort to look at the Middle East, which accounts for $6 to 7 billion in annual remittances to India from an estimated three million Indians here. The whole focus of the meeting was on Indians in the West."    

Jeffrey E. Garten IHT Monday, January 13, 2003 Get together   PARIS The Bush administration is leaving no doubt that it intends to use America's enormous military power to make the world a safer place. But to succeed, it must develop a more robust global economic policy as well. Unless military confrontations lead to something much better for the millions of people who will be hurt, America will have won the wars and lost the peace. It is true that the administration is aggressively promoting trade liberalization by pushing for new commercial deals with Latin America, as it has recently done with Chile and is now doing in Central America.

It is also pressing for more tariff and quota reductions around the world in an omnibus negotiation that it hopes to conclude within two years under the auspices of the World Trade Organization.

These efforts are an excellent start. But there are at least four broader challenges that the United States should now confront, and with an urgency that the Bush administration has yet to demonstrate. The first is reinvigorating global economic growth. The world economy is in trouble. Corporate investment and trade are slowing, factories are producing more than they can sell, and deflation is threatening many regions. Germany and Japan, are stagnating. Big emerging markets, from Indonesia to Brazil, are in deep trouble.

America's economy is the world's most powerful by far, accounting for almost a third of global demand these days. But even if it grows at a healthy rate this year, the United States by itself cannot create a sustainable international economic recovery.

A U.S. revival depends on the health of American companies, and that in turn depends in part on expanding foreign markets. Overseas sales of American goods and services made up at least 25 percent of U.S. economic growth in the 1990s.

And because many of America's top companies - Intel, Coca-Cola, Johnson Johnson, for example - rely on Europe, Japan and developing countries for more than 30 percent of their revenues, stronger foreign economies are important to the health of U.S. stock markets, the principal financing vehicle for corporate America's expansion.

Washington must bring together its economic partners - the Group of Seven nations made up of Canada and Japan and four in the European Union - to get the global economy moving again.

The United States, which is already running huge budget deficits and has lowered interest rates to levels not seen in generations, has little room to maneuver. But it can encourage the European Central Bank to lower its relatively high interest rates, since inflation on the Continent is not nearly the threat that stagflation is. The European Union must also let up on its growth-constricting demands that Germany, Italy and France restrict spending and, in some instances, raise taxes. The United States and Europe can push Japan to restructure its growth-strangling bank debts. Second, there will soon be an acute need to rebuild countries that are defeated or disintegrating. Estimates for reconstructing Iraq range from $120 billion over 10 years, in the case of a very short war, to $1.2 trillion after a prolonged conflict, according to extensive work done by the Yale economist William Nordhaus. This amount does not include the costs of the administration's vision of spreading democratic and free market institutions in the Gulf region.

The job of economic relief and reconstruction will most likely need to be handled by the United Nations, but substantial American financial support will be essential. Given budget deficits at home, this will be no easy task.

Will this money come from domestic programs or from foreign aid already promised to others? At the least, the Bush administration needs to be working with Congress to incorporate the requirements in planning - something which Mitchell E. Daniels Jr., director of the Office of Management and Budget, has been reluctant to do. One problem is that there is no single agency in Washington capable of overseeing the extensive United Nations efforts that must be mounted. One needs to be created, just as the Economic Cooperation Administration was established in 1948 to oversee the Marshall Plan. Like it or not, we are entering a decade of political and military tension, and nation-building is going to be a major part of America's response. Third, Washington needs to prepare for all-too-possible international economic crises. A major rise in oil prices in reaction to turmoil in Venezuela and Iraq has already begun and could send the global economy into a deep recession. America should be working with the European Union and Japan to release emergency oil reserves if oil prices spiral out of control. It should be encouraging Russia to expand production, too, by promising that it will buy Moscow's supplies well into the future.

Another crisis could involve the dollar, which was down 15 percent against the euro for all of 2002. If the U.S. trade deficit continues to soar and foreigners get nervous, they could dump their dollars.

It would help if Washington could persuade the European Central Bank to lower its interest rates - which it should do anyway to stimulate economic growth - and make the euro less attractive as an alternative to the dollar. Beyond that, Washington, Brussels and Tokyo will have to be prepared to coordinate purchases of the dollar if it goes into free fall.

Latin America could provide the spark for a global financial debacle. After all, Argentina and Venezuela are in deep trouble, and Brazil's economy is fragile at best. In 1997 a currency collapse in Thailand set off a global financial meltdown. Washington and its economic partners had better focus more on what is happening south of the Rio Grande. Finally, the United States will have to give much more attention to helping developing countries, the very nations in which so much of today's turmoil exists, to get a fairer deal from globalization, which has disproportionately benefited rich countries so far.

This means not only negotiating trade agreements but also improving the World Trade Organization's ability to settle trade disputes and to give technical assistance to struggling countries overwhelmed by the blizzard of new trade laws in the last decade.

It also means helping the World Bank and its regional counterparts deal with poverty more effectively, rather than just criticizing their performance, which is what Washington so often does. The Bush administration has never shown much interest in multilateral diplomacy except when other countries press it to the wall, as they have with Iraq. But in the economic realm there is no choice but to seek partners.

In the immediate aftermath of World War II, the United States pushed for the establishment of the IMF and the World Bank, and coordinated the Marshall Plan with European nations. Washington realized that economic stability and prosperity were essential to security. It is true today, too. The writer is dean of the Yale School of Management and author of "The Politics of Fortune: A New Agenda for Business Leaders." He held economic and foreign policy positions in the Nixon, Ford, Carter and Clinton administrations.

www.canada.com John Valorzi The Canadian Press Sunday, January 12, 2003

A lessening of international tensions in hot spots such as Iraq, North Korea and Venezuela, where a widespread strike has crippled the country's oil industry, could help lift markets this year, analysts say.

After one of the most volatile periods in memory for the stock market, the average investor is nervously hoping that 2003 will bring a long-awaited rally in equities.

With the U.S. economy looking poised for recovery, the stock market could end a three-year losing streak that has squeezed investors portfolios and left many average consumers disdainful of buying stocks.

A lessening of international tensions in Iraq, Venezuela and North Korea could also spark a market recovery. And there's also a chance investors may forget the lessons of the current bear market and get tempted again by hot stocks that could create another bubble to burst.

That's why keeping investor expectations in check is right up near the top of any list of financial resolutions for the New Year, advisers say.

The usual things such as making sure you diversify your holdings, invest in RRSPs, think ahead for tax planning and keep debts manageable should be on that list as well. But for such volatile times, investors must accept the fact 15 to 20 per cent annual returns on their portfolios are a thing of the past, so they should be thinking long-term, not month by month or day by day.

"With everything that's happened over the past three years, it sort of drives home the point that if you're investing, your best strategy is always to have a diversified portfolio and stick with it for the long haul," says Marc Levesque, senior economist at TD Bank.

"Don't try to time the markets and play games in hopes of making a quick buck. Investing is a long-term proposition, and there's a lot of uncertainty out there now as to where the markets are going over the next year.

"My advice to people would be to just sit there, stand pat. The markets will recover one day."

Model portfolios should include about half of the money in stocks, a third in bonds and the rest in cash or short-term liquid investments. Those percentages can then be adjusted depending on how one particular sector is doing against the other.

Bea Hale, a certified financial planner with the Berkshire Investment Group in Whitby, Ont., says she reminds clients to review their portfolios to ensure they are appropriately diversified and not just in one market sector or one type of investment.

"Quite often, a lot of the clients are in something that is a little too risky. Not diversified overall, but diversified in one sector," she says. "It causes a problem when that sector goes down."

Richard Yasinski, president of Financially Sound in Stittsville, Ont., near Ottawa, says he'll be advising his clients in the new year to weigh the pros and cons of being long-term equity investors.

Although Yasinski also advocates a balanced approach to investing, he has long held that stocks should play a significant part of most portfolios, particularly for investors looking ahead 10 years or more.

But given the length of the stock market downturn and the volatility that investors can expect ahead, Yasinski says he understands why people may be having their doubts about equities.

"My clients have been investing for five years or more and not seeing a lot of growth," Yasinski says. "I guess my comment to clients is: 'Are you willing to stick it out.' "

Conditions are very different now compared with the 1990s and "clients are going to have set their expectations" and decide whether they really believe equities will outperform bonds or cash or other investments, he says.

Yasinski is among those who is wary about income funds, believing there has been so much recent interest in them that there is a "mini bubble" that's bound to burst at some point.

Income funds pay out a large portion of the cash flow generated from the underlying business each month or quarter, making them somewhat similar to an interest-bearing or dividend-paying investment.

However, income trust units are a form of equity, akin to common shares, that provide investors with less protection than do bonds or preferred shares, which have a higher claim on the business's assets in the event of insolvency.

Investors may also face special tax opportunities, or challenges, since the trusts' distributions may be treated as interest, dividend, capital gains or a combination of all three.

Yasinski says he believes the biggest opportunity for investors is in "standard common shares of viable businesses that have just been beaten up the last couple of years because of the market."

"Don't give up yet, especially if you have five or more years before you ever need the money."

www.sfgate.com David Armstrong, Chronicle Staff Writer Sunday, January 12, 2003

When Hewlett-Packard's wholly owned subsidiary in Chile imports office equipment from the parent company, such as HP printers, it must pay a 6 percent Chilean import duty.

That fee will disappear if a proposed free-trade agreement between the United States and Chile becomes law, as expected.

That, in turn, could help HP Chile lower its operating costs and grab market share from Canadian and Japanese companies that already benefit from their countries' free-trade agreement with Chile, said HP Chile's marketing manager, Axel Heilenkotter.

In time, Heilenkotter said, the free-trade agreement could create such favorable business conditions that the Palo Alto company might set up manufacturing operations in Chile, a small but entrepreneurial South American nation in whose capital, Santiago, HP employs 200 people at a sales and marketing complex.

The pact now goes before the congresses of both countries for ratification. In the United States, Congress can vote either for or against the deal, but cannot amend it under terms of trade promotion authority narrowly granted to President Bush last year.

Supporters of the agreement maintain that it will create a level playing field for business. Skeptics fear that U.S. producers will be undercut by cheap Chilean imports and the South American nation's skirting of U.S. labor and environmental laws.

If implemented, the trade deal will be Washington's first such agreement with a South American country. It would make Chile the fifth nation to join the United States in a tariff- and quota-slashing trade pact, after Canada, Mexico, Israel and Jordan.

The United States also has reached tentative agreement on a free-trade pact with Singapore.

On Wednesday, U.S. Trade Representative Robert Zoellick announced that Washington will open talks with five Caribbean nations, to forge a trade deal with them. Two days later, Zoellick said he will meet trade ministers from five southern African countries this week with an eye toward creating a regional free-trade area there.

The pact with Chile could serve as a stepping-stone for even more ambitious projects such as the proposed Free Trade Area of the Americas, an idea ardently supported by Bush. It would encompass every country in the Western Hemisphere except Fidel Castro's Cuba, in a huge region devoid of tariffs, quotas and other trade barriers.

Chile's ambassador to Washington, former central banker Andres Bianchi, helped negotiate the deal with the United States, which as Chile's largest trading partner accounts for 18 percent of Chilean trade.

Bianchi said in an interview that he is convinced the agreement will benefit both nations, and that its significance goes beyond its immediate worth in dollars and cents.

"The real value is the message that it sends to the rest of Latin America," Bianchi said. "The message is that countries that pursue sound monetary and economic policies, that are open, that are democratic, those countries are accepted into the club."

Bianchi said failure to pass the agreement could strengthen the populist backlash reflected recently in the election of left-leaning leaders in Brazil and Venezuela.

Chile emerged in 1989 from a bloody military dictatorship led by Gen. Augusto Pinochet. Since then, it gradually has rebuilt democratic institutions and embraced freewheeling capitalism, which the government says has reduced the number of Chileans living in poverty from 45 percent to 20 percent of the population.

In addition, Chile has enjoyed government budgetary surpluses in 14 of the past 15 years and earns high marks on international surveys of competitiveness,

transparency and resistance to corruption.

The Chile trade deal has been in the works for some time. First floated as an idea in 1989, it was set aside while Washington crafted NAFTA with Canada and Mexico. Formal talks with Chile finally began in late 2000 and lasted two years.

When the tentative agreement was announced last Dec. 11, Zoellick characterized Chile as "an ideal free-trade partner of the United States because of its sound macroeconomic policies and commitment to free trade."

In the long prelude to negotiations, U.S. businesses were broadly supportive, though some, including California vintners and farmers, fear unfair competition from rivals that pay their workers low wages and receive government subsidies.

Bianchi, though, played down the threat of competition from Chilean farmers and winemakers, noting that because it is in the Southern Hemisphere, Chile is growing produce when it is winter in the United States, while in the summer, U. S. producers could export to Chile.

Lisa Dillabo, an international specialist at the California Farm Bureau, said the Farm Bureau is generally supportive of free trade.

In working out the tentative deal with Chile, however, Dillabo said California farmers demanded that the pact incorporate penalties should Chilean exporters dump products on the U.S. market below cost.

She said California fruit and vegetable growers are vulnerable, but added that the deal could open up opportunities for the state's meat producers.

The Wine Institute, a trade group based in San Francisco that represents U. S. winemakers, expressed reservations about the deal. "We insisted on tough point-of-origin regulations, so companies couldn't just transship their products through Chile to the United States and say they were Chilean and take advantage of the trade agreement," said Gladys Horiuchi, a spokeswoman for the Wine Institute.

U.S. agricultural interests succeeded in getting a 12-year delay for the elimination of tariffs on farm goods. Tariffs on most nonfarm goods are either dropped the day the trade deal becomes law or expire after four years.

Lon Hatamiya, secretary of California's Technology, Trade and Commerce Agency, said he thinks the Chilean trade pact eventually will prove to be a good deal for California's farmers, whom he characterized as highly productive and competitive.

Chile, ranked 32nd among the state's export markets, is not a big country, Hatamiya noted, but certain sectors of the Chilean economy could be profitable for California exporters, he said.

The state's manufacturers, he said, should benefit, noting that Chile, which has a large mining industry, needs to buy heavy equipment for mining and for environmental cleanup, fields in which California companies are world leaders.

U.S. high-tech firms largely support the deal with Chile, said Tim Bennett, senior vice president for international affairs with AEA (formerly the American Electronics Association).

"The size of their market is not huge," Bennett said of Chile. "However, Chile is probably the most advanced and open economy in South America. We think this will have some symbolic effect, and that it will stimulate a move toward the Free Trade Area of the Americas."

Chile, with 60 percent of its gross domestic product generated by exports, strongly supports free trade, said Bianchi, the Chilean ambassador. Chile has trade deals with the European Union and South Korea that should become law this year, he said.

If all goes well, said Bianchi, who follows the machinations of the U.S. Congress from his base in Washington, the agreement could be approved this summer or fall, clearing the way for it to become law Jan. 1, 2004.

U.S.-Chile free trade agreement

The agreement: Trade negotiators announced an agreement between the two nations on Dec. 11. The Chilean pact will be the first for the United States with a South American country. The agreement will be the fourth free-trade agreement that the United States has entered into. The other agreements are the North American Free Trade Agreement (the United States, Canada and Mexico) and bilateral agreements that the United States has with Jordan and Israel.

What will it do? Phase out 85 percent of tariffs within four years and all tariffs in 12 years. Loosens controls on foreign investment and flow of capital. Serve as a model for agreements with other Latin American countries.

What's next: The agreement needs to be ratified by the congresses of both nations. .

Demographics on the two economies:

Chile (flag)

Population: 15 million

Gross domestic product: $153 billion (2001)

Value of exports to the United States: $4.3 billion (2001).

Leading exports to the United States: copper, nitrates, fruit, wine, farm- raised salmon

United States (flag)

Population: 281 million (2000)

Gross domestic product: $10.08 trillion (2001)

Value of exports to Chile: $4.5 billion (2001)

Exports to Chile: autos, computers, construction machinery, paper products, telecom equipment.

California (state flag)

Population: 35 million

Gross state product: $1.3 trillion

Value of exports to Chile: $281 million (2001)

Imports from Chile: fruit (fresh, canned, juice), wine

Exports to Chile: computers, construction equipment, aircraft .

Sources: U.S. Trade Representative's Office, Government of Chile, World Factbook 2002, California Trade, Technology and Commerce Agency, U.S. Census Bureau

E-mail David Armstrong at davidarmstrong@sfchronicle.com.