From Volume 6, Issue 33 of EIR Online, Published August 14, 2007
Asia News Digest

Asia's Poor Made Poorer by Globalization

Aug. 8 (EIRNS)—The Asian Development Bank's recently released annual statistical publication, Key Indicators 2007, points out that the globalization- and economic liberalization-led economic policies adopted by Asian nations since the early 1990s, have increased both absolute and relative inequality between the rich and poor, as well as internal violence. The report corroborates the observation made by Lyndon LaRouche years ago about the dangers posed by the economic models adopted by Beijing and New Delhi.

The difference in income between rich and poor has grown since the 1990s. By contrast, the economic developments, prior to the days of "globalization" and "economic liberalization" undertaken by two of Asia's newly industrialized economies, the Republic of Korea and Taiwan, had balanced growth which raised the standard of living of the poor.

In several cases, slow growth in rural incomes has resulted from weaknesses in public investments in rural infrastructure, and a policy environment that has kept private investment away. Meanwhile, growth in urban areas has been insufficient to absorb surplus labor from rural areas. Instead, new opportunities generated by urban growth in developing Asia have favored the highly-educated, further aggravating the earnings gap between rich and poor.

India, Myanmar Strengthen Infrastructure Ties

Aug. 8 (EIRNS)—India has offered Myanmar the immediate use of Sittwe port on the Andaman Sea as soon it becomes ready for navigational purposes, sources in India's Ministry of External Affairs confirmed today. The $120 million project envisages upgrading the port and a linked waterway to upper Myanmar, from which a road is to be built to connect India's northeastern state of Mizoram. The fresh offer was made after Myanmar expressed reservations over New Delhi's earlier proposal to develop the port and operate it for some time before transferring its ownership to Myanmar.

"The connectivity of the rest of India with northeast Asia would improve significantly if this project becomes a reality. Myanmar will benefit from additional revenues collected through goods going to India. It will also have a 225-kilometer-long navigable waterway in the bargain," said Minister of State for Commerce Jairam Ramesh.

India's interest in and involvement with Southeast Asia has been growing steadily over the past decade, and its concern for development of the Andaman basin has grown accordingly. In 2004, an agreement was signed in Yangon by the foreign ministers of India, Myanmar, and Thailand to develop transport linkages among the three countries. When complete, the 1,400-km road southern corridor of the Eurasian Land-Bridge will be a highway of friendship linking the peoples of South and Southeast Asia.

Mortgage-Backed Securities Woes Hit China

Aug. 7 (EIRNS)—The Bank of China will lose "several million dollars" on its investments in U.S. mortgage-backed securities (MBS), Zhu Min, vice president of the Bank of China, had to admit to the press at a conference in Beijing yesterday, Agence France Presse reported. The Bank of China is the nation's largest foreign-exchange bank. It has invested "several billion" U.S. dollars in mortgage-backed securities, Zhu Min said, but the losses would have "little impact," he claimed.

The Chinese purchases of these securities is just one aspect of efforts to pull more foreign financial flows into the U.S., as Bear Sterns and other investment banks are hit by the crash of the vast U.S. mortgage bubble. At stake is the value of the U.S. dollar, which China is trying to support.

The U.S. Department of the Treasury has just released a report saying that China was the largest investor for U.S. mortgage-backed securities over the last year. As of June 30, 2006, Chinese financial institutions had bought $107.5 billion worth of these securities, an increase from $3 billion in 2003. However, given China's vast foreign-exchange reserves of $1.33 trillion, the biggest portion of which are invested in U.S. Treasuries, that amount is relatively minor in comparison. It is also unknown what part of these securities are in the now totally worthless subprime mortgage market.

The Bush Administration is trying hard to "sell" China on buying more of this junk, without much success to date. On July 13, Alphonso Jackson, U.S. Secretary of Housing and Urban Development (HUD), arrived in Beijing as an MBS salesman. These securities "yield a higher rate of return than a traditional U.S. Treasury bond, with the same credit risk," Jackson claimed. He did not appear to get many buyers. On Chinese investments in the Government National Mortgage Association (Ginnie Mae), which are government-backed MBSs, Jackson said that HUD "have not been a major player in that area. They bought some from us, but not in great numbers." When he met People's Bank of China governor Zhou Xiaochuan, Zhou asked him about the risks of holding Fannie Mae or Freddie Mac securities, Jackson said.

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