A High Price - The Funding of Al Qaeda

Money Laundering Bulletin, November 2008

The September 11, 2001 attacks on the US resulted in a raft of regulations to curb terrorist financing, but seven years on Al Qaeda is still at large, writes Paul Cochrane (from Beirut and London), has adapted to the new regulatory environment to raise funds, and morphed into an international terrorist Hydra.

9/11 Impact

Prior to 2001, Al Qaeda was like a business conglomerate, owning ships, aircraft, construction companies, travel agents and businesses, including Blessed Fruits, a honey company in Sudan, and the Khartoum Tannery. But the financial backbone of the terrorist organization founded in 1988 by Osama bin Laden were the sizeable donations from Islamic charities and individuals, primarily in the Arabian peninsula, to meet an annual budget estimated at US$30 million in 2000.
Following the 9-11 attacks on the United States, the Bush administration launched a “war on terror”, and counter terrorist financing (CTF) became of paramount importance in the fight against Al Qaeda.
In the words of one senior Central Bank official in the Middle East, financial regulators were cast “into the eye of the storm.”
“Anti money laundering (AML) and counter terrorist financing (CTF) suddenly became buzz words, and an area of major concern,” said the official.
A raft of regulations and legislation were passed by the US, Europe and the United Nations, while the OECD’s Financial Action Task Force (FATF) expanded its mission beyond money laundering by adding 9 Special Recommendations on Terrorist Financing to its 40 Recommendations on Money Laundering.
With the USA Patriot Act’s International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 and the Office of Foreign Actions Control (OFAC) Sanctions regime firmly in their hands, the USA went on a global offensive to implement and improve AML and CTF regulations by states and private financial institutions.
The flurry of activity to curb Al Qaeda’s finances had an impact in the immediate aftermath of the 9-11 attacks, with funds frozen and financiers arrested, further compounded by the US-led invasion of Afghanistan to overthrow the Taliban, who were giving safe haven to Al Qaeda.
“Before 9-11 there was a very significant amount of money that Al Qaeda could raise in the Arab world, and that rose after 9-11 until the arrest of Sheikh Mohammad, the mastermind of the 9-11 attacks, in 2003,” said Rohan Kumar Gunaratna, an expert on Al Qaeda and director of the International Centre for Political Violence and Terrorism Research in Singapore. “Pakistan also arrested the chief accountant of the attack, Mustafa Ahmed Hawsawi, who wired most of the money through Dubai. With their arrests this seriously interrupted the flow of money from the Arabian peninsula to Al Qaeda,” he added. Citing anecdotal evidence, Gunaratna said several million dollars a month had come from a group of businessmen in Jeddah, Saudi Arabia.
The business interests Al Qaeda had built up in Sudan, Afghanistan and parts of the Middle East also went out of action. “After Afghanistan was lost in 2001, Al Qaeda was on the run and no longer had the luxury of retaining a business environment,” said Gunaratna.
But while the Western financial sector was coming to grips with AML and CTF legislation, teaching staff Know Your Customer (KYC) procedures and how to file Suspicious Transactions Reports (STRs), Al Qaeda’s financiers started to adapt to the new environment following a number of set backs.
The organization also morphed from what some call “Al Qaeda classic,” led by Osama bin Laden, into affiliated and/or ideologically inspired groups around the world, from Europe to the Middle East and North Africa (MENA), to Central Asia, the Far East and Xinjiang in China. Like the mythical Hydra, Al Qaeda could not be stopped even as its main centres of operations were neutralized.
“Al Qaeda classic, the bin Laden-led group, transformed from an operational organization into an ideological and training organization,” said Gunaratna.
But how connected such groups are with Al Qaeda is not fully understood. “I’m sceptical of the links between Al Qaeda and its affiliates, when you compare groups in say Algeria and Lebanon. It’s more real with the Libyans, but at the end of day they are only concerned about Libya,” said Nigel Inkster, former deputy head of MI6 and Director of Transnational Threats and Political Risk at the International Institute for Strategic Studies (IISS). “It’s more sensible to look at Al Qaeda as a movement that provides a common front for takfiri Jihadists,” he added, referring to fundamentalist Muslims that advocate the use of violence to achieve political ends.
Dennis Lormel, Managing Director of IPSA International, an investigative consulting firm, and former head of the FBI's Terrorist Financing Operations section, said it was hard to know the extent of the relationship between Al Qaeda and such affiliates, as although Al Qaeda may approve of a group’s activities, there may be no actual communication between the two groups.
“In today’s world Al Qaeda is so fragmented it is difficult to look at Al Qaeda as a single organization, and they don’t require as much money,” said Lormel. This is a fundamental difference between how Al Qaeda operated, requiring significant funds to maintain a base of operations in Afghanistan and carry out operations internationally, and the new breed of more localized, ideologically inspired groups.
Indeed, compared to the estimated US$500,000 that Al Qaeda spent to carry out 9-11, the terrorist attacks that occurred in Madrid in 2004 and London a year later were cheap by comparison.
“For small independent groups like the one that carried out the attacks in London, the whole operation had change from 5,000 GBP – it was peanuts,” said Inkster. “In Madrid, they were living off benefits, hired safe houses and bought TNT. You don’t need much money for terrorism per se, but do in places like Afghanistan to support families.”
Such localized groups rely on funding from numerous sources. The Madrid cell for instance differed from other groups by utilizing drugs to raise funds, attributed to the terrorists having been drug dealers prior to turning to radical Islam.
“There is no evidence of Al Qaeda classic engaging in the drugs trade, but affiliates like the Madrid cell purchased explosives from a quarry in Spain by exchanging hashish,” said Gunaratna. He added that 90 percent of all terrorist attacks cost less than US$10,000.

Donations to diamonds: the diverse sources of funds

To raise funds, Al Qaeda and affiliated groups are using numerous techniques, ranging from donations, charities, and zakat (a requirement of Islam for Muslims to donate money to needy causes), to the internet, counterfeits, front companies in offshore havens, and financial crime.
“Financial crime falls into three sub categories – bank, cheque and credit card fraud - as almost all banks have taken insurance, so if someone defrauds the bank, the insurance will pay,” explained Gunaratna. “In fact, banks don’t want negative publicity as they don’t want an investigation and police to arrest suspects, so bank cheque and credit card fraud is low risk.”
Such techniques have been widely used in Europe. One of the London bombers defaulted on a US$20,000 loan from HSBC Bank, while a second bomber secured US$14,000 in credit from a building supplies company. In Germany last December, three men were convicted on charges of attempting to raise US$6.3 million for Al Qaeda by faking a death to collect on nine life insurance policies.
Telecommunications are also being used, said John Solomon, global head of terrorism research at World-Check, a British company that runs an intelligence database on financial risk.
In December 2007, Saudi authorities found a mobile phone SIM card on a suspect that had a text message with a fundraising appeal from Ayman al-Zawahiri, a prominent Al Qaeda figure.
Solomon pointed to the internet as a means to raise funds. “On websites that have conflict zones that fall within the Jihadist narrative - Afghanistan, Palestine and Iraq – there is a bank account number to support the martyrs and martyrs’ families,” he said. The internet is also being used to inform terrorists how to carry out cyberfraud and credit card fraud, said Lormel, citing a chapter in a book by Imam Samudra, who carried out the Bali bombing in Indonesia in 2002, and a British Jihadist website.
Offshore havens are cited as an area where Al Qaeda could have front companies, said Douglas Farah, a senior investigator with the Nine Eleven Finding Answers (NEFA) Foundation.
“If you look at the banks shut down after 2001, they were all in places like the Bahamas and the Cayman Islands, while different groups have had companies registered in places like Liberia. I think these are the more dangerous elements, as front companies have a complete lack of transparency, but the Bush administration in its early days moved aggressively to make offshore havens even safer, especially in the Caribbean. Since then been more neutral, but point being we like those things too, not just terrorists and bad guys, so they survive and that is a problem on the organized crime and TF front,” he said.
As Farah remarked, tracking down the sources of Al Qaeda’s funds is about as easy as finding a needle in a stack of needles.
He added that commodities are prime means to move funds, citing Dubai as an area of concern for the acquiring of gold and diamonds following heightened regulations in Antwerp.
Dubai, which is a major hub for money laundering, particularly through real estate, according to the central bank source, is also a route for smuggled diamonds from South Africa, and for financing for Al Qaeda and other groups in Somalia. The Emirate is equally flagged as a primary transit route for goods and money destined for Pakistan and Afghanistan through its free trade zones.
In Iraq, which became a hotbed of terrorism following the US-led invasion in 2003, Al Qaeda in Mesopotamia received funds from sympathizers in the Gulf, smuggling antiquities out of the country, kidnapping victims for ransom, and garnering donations from foreign fighters.
“When Jihadists were recruited in Europe and other places they were sent to Iraq - probably through Syria - with backpacks full of cash, so they cash couriered a lot of money. In one case in the US, a family couriered money to Jordan and then to Iraq,” said Lormel.
In a dossier found by the US Army on 600 fighters with the Islamic State of Iraq, a group associated with Al Qaeda, the Saudi-owned newspaper Al Hayat reported in January that the donations “volunteers are forced to make in Syria range from 30 Syrian pounds (US$0.60) to huge sums that reach up to US$12,400, and that the small donations are made by those coming from Libya, the Arab Maghreb, and Syria, whereas volunteers from the Arabian peninsula come carrying large sums that reach thousands of dollars.”
However, Al Qaeda’s presence in Iraq has diminished over the last year, with General Michael Hayden, the director of the CIA, saying in May that the organization has suffered “near-strategic defeat” in Iraq. It is a view corroborated by counter terrorism experts, attributing the decline of Al Qaeda’s fortunes in Iraq to tighter border controls in Syria, the troop “surge” and the US-backed Sunni Muslim “Sons of Iraq” militia taking on Al Qaeda rather than the US or Iraqi armed forces.
A number of significant developments have also curbed financing, with the US government shutting down several money exchangers in Mosul, a primary hub for receiving money wired from Syria and elsewhere. Last September, the US captured an Al Qaeda financier whose passport showed he had been to Syria 30 times. A second financier, captured by the Iraqi army, was responsible for negotiating the release of kidnapped victims and found with cheques for US$600,000.
New techniques used by the US military, called the "Iraq Threat Finance Cell," have also curbed Al Qaeda’s funding in Iraq.

Iraq - the training ground

“For a long while Al Qaeda was making money in Iraq that also helped them in other places. But one of the problems Al Qaeda has had in the last few years was that money was cut down after the US embedded financial investigators with the military and went after the money,” said Lormel.
But with a weakened Al Qaeda in Iraq, many of the foreign Jihadists returned home, to Yemen, North Africa and the Levant in particular, bringing with them the techniques for carrying out terrorist attacks and how to generate income.
In Lebanon, the Jihadist group Fatah al Islam, which is linked to Al Qaeda, last year engaged in a three-month battle with the Lebanese Army in Nahr El Bared, just north of Tripoli. Funded predominantly by cash couriers and donations, according to the Lebanese Financial Intelligence Unit (FIU), the group’s fighters were veterans of Iraq, wanting to take the battle to Israel but thwarted by Hizbullah, the Shiite militant group that controls Lebanon’s border with Israel. Instead, the group entered into battle with the pro-Western Lebanese government.
Iraq veterans also returned to Libya and Algeria to wage war against the state and foreign interests. Over the past year, Al Qaeda Maghreb in Algeria has adopted suicide bombing as a technique, carrying out 11 attacks, as well as a devastating attack against UN offices. How connected the group is to “Al Qaeda classic” is also not clear.
“Al Qaeda in the Land of the Islamic Maghreb is using Al Qaeda as a branding tool, if nothing else, to get more recruits and bolster their efforts in Algeria,” said Solomon. “There is an argument that they did benefit materially from Al Qaeda in Iraq, which had been successful at profiting from the war torn situation, with millions of dollars said to have been transferred out of Iraq to the Maghreb region through bulk cash smuggling.”
Funds are also raised through sales of counterfeits, smuggling and drug running, according to Jaimie Burnell at Control Risks.

Al Qaeda 'classic': opium, minerals and robbery

While localized Al Qaeda groups generally require less funding to carry out terrorist attacks, Al Qaeda’s bases in Central Asia require significant amounts of funding to train recruits and carry out operations, as well as feed, house and support fighters and fighters' families.
Just as the invasion of Iraq had repercussions for the MENA region in terms of the spread of Al Qaeda and Jihadist groups, the invasion of Afghanistan had fallout for Pakistan, which has become the centre of operations for ‘core’, or ‘classic’ Al Qaeda.
Numbering between 200-300 Arab fighters, according to Gunaratna, and an estimated 1,000 to 8,000 foreign fighters, funding is estimated at less than US$100,000 a month. But the group that is harbouring Al Qaeda in the North Western Frontier Province (NWFP) and the Federally Administered Tribal Areas (FATA) in northern Pakistan, Tehrik-i-Taliban Pakistan (TTP), an umbrella group of Jihadist groups, is spending up to US$40 million a year in order to maintain bases and carry out attacks.
“It is not clear if Al Qaeda is receiving money from the TTP, but what is clear is that the TTP protects Al Qaeda and is under its influence, and at least by one account tried to carry out one operation internationally, in January in Barcelona,” said Solomon. “So really, they are acting in concert, and although confusing with the names of different groups, it’s safe to say they are acting in unison. As the TTP becomes more financially secure, Al Qaeda then has more resources to maintain a defensive posture in that safe haven and undertake operations in Pakistan and against NATO forces in Afghanistan.”
According to Solomon, the TTP, led by tribal leader Baitullah Mehsud, is raising funds from three primary sources. The first is taxing the opium trade from Afghanistan, which accounts for 93% of the world’s production and valued at some $2.2 billion. The Taliban is reportedly in control of three of the highest producing opium provinces.
While the TTP is not directly involved in cultivating opium, the group imposes a protection tax of up to 15% on heroin laboratories and distribution networks. The TTP are also taxing ordinary trade after it took control of the Khyber Agency, the corridor through the Khyber Pass into Afghanistan and primary route for goods destined for Central Asia.
“It’s been a big way to increase revenues over the past year, and they’ve also been able to loot trucks, including NATO material,” said Solomon. “A Chinook, Blackhawk and a Cobra helicopter were recently stolen en route, and the Taliban took pictures and videos to prove it. Apparently they sold the Chinook for a few hundred thousand dollars on the black market in Afghanistan.” An estimated 70% of NATO’s supplies pass through the Khyber Pass to Afghanistan. In March, the Taliban blew up 42 trucks transporting fuel to the NATO forces.
The second method is robbery. “The TTP have a number of training camps to teach not only terrorist tactics, but also criminal tradecraft, like how to rob a bank. They have dispersed members throughout Pakistan to get security positions at banks and money exchanges to case and later rob them,” said Solomon. Over the past year there have been 21 robberies in Karachi, with several attributed to militants with links to Baitullah Mehsud. A recent heist netted some US$73,000.
The tactic serves two functions, to send funds to the base camps and threaten the Pakistani government through its network of sleeper cells. In 2007, the TTP and its allies carried out 50 suicide attacks in Pakistan, killing nearly 1,000 people, and is widely believed to have carried out the assassination of Benazir Bhutto last December.
A third source of funding is from minerals, with the TTP recently brokering deals between tribes to get a marble quarry near Swat back in operation, as well as a coal mine 40 kilometres south of Peshawar. In addition to a hefty brokerage fee, the TTP taxes the trucks at the quarry and mine.
A further method is donations from Pashtuns, Afghanistan’s largest single ethic group and the dominant populace in Pakistan’s NWFP and FATA. There is also support from Pashtun businessmen in the Gulf, particularly Dubai.
“That is where the trade starts, with commodities going from Dubai to Karachi through Pashtun businessmen sympathetic to the TTP, and up through the tribal areas. That whole corridor has sympathizers, with funds going through commodities or [alternative remittance system] hawala,” said Solomon.
Seven years after 9-11, Al Qaeda and affiliates clearly remains a thorn in the side of the West and numerous states despite a plethora of regulations and some successes in curbing financing.

Copyright Informa Law

US Embassy Baghdad: The largest and most expensive in the world

Commentary, Executive magazine

Opened in the midst of the slaughter in Gaza and the twilight of Bush’s presidency, the new American embassy in Baghdad garnered less coverage than when its astronomical budget was first publicised in 2005.
The opening was more than the completion of the largest and most expensive embassy in the world. It marked the day the US diplomatic corps moved out of Saddam Hussein’s former palace and handed it over to the Iraqi government, five days after US forces officially came under an Iraqi mandate on New Year’s day.
The move from one palace to what is essentially an even larger one is being eyed warily by many Iraqis, the embassy far grander – albeit minus the gold plated bathroom fixtures - than anything Hussein ever built during his nefarious reign.
It is on a level of Cold War era grandeur, similar in scope to the colossal project Nicolae Ceaucescu attempted in Bucharest, the centerpiece a palace the Romanian leader wanted to be seen from space.
The 104-acre embassy complex, which is the size of approximately 80 football fields, nearly turned into a similar white elephant as costs ballooned to $700 million and the project taking nearly two years longer than expected. In that time it became a symbol of the quagmire Iraq has become for the US, with no end in sight and costs spiralling upwards. But with the embassy finished and operational, it now represents the most prominent symbol of ‘fortress America’ today and, moreover, that America wants to stay in Iraq for longer than Barak Obama’s presidency will last.
As the International Crisis Group commented in 2006, “the presence of a massive US embassy co-located in the Green Zone with the Iraqi government is seen by Iraqis as an indication of who actually exercises power in their country.”
Visible from space and larger than the Vatican, the embassy draws historical comparisons to the Crusader castles of the middle ages. All that is missing is a crocodile infested moat around the walls.
But secure it certainly is nestled inside the “Green Zone,” with a 15ft thick perimeter wall to protect this city within a city that includes a power station, a water treatment plant, schools, restaurants, swimming pools and shopping area.


With an annual budget of $1.2 billion, the 5,550 Americans and Iraqis working at the embassy – half listed as security – are certainly not roughing it. The residence of the US ambassador to Iraq is 16,000 square feet, while the deputy chief of mission has a “cozy cottage” measuring 9,500 square feet.
Tough though a posting to Baghdad may be for the diplomats, State Department, FBI, and federal agents that are to work out of the embassy, it is far from the realties of the “red zone” that lies beyond the walls, of power cuts, broken sewage pipes and violence.
That the US needed a secure site is understandable, given the track record of attacks on US embassies. In Beirut, the Americans are in their third embassy in less than 30 years, while the former US embassy in Tehran stands as a memorial to the overthrow of the Shah, and resultantly the American presence in Iran, the walls covered in colorful murals depicting the US as an oppressor, imperialist and warmonger. As Ayatollah Khomeini said in December, 1979: “This place is not to be considered an embassy but rather a ‘spy center.’” Following the US embassy hostage crisis in Tehran, the US had to resort to the somewhat farcical position of operating out of the Swiss embassy.
A drive past other embassies in the region indicates how seriously security is taken, with the Istanbul compound a veritable fortress, as is the one in Amman, with armored personnel carriers lined up outside and reportedly surface-to-air missiles within the sandstone complex.
But as Niccolo Machiavelli points out in the section on fortresses in that Bible of realpolitik, The Prince, “If they are beneficial in one direction, they are harmful in another.” Indeed, despite US ambassador to Iraq Ryan Crocker saying at the launch that the new embassy is a testimony to America's commitment to a “long-term friendship with Iraq,” given the US role in the country over the past nearly six years it is hard to see the embassy as a symbol of friendship. And furthermore, with the embassy a fortress, it doesn’t exactly give off the impression of amiability. But that is the Catch-22 situation America has placed itself due to its foreign policy decisions over the years in the Middle East. At the same time as presenting itself as a beacon of hope, democracy and freedom to the world, to gain access is akin to entering a maximum-security prison.
As Machiavelli remarked: “So, all things considered, I commend those who erect fortresses and those who do not; and censure anyone who, putting his trust in fortresses, does not mind if he is hated by the people.”


PAUL COCHRANE is a Beirut-based journalist

Photos of the former US embassy in Tehran (by Paul Cochrane)

Press TV appearance: Middle East Today

12 Dec. 2008: Recent Clashes in Yemen

Press TV Middle East
http://www.presstv.ir/Programs/player/?id=78370

A Change in Fortunes

Commentary - Executive magazine

The double whammy of the subprime market crisis followed by the deepening financial crisis has seen a remarkable change in fortunes among the vanguard of economic power. Recall British Prime Minister Gordon Brown’s visit to the Gulf in November to essentially beg for money to help shore up Britain’s ailing industry.

Not even a year ago such a trip by the leader of one of the world’s leading financial centers - and accompanied by 27 senior business executives - would have been unthinkable. Rather the trip would have been about cementing economic relations, making some speeches about the value of the free market, a veiled reference to democracy, and hopefully the flogging of British goods/services/weapons.

But these are different, and difficult times, and pride is being forced off faces to be replaced with knitted brows and forced smiles of gratitude (if the money is stumped up).

And perhaps rather unsurprisingly, there are elements among this increasingly dishevelled elite that are not happy about this change, particularly when it comes to non-Western entities buying up landmark buildings and sizeable assets in Europe and the USA.

The British popular press is a glaring example, which appears unable to accept the shifts in economic power, with regular commentaries and articles bemoaning such “humiliation” on the world stage. Gulf sovereign wealth funds (SWFs) have come under particular criticism over the past year and a half, largely knee-jerk jingoism of the sensationalist kind.

Take this example from an editorial in The Daily Express in November: “There is mounting concern about individuals and sovereign wealth funds in the Middle East that are buying into key British businesses...Now they are buying out our assets, our country, with our own money. It is a sad, sickening prospect.”

That a change in fortunes affects the psyche of a former world power is somewhat understandable, though there is little need, to use a common expression, “to bite the hand that feeds you.”

But such resentment has been around for quite some time, and recent changes are no exception. One notable factor in this new alignment of the financial stars is how pragmatic political leaders are compared to popular feeling. Just think back a few years to Dubai Ports World’s attempt to acquire the rights to run American sea ports. The Bush administration was all for it, whereas US media made a mountain out of a mole hill. Newspaper cartoons depicted terrorists hidden inside containers, Arabs dressed in jelabas turning a blind eye to dubious cargos sailing past the Statue of Liberty, and all the old, staid Orientalist clichés were dragged out that seemed to confirm what the Arab world has long suspected: that Americans and the West view Arabs as untrustworthy and potential terrorists.

The Dubai Ports episode was a particularly virulent case, and the emirate did well to back out quietly without making a fuss. The spate of SWFs buying up assets and icons over the past year is being taken in a rather different light, but is nonetheless seemingly dependent on the acquisition. After all, Manchester City’s supporters couldn’t have been more enthusiastic about the Abu Dhabi United Group for Development and Investment purchase of the soccer team this year. But when it came to Abu Dhabi's SWF pumping some $7.5 billion into Citigroup, and Kuwait investing in Merrill Lynch a year ago, up went the cry of the barbarians being at the gates and concern over vested political interests. As if Western multinationals, the International Monetary Fund (IMF), or the World Bank don’t have vested political interests everywhere they operate!

But as with jingoistic attitudes having to change, so it looks as if the West’s dominance of the IMF may also have to adapt to the fallout from the financial crisis. The fund is looking to the Gulf’s finances – with oil producing countries generating some $1 trillion over the past few years from high oil prices – to help the IMF’s bail out packages. In return, Gulf countries will want more than just a seat at the IMF’s table; they will want to have an actual role in the fund’s decisions.

As Brown said in Abu Dhabi, “I very much accept the argument that countries which do contribute in this way should have a greater say in the overall governance of the IMF.” Whether this will happen, and to what degree, will have to wait until the next meeting in April.

And as for the Gulf helping to shore up British business – despite the reservations of the popular press – Brown’s visit helped to land $1.5 billion in deals, while Barclays Bank bypassed a handout from the British Treasury through a $11 billon stake from the Abu Dhabi royal family. The times are a-changing, and hopefully so will attitudes as the axis of financial power starts to shift.

Bangladesh bucks the global downturn trend

By Paul Cochrane in Dhaka, Bangladesh
International News Services

As the old dictum goes, one man’s loss is another man’s gain. In a globalized world in the midst of a financial downturn, this saying is particularly true, with certain countries unexpectedly benefiting from the ongoing crisis.
Bangladesh is one of the unexpected gainers, especially as 75.83% of its national exports come from knitwear (39.21%) and woven goods (36.62%), primarily to the EU and US markets. The expectation would be that exports of Bangladeshi ready made garments (RMG) would slide in accordance with the drop in global stock markets and plummeting retail sales. After all, India has laid off 700,000 textile workers, Indonesia 120,000 (10% of the sector), and China has equally downsized operations in the RMG sector in the past few months. But the reason that Bangladesh’s prospects are looking rosy – in woven, knitwear and footwear - is that the goods the country exports are not medium- to high-end wear, as China, India and elsewhere have increasingly moved into of late.
Bangladesh predominantly produces low-end goods, and low-end priced goods are in greater demand as people in the US and Europe tighten their belts for what appears to be a financially rocky road ahead. Bangladesh also has much lower minimum price fixation than elsewhere, with a dozen cotton t-shirts exported to the EU-27 market costing US$19.56 in 2006 but just US$15.60 in 2007, significantly less than nearest rival Cambodia at US$29.04, according to Eurostat.
In a period where companies are cutting costs at every possible corner, such figures speak for themselves. Sure, in the near term Bangladesh’s RMG sector will not report the kind of double digit growth figures they have experienced over the last few years, but static and marginal growth is certainly more preferable than laying off workers and downing tools. And if Bangladesh effectively utilizes the opportunities this crisis is providing to cement good working relations with major buyers, Bangladesh over the next few years will rise up the ranks to be among the top three RMG manufacturers in the world.

Photo by Paul Cochrane

Indo-US Nukes and the 'war on terror'

Indian Army soldiers patrol the streets of Srinagar, Kashmir

By Paul Cochrane in New Delhi, Executive (Commentary)
November 2008

Over the last 1000 days India has been trying to get its nuclear status green-lighted by the USA despite not being a signatory to the Non-Proliferation Treaty (NPT) or the Comprehensive Nuclear Test Ban Treaty.
The US Senate's ratification in October of what is known in India as the '123 Agreement' - in reference to Section 123 of the US Atomic Energy Act - will have a profound shift in geo-politics for Asia, the Middle East and the West. For behind the deal is big power politics – the two giants of Asia, China and India, the region's basket cases, Afghanistan and Pakistan, and Washington's perennial thorn-in-its-side, Iran. There is also the US-led 'war on terror' to consider.
For by inking the 123 civil nuclear pact, India now has access to nuclear reactors, fuel and technologies from the US after a gap of 34 years, when New Delhi first conducted a nuclear test in the Rajastani desert in 1974. The deal has also put the US top of the list to supply the nuclear technology, valued at $100 billion over the next 20 years, and will enable India to develop 200 nuclear warheads as well as indigenously designed nuclear submarines. Sizeable arms deals and economic cooperation agreements have also been inked, with the US expected to get the proposed $10 billion Multi Role Combat Aircraft deal and replace Russia as India's biggest weapons supplier.
But in the bigger picture, what the bilateral agreement has achieved for Washington is a new ally in Asia that can pressure Iran, with whom India has energy agreements yet little desire to have another nuclear power in the neighborhood. India can also act as a bulwark against the emerging dragon, China. Just over the border from India in the Tibetan Autonomous Region are an estimated 500,000 troops of the People's Liberation Army (PLA), as well as Intercontinental Ballistic Missiles (ICBMs) bases. It has long been a trigger point and could be again, with numerous skirmishes occurring between the PLA and Indian troops over disputed border areas high in the Himalayas.
By bringing India onboard - the world's largest democracy at some 1.2 billion people and counting - the US has a country that borders other countries of concern whose democratic credentials are dubious at best: Pakistan, Myanmar, and Bangladesh.
The agreement may also well be the Bush Administration's last positive foreign policy achievement. It certainly put a smile on the face of Bush when Indian Prime Minister Manmohan Singh told G.W. that "India loved him." But while the agreement is advantageous for Washington, it yet again sends signals of hypocrisy and double standards to the world. There are only four countries that are non-participants in the NPT: Israel, India, Pakistan and North Korea; but with the exception of Pyongyang, whose nuclear arsenal is still in an embryonic stage, the US has strong relations with the first three. Iran on the other hand, which is cooperating with the IAEA, is continuously under pressure to rein in its nuclear program.
The thawing of relations between New Delhi and Washington DC have however come at a time of heightened terrorist attacks within India by Islamists. Although homegrown, the attacks have links to Pakistan.
Islamabad was after all fingered as a perpetrator of the terrorist attack on the Indian Embassy in Kabul in July, and there are allegations of financial support for Indian Jihadists coming from Pakistan and Bangladesh. The deluge of fake Indian Rupees, which are a contributor to inflationary pressures, have also been traced to state-of-the-art printing presses in Pakistan. Furthermore, during meetings at the White House Bush and Singh reportedly discussed the prospect of Pakistan imploding and the notorious Inter-Services Intelligence (ISI) becoming "a state within a state."
New Delhi is now mulling a beefed up anti-terrorist law and its National Security Agency has been briefed by the US Department of Homeland Security on how to set up a similar body to better integrate its intelligence services which, according to one analyst I spoke to in Delhi, are still operating with a World War Two mindset. Additionally, the Indian press has reported growing pressure on New Delhi to send troops to Afghanistan.
In the global 'war on terror,' India clambering onboard the US train can been seen as a boon, but for the more skeptical, India has sold out in this new alliance and Washington DC has once again shown its Janus face when it comes to nuclear issues. Iran and China are the biggest losers in this, while the world has become an even more uni-polar place.

PAUL COCHRANE is a freelance journalist. He is currently in India.

The Spectre of Cyber Warfare

Commentary - Executive magazine

Over the summer the spectre of cyber warfare gained international significance, spurred on by reports of cyber attacks that crippled Georgia’s infrastructure in the wake of Russia’s ‘intervention’ in South Ossetia.
Reportedly carried out by nationalistic Russian hackers rather than by the Kremlin itself, the incident has shown how vulnerable a country’s critical national infrastructure (CNI) is to cyber attacks. Even presidential campaigns are open to attack, with senators John McCain and Barack Obama’s systems allegedly hacked into by the Chinese.
The dark side of technology has also come to the attention of the private sector in the Middle East, with a handful of banks in Dubai hit by ATM card theft and fraud in September. Furthermore, cyber crime continues to rise in the region, with some 50 million incidents of hacking against the public and private sectors in March, up from 15 million in December 2007, according to a study by internet security firm Trend Micro.
How seriously Middle Eastern governments are taking cyber crime is difficult to gauge however, particularly in terms of prevention and awareness. Additionally, businesses and governments are reluctant to announce cyber attack incidents to not cause concern to shareholders and the public, while statistics like the one above need to be taken with a pinch of salt as internet security firms have a vested interest in making out that cyber crime is worse than it may actually be.
Nonetheless, last year’s Virtual Criminology Report by NATO, the FBI and other agencies stated that cyber spying is one of the biggest security threats nations face, with 100 countries having experienced some form of cyber warfare. Britain’s secret service, M15, went as far as saying the country was “four meals away from anarchy” if there was a serious interruption to CNI and the distribution of food.
That countries are starting to take the threat seriously was highlighted at a conference I attended in Crete in September organized by the European Network and Information Security Agency (ENISA), which was set up in 2005 to investigate internet security problems and make recommendations for EU member states on how to protect themselves. What struck me was how long the EU has taken to tackle the issue on a collective basis, and that between three to five years are needed for all EU countries to be at a common level of protection. Furthermore, in a speech given by German Member of the European Parliament (MEP) Jorgo Chatzimarkakis, he said he “couldn’t understand politicians who doubt the importance of this endeavour” to tackle cyber crime. ENISA itself was at risk of not even getting established at one point, while few MEPs know much about cyber crime. Meanwhile, a speech by Lord Toby Harris stressed how ambivalent Britain’s political establishment is about information security, with less than 10 out of the 1400 members of the House of Commons and the House of Lords taking a serious interest in the subject. This in a country where six government departments have reported system compromises over the past year, many multiple times, and identity theft is estimated at $3.4 billion a year almost beggars belief. But while the EU is starting to take on the challenge of improving cyber protection for governments, businesses and consumers, the fact that ENISA’s budget is only $11.5 million a year indicates that more needs to be done and for regulations to be enacted.
Naturally, I started to think about how the Middle East is prepared for this phenomenon when so many EU countries are just setting up Computer Emergency Response Teams (CERTs) and Disaster Recovery Plans (DRP). The picture is not overly rosy, with the International Data Corporation estimating that total internet security spending in the region will only touch $9.3 million by 2009, with the UAE, Saudi Arabia, Kuwait, Qatar and Bahrain the top five investors. When you consider that security systems for small networks of 100 computers cost roughly $15,000, and those involving 1,000 computers $30,000, the region’s spending is woefully inadequate to protect CNI and businesses. What is being done on the legal front also needs to be addressed.
For instance, how protected are governments and businesses from cyber attacks when European countries do not have a Data Breach Notification Law? Are there units of law enforcement adequately trained to take on e-crime? And are there Disaster Recovery Plans and CERTs in place for when the seemingly inevitable happens?
Such questions need to be asked as the region gets more connected, and will gain further importance if many Arab countries go ahead with plans to build nuclear power plants (NPPs). After all, a NPP in Baxley, Georgia was shut down for 48 hours in March after a software update was installed on a single computer, and in 2003 a NPP in Ohio had its safety monitoring system disabled by a virus.
National responses to the problem and heightened regional cooperation are undoubtedly necessary to protect CNI and citizens from what is already a global phenomenon that is not going to go away.

Anti-Money Laundering and Counter Terrorist Financing in the Middle East

Executive magazine

Since 9/11 the issue of combating money laundering and terrorist financing has taken on greater importance for the banking and financial sectors, forcing institutions to shake up their administrative divisions to comply with regulations as well as apply initiatives like ‘know-your-customer’ at the branch level. It’s been a costly and time consuming process, but with the Middle East and North Africa (MENA) region a focus of international anti money laundering (AML) and counter terrorism financing (CTF) initiatives, central banks and financial institutions were left with little choice.
The USA’s Patriot Act has been the main driver, sections 311 and 314 in particular, calling for ‘Special measures for jurisdictions, financial institutions, or international transactions of primary money laundering concern,’ and in Section 314, ‘Cooperative efforts to deter money laundering.’ The seriousness of these requirements cannot be downplayed.
Unless MENA banks comply, they will be unable to have a representative bank or depository in the US, and other day-to-day operations, such as letters of credit, face heightened suspicion if not downright refusal. Furthermore, failure to comply with the Patriot Act and the OECD’s Financial Action Task Force’s 40 Recommendations on money laundering (ML) plus 9 Special Recommendations on terrorist financing (TF) can blacklist a country and its banks, as the Commercial Bank of Syria and Iranian banks currently face. Additionally, the consequences of non-compliance are not just operation- and reputation-related but also financial, with Arab Bank fined $24 million in 2005 by US banking regulators for failing to implement AML controls at its New York branch.
The costs of implementing AML and CTF compliance certainly outweigh the risks, but are nonetheless costing institutions a pretty penny, whether installing new software, employing and training staff, or building up a compliance division. Middle Eastern banks are cagey about releasing such figures, but for an idea of the costs involved, a Pricewaterhouse Coopers report in Australia estimated the cost of AML/CTF compliance for a financial institution at $48 million to $96 million.
A recent survey by KPMG found that from around the globe, the regions that recorded the highest increase in costs of AML compliance were, “unsurprisingly,” North America and the Middle East/Africa. “This reflects the significant legal and regulatory changes in the US, and the wider impact of the extra-territorial provision of US law around the world,” the report noted. Middle East-Africa banks average percentage increase in AML investment between 2001-2004 was 68%, and between 2004-2007 an estimated 70%.
In terms of cost, topping the list was enhanced transaction monitoring, greater provision of training, sanctions compliance, remediation of ‘know your customer’ documentation, and transaction ‘look-back’ reviews.

Need for more regulation

The region has been fairly successful in curbing money laundering and terrorist financing, at least according to official accounts, with the Middle East North Africa-Financial Action Task Force (MENA-FATF), a regional body based in Bahrain, claiming a 90% decline since the body was set up in late 2004.
But tackling ML and TF is a slippery business, as heads of financial intelligence units and compliance officers unabashedly make clear. Indeed, ML and TF is considered to occur more in major financial centers, such as London and Frankfurt, where there is greater safety in numbers, than in the smaller and more risk associated markets of parts of the Middle East.
The countries in the MENA region that have warranted censure, Iran and Syria, are arguably lower in the money laundering stakes than the likes of Dubai, and in terms of terrorist financing, Saudi Arabia.
But the matter is politically tinged (see Islamic Banks and TF article, page xx), as a private sector dialogue with the US government attended by all the region’s major banks in Cairo a few years ago highlighted when there was a heated discussion about what constitutes a terrorist group. The 5% that were in disagreement concerned Hamas and Hizbullah, two groups at the top of US concerns with TF that also enjoy popular support around the Middle East, including Saudi Arabia, a known financial backer of Hamas.
Politics aside, banks are making noticeable progress in tackling ML and TF, but there is still reluctance amongst Middle Eastern banks to voluntarily adopt higher AML standards in line with global policies as it would put them at a competitive disadvantage. This was reflected in the declining importance senior management placed on AML issues in the KPMG survey, with 88% of respondents in 2004 citing AML as a high profile issue, but by 2007 only 54%.
There is optimism however, with 84% of respondents from banks in the UAE expressing the view that AML regulations should be increased. Indeed, although MENA-FATF has been carrying out country evaluations, to improve AML and CTF in the region commercial and retail banks need to be encouraged to do more, for their reputation as much as curbing money laundering and terrorist financing.

Photo by Paul Cochrane

Into the Lebanese Night

Beirut nightlife is legendary in the Arab world and beyond. Even so, could it be improved further?

BY PAUL COCHRANE IN BEIRUT for Aishti magazine

That Beirut has the best nightlife in the Middle East has not been in question since the civil war ended and the capital replaced Jounieh as the country’s prime spot for drinking and cavorting.
Come rain or shine, conflict or peace, Beirut has always offered a vibrant scene, from restaurants to bars, to after-hours clubs.
But as Beirut can be with fashion - fickle to say the least - so is the nightlife scene. Bars open, a trend is set, other spaces are established, and hey presto, a new nightlife hub hits the capital.
Then the Beiruti capriciousness sets in, with the scene moving elsewhere as people tire of that locale or places are run into the ground. So it was with Monot street a few years ago, and now perhaps with the current nightlife hub of Rue Gouraud in Gemmayzieh, after the revival of Downtown Beirut.
There is nothing overly surprising about this – it’s the free market after all – but there is a degree of herd mentality, in not only the setting up of bars, but also how people migrate with the nightlife vibe. And that can lead to what, to some, is a bad sign: homogeneity.
“It seems Beirut has a diverse nightlife but if you scratch the surface you realize there isn’t much diversity,” says Paddy Cochrane, owner of Gauche Caviar and lounge bar Cloud 9 in Gemmayzieh. “I find it curious that 90% of Beirut’s nightlife limit itself to one street - Rue Gouraud. And how many really unique places are there? Very few. Many are a copy with slight adjustments.”
Cochrane may have a point. Many bars on Gouraud are near carbon copies of each other, offering the same drinks, the same menus and the same music in similar interiors. One recent edition to the street allegedly even asked the interior designer of one bar to do exactly the same thing for their establishment. The feeling is that if it works in one place, it will work again. But on the very same street?
Veteran bar owner Michel Saidah, behind nightlife institutions Havana (Jounieh), Pacifico (Monot), and Dragonfly (Gemmayzieh), points the finger at wannabe entrepreneurs setting up bars without any professional experience in the field. But what he thinks is really missing is passion.
“And not only passion, its taste. Those succeeding are the most professional in taste and music, lighting, technical stuff and in solving problems. Also keeping stock. It’s a whole machine, and owners have to give 90-100% of his time to do it,” says Saidah.
“I went to South America, Asia and Europe to get inspired but not to copy, and those ideas are part of your inspiration,” he adds.
Inspiration, like necessity, is the mother of creation. But when you are catering to a mere 10,000 people that are willing and financially able to have a night on the town, numbers can be a problem. On an average week night bar owners reckon between 300-400 revelers go to Gemmayzieh, and over a 1,000 are knocking back cocktails on Fridays and Saturdays.
This has prevented European-style dance clubs and live music venues from opening up. Beirut does have Music Hall, which puts on great live acts from around the world, but the venue doesn’t allow Lebanese artists to perform. And there are a number of Arabic music-orientated venues but they are not always to the taste of the Europhiles.
“People who like Lila Braun have a more difficult choice than those that like Concerto or Casino,” says Andreas Boulos, owner of Torrino Express in Gemmayzieh.
The current political situation obviously doesn’t help, but neither do cash strapped 20-somethings that want to party but can barely afford a shot. This hasn’t stopped people from thinking that larger spaces could, and should, open.
“It’s remarkable, given the Lebanese love of dancing, that there isn’t a European-style night club - the size of Basement - with a proper dance floor in the middle that would get people away from their tables and get the community spirit back,” says Cochrane.
Zeid Hamdan, the producer and musician behind bands Soap Kills, the New Government and electronic band ShiftZ, says that if a venue for alternative live music opened, he “could fill it every week.”
But the idea of opening a place that needs a good volume of people through the doors is fraught with problems. BO18 has survived as the only - and best - place in town for dancing into the small hours. But when the likes of Sky Bar and White are open during the summer months, the action is diverted there away from Gemmayzieh.
“Sky Bar pulled all customers out of the town. Every sales man was saying, ‘Can you believe how many boxes of champagne we sell everyday?’” recalls Boulos. “But that’s the thing, one hub takes it off everyone else.”
So where next for Beirut’s nightlife? Monot Street is making a bid for a comeback with the re-launch of Lila Braun, and bars keep opening in Gemmayzieh, despite the area’s near saturation point.
Boulos thinks that the strategic location of Gemmayzieh will continue to attract new bars.
“Some mention Badaro as a possibility but most likely down to Mar Mikael. We are already from Paul’s to Electricite du Liban, so will probably connect all the way to Art Lounge,” he says.
Ultimately, the question is what kind of nightlife are people looking for?
Beirut isn’t New York or London, lacking both the numbers and the cosmopolitanism of greater metropolises, but considering the population here and what is on offer, there is little to really complain about. Although a bit more passion and a lot less homogeneity wouldn’t go amiss. After all, having the best nightlife in the region doesn’t mean you can’t get even better.

On the Media Battle for Lebanon, May 2008

Arab Media & Society

On May 7, what was supposed to be a day of strikes to demand higher wages metamorphosed into eight days of fighting between the Hizbullah-led opposition, “March 8”, and the pro-government, “March 14” forces. (1) At the forefront of Lebanon’s bloodiest infighting since the civil war were the media, relaying the heated words of politicians that stoked the conflict while beaming out propaganda thick and fast. Lebanon’s media divisions became further entrenched in their sectarian and political camps, pan-Arab media did the same, and media outlets came under direct attack. (2) The Lebanese public, meanwhile, holed themselves up inside and watched events play out on TV.


After Ghassan Ghosn, the head of the General Confederation of Lebanese Workers, announced that the strike was cancelled, Hizbullah and its supporters shut down Beirut by blocking roads with piles of rubble, burning tyres and overturned rubbish bins. The following day, Hizbullah military units moved into the west of the city and started taking over, engaging in street battles with members of Sunni politician Saad Hariri’s Future movement and affiliated parties.
What changed a day of socio-economic concerns into political violence were demands Prime Minister Fouad Siniora’s government made in the days prior to the clashes. Walid Jumblatt, the pro-government Druze leader and head of the Progressive Socialist Party (PSP), had called for Hizbullah’s private phone network to be shut down, the removal of surveillance cameras Hizbullah had installed by runways at the airport, and for the head of airport security (a Shia by the name of Wafik Shoukair), to be replaced as he was alleged to be working for Hizbullah.
On May 8, Hizbullah’s Secretary General Hassan Nasrallah responded in a press conference, saying the decisions of the government were “tantamount to a declaration of war and the start of a war...on behalf of the United States and Israel.” He also went on to say that the phone network was used in “defending the country against Israel,” and that Jumblatt’s dream “is Sunni-Shia strife. We will not fulfil his dream.” (3)
That evening, as reported by only a few media outlets and relayed in a firsthand account from an employee of the Hariri-owned, pro-government Future TV (FTV) channel, the Future movement brought in thousands of men from Akkar and Tripoli to the Kantari area of West Beirut. “There were two six-wheeler trucks full of mattresses for the guys to sleep on in preparation for a fight. When we saw them we felt more comfortable, then the next day they all disappeared. Maybe they ran away or the Future movement changed its mind and didn’t want a clash. The men were paid to be there, and not armed, just with batons,” he said.
The next group to disappear from around the FTV offices in Kantari were the Lebanese Army, including three armoured personnel carriers that had been stationed in the channel’s parking lot. Then the SecurePlus security guards hired to protect FTV fled, bar one blubbering 18-year old security guard that had to be slapped around by the news editor to “act like a man.” (4)
On the morning of May 9, the FTV employee said an army officer entered the Kantari offices. “He said armed men were outside and if you don’t leave the building, they will come in or burn the building down. The news editor asked for re-assurances: for employees to be allowed to leave and the station to not be harmed, as well as for one technician to stay behind. After everyone left - according to the technician - the Colonel came back with Hizbullah technicians to be taken to the master control room. Cables, uplinks and satellite links were cut – they were professional and knew what they were doing. They needed to find the server, so made the technician call the head technician to find out, and on the phone [Hizbullah] said they knew where he lived.”
Future TV’s terrestrial, satellite and news channel, Future 24, were off the air. New TV, a pro-opposition TV channel, was later given exclusive access to film the seized offices. Meanwhile, Future’s radio station Al Sharq, the Future-owned Armenian radio station Sevan, and the Mustaqbal (Future) newspaper had their offices raided and ceased operations.
Later that Friday afternoon, Syrian Socialist Nationalist Party (SSNP) members, in an act of revenge for the burning of SSNP offices by Mustaqbal supporters during clashes in February 2007, set the FTV offices in Raouche on fire. The FTV employee said an estimated 20-30% of the channel’s archives were lost during the fire, including footage of Harb Tamouz (the July 2006 war between Hizbullah and Israel). “Fortunately, the week before a big part of the archives had been copied, and all the footage relating to Hariri was in a different location,” he said.
New TV's footage of the seized Future TV offices

Propaganda a go-go

Prior to the shutdown of FTV, violence had escalated on the streets of West Beirut and in other parts of the country. Lebanese TV channels were constantly streaming live news of the events, with reports, statements, claims and counter claims forcing viewers to keep an eye on all channels to get an idea of what was going on. (5)
Even pan-Arab channels were showing their true colours, with Saudi-owned Al Arabiya TV clearly on the side of the Siniora government and against Hizbullah, while the Qatar-owned Al Jazeera gave sympathetic coverage to Hizbullah.
Members of the government came out and decried Hizbullah’s actions as a “coup d’etat,” which was quickly picked up on by March 14 affiliated media outlets, on Al Arabiya TV, as well as by the Western media. March 14 also denied that Future had a militia, reiterating that the only militia in Lebanon was Hizbullah, and that, in the words of Hani Hammoud, senior adviser to Hariri, “the end result is that Iran has taken over the country.” (6)
Al Manar and NBN, on the other hand, spoke of the “government’s militia”, and that March 14 was receiving orders from Washington and Israel, making Lebanon a pawn in the US-Zionist agenda for the Middle East, thus a legitimate target.
Hizbullah played the take over of Beirut as a move in a “correction-ist direction, bringing a new identity to Beirut, of being against Israel,” said Dr Ibrahim Mousawi, a Lebanese political analyst allied with the March 8 movement.
The night of May 9 was an exception to all the news that had filled up the airtime of Lebanon’s television channels. The Christian channel LBC, lacking any competition from FTV, which had the rights to air Superstar (the US’ Pop Idol), broadcast live reality show Star Academy at peak time. (7) The show featured a choreographed sequence of women in leather dancing amid chains at the start, and a full audience in attendance. (8) Al Manar broadcast a Syrian soap opera.

LBC's Star Academy aired live while the clashes continued in Beirut...

...Al Manar aired a Syrian soap opera

The next day, May 10, propaganda went into overdrive, with Al Manar showing video montages of March 14’s connections with the United States via slowed-down, key-hole style images of Jumblatt meeting with US Assistant Secretary of State David Welch, and Siniora meeting with US Secretary of State Condoleeza Rice (but notably avoided showing footage of Rice and Welch meeting with Parliamentary Speaker and Amal leader (March 8), Nabih Berri). (9) Al Manar also showed footage of a hand grenade with Hebrew writing on it that was allegedly found in pro-government offices, implying March 14 was receiving military aid from the Israelis.

Al Manar footage of an Israeli hand grenade allegedly found at a Future Movement office

But with Future TV off the air, March 14 was left with only one sympathetic Lebanese TV station, LBC, which aired footage of a demonstration outside the FTV offices to protest the channel being taken off air.
"The shutting down of FTV showed the increasing importance of the media as a target on the battlefield,” said Habib Battah, an independent media analyst on the Middle East. “Keeping FTV off the airwaves was a psychological attack on Future's political supporters. It also gave the other side a monopoly over propaganda messages, with no channel to rebut the damaging allegations that were made against it.”
Among the opposition there was a great deal of schadenfreude over FTV being silenced. The fact that Al Manar and Hizbullah had made so much noise over the destruction of Al Manar’s studios in Beirut’s southern suburbs by Israeli fighter jets in Harb Tamouz (the July, 2006 war) aggravated many people when it came to the shutting down of FTV, with condemnations coming in from around the world. And unlike Future TV, which re-started broadcasting on May 14, Al Manar had contingency plans for an attack on its facilities and was only off air for two minutes. (10)
“It is ironic that Al Manar protested Israel's attack on its headquarters as a violation of the free press while Al Manar supporters helped shut down a Lebanese-owned media outlet less than two years later," said Battah.
The decision to not merely gag by totally silence FTV even angered some March 8 supporters, with Mousawi saying he didn’t agree with FTV being shut down and that it “backfired” on Hizbullah.
According to Ramez Maalouf, Professor of Journalism at the Lebanese American University, Hizbullah’s rationale behind taking FTV out of the media equation was to calm down the situation in the country.
“People in Hizbullah said [if FTV stayed on air] it would make the war more violent and dangerous, and was a way of keeping things quiet,” he said. “To me it was dangerous, as it further underlines the idea that people have that Hizbullah can do anything as it is on a mission from God.” (11)
Later on May 9, however, Hizbullah issued an apology for the closure of FTV and the treatment of journalists while covering events, but laid the blame squarely on the government’s shoulders. (12)
"We are sorry about everything that has happened to the press corps, but the government is to blame for letting things get this far. We hold the government fully responsible for everything that has happened to the media. We hope these media will be operating again soon under the control of the Lebanese Army,” Hizbullah MP Hassan Fadlallah said in a statement issued to the Lebanese National News Agency. (13)
Somewhat ironically, on the final day of the conflict, on May 14, when fighting had shifted from Beirut to the Chouf and Tripoli, Al Manar released a statement citing “violations of press freedom” when viewers in northern Lebanon complained that Future movement supporters had pressured local cable providers to stop broadcasting Al Manar, NBN and OTV.

Media war

“Truth was the victim of this war, and there was a lot of misleading propaganda,” said Mousawi. “Of course there were variations between one outlet and another, and I believe the media that followed the March 14 camp made the largest distortion – FTV became just like any media outlet of a gang, and didn’t hold to basic principles of journalism, inciting hatred and creating news about things that didn’t exist. At the same time, the March 8 media was not impeccable either - all made mistakes.”
Mousawi added that March 8 media was keen not to fall into the trap of provoking fitna – discord – between the Sunni and Shia, which Nasrallah claimed Jumblatt and the government were trying to do, and what Hizbullah claims is an American project in the region (this Shia-Sunni divide is referred to in some Washington DC circles as the “Sushi war”).
To Maalouf, blame lay less with the media than with Lebanon’s sectarian political system.
“It’s a case of politicians bringing things to a boil, but the media needed to use words more carefully,” he said. “I think the fault lies with the politicians as it’s about the choices the political system gives people, not the media.”
Maalouf said LBC was seen as the least biased of all the channels.
“But all in all, LBC is like An Nahar (newspaper), centre-right,” he added. Notably, he said OTV, allied to opposition leader Michel Aoun’s Free Patriotic Movement, increased its viewership during the clashes.
“The more divided the audience became, the more people navigated to the channels that reflected their views. For instance, the tenser it became, the more Christians watched OTV, which they didn’t watch much usually,” Maalouf said.
To Battah, the conflict showed that most Lebanese television stations have become an intrinsic part of the infrastructure of the political establishment.
“Lebanese TV is no longer just biased, it is one of the most important weapons in the hands of political groups,” he said.
“This has led some Lebanese politicians to justify attacks on the media, and unfortunately this is now accepted by many of their constituents. It’s a very dangerous development because even now average citizens are engaging in attacks on journalists just because they don't agree with the broadcaster's politics. This is definitely a low point for Lebanese journalism. The polarization of society has increased sectarianism in the press and stoked hatred toward the press as a whole.”

The Aftermath

While viewing habits had changed during the clashes, the media environment started to get even more virulent once the fighting died down and FTV was back on air.
With the fighting ongoing, FTV had re-located to Beirut Hall to prepare for getting back on air. “We waited for the political green light as Future faced a lot of threats that the Kantari offices would be burned down [if FTV went on air],” said the Future TV employee.
When FTV re-launched, channels like Al Arabiya showed solidarity by re-broadcasting footage, while LBC aired a statement by the Mufti of Beirut on Marcel Ghanem’s show saying FTV was back.
“It’s a different story how coverage changed after re-broadcasting,” said the FTV employee. “FTV went from being biased to being extremely biased. It started calling it an Alam Harb (“media war”), people were asked not to say certain things and to cut a statement to change the meaning. For instance, they transcribe a speech and then the editor underlines the words you can use, five words here and 20 words there, and this changes it all, it becomes a different speech. The management and the news directors also started saying they [March 8 media] are lying in news bulletins and creating this story, so it’s ok for us to do whatever. I think this is the worst effect of what happened,” he added.
Al Manar meanwhile started portraying the end of the conflict as a victory for Hizbullah, which had not capitulated to any of Jumblatt’s demands and, by force, driven March 14 into an agreement in Qatar that ended a political crisis that had lasted 18 months. In December 2006, Hizbullah and co. pulled out of the government and established a tent city that closed off downtown Beirut. Once President Emile Lahoud stood down from office in November last year, the political standoff stalled the election of a new head of state some twenty times. By June 21, with a compromise reached on a new president, General Michel Sleiman, the tents were taken down and Beirut appeared to be back to normal.
On the TV, programming returned to its usual content, including politically partisan points of view and journalism that skirts the line between news and propaganda.

Footnotes

1) The March dates refer to demonstrations in downtown Beirut in the wake of former Prime Minister Rafik Hariri’s assassination on February 14, 2005. March 8 consisted of Hizbullah and Amal, while March 14 (the date of the so-called ‘Cedar Revolution’) consisted of Hariri’s Future movement, the Progressive Socialist Party, the Lebanese Forces, the Phalange Party and Aoun’s Free Patriotic Movement (FPM). The predominantly Christian FPM later joined March 8, diving the Christian community.
2) Lebanese TV channels are split into two camps: The pro-opposition channels are Hizbullah-backed Al Manar TV, the National Broadcasting Network (NBN), which is partially backed by Shiite parliamentary speaker and head of the Amal movement Nabih Berri, New TV, and the Free Patriotic Movement-run Orange TV or OTV. Pro-government channels are Mustaqbal (Future) TV, owned by the Hariri family, and the Lebanese Broadcasting Company (LBC). See Paul Cochrane, ‘Are Lebanon’s Media fanning the flames of sectarianism?’ in AMS - www.arabmediasociety.org/?article=206
3) A transcript of Nasrallah’s speech is available at http://yalibnan.com/site/archives/2008/05/nasrallah_justi.php
4) Members of the opposition, and opposition media, claim the Hariri-owned security company SecurePlus is the Future movement’s militia.
5) Both Al Manar and Future TV did not reply to official requests for interviews with the management.
6) Nick Blandford, ‘Uncertainty deepens in Lebanon as Hezbollah seizes control of west Beirut’, Christian Science Monitor, May 9, 2008 - www.csmonitor.com/2008/0509/p25s23-wome.htm
7) Saudi prince and billionaire Walid Bin Talal increased his stake in LBC-Sat and the Production and Acquisition Company to 85% in July this year.
8) Beirut Report – www.beirutreport.blogspot.com/2008_05_01_archive.html
9) For screen shots and descriptions of media coverage during May see Lebanese-American journalist Habib Battah’s blog, Beirut Report – www.beirutreport.blogspot.com/2008_05_01_archive.html
10) See Paul Cochrane, “Bombs and broadcasts: Al Manar's battle to stay on air” in AMS - www.arabmediasociety.org/?article=19
11) Maalouf was making a reference to the slogan Hizbullah adopted after Harb Tamouz – “Nasr min Allah,” Victory from God.
12) Many journalists, foreign and Lebanese alike, were threatened by Hizbullah and Amal gunmen when trying to cover events. Two Al Jazeera TV staff were also wounded during clashes in a Beirut neighbourhood. An Al-Arabiya TV crew were briefly taken prisoner in a Beirut suburb on May 8, released after half an hour by Hizbullah.
13) www.menassat.com/?q=en/news-articles/3673-hezbollah-takes-over-west-beirut-1

ALL PHOTOS COURTESY OF HABIB BATTAH - www.beirutreport.blogspot.com

Syria’s Water Shortages: Agriculture, Subsidies and Hydropolitics

With flour subsidised, crop failure this year has eaten into the government's four to five millions tons of reserves

By Paul Cochrane in Damascus, Executive magazine

SYRIA IS IN THE MIDST of its third year of drought. Some 90% of the barley has been lost due to crop failure, the wheat harvest is down by over 50%, and ground water reserves are running low.
In the face of such a crisis, Syria has had to resort to the international wheat market for the first time in 15 years, no longer self-sufficient or able to export from what was, since antiquity, one of the region’s bread baskets.
This hydrological crisis couldn’t have come at a worst time for Syria, with the country attempting to implement widespread economic reforms and reduce subsidies while food, energy and living costs continue to spiral upwards. Furthermore, the international price of wheat has risen 83% over the past year, putting strain on Syria’s budget deficit and wheat reserves.
Such hard realities couldn’t be further from the rosy picture presented by the media and investors in the wake of Syria’s economic reforms, who cite surging investments, the financial sector’s exponential growth, a stock market in the offing, and rising tourism figures.
“People are bullish on Syria, but there are problems we are facing,” said Dr Nabil Sukkar, managing director of the Syrian Consulting Bureau for Development and Investment. “Agriculture is not fashionable, people instead talk of industry and ICT, but it should be given the priority it deserves in Syria,” he added.
The scale of Syria’s hydrological woes is forcing the government to rethink its agricultural policies as wheat and barley reserves dwindle. Last year, Syria produced 4.1 million tons of wheat, more than enough to meet demand for the 4 million tons consumed domestically. But the government estimates this year the harvest could be as low as 2 million tons, a drop of over 50%, if not lower. Barley, which accounts for 10% of Syria’s grain production, has declined 90%, having an immediate knock-on effect on the livestock sector, which used 60% of all barley as animal feed. Many small-scale farms have been forced to close as a result.
The decline in production is attributed to low rainfall, the land freezing over at the beginning of the year, and the over-usage of groundwater resources.
“Everywhere received only 50% of rain, and in agricultural areas this is a major problem,” said Dr Abdullah Droubi, Director of Water Resources at the Arab League’s Arab Center for the Studies of Arid Zones and Dry Lands (ACSAD) in Damascus. Other areas received only 15-30% of normal precipitation levels, with the exception of the coastal regions, resulting in an average of 2 inches or less between September 2007 and April 2008, according to the United States Department of Agriculture’s Foreign Agricultural Service (FAS).
The water shortage is most severe in the northern governorates of Al Raqqah, Al Hasakah and Aleppo, which account for 75% of the country’s wheat production. The problem is further compounded by Syria obtaining an estimated 85% of its renewable water from the Euphrates, Tigris and Orontes rivers, but with poor rainfall in neighboring Turkey, where the rivers originate, Syria is struggling to meet its water needs.
“They are trying to irrigate some places with supplementary water and from ground water, but as ground water is not recharged, it is a closed cycle - no precipitation means groundwater will decrease,” said Droubi. Utilizing ground water also means less water flows into lakes and rivers, as well as increasing the salinity of ground water reserves.
Pollution, inefficient usage of water and above all a surging population, growing at 2.11% a year, is putting further strain on resources. Additionally, demand for domestic potable water is growing at 4.5% a year and consumption is expected to increase by 40% a year over the next 15 years, according to research by Makram Shakhshir at the University of Damascus.
The problem is particularly acute in urban areas such as Damascus, home to six million people, a third of the country’s population.
The growth of Damascus has impacted directly on the city’s water table as the capital expanded from 1,900 hectares in 1945 to 8,500 today. The nearby Ghuta Oasis, a prime source of water and arable land, has also shrunk, from 25,000 hectares to 10,000 hectares, and continues to lose some 200 hectares per annum as the city expands outwards.
The Barada water basin, located under Greater Damascus, has also retreated in the past 20 years, from 50 meters below ground to 200 meters. Some experts suggest this could this could drop to 400 meters in the next 20 years, exacerbated by some 87% of the 25,000 wells around Damascus being illegal, according to Francesca de Chatel, author of Water Sheikhs and Dam Builders. Furthermore, with Damascus’ ground water table shrinking, sewage is reportedly seeping in and contaminating the water below.
With greater demand and a rising population, Syria’s water problems are only likely to get worse, said Droubi. “Drought is a very big issue in the region and related to climate change, but no one knows to what extent. As for the future, the region will suffer from more drought and lowering precipitation - a 20% reduction in 50 years is one scenario,” he said.


Walking a fine line

To offset the crop reduction, Syria received 190,000 tons of wheat in aid from Abu Dhabi, and canceled a deal with Egypt to exchange 176,000 tons of wheat for rice. The government is also dipping into its estimated 4 to 5 million tons of wheat reserves to keep bread affordable as other food prices have risen by an average of 20% in the last six months, according to the World Food Programme.
“Rice went from 20 SYP ($0.40) to 120 SYP ($2.25) a kilo; olive oil has also risen in price, which we have for breakfast, lunch and dinner. People are hurting,” said Yassir Hamod, a storeowner in Damascus.
To counter rising prices, the government raised public salaries by 25% earlier this year, but with accommodation and energy costs also surging, it may be only a matter of time before people take to the streets to protest, as has occurred in 30 countries around the world over rising food costs.
“We have not seen real repercussions from the rise in prices,” said a political analyst with close ties to the Syrian government. “Maybe in February or March 2009 when people feel the repercussions of winter fuel costs coupled with food expenses, here is a test, so we may witness some disturbances but the crisis is not yet mature.”
Nevertheless, with so many issues converging at once, Syria is struggling to find the right balance between keeping the populace placated through cheap food and fuel - spending an estimated 15% of GDP on fuel subsidies alone - and implementing reforms that will phase out subsidies that have been a mainstay of the Baathist socialist system. Finance Minister Muhammad al-Hussein was quoted in April as saying removing bread subsidies is a “red line,” particularly as consumption of bread has increased as other staples have risen in price. But with the wheat crop half the level of domestic demand, Syria could use up much of its wheat reserves this year alone, forcing the country to buy on the international market, where prices have risen 83% over the past year. Such an outcome would have an immediate impact on Syria’s budget deficit, which was 10% of GDP last year. Furthermore, with Syria now a net importer of oil but with demand for oil rising as well as for electricity, up 5% in the first half of 2008, the budget deficit is expected to soar this year.
“It is a mounting crisis and measures are minimal compared to the extent of the crisis,” the analyst said. “The government doesn’t have a clear view on how to manipulate price rises and salaries, it is still very ad hoc and experimental. The government will support employees, but leave to the rule of the market the others,” he added.

Agricultural solutions

It is in agriculture that the biggest changes need to be made however, the biggest net user of water with some 45% of the sector irrigated, a figure hydrologists consider an inefficient usage of water. And with the state the sole buyer of wheat, barely, sugar beet, millet and cotton, the onus is on the government to reform.
“The debate in Syria is what priority agriculture should take,” said the analyst. “In principle, what is needed is a revision of the state plan for agriculture regarding the distribution of crops and harvests.”
The government has already embarked on a scheme to reduce cotton production to solely cater for local needs, particularly as cotton is highly water-intensive as well as accounting for nearly 25% of the total global insecticide market, a further cause of land and water degradation. However, Sukkar said agriculture is still operating along traditional lines as land reform has not been implemented.
“We are faced with constraints, such as land reform laws which put a ceiling on ownership and prevents mechanization of agriculture,” he said. “Law 10 of 1986 allowed joint public-private projects in agriculture, the government allocating 25% in land allocation and 75% private. It was meant to encourage commercial agriculture but it didn’t work, it was a failure,” Sukkar added.
In reforming other areas, such as reducing production of certain crops like tobacco and cotton, it will be a case of losing export dollars but at the same time helping to ensure water sources, said Droubi.
“I say that water policy should be more important than politics, as water decides economic development in the country, but this is lost in bureaucracy and the public sector is not at the right level,” Droubi said. “We need a technical revolution and support from developed countries, especially as the trouble in the region will impact on the Europe and the USA,” he added.
One solution put forward is for Syria to build desalinization plants. “It was discussed during the peace process and has good potential,” said the analyst. But with prices tags of $1.5 billion upwards for a facility, as well as the time needed for construction, the suggested solution for the short term is improved water usage, stopping leakages, and public awareness campaigns.
“One of the key issues is people are wasting water as there is not a culture of saving resources,” said Poul Gadegaard, Team Leader of the Syrian Enterprise Business Centre. “The government is more focused on petrol and diesel than water, but it should be the other way around. Water prices should rise as people need to learn to economize; I think this is a big, big problem.”


Hydropolitics

Syria’s water woes go beyond crops and potential social unrest to geopolitics. Hydropolitics is the proverbial 1000lb gorilla in the room that somehow gets overlooked amid the region’s ongoing political problems.
“Water should be a top priority now, we are not in the 1960s or ‘70s. We can see that the situation is dropping very fast, and there is no time to even think of a solution,” said Droubi. “Cooperation is needed on a regional level.”
Some progress has been made, with Syria, Turkey and Iraq earlier this year agreeing to establish an institute to find solutions to water and environmental issues between the three water-linked countries.
“Where political relations have had an impact on the water crisis is Turkey allowing more water through its dams to Syria,” said the analyst. But in rain starved southern Syria the issue is still a political one. The Israeli-occupied Golan Heights provide an estimated 30% of the Jewish state’s water, while the water basin connects to Syria, Western Jordan and Northern Israel. Access to the water of the Golan region will be pivotal in any peace discussions between Damascus and Israel, but Syria should not bank on gaining much water the analyst said, despite the Golan’s proximity to Damascus.
“Syria cannot expect big amounts of water to come from this area. I don’t think the Golan will add much political speaking – Syria should look for a solution elsewhere,” said the analyst.
Ultimately, unless a multi-pronged solution to Syria’s water woes is enacted – politically, socially and economically - the country could face rising socio-economic problems just as Syria is opening up to the world.

Graphs, charts and satellite images courtesy of the United States Department of Agriculture’s Foreign Agricultural Service. Photographs by Paul Cochrane.

Lebanon vs. Syria: The battle to be the region’s playground

Commentary – Executive magazine

Unlike the heady summer of 2006, this year’s season is hardly a memorable one. It was back to business as usual, and as the summer winds down and tourists pack their bags to head home, the tourism sectors of Lebanon and Syria are no doubt pleased there actually was a summer season.
That Lebanon needed a calm summer far more than Syria is a given, particularly following the July war and the ensuing 18-month political debacle. But Syria has also benefited from greater stability in Lebanon, especially when it comes to attracting tourists from the West, who have a tendency to lump the Levantine countries together and avoid the region if there is a crisis.
Both countries were therefore lucky that the May clashes and the resulting Doha Agreement happened when it did, giving ample time for tourists to plan a summer visit.
The big difference between Lebanon and Syria’s tourism sectors however is that Syria is beating Lebanon hands down when it comes to attracting tourists.
Earlier this year Syria made the sound decision to advertise in the Gulf - bar Saudi Arabia -and the county is resultantly chockablock with Khaliji (Gulf) tourists, reflected in the joke circulating around Damascus that if you want to get a taxi outside any of the major hotels you have to wear a white jellaba or otherwise you’ll never get a ride.
The other noticeable difference is that Syria is getting tour groups by the busload, sweating their way around Damascus’ old city and the country’s numerous historical sites. Indeed, sitting in the lounge area of a hamam after a rigorous scrub one sultry August afternoon, I was taken aback by a dozen South American tourists that swarmed in and started snapping away at everything in sight. My fellow hamam clientele also seemed a little bewildered, with a chap opposite me rolling his eyes. But as soon as all the ajnabi (foreign) tourists left, he then thrust a camera in the hands of a hamam attendant to take a photo of himself bedecked in towels, and then asked me to join him. Ahmed, as he introduced himself, was from Libya and marvelled at what Syria had to offer, regaling me with his trip around the country.
Lebanon on the other hand doesn’t seem to be doing much to attract tourists other than appealing to expatriate Lebanese to come home for the summer. True enough expat Lebanese spend a bundle when they are over here, as a trip any night of the week to Sky Bar and downtown shows, but Lebanese returnees with foreign passports aren’t exactly tourists, particularly as most stay with friends or family. And while Khalijis are back on the streets of Beirut, the tour groups are conspicuously absent. It is quite clear Lebanon needs to develop a tourism plan and start marketing the country globally.
After all, if tiny Dubai with just shopping malls and flashy hotels can attract 6.4 million tourists a year, then Lebanon can surely boost figures from an estimated 1.5 million, especially if a modicum of stability prevails.
Lebanon has much to offer, and has a clear advantage over Syria when it comes to quality accommodation, restaurants and services. That isn’t to say that Syria doesn’t have the latter, but the country is desperately short of hotel rooms, reflected in a supply gap of 2 million nights per year in the four to five-star range.
But while Lebanon has few plans to boost tourism numbers, Syria aims to turn the country into a prime tourism destination, with 377 investment projects underway worth some $3.3 billion and international chains clamoring to get in. Damascus has also offered three huge locations for tourism development that are expected to attract up to $15 billion in investment.
How successful Syria’s tourism developments have been so far is reflected in the stats, with tourism numbers surging from 2 million in 2004 to some 4.6 million last year, spending $2.8 billion and accounting for 14.5% of the country’s GDP. Of the tourist numbers, 73% were Arabs, a figure that has increased 15% since 2005, and some 500,000 were from Iran, predominantly coming on pilgrimage. As Faisal Najair, director of Damascus’ Tourism Department was quoted as saying: “We hope to make Syria a resort for all Arab and Gulf tourists.”
With such developments underway, Syria could soon surpass – if it hasn’t already – Lebanon as the preferred destination in the Levant for higher-end tourism and even tourism of the more dubious kind. According to reports, the number of super nightclubs in Damascus has soared in the last three years from 15 to 40.
It’s time Lebanon, for once, took a leaf from Syria’s book if it wants to remain the region’s playground, as well as give the economy a much need boost.

Drug Financing, Money Laundering and Corruption Abound in Afghanistan

The Pakistani side of the climb up to the Khyber Pass.
Photo by James Molliso, Wikipedia Commons

Money Laundering Bulletin July/Aug 2008

After the US-led invasion in 2001 to overthrow the Taliban, Afghanistan took some important steps to curb money laundering and terrorist financing. The continued conflict, the profit that impoverished farmers can earn from poppy cultivation and entrenched corruption have, however, rendered these developments largely ineffectual, says Paul Cochrane.
In 2004, Afghanistan enacted anti-money laundering (AML) and counter terrorist financing (CTF) law, which also set the parameters for a Financial Investigation Unit (FIU). But instability, coupled with Afghanistan being the world’s top opium supplier, has stymied these measures. Corruption is wide spread, the government has minimal control over much of the country, and borders are porous despite attempts by NATO to better regulate entry points. In addition, there are concerns such as those aired by the International Crisis Group when it told the US House Foreign Affairs Committee last October that “Afghanistan is in danger of becoming a failed state, in part because it is in danger of becoming a narco-state.”
Following the installation of the Islamic Republic of Afghanistan led by President Hamid Karzai, the state was reorganized under a new constitution, and by 2003 the Central Bank, Da Afghanistan Bank (DAB), was re-establishing relations with the international community. New licences were issued to commercial banks (currently 15 foreign and Afghan banks), and by late 2004 an AML and CTF legislative framework had been adopted designed to meet the recommendations of the Financial Action Task Force (FATF).
In 2006, Afghanistan became a member of the Asia Pacific Group (APG), and has observer status in the Eurasian Group. According to the APG Secretariat, the APG will carry out a country evaluation in late 2009. The Central Bank is also to establish a Financial Services Tribunal to review certain decisions and orders of the DAB.
The country’s AML law addresses criminalization of ML and TF, customer due diligence, international cooperation, extradition, and the freezing and confiscation of funds in addition to cross-border currency reporting. Transactions and cash transactions equal or exceeding 1,000,000 Afghani (US$19,890) have to be declared to the FIU, a semi-autonomous unit within DAB established in 2005, which has the legal authority to freeze assets for up to seven days.
According to the US State Department’s March 2008 International Narcotics Control Strategy (INCS) Report, the FIU receives approximately 10,000 large cash transaction reports from financial institutions each month, up from the 4,000 reports received and processed per month in 2006.
The FIU has over 140,000 large transaction reports currently stored in its database that can be searched using a number of criteria, while institutions have to keep records for at least 10 years.
AML examinations have been conducted at all commercial Afghan and foreign banks, up from half assessed last year.
There is reportedly growing awareness of AML requirements in banks, bolstered through DAB’s work with the recently created Afghan Bankers Association (ABA). The ABA has drawn up a “know your customer” (KYC) form that has been adopted by the sector and is providing seminars on identifying suspicious transactions. According to the INCS report, seven suspicious transaction reports were received in 2007 by the FIU, one of which was referred to law enforcement for investigation.
But despite such moves, commercial banks are confined to major cities, resulting in Afghanis relying on money dealers and the hawala system, an alternative remittance system (ARS) popular throughout Asia, Africa and the Middle East. There are over 300 hawaladars in Kabul, with some 100-300 additional dealers in each of the country’s 34 provinces. Hawaladars are supposed to be licensed by the DAB, and from September 2006, a new ARS regulation system was introduced to replace former regulations. The DAB has issued approximately 100 licences in Kabul, and this year embarked on a scheme to register hawaladars in other major cities.
But as the INCS report notes, “Given how widely used the hawala system is in Afghanistan, financial crimes undoubtedly occur through these entities.”
And therein lies the nub of the problem in curbing ML and TF in Afghanistan. Not just better regulating hawaladars, but enforcement of AML and CTF legislation in the face of corruption and the narcotics trade.
“The Afghan AML documents looks good, but it’s going to be really tough to make a dent on the endemic corruption and opium trade that permeates the economy in addition to border issues,” said John Solomon, a Central Asia specialist at World-Check, a British company that runs an intelligence database on financial risk.
According to the April 2008, UNODC Illicit Drug Trend Report, Afghanistan accounts for 93 percent of the global annual output of opium, utilizing 4 percent of the country’s farmland and involving 14 percent of the population. Warlords and the Taliban benefit directly and indirectly from the trade, said Solomon, issuing an usher tax on opium production of up to 20 percent, 15 percent on processing at laboratories, and 15 percent on transport. Furthermore, with such large amounts of money involved, there is suspicion that the opium trade is linked with the upper strata of the political establishment as well as law enforcement agencies.
“The Anti Narcotics chief, or police chief, gets an official salary of US$60 a month, and to land a job like that there are bidding wars reaching as high as US$100,000 for a six-month appointment, so clearly there must be bribes involved, and related to the opium trade,” said Solomon.
He added that there was anecdotal evidence that drug money is being laundered through purchasing real estate in Kabul, particularly in the upmarket and “surprisingly expensive” area of Sherpa.
But for more extensive ML related to opium, observers say the money and drugs flow out of the Central Asian countries to the North of Afghanistan, through neighbours Pakistan and Iran, and also via Dubai. Solomon added that there were reports that Ariana Afghan Airlines is being used to smuggle drugs and money.
To counter cross-border movements of people, weapons, money and cash, the NATO-led International Security Assistance Force in collaboration with the Afghan and Pakistan intelligence services embarked this year on the first of six joint intelligence centres to be built on either side of the Durand Line. But with borders of 3,435 miles, curbing illegal crossings will prove difficult.
“Most of the border is not policed or regulated in anyway, and there are loads of smuggling routes so this initiative will not solve the problem,” said Solomon.

Content Shift

Commentary – Executive magazine

A RECENT TRIP to London and Rome brought home how precarious the future of newspapers is in Europe, particularly in the capitals where commuters are inundated with free copies of tabloid newspapers.
Glancing around at fellow passengers on the London Underground, few were reading ‘normal’ newspapers while every other person was flicking through freebie Metro - which is to be found in most European capitals – or sister-paper London Lite.
Light these newspapers (if you can call them that) certainly are, all celebrity news orientated with a splash here and there of local news; it was as if Britain were in no way involved on the international stage, or in Iraq and Afghanistan.
The rise of these dailies have hit the national newspapers doubly hard, struggling as they are for advertising in the midst of an economic slowdown while trying to retain a readership in an era of immediate news. This has had a direct impact on the news the papers are producing, with newspapers jumping on the bandwagon of reduced hard news and foreign coverage in favor of the sensational and glamorous. All these factors thrown together have resulted in gloomy prospects for the industry.
Total sales of national newspapers in the UK are down 2% year on year, with broadsheets falling 3.4%, while the tabloid press has only dropped 1.2%. In the USA it is a similar story, with all newspapers reporting a drop in sales, bar a few exceptions, with total newspaper advertising, combining print and online revenues, falling 9.4% last year.
Less disheartening is the fact that there are still people around who want serious news, with The Financial Times’ circulation growing 2.1% while the Wall Street Journal’s circulation of 2.1 million copies has risen 0.4% over the past year.
Of concern however is that the increased commercialization and sensationalism of newspapers is leading to much larger papers, page wise, to give people supposed value for money – with some Sunday editions weighing in at nearly 2 kilos – but written by a near skeleton staff and almost devoid of original content. This has led to what Nick Davies, author of “Flat Earth News,” has called ‘churnalism’.
In a study Davies carried out with Cardiff University on the sources for articles in British newspapers over a two-week period, they found that 60% of stories in the more serious newspapers were wholly or mainly wire copy (i.e. Reuters, Associated Press or the UK’s Press Association) or from PR firms, 20% had clear elements of wire copy or PR, and 8% were from uncertain sources. That left only 12% of articles that were actually researched by journalists in person or over the phone - real journalism in other words.
But with Britain now having more PR people than journalists (47,800 vs. 45,000), it is perhaps no real surprise that PR is having an impact on a sector that is desperate for content while at the same time slashing their budgets for staff and expenses. Of further concern in our globalized world, and naturally for the Middle East, is that foreign coverage is on the decline. In 1970, for instance, CBS had three full-time correspondents in Rome alone, but by 2006, the entire US media, print and broadcast sector had only 141 foreign correspondents to cover the whole world.
While this is all bad news, particularly for newspaper journalists, it has meant that other media and entertainment outlets are picking up the slack.
For instance, a recent PricewaterhouseCoopers (PWC) survey of 15 global media markets, from online, TV, and newspaper advertising to theme park and cinema ticket sales, estimated that these markets were worth $1.6 trillion, and will be worth $2.2 trillion by 2012.
The ad battle between online publications and newspapers is where things will get the bloodiest though, with PWC predicting that by 2012, newspaper print ads will be worth $123 billion, only $3 billion more than online advertising, while newspaper ads and circulation is expected to rise from $186 billion last year to $208 billion. Notably, where newspaper circulation is dropping, in the US, UK and Europe, there is to be a rise in the emerging markets of China and India. So while new media will make inroads everywhere, old media may see an upturn in newer markets.
The question that plagues journalists and people that like to be kept well informed though is what kind of content these new publications will have as the battle between new and old media takes on epic proportions – heavy on quantity but not much quality appears to be the obvious conclusion.
Ultimately, what is likely to happen is that there will be an upswing in demand for specialized and niche publications catering to people’s specific business and personal interests, while general news becomes more marginalized, slotted in-between ‘churnalism’, saucy sex scandals and photo shoots of what celebs were wearing at some cocktail bash.