Global Trends by Martin Khor

Monday 12 June 2006

An eventful week that was

Last week saw many significant events.  The number one Iraqi insurgent on the wanted last was killed in an air-strike, but few expect the violence to let up.  There was a spat between the United States and a United Nations top official.  And stock markets in developing countries were tumbling at the end of the week due to global trends.

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It was one of those weeks filled with significant events. 

Last Thursday it was announced that Iraq’s highest-profile insurgent, Abu Musab Zarqawi, had been killed in an American air-strike on a house he was in.

The death of the Al Qaeda leader was greeted with scarcely concealed glee by the coalition countries, for it was a bright spark of good news for them in an otherwise gloomy situation as Iraq has been fast descending down the spiral of sectarian violence in recent months.

Though Zarqawi’s death lifted the morale of the American and Iraqi administrations, few thought that the violence would be reduced.  On Saturday, 28 died in Baghdad from a bomb blast.

As the Wall Street Journal put it, the Sunni-Muslim dominated insurgency has led the Shite-controlled government to retaliate, at times using private militias, and this has broadened support for the insurgent groups beyond groups like Zarqawi’s.

“Meanwhile the government’s control over the country beyond the US-fortified zone where it works has weakened during six months of factional political wrangling,” said the Journal, adding that the US warned that violence could even increase if insurgents retaliate for Zarqawi’s death.

The American public’s demand for a quick withdrawal of US troops from Iraq will increase if the violence continues.

Meanwhile, the situation in Afghanistan also deteriorated when riots broke out in Kabul and buildings housing Western organisations were burnt after an American military vehicle ploughed into a crowd and killed six people.

The riots released pent up public resentment of the US troops (including their traffic behaviour), and of the continued foreign presence.

The recent news exposure of several incidents of the killing by American soldiers of innocent civilians (including children and women) in Iraq as well as Afghanistan has further damaged the image of the US.

The Israel-Palestine situation became explosive again at the end of the week as Israeli missiles killed many civilians in Gaza, causing fresh outrage.  

Last week also saw a major spat on the diplomatic front between the United States and a top United Nations official.

The UN deputy secretary general Mark Malloch-Brown made critical remarks on how the US administration was losing friends at the UN because of its uncooperative attitude, on how American citizens’ perceptions of the UN were distorted by some TV talk-show, and why the US should engage with the UN in better spirit.

The U.S. ambassador to the UN, John Bolton, responded with a blistering attack on both the UN and Malloch-Brown.  He said Malloch-Brown’s remarks had “very grave” consequences and asked UN secretary-general Kofi Annan to censure his deputy.

Kofi, to his credit, stood by his deputy and appealed for calm, saying, “Let’s put it behind us and move on.”

But the spat may be a preview of bigger battles to come.  The US has led a move that the UN Secretariat be authorized to spend only half of its annual budget, and the remainder will be released only if there are reforms to the liking of the developed countries.

By the end of this month the UN’s funds will run out unless fresh spending authorization is given. The developing countries see this is as financial blackmail, and oppose the threat of the powerful nations to cripple the UN unless it is prepared to dance to their tune.

As the end of June approaches, tensions are building, with the UN facing the possibility of closing some operations and retrenching some staff. 

Last week also saw a significant slump in the stock markets of many “emerging markets”, signaling the start of tough times ahead for portfolio investors in developing countries.

In the past year, many billions of dollars have flowed from abroad into the share markets of developing countries, fuelling a boom. 

But with interest rates rising in the US and some European countries, a worldwide downturn in equities is taking place.

Hardest hit are the developing countries.  In the past three years their share prices rose by almost 200% on average, according to an index for emerging markets.  But the index fell 21% from its high of 9 May to last Thursday.  On that day alone, share values tumbled by more than 3% in India, Taiwan, Indonesia and South Korea.

It looks like the world financial markets are behaving in a roller-coaster way again, with record capital inflows into developing countries when the future looked rosy, and sudden big shifts out when prospects look a little dimmer.

On a nicer note, the World Cup began as the week ended.  It will occupy the attention of soccer-mad millions even as the world may be swamped by weightier concerns in the weeks ahead.