Month: June 2005

HAGEL: CAUCASUS OF GREAT IMPORTANCE TO US AND WORLD
Pan Armenian News
04.06.2005 03:13
/PanARMENIAN.Net/ The South Caucasian region is of great importance
to the US and the whole of the world, US Senator Chuck Hagel stated
in the course of a press conference in Tbilisi June 3. “The main
reason for my arrival in the South Caucasian region is the great
geopolitical importance the region has not only to the US, but also
the whole of the world. In my opinion US Congress members should be
well-informed over the processes developing in that region,” the
Senator stated. He noted that “certain difficulties in the region
persist, however, it is important that a right course is chosen.”
“There is work still to be done in implementation of democratic,
electoral reforms, making borders more transparent and lifting the
restrictions, however the leaders of the region understanding that
these problems should be solved and working over them is the most
important,” the Senator remarked. In the course of his stay in Tbilisi
Mr. Hagel had meetings with the Georgian President, Defense Minister,
National Security Council Secretary, visited the Krtsanis Training
Unit of the Georgian Defense Ministry, where Georgian servicemen,
who are to participate in international peacekeeping operations, are
trained within the US Sustainment and Stability Operation Program,
reported Novosti-Gruzia.

The outsiders
By Diplomatic Editor, Trevor Royle
Sunday Herald, UK
June 5 2005
When French “Non” voters claimed that they had rejected the
EU constitution because they did not want any more cheap Polish
plumbers or were alarmed about an influx of Turkish immigrants, they
were striking right at the heart of Europe’s current problems. The
EU’s motto might be “united in diversity”, but first the French and
then the Dutch gave notice that they want nothing to do with further
enlargement and believe that Europe’s borders are quite large enough
for the time being.
On the matter of Polish workers, they had probably succumbed to one
urban myth too many about industrious young plumbers exchanging Warsaw
for Versailles and creaming off the best jobs. Poland is half the
size of France and, as the EU’s social affairs commissioner put it,
even if every plumber in Poland emigrated to France, they would still
be outnumbered.
More worrying is the antagonism aroused by the issue of Turkey’s
membership. This is a country which is due to begin talks with the
EU this autumn, with a view to becoming a full member in 2015. But
it is also a country which former French president Valery Giscard
d’Estaing has described as having “a different culture, a different
approach, a different way of life”. Its people also seemed to him
to be alien when compared to the rest of Europe: not only were their
“values incompatible with Europe’s”, they were mainly Islamic.
For many Western Europeans this might be a step too far. Although
Turkey would help to supply the young immigrant workers needed
by western Europe to fill menial jobs and to bolster its ageing
population, there are too many imponderables in considering Turkey
as a full member in the next round of enlargement.
First, there is the religious issue and it is instructive to consider
that Ukraine’s application will be considered at the same time. Not
only is Ukraine Christian, it is demonstrably in Europe and would
logically extend the EU’s boundaries eastwards, whereas Turkey drags
them to the south and towards the Middle East. Second, there is the
question of Turkish troops in Cyprus: these would have to be removed
as they breach the EU’s concept of sovereignty. Finally, there is
growing clamour for Turkey to apologise for the infamous Armenian
massacres at the end of the first world war, just as Germany had to
acknowledge its role in instigating the Holocaust by apologising to
the Jewish people and paying them reparations.
While that latter condition might seem a touch existential, it
sums up the sense of otherness which many EU members hold about the
next stage of enlargement. Similar fears have been expressed about
Bulgaria and Romania, both of which have applied for membership of
the club, but these are occasioned more by financial than by cultural
or religious reasons. Just as last year’s enlargement meant that the
richer countries had to foot the bill for the economic development
of the 10 new members, so too do many fear that another enlargement
might cripple the EU budget. With the euro in decline and with the
economies of France, Germany and Italy faltering, those who voted
No last week were also taking their purses into account. If further
expansion means more expenditure and higher taxation, why vote for
a measure which will hit their pockets?
There are, in fact, solid reasons for this seemingly relentless
broadening of the EU’s interests. It satisfies the belief that in order
to grow in strength the organisation has to expand. It conforms to the
EU’s current security strategy by insisting that the new members are
more likely to pay attention to the union’s founding principles and
in so doing will make Europe a more stable place. It allows the EU to
counter US world hegemony, although this point exists in theory only,
and it provides a sense of continuity. Those committed to the EU also
enjoy pointing out that each earlier enlargement only strengthened it,
the accession of Britain in 1973 being a case in point.
As things stand, the EU is set to open negotiations with Ankara later
this year and the Turkish government insists that it is pushing ahead
with the internal reforms required to meet EU criteria. Part of their
diplomatic offensive is based on the fact that vital pipelines from
Iraq and the Caucasus run over their territory, and that EU membership
will bring stability to the Black Sea whose coastal littorals are
also shared by Bulgaria and Romania, the other EU applicants. As
Turkey also controls the Bosporus, the strategic gateway for the
Caucasus, the argument for EU enlargement into the region seems to
be entirely logical.
However, strategic considerations probably cut little ice with last
week’s No voters. Their beef was much simpler: they had lost faith
in the system and were given the opportunity of recording their
opposition.
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Dallas Morning News , TX
June 4 2005
Winery lends flavor to city
Couple pop the cork on a new company
By JENNIFER AREND / The Dallas Morning News
Two years ago, engineer and Grand Prairie resident Rick Sala saw the
writing on the wall.
Layoffs had already started at BancTec in Irving, where he worked,
so he began looking for other opportunities.
“I was tired of the same old manufacturing jobs,” said Mr. Sala, who
had also worked for Motorola, Fujitsu and Peterbilt, among other
companies.
Customers can buy or sample the house wines or bottle their own
creations at The Winery in Grand Prairie. In 2003, he came across
Wine Not, a winery franchise company. The company has eight winery
locations in the United States, including one in San Antonio, and
several in Canada.
Mr. Sala had always enjoyed drinking wine, so he and his wife, Debra
– another engineer – decided they would open their own winery in
Grand Prairie. The Winery in Grand Prairie opened about five weeks
ago, at Robinson Road and Crossland Boulevard.
The Wine Not wineries don’t deal with the grapes themselves. They
import the grape juice, or “must,” as it’s called. Then the juice is
blended and customized, and the fermentation process begins.
Suppliers buy grapes from all over the world, including Italy, France
and California.
“In a way, it’s like making anything else,” Mr. Sala said, adding
that it didn’t hurt that he started out in school as a chemical
engineer. He became a master vintner after training sessions in
Canada.
Chardonnays, merlots, zinfandels, even fruit-flavored wines – the
variety of wines that Mr. Sala can make is extensive.
The winery is already doing a brisk business.
Groups have booked private tastings and parties, and others have
wandered in after driving by and wondering about the new business.
Mr. Sala has already sold more than half of his original stock, and
there’s a waiting list for some varieties. Last week, Mr. Sala
entered some of his wines in the Lone Star International Wine
Competition, held at Lone Star Park. The competition is organized by
the Texas Wine and Grape Growers Association.
Mr. Sala said he’s enjoyed people’s reactions to the new business.
“Their jaws will kind of drop, and they’ll say, ‘So, what do you make
here?’ As if it wouldn’t be obvious from the name,” Mr. Sala said
with a laugh.
“It’s as if having a winery in Grand Prairie is an oxymoron.”
The new 3,400-square-foot building was designed to look like a cross
between a church and a warehouse, Mr. Sala said. The open floor plan
allows customers to view the wine laboratory, including three giant
stainless-steel fermentation vats and bottling machinery. Making the
wine is a four- to six-week process, and the winery can produce up to
4,000 bottles per month.
Bottles range from $12 to $25, and tastings, which include three wine
varieties, are $6.
The wine is only available at the winery now, but Mr. Sala said he
hopes to sell his wine at restaurants and stores in the future.
“A lot of people make wine too pretentious,” Mr. Sala said. “That
tends to turn people off.
“I want to make it fun,” he added. “I don’t want people to be made to
feel stupid.”
He said that eventually, he plans to offer classes on wine that would
teach topics such as which wines are traditionally paired with
certain foods.
“But if you like white wine with steak, that’s fine,” he said.
For customers who want to bottle their own vintage, a batch costs
between $195 and $280, but that produces about 29 bottles of wine.
Customers can also customize the labels on the bottles.
Dr. Dean Peyton, a longtime Grand Prairie resident, spent a few
mornings recently filtering and then bottling his first batch of
wine, which he named “Bubba Blanc,” an homage to his nickname.
Dr. Peyton said having a winery in Grand Prairie is surreal.
“It’s crazy as hell,” he said. “I thought, ‘Could this possibly be
real?’ ”
Dr. Peyton said he didn’t know anything about wine before visiting
the winery.
“I just liked to drink it,” he said. But he was willing to learn how
wine is made, so Mr. Sala gave him step-by-step lessons. “This is
fun, to have something like this in Grand Prairie.”
Anush Gharibyan, marketing director for the winery, heard about Mr.
Sala’s business plans when she was still a graduate assistant at the
University of Dallas, where she was completing her MBA.
A lover of wine who spent her undergraduate years in Armenia studying
the winemaking process, Ms. Gharibyan encourages people to take part
in “wine culture.”
“Wine-drinking is a lifestyle,” said Ms. Gharibyan, who dreams of
having her own winery someday. “And if you drink moderately, it is
healthy.”

US Christian leaders meet Palestinian Authority head -05/06/05
Ekklesia, UK
June 5 2005
Senior US Christian leaders have met with the head of the Palestinian
Authority following his discussions last week with President George
W Bush. Their aim was to encourage further initiatives towards
bridge-building in the Middle East.
The National Council of Churches USA General Secretary, the Rev Dr
Bob Edgar, and the Chief Executive of the United Methodist Board of
Church and Society, James Winkler, were among those who engaged in
what they described as ‘constructive conversations’ with Palestinian
President Mahmoud Abbas shortly after his White House Rose Garden
press conference.
During the meeting, Dr Edgar described to Mr Abbas his deep
sadness on seeing the wall that separates Israeli and Palestinian
neighbourhoods – and also divides Palestinians from others in their
own community. “Walls separate, bridges heal,” he declared.
Following the encounter, Dr Edgar said that he was “excited about
the opportunity to meet with President Abbas. I also look forward
to the day when we will be able to meet with Prime Minister Sharon
[of Israel].
“It is extremely important that we continue to work and pray for peace
in the Holy Land,” continued the US ecumenical leader. In spite of
the conditions we remain hopeful that peace is possible.”
Other denominations and organizations represented included the Armenian
Orthodox, Lutherans, Presbyterians, Mennonites, Church of the Brethren,
Roman Catholics, Episcopalians and the development agency World Vision.
NCCUSA gathers together churches representing 50 million mainly
Protestant, Anglican and Orthodox Christians across the USA. A wider
network, Churches Together in the USA, is building further links with
Catholics, independent evangelicals and Pentecostals.

USA CONSIDERS CZECH REP TARGET COUNTRY IN TRADE IN PEOPLE
Czech News Agency
June 3, 2005
WASHINGTON/PRAGUE, June 3 (CTK) – The United States continues to
consider the Czech Republic a source and target country of trade
in people, but it ranks it in the best of three groups into which
it divides countries according to their effort to fight the evil,
says an annual report by the U.S. State Department.
This is the fifth such report and the department works it out under
the law on the protection of victims of trade in people.
Slovakia is ranked in the second group, which means that developments
there are a source of worries to Washington and that sanctions could
be imposed on it if the situation worsened.
The same group includes Russia, Ukraine, Greece, Azerbaijan, Armenia
and Uzbekistan.
According to the report which CTK got from the U.S. embassy in Prague,
the Czech Republic is a source, transitory as well as target country
of trade in women and children.
They are illegally brought from Ukraine, Russia, Belarus, Moldova,
Lithuania, Romania, Bulgaria, Slovakia, China and Vietnam mainly for
sexual abuse and prostitution.
The report also says that intra-state trade in people is extensive
and that mainly Romany women are a risk group of victims.
The Czech Republic meets the fundamental demands of the fight against
trade in people because the government reinforced the relevant
legislation in 2004 and raised the pilot programme of aid to the
victims of trade in people to the national level, the report says.
It notes an improvement in legislation and in the work of the police,
but points out that the number of cases taken to courts and the
sentences handed out have remained low.
According to the report, the Czech police investigated 30 cases and
prosecuted 19 perpetrators on suspicion of committing the criminal
offence of trading in people last year.
Courts convicted 12 perpetrators compared to five in 2003.
Out of the 12 convicts, three got unconditional sentences from three
to five years in prison and nine got suspended sentences.
Though no civil servant was accused, it is alleged that border officers
help illegal people smugglers, the report says.
It says that help to the victims and their protection does not meet
minimal requirements in Slovakia.
Though the government is preparing a national plan of fighting trade
in people, it is still too early to guess its efficiency.

The Economist
June 4, 2005
U.S. Edition
Reason to worry; Turkey and the EU
ankara
Fallout for Turkey from the no votes in France and the Netherlands
The country with most to lose from the EU referendums may be Turkey
WHAT do the French and Dutch rejections of the European Union
constitution imply for Turkey’s hopes of joining? If one believes the
country’s political leaders, nothing. “This result has nothing to do
with Turkey’s candidacy, we will continue on our path with the same
enthusiasm,” the Turkish prime minister, Recep Tayyip Erdogan, told
parliament this week. His rhetoric was echoed by EU officials. And in
theory they are right.
The constitution makes no reference to Turkey’s membership. In France
(as in some other anti-Turkey countries, notably Austria) voters have
been promised the chance to stop Turkey joining in a separate
referendum on further enlargement, when the time comes. Moreover,
last December’s decision by EU leaders to promise Turkey the start of
membership talks on October 3rd was a political one that can be
changed only by consensus of all 25 EU members. Some optimists even
venture to suggest that the defeat of the constitution could pave the
way for a looser EU that it would be easier for Turkey to fit into.
Yet the reality is more worrying for Turkey. The French and Dutch
noes may be “the EU’s internal problem”, as Mr Erdogan claims. But
they also reflect growing hostility around Europe to further
enlargement of the EU-and, specifically, to the idea of taking in
poor, big and Muslim Turkey. There is also a good chance that
Germany’s opposition Christian Democrats (CDU) will win the election
expected in September. The CDU leader, Angela Merkel, is firmly
opposed to Turkey’s membership and has lobbied instead for a
“privileged partnership” that has been roundly rejected by the Turks.
Her hostility to full membership for Turkey is shared by France’s
Nicolas Sarkozy, a would-be presidential candidate in 2007.
Against this gloomy background, the wisest course for Turkey,
according to the EU ambassador to Ankara, Hansjorg Kretschmer, is to
ignore the ructions in Europe and focus on implementing the sweeping
reforms that earned it the precious October date for talks. In one
hopeful sign, Mr Erdogan last week appointed Ali Babacan, his young
and pragmatic economy minister, to head the EU negotiations. Turkey
is also about to sign a protocol extending its customs union with the
EU to the ten new members that joined last year, including Cyprus.
This week a long-delayed new penal code came into effect. But despite
such radical provisions as making marital rape a crime, the code also
contains several controversial articles-for example one that allows
long prison terms for journalists who attack the Turkish military
presence in northern Cyprus or describe as “genocide” the mass
slaughter of Armenians during the first world war.
There are, indeed, disturbing signs that Mr Erdogan may be pandering
to a recent upsurge in nationalism that is being fanned both by
anti-Turkish sentiment in Europe and by the country’s hawkish
generals, whose power may be eroded by EU reforms. Besides continued
police harassment of Christians and other minorities, last month an
appeal court in Ankara upheld the banning of Turkey’s biggest
teachers’ union because it had said that the country’s 14m Kurds
should be able to educate their children in their mother tongue.
Turkish academics had to cancel a conference to debate the Armenian
tragedy after the justice minister, Cemil Cicek, accused them of
“knifing Turkey in the back”.
Mr Cicek’s outburst, concluded one senior EU diplomat, was
“confirmation that the government no longer believes in the EU
process.” That view may be exaggerated, but there is disillusion with
the EU among Mr Erdogan’s conservative base. One example is perceived
European indifference to restrictions on the Islamic headscarf. It
was surely with his conservative base in mind that Mr Erdogan last
week introduced legislation to reduce penalties for those who run
underground courses to teach the Koran. The move brought renewed
charges from Turkey’s fierce secularists that Mr Erdogan’s real
intention is to move the country closer to an Islamic theocracy, and
not to the EU. Turkey’s many enemies in Europe would surely take
pleasure in that.
GRAPHIC: Euro-anxiety in the markets?

Plane carrying Macedonian football team to Armenia forced back mid-air
Agence France Presse — English
June 4, 2005 Saturday 4:28 PM GMT
SKOPJE June 4 — A plane carrying the Macedonian football team was
forced to turn back mid-air after being denied permission to land
in Armenia by Turkish authorities, who threatened to shoot it down,
media here reported Saturday.
The plane carrying the players to their World Cup qualifying match
with Armenia was surrounded by two military jets and denied permission
to land in neighbouring Armenia as it prepared for its descent just
20 kilometres from its destination, the Macedonian daily Utrinski
Vesnik reported.
Instead the pilot decided to return to Skopje. After their five-hour
return flight Thursday the players were stranded at Skopje airport
for five hours more as discussions continued about what to do.
Tired and angry at their ordeal, the Macedonian team asked UEFA,
European football’s governing body, to cancel their match but the
officials ruled the match on Sunday had to go ahead.
“When we arrived back in Skopje we didn’t want to fly back again and
asked for the match to be cancelled,” said Goce Sedloski, captain of
the Macedonian team, and Dinamo Zagreb player.
“If UEFA and FIFA (the world football governing body) organise the
matches it’s better if the Macedonian team don’t play in them if we
have these kinds of problems,” added player Goran Pandev, who plays
for Italian side Lazio.
Macedonian officials have complained to Turkish authorities and
Brussels about the incident, the paper reported.
In Ankara, the foreign ministry confirmed that Turkish authorities
had asked a Macedonian aircraft to leave Turkish airspace, but did
not confirm that it had been threatened with shooting.
“The relevant authorities confirmed that the plane entered Turkish
airspace without authorisation. They asked it for an authorisation
number but the pilot gave them a false number and was then asked to
turn back,” an official at the ministry said.
“The pilot did not give the reason for his flight to Armenia — the
authorities can exceptionally allow an unauthorised flight through
Turkish airspace if there is a serious reason, but this was not the
case,” he said.

La República (Uruguay)
June 4, 2005 Saturday
Importante accionista esta tras aeropuerto de Turquía;
Eurnekian tras aeropuerto de Turquía
La nueva empresa que dirigira el Aeropuerto Ataturk ( Estambul,
Turquía ) con terminales de vuelos Internacionales y domesticos, sera
determinada por una oferta prevista para el proximo 10 de junio.
La empresa que proporcione la oferta mas alta ganara el arriendo de
las terminales del aeropuerto internacional por el período de 15,5
años. Corporacion America SA, se presentara a la licitacion. Esta
empresa es dirigida por Eduardo Eurnekian, principal accionista de
Aeropuertos Argentina 2000 que opera 32 aeropuertos en Argentina, uno
en Ecuador, el aeropuerto de Yerevan en Armenia y el recientemente
renovado aeropuerto de Carrasco en Uruguay.
–Boundary_(ID_meFYK6+erVAei+kwbLyzAQ)–

Journal of Turkish Weekly
June 4 2005
Will Yerevan open their archives?
source: Hurriyet, 4 June 2005
Speaking at a news conference on Friday, Prof. Dr. Enver Konukcu of
Erzurum Ataturk University Department of History said, “Our state
archives have already been opened. However, Yerevan will not open its
archives since there are so many documents which constitutes evidence
of massacres committed by Armenians against Turks.”
Konukcu added that that the media had an important role to play in
the allegations over the so-called genocide, saying that owners of
many newspapers in the United States were of Armenian and Greek origin.
“The Ottoman Empire faced a series of Armenian uprisings in eastern
Anatolia in 1829, under Sultan Abdul-Hamid II. After problems became
more serious, the Ottoman Empire adopted the Relocation Law. About
12 thousand Armenians had been living in Erzurum when the law had
come into force. 5 thousand of them had been relocated. The Ottoman
Empire had taken all necessary measures to protect the Armenian people
during the relocation.”
“Armenians claim that 1.5 million Armenians had been killed by
Turks. In fact, Turks have never committed genocide in their history.
Our state archives have already been opened. But, Yerevan will not
open its archives since there are many reports proving massacres
committed by Armenians against Turks,” he said.
Turkey asked the diaspora Armenians and Armenia open their archives.
The archive in Jerusalem, Istanbul Armenian Church and the Tashanak
arcives contains vital documents.

A regime changes – Paul Wolfowitz at the World Bank
The Economist
June 4, 2005
U.S. Edition
The World Bank’s new president is famous for his commitment to “regime
change”. The Bank is committed to a peaceful version of the same thing
ON ITS way to the Mekong river, the Nam Theun tributary flows
uninterrupted across the Nakai plateau in Laos, the poorest country in
South-East Asia. Not for much longer. In March, the World Bank backed a
proposal to dam it. Hydroelectric turbines will generate up to 1,070 MW
of electricity, 95% of which will be exported to neighbouring Thailand.
This is the World Bank’s natural habitat, where its compulsions
and capabilities are both shown to full advantage. The project is
not just an exercise in hydrology. The Bank’s grants will help to
resettle villagers, including Vietic-speaking hunter-gatherers, from
the inundated plateau behind the dam and to compensate inhabitants of
the dried-out riversides below it. As the Bank’s International Advisory
Group reported earlier this year, the displaced are experimenting
with new ways to make a living, from an organic mulch plant to eel
breeding. The project will set aside a nature reserve, where wildlife,
from pangolin to reticulated python, will be defended by village
gamekeepers, their salaries paid out of the dam’s revenues.
But this is not, it is safe to say, the natural habitat of Paul
Wolfowitz, who took office as the Bank’s new president on June 1st.
The plight of the reticulated python and the Vietic-speaking peoples
are unlikely to have crossed his desk in the Pentagon, where he
previously served as America’s deputy secretary of defence. Mr
Wolfowitz has instead spent most of his career cogitating about
America’s power in the world, representing it abroad and lobbying
to enlarge it, first in congressional back offices, most recently
at the intellectual forefront of George Bush’s foreign policy. He
knows little about finance; only a little more about development,
although, as ambassador to Indonesia for three years, he has lived in
a populous, poor country. Behind him, he leaves the ongoing nightmare
of reconstructing Iraq, a project that is certainly behind schedule
and over budget.
The Bank which Mr Wolfowitz now heads has as many sides as the Pentagon
he has left. Speaking on May 31st he said he would be willing to
listen and experiment, but it will take him some time to get to grips
with a complex organisation. The Bank’s most prominent aspect is the
International Development Association (IDA), which gives grants ($1.7
billion last year) and soft loans (another $7.3 billion) to 81 of the
world’s poorest countries. As important, but less widely understood,
is the International Bank for Reconstruction and Development (IBRD),
which lent about $11 billion last year. The IBRD has some claim to
being a bank rather than a fund. Blessed with a AAA-credit rating,
it can borrow cheaply on the capital markets, and lend, slightly
less cheaply, to the aristocracy of the third world, such as China
and Brazil.
The Bank also has third and fourth sides-two smaller agencies that
take on some of the risk of private lending to poor countries-and
a fifth that settles disputes between foreign lenders and sovereign
borrowers. Dams in Laos notwithstanding, only 5% of the Bank’s money
went to the energy and mining sectors last year. Three times as much
went to social services, such as health, while education received 8%.
The Bank also performs a type of economic chiropractics, giving
money to governments in need of an “adjustment” in their policies,
fiscal or monetary.
Mr Wolfowitz may, in fact, discover much that is familiar to him at
the Bank. It is first and foremost a formidable technocracy. But
in its own bloodless idiom, the Bank now talks increasingly about
politics, even if it does so in euphemisms such as “good governance”,
“capacity building”, “voice” and “empowerment”. It is committed to
understanding the political institutions of the countries in which it
operates. Haltingly, hesitantly, it is also committed to changing them.
In June 2000, for example, the Bank lent $190m to help finance a
1,000km pipeline from the oilfields of landlocked Chad to the port of
Kribi in Cameroon. But laying the pipe was the easy bit. Much harder
is managing the revenues, which threaten to overvalue Chad’s currency
and underwrite endemic corruption.
The Bank’s answer was two-fold. It insisted that the pipeline revenues
be paid into an offshore escrow account. About 10% of the money would
be held aside for future generations. The rest would flow to the
government’s poverty-fighting efforts under the close supervision of a
new body, commonly known as the Collège. Staffed by parliamentarians,
judges and representatives from human-rights groups, the Collège was,
in effect, a new institution of state. It was soon debating whether
to withhold money from the government. Clearly then, even when it
is in the business of erecting dams and laying pipelines, the Bank
is also often building states and reforming regimes.
That is a big change. Until 1996, politics was the variable that
dared not speak its name at the Bank. Country directors, who head
its branch offices in borrowing countries, came to their jobs as
“self-described political neophytes”, according to a recent Bank
publication that recounts their education in the ways of the world.
Their initial innocence was largely self-imposed. Basil Kavalsky,
who served as the Bank’s country director across eastern Europe,
confesses that it was “an article of faith…that we did not take
political considerations into account.” Actually, it was more than
an article of faith. The Bank’s articles of agreement, its founding
charter, enjoin its officers to remain studiously apolitical.
Of course, the neophytes soon learned all about the political
character of their host countries. But, notes Mr Kavalsky, they treated
corruption as “a given, a part of the environment to be factored into
the calculation. We did not treat it as a variable-something which
we should make a concerted effort to address.”
That changed with James Wolfensohn, Mr Wolfowitz’s predecessor. It
was perhaps his most far-reaching innovation in a tumultuous ten-year
reign. In May 1996, he visited Indonesia, where Mr Wolfowitz had been
ambassador from 1986 to 1989. The brazen corruption of the country’s
ruling Suharto clan irked them both. Mr Wolfowitz broached the issue,
albeit politely, as he prepared to leave his ambassadorial post
in the country in 1989. Seven years later Mr Wolfensohn was more
forthright. “Let’s not mince words,” he said at the Bank’s 1996
annual meeting in Washington, DC, “we need to deal with the cancer
of corruption.”
The following year, the World Development Report, written by a team led
by Ajay Chhibber, was the first publication in which the Bank properly
addressed the topic. It was the beginning of a thorough re-examination
of the role of the state and political institutions in development.
Mr Chhibber is now given to quoting Napoleon: “institutions alone
fix the destinies of nations”. That dictum finds some support in
the latest economic research on development. A number of economists
believe the policies they advocated in the 1980s and 1990s-stabilise
prices, liberalise trade, privatise industries-matter less than the
institutions that stand behind those policies.
Leading the chorus are Daron Acemoglu, Simon Johnson and James
Robinson of the National Bureau of Economic Research. As they point
out, for example, the prescription of stable finances and sound money
did little to help in Argentina. The state found itself chronically
prone to profligacy, for deep institutional reasons. It had to appease
the country’s unruly outlying provinces, which contribute little to
the economy but dominate parliament. Likewise, they argue, Ghana’s
wildly overvalued exchange rate in its post-independence decades
was not a monetary blunder. It was a political strategy designed to
redistribute resources from the country’s cocoa exporters, who received
artificially low prices for their exports, to the import-buying city
dwellers, on whose support the regime depended.
Testing such theories is fraught with difficulty. But the measurement
of institutions has made some progress. Dani Kaufmann, at the World
Bank, notes an explosion of indicators of good government, most based
on business surveys or expert perceptions, that offer measures of
accountability, bureaucratic competence, the rule of law, and so on.
By sorting and sifting these numbers, he and his colleagues believe
that they can derive workable measures of misrule. Precise rankings
between countries are not possible, but broad comparisons are, and
changes over time can be discerned. Over the past eight years, for
example, many governments in Africa have defied the Afro-pessimists
(see table), although more have regressed.
Mr Kaufmann believes he and his colleagues can demonstrate a strong
causal link between his indices of sound government and prosperity.
If the rule of law in Somalia, for example, were to match even that
prevailing in Laos, Somalia’s income would rise two- to three-fold
in the long run, Mr Kaufmann estimates.
These are powerful arguments. But even if it is true that institutions
fix a nation’s destiny, can the Bank fix a nation’s institutions? Is
there a reliable “transmission mechanism” between the levers the Bank
can pull and the results it cares about?
By training and temperament, Bank staff have tended to view government
as a practical art. But their efforts to date give comfort to those
of a more fatalistic cast of mind, who believe good government cannot
be engineered, but must evolve.
In 2000, the Bank unveiled its strategy for reforming public
institutions and strengthening governments. Between 2000 and 2004,
lending to promote economic reforms fell by 14% a year, but lending
to improve governance rose by 11%. In the 2004 fiscal year the Bank
committed 25% of its lending to law and public administration (see
chart overleaf). It had 220 staff dedicated to the cause, and more
than 840 professionals affiliated with it.
For the most part, its direct efforts were confined to poorer
countries, dependent on IDA for grants and soft loans. The richer
developing countries, such as Brazil or India, where the state
apparatus was formidable, were reluctant to cede ground to outsiders.
In China, where Edwin Lim once served as chief of mission for the Bank,
“the economic dialogue was always,” he admits, “within the Chinese
ideological and political limits.”
A review of the Bank’s efforts to prune the lush bureaucracies of
African states concluded that civil-service reform remains elusive
and intractable. Elsewhere, anti-corruption commissions proliferated,
but achieved little-indeed they were often set up in the wake of some
scandal as an alternative to doing anything.
Part of the difficulty, as Dani Rodrik of Harvard University points
out, is that typical measures capture institutional outcomes, not
institutional forms. The “rule of law”, for example, measures how
secure an investor feels about his property. It tells us little
about precisely what makes him feel that way. According to Michael
Woolcock, of the Bank, and Lant Pritchett, of Harvard University,
the development industry can agree on “objectives” (children should
be taught, roads should be passable, the rule of law should prevail)
and “adjectives” (government should be accountable, transparent and
responsive). But that is about all. As a result, Mr Kavalsky notes,
the Bank’s prescriptions in this field often come “very close to a
tautology”. What is required for growth? Good governance. And what
counts as good governance? That which promotes growth.
But the main difficulty was the obvious one: politics. When the Bank
moved in on examples of bad governance, it too often forgot to ask,
bad for whom? Consider, says Mr Chhibber, Turkey’s banking system prior
to that country’s financial crisis in 2001. In 1998, the government was
advised to set up an independent financial regulator, styled on those
of Britain and Canada. Instead it created a regulator that was packed
with political appointees. To the Bank’s technocrats, it was obvious
that the country had too many banks, many of them state-owned, and that
they were not serving the economy at all well. But in Turkey at that
time, state banks had a different purpose. They were the playthings
of politicians, given to them as the spoils of electoral victory.
In such a situation, Mr Chhibber points out, all the Bank can do is
bide its time. After the 2001 financial crisis, political resistance
to an independent regulator broke down. Once established, the regulator
closed more than 20 private banks, and cleaned up the system, at a cost
of 33% of GNP. Mr Chhibber argues that earlier failures contributed
to the eventual success. The work undertaken in 1998 allowed Turkey,
under a new economy minister, Kemal Dervis, himself an alumnus of the
Bank, to take advantage of the opportunity for reform when it arose.
In a speech in 2000, Mr Wolfowitz reflected on the thawing of
authoritarian regimes in South Korea, Taiwan and the Philippines-the
last of them on his watch as assistant secretary of state for East
Asia. In these regimes, he noted, America worked on institutional,
rather than revolutionary, change. It once counted Ferdinand Marcos,
the dictatorial president of the Philippines, as an ally. If it
had written him off, it would have lost all influence over him,
Mr Wolfowitz said. But America could not coddle Marcos indefinitely
either.
Such dilemmas will almost certainly revisit Mr Wolfowitz in his
new job. The Bank must continually choose whether to coddle bad
governments, or to cut them off. If misrule matters so much for
development, should it reserve its money for committed reformers,
turning its back on the reform-shy? That would make its money go
further; it might also encourage laggards to reform. David Dollar
and Victoria Levin, two Bank economists, reckon that since 1995
the Bank’s soft-loan arm, IDA, has become much choosier about its
clients. Broadly speaking, money flows to countries based on two main
criteria: how well run is it? And how poor?
IDA may be pickier than it once was, but the Bank as a whole is not
quite as discriminating as this study suggests. Richer countries,
even if badly run, can still unlock money from the IBRD, the
Bank’s commercial-loan arm. And disastrously run countries are never
entirely shunned by IDA. Each gets a small allocation regardless of its
performance, and some qualify for money from the Bank’s £25m trust fund
for failed states, which it calls “low-income countries under stress”.
Some think that, if it were to confine itself to the well-governed
parts of the globe, the World Bank would scarcely warrant its title.
But the Bank is learning that every unfit government is unfit in
its own way. In some countries, citizens cannot hold policymakers to
account (China); in others, policymakers cannot bend the bureaucracy
to their will (Armenia). In some cases, the state is captured by
venal interests-either wealth captures power (Russia under Yeltsin),
or power captures wealth (Russia under Putin). In others, the state
is so weak there is nothing worth capturing.
The Bank must pitch itself accordingly. If the state is honest, but
weak, the Bank can try to train judges and equip civil servants. But
there is no point investing in the machinery of a captured state. A
project to strengthen the fiscal apparatus of Mobutu Sese Seko, the
kleptocratic former ruler of Zaire, counts as the most misguided Bank
project ever, in the opinion of Susan Rose-Ackerman, a corruption
expert at Yale University.
If there is no will for reform on the part of government leaders, the
Bank can try to go over their heads, stimulating demand for reforms
in the public at large. Sometimes this works. When Thailand slipped
in the Bank’s ratings of good government, Mr Kaufmann recalls, the
prime minister had to go on the radio to explain himself.
Some will argue, of course, that foreign aid has been political
since its inception. The World Bank owes its existence to America’s
strategic commitment to rebuild post-war Europe. And many think the
modern aid business and the cold war were twin-born at the moment of
President Harry Truman’s inaugural address in 1949. That speech is
famous for Truman’s vow to strengthen the freedom-loving nations of
the world against the false philosophy of communism. But in it he also
promised to share America’s know-how and some of its resources with
those parts of the world threatened by the “ancient enemies-hunger,
misery and despair.”
Mr Wolfowitz, of all people, is not one to disavow Truman’s commitment
to strengthen freedom. But if the ends Truman sought were deeply
political, the means were mostly technocratic. The Bank which Mr
Wolfowitz now leads is in a different game. The ends it pursues
are primarily technocratic-it wants to fight poverty, not a false
philosophy. But the means it employs have to be canny, opportunistic
and, yes, political.
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