OFW Filipino Heroes

Thursday, January 12, 2012

Philippines, Peru among emerging-economy stars by 2050: HSBC

LONDON: The Philippines and Peru will be among emerging economies that become much more prominent in the next few decades, helped by demographics and rising education standards, with the Philippines set to leapfrog 27 places to become the 16th largest economy by 2050, HSBC predicts.

The bank expects China to overtake the United States as the world's biggest economy by 2050, and says strong growth rates in other developing countries will help drive the global economy.

"Plenty of places in the world look set to deliver very strong rates of growth. But they are not in the developed world, which faces both structural and cyclical headwinds. They are in the emerging world," the bank said in its report 'The World in 2050'.

It based its forecasts on fundamentals such as current income per capita, rule of law, democracy, education levels and demographic change.

HSBC projects the Philippines economy is poised to grow by an average of 7 percent annually over the next 40 years, while Peru should average annual growth of 5.5 percent over the same period.

The sheer pace of population growth in countries such as Nigeria and Pakistan means that these economies will swell in size to be included among the 100 biggest economies even if their incomes on a per-capita basis remain low.

HSBC said lower scores for rule of law in Latin America constrained its per-capita income projections for the region though it noted that Brazil was making headway in this aspect.

"The losers are the small population, ageing economies of Europe," added the bank, which says the demographics in much of Europe underscores concerns about the debt problems faced by many of the continent's governments.

'COPY AND PASTE' If sufficiently open to modern technology, developing countries could enjoy many years of robust GDP growth

although they could struggle for growth drivers once they have adapted to technological advances, HSBC said.

"The initial years of development could be described as 'copy and paste' growth, as countries open themselves up and adapt to the world's existing technologies. Once the 'copy and paste' growth is complete ... many economies struggle and get stuck in what is often known as the middle-income trap."

"But many of the countries we are considering are still at such an extremely low level of development that there are years of this 'copy and paste' growth ahead," it added.

It was here that many of the pessimism about China was misplaced, the bank argued.

"One of the most commonly cited reasons for concern about China is the high rate of investment as a percentage of GDP ...(But) we believe the strong rate of investment is entirely justified - providing China with much needed basic infrastructure," it said.

The bank said high levels of education in central and eastern Europe meant that the region could enjoy strong income per capita growth in the coming years before weak demographics eventually sap economic growth.

"While education rates are similar (to the West), the average income per capita in the central and Eastern Europe block is just one fifth that of the developed world. For this reason ... economies have great scope to catch up in income per capita," it said.

"Some of the smaller Eastern European countries - Romania, the Czech Republic and Serbia - (should) all do extremely well, particularly in the coming decade, before demographics prove to be more of a drag."

Source: From the Economic Times

Wednesday, January 11, 2012

Bright economic prospects kept boosting shares in the Philippines

Investors' optimism on the Philippines economy continue to send share prices climbing on Tuesday to a new record high of 4,591.26 before tapering off by the final bell.

The bellwether Philippine Stock Exchange index nevertheless ended the session just below record at 4,561.08, up by 0.42 percent or 19.48 points. The broader all-share index added 0.4 percent or 12.38 points to 3,106.43.

Trading volume reached 3.45 billion shares worth 6.25 billion ($142.36 million) with 100 stocks advancing, 57 declining and 42 unchanged.

Of the six counters, only the mining and oil sector bucked the trend and succumbed to profit taking.

Brokerage DBP-Daiwa Securities, Inc. said investors remain bullish on the economy given expectations of lowered rates to support business growth.

"The continued easing of the country's inflation rate provides enough justification for a possible policy rate cut by the central bank in order to spur economic growth and alongside the planned rollout of government infrastructure projects," the brokerage said.

DBP-Daiwa Securities said lower interest rates are supportive of the banks 'lending business as cost of borrowing would relatively be cheap.

This, it said, is the key reason as for the strong stock performance of the major banking stocks at the start of this year.

In fact, the country's top three banks, Banco de Oro Unibank, Inc. (BDO), the Bank of the Philippine Islands and Metropolitan Bank and Trust Co. were Monday's top gainers.

The brokerage also noted that there was a strong value turnover among these issues signaling the "incessant appetite for these high beta counters."

Also, equities across the globe were trading higher.

Dow Jones industrial average index finished Monday's session with a gain of 32.77 points. Neighboring Asian stock markets also traded positively today.

Stocks in the 30-company index were mostly up. Although investors booked their BDO gains, the two other banks continue their upward trek.

In other corporate news, port operator International Container Terminal Services Inc. is eyeing $150 million from an overseas debt sale to finance new projects for 2012.

ICTSI said proceeds from the offer will be used to develop greenfield projects, potential acquisitions and general corporate purposes.

Philippines' economic outlook: indicators support PHL economic growth

The economy will grow by 5 percent to 6 percent this year on government spending, consumer demand and overseas Filipino workers' (OFW) remittances, First Metro Investment Corp. (FMIC) said in a briefing Tuesday on Philippine economic outlook.

FMIC, a unit of Metrobank Group, is "cautiously optimistic" about the Philippine economy, noting current indicators point to robust investment inflows, strong market appetite, lower borrowing cost, ample liquidity and faster capacity to pay debt.

"The outlook for 2012 is very positive," said Francisco Sebastian, FMIC chair. "The country is in very good shape with its macro-economic fundamentals still intact."

Public debt is lower, inflation has eased and government remains serious with its fiscal and reform measures, he said.

However, threats like economic slowdown in China, a protracted debt crisis in the European Union and a weakening of commodities market remain, FMIC noted.

Also, the country is facing the La Niña weather phenomenon until February and that may weaken agriculture output.

Roberto Juanchito Dispo, FMIC president, said the economy will level up this year in terms of macro-economic fundamentals and capital markets.

'De facto upgraded'

Despite the US and European crises, OFW remittances will grow by 5 percent to 7 percent and inflation will stay within 3.5 percent to 3.7 percent because of stable crude oil prices, Dispo noted.

Exports are will also recover from a negative 4.3 percent to 5.7 percent growth while imports will increase by 10 percent, according to the FMIC president.

FMIC sees the peso-dollar exchange rate slip in favor of the US currency at 43:$1 to 45:$1 as the US recovers and outperforms Japan and Europe.

The equities market is likely to perform better, with the Philippine Stock Exchange index hitting 5,000 by year's end because of low interest rates, slower inflation and a credit rating upgrade, according to the Metrobank Group unit.

Growth drivers will include consumer spending, investments in tourism sector, and infrastructure development under the Aquino administration's public-private partnership program.

Monetary policy will relax the first quarter and stay relatively stable the rest of the year.

As such government securities will have relatively low rates, including 3 percent for 91-day Treasury bills, 4.75 percent for 5-year and 10-year notes and bonds, and 6 percent for 25-year notes.

With this outlook, the Philippines is "de facto upgraded" with both onshore and offshore markets already pricing the country's debt instruments at investment grade levels, said.

He cited the sale of $1.5-billion, 25-year global bonds last week at a yield of 5 percent.

Last year, Fitch Ratings raised the country's long-term foreign currency bond to BB+ from BB or a notch below investment grade. Moody's Investors Service also upgraded Philippine currency bonds to Ba2 from Ba3.

Higher credit ratings lower the price of a nation's debt and allow governments to easily borrow for infrastructure projects, and an investment grade attracts global institutional investors.

Monday, January 9, 2012

US-China rivalry behind fresh corruption charges in the Philippines

By Joseph Santolan

9 January 2012

Graft and corruption charges were filed against former Philippine President Gloria Macapagal Arroyo on December 28. The charges stem from a scandal that erupted in 2007 over the alleged rigging of bids for the construction of a national broadband network (NBN) on behalf of a Chinese corporation, Zhongxing Telecommunication Equipment (ZTE). This is the second set of charges filed by President Aquino's administration against Arroyo and clearly reveals what lies behind Aquino's political battle against the former president: the geopolitical struggle between China and the United States in the region.

Arroyo is currently under arrest in the Philippine Veterans Memorial Medical Center on charges that she committed electoral fraud during the 2007 senatorial elections on behalf of candidates from her Lakas-Kampi-CMD party. Electoral fraud is a charge that precludes the possibility of posting bail, and was thus the first case filed by the Aquino administration in a rush to prevent Arroyo from leaving the country.

The electoral fraud case that the government has filed against Arroyo is threadbare, built on the testimony of a single witness. Norie Unas, a former provincial administrator from the southern province of Maguindanao, has sworn that he overheard Arroyo issue orders to engage in cheating in the 2007 election. No evidence beyond this claim has been presented.

In 2009, the political clan of the Ampatuan family massacred 59 people, 34 of them journalists, in one of the bloodiest acts of electoral violence in the Philippines in years. Unas, the Aquino administration's sole witness, has been repeatedly accused by witnesses in the Ampatuan trial of not only being party to planning the massacre but of having ordered the backhoe that was being used to bury the bodies in a mass grave. It is widely speculated that Unas cut a deal with the Aquino administration to testify against Arroyo in return for immunity in the Ampatuan case.

There is a wealth of evidence that Arroyo cheated in the 2004 presidential election. Presenting a case against her for this, however, would expose the entire corrupt political system in the Philippines, implicating both her and her rivals. Aquino, a congressman in 2005 when the election fraud scandal broke, defended Arroyo, then an ally, against charges that she rigged the election.

The political blitzkrieg now being carried out against Arroyo is at its base not about corruption or poll fraud. It is about the shift that occurred during her administration, reorienting the Philippines' economic and political ties away from the United States and toward China.

In 2007, the Arroyo administration proposed to construct a national broadband network connecting all Philippine government offices and was soliciting bids from private contractors for the construction. Three corporations bid: ZTE, a Chinese state corporation; Amsterdam Holdings, a local start up backed by Chinese firm Huawei Tech; and the US telecommunications company Arescom. Arescom significantly underbid both rival offers.

The US ambassador sent a letter to Arroyo urging fair and transparent consideration of all proposals. Arroyo favored the more expensive ZTE bid over its rivals. The head of Amsterdam Holdings, son of the long-time speaker of the House of Representatives, cried foul. Accusations emerged of bribery and secret deals cut during golf games. The bid from Arescom was entirely left out of the Philippine press.

Lurking behind the sordid mess of who said what and to whom is a simple fact: Arroyo gave a massive infrastructural contract to a Chinese state corporation over a rival bid from a US firm.

This NBN-ZTE deal, as it became known, was part of a trend. In the same year, the lucrative contract for the operation of the Philippine power transmission grid, TransCo, was given to the China State Grid over a rival bid from San Miguel Corporation. Thirty five percent of the San Miguel Corporation bid of $US3.905 billion came from the US-based Texas Pacific Group—now TPG Capital—one of the world's largest private equity firms, specializing in leveraged buyouts.

Leading the TPG bid was Ernest Bower, who, according to WikiLeaks cable 07Manila3966, met with US Ambassador to the Philippines Kristie Kenney to discuss the widespread rumors of corruption on the part of the Arroyo administration in the TransCo bidding. The cable concluded, "It is unlikely that we will ever know whether collusion took place in this bidding, or whether there were other irregularities. There is a consensus among Filipinos that Congress will get its share when the franchise comes before it." Bower is now head of the Southeast Asia section of the Center for Strategic and International Studies (CSIS), an important think tank behind the Obama administration's "pivot" to Asia and aggressive imperialist maneuvers against China.

Other substantial contracts were bid out to Chinese corporations, including the construction of a 90-kilometer railway, Northrail, in late 2004, at the time one of the largest Chinese-funded projects in Southeast Asia.

Aquino has been consolidating political power against his rival Arroyo for the past year. At every turn he has had the support of Washington. US diplomatic attaches supplied his administration with evidence of corruption on the part of high-ranking military officials beholden to Arroyo. The day Aquino announced that he would be prosecuting Arroyo for corruption; US Pacific Commander Admiral Robert Willard visited him and promised to ensure additional US military supplies in the mounting tensions with China over the South China Sea. The day Aquino prevented Arroyo from leaving the country, though she had not yet been charged with any crime—a clear violation of the Philippine constitution—Hillary Clinton visited Manila. She praised Aquino, offered additional US economic aid and promised that US would supply the Philippines with a second warship.

Each new step in the prosecution of Arroyo has been spearheaded by the various groups of the Philippine 'left.' Bayan Muna, the largest party-list organization with ties to the Maoist Communist Party of the Philippines, filed the NBN-ZTE case charges against Arroyo. Bayan Muna representative Neri Colmenares indicated clearly the direction that further prosecution of Arroyo would take in a message sent to the press on December 29. He called on the Aquino administration to turn a microscope on any deal that "China is involved in, including the Northrail project, for possible anomalies."

The Aquino administration's prosecution of Arroyo serves the interests of Washington in its increasingly tense confrontation with China. The filing of the NBN-ZTE case is simply the most transparent evidence yet of this.

See more in World Socialist Website

Sunday, January 8, 2012

China's Warship Intruded Philippines Sabina Shoal - December 2011 - Gains another Protest

Photographed through the window of a closed aircraft, an aerial view shows Pag-asa Island, part of the disputed Spratly group of islands, in the South China Sea located off the coast of western Philippines on Wednesday July 20, 2011. (AP Photo/Rolex Dela Pena, Pool)

Philippines accuses China of maritime intrusions in December before Christmas

MANILA, Philippines — The Philippines has protested to China over three Chinese vessels that intruded into its waters last month, in the latest flaring of tensions over disputed West Philippines Sea (South China Sea) regions.

The Philippines accused China of intruding into its "maritime jurisdiction" after three Chinese ships were spotted last month in disputed areas in the West Philippines Sea (South China Sea), the Department of Foreign Affairs said on Sunday.

China, the Philippines, Brunei, Malaysia, Vietnam and Taiwan have conflicting claims in the Spratlys, an area believed to contain huge deposits of oil and gas in the South China Sea

A Philippine foreign ministry statement said it had summoned the Chinese embassy's charge d'affaires on Thursday to convey "its serious concerns over recent actions of the People's Republic of China in the West Philippine Sea".

Manila refers to the South China Sea as West Philippine Sea to strengthen its claims on parts of the Spratlys. Philippine troops occupy nine islands and shoals in the Spratlys.

Citing reports from the defense and military establishments, the foreign ministry said two Chinese vessels and a Chinese navy warship were seen around Sabina shoal in the Spratlys on December 11 and 12, respectively.

Sabina shoal is around 124 nautical miles from the western island of Palawan and is within "Philippine sovereignty and maritime jurisdiction".

The Philippine government expressed its "serious concerns" to the Chinese Embassy after the three vessels, including a Chinese navy ship, were sighted near Sabina Shoal in the South China Sea on Dec. 11 and 12, Foreign Secretary Alberto del Rosario said Sunday.

In May 2011, Philippines protested China of intrusions into its territory, citing six instances, including one in March when two Chinese patrol boats tried to ram a survey ship.

The disputed ownership of oil-rich reefs and islands in the West Philippines Sea (South China Sea), through which $5 trillion in trade sails annually, is one of the biggest security threats in Asia.

"These intrusions of the Chinese are clear violations of the 2002 ASEAN-China Declaration on the Conduct of Parties (DOC) in the South China Sea as well as the provision of the United Nations Convention of the Law of the Sea (UNCLOS)," the foreign ministry said.

Regional military commander Lt. Gen. Juancho Sabban said a Philippine navy patrol ship and an air force plane kept watch from a distance until the Chinese vessels left the country's territorial waters.

The three vessels apparently came from the Chinese-occupied Mischief Reef in the disputed Spratly Islands then cruised into Philippine waters on their way back to China as part of a regular shifting of forces, he said.

"We were watching them. They did not drop anchor or unload construction materials and appeared to be just passing through," Sabban told The Associated Press.

The Chinese Embassy in Manila did not immediately respond to a request for comment.

In Beijing, Chinese Assistant Foreign Minister Liu Zhenmin told the official Xinhua News Agency that the situation in the South China Sea "is peaceful and stable." China will always opt for negotiations to peacefully resolve disputes on "some islands ... and the demarcation of parts of the sea," Liu said.

Claimants should set aside the disputes and pursue common development ahead of a solution, Liu said, reiterating that outside "forces" should not meddle in the conflicts. China has repeatedly warned the U.S. not to intervene in the disputes.

Del Rosario said the new Chinese intrusions violated a 2002 accord between China and the Association of Southeast Asian Nations that discourages claimant countries to the South China Sea's disputed Spratly Islands from taking aggressive steps that could ignite tension or confrontations.

China, the Philippines and four other claimants have long been locked in a tense dispute over potentially oil- and gas-rich West Philippines Sea (South China Sea) territories, including the Spratlys.

Many fear the region could be Asia's next flash point for conflict.

The Philippines and Vietnam separately accused Chinese vessels of repeatedly intruding into Spratlys areas under their control and sabotaging oil explorations in their regular territorial waters in the first six months of last year.

China denied the claims and reiterated its sovereignty over most of the South China Sea.

Amid the disputes, the Philippines turned to the United States, a defense-treaty ally, to strengthen its underfunded military, one of Asia's weakest. The Philippine navy relaunched an old U.S. Coast Guard cutter as its biggest warship last month to guard its waters near the Spratlys.

President Benigno Aquino III and other top Philippine officials plan to travel to the United States this year to seek two more ships and a squadron of F-16 jets, according to del Rosario.

Saturday, January 7, 2012

Philippines Military Billions Fund Mess, George Rabusa, AFP, Military

Former Armed Forces budget officer George Rabusa INQUIRER FILE PHOTO

On Jan. 27, 2011, retired Lt. Col. George Rabusa disclosed a multimillion fund scam in the military while testifying in the Senate blue ribbon committee's inquiry into the plea bargain between state prosecutors and former military comptroller Carlos Garcia.

Rabusa, who served as budget chief of the Office of the Armed Forces' Deputy Chief of Staff for Comptrollership from November 1999 until 2002, revealed how it had become a tradition for senior military officers to receive a pabaon (sendoff) in tens of millions of pesos.

Rabusa said that when Angelo Reyes retired as Armed Forces of the Philippines chief of staff in 2001, he received a total of P150 million from the AFP funds—broken down into a pabaon of "not less than" P50 million on his retirement, and the P5 million he received each month during his 20 months as the AFP chief of staff.

The whistle-blower also said that spurious transactions benefited former AFP Chief of Staff Efren Abu, and allowed former AFP Chiefs of Staff Diomedio Villanueva and Roy Cimatu to take home a total of P227.4 million and P110 million, respectively, by the time they retired.

In his testimony, Rabusa admitted that he himself had pocketed money from military funds and that he helped his boss, Garcia, "convert" almost P1 billion from 2001 to 2002 for distribution to ranking officers and other recipients outside the AFP.

Rabusa said the money came mainly from the annual military slush fund of P480 million, known as the provisions for command-directed activities, and allocations from the personnel services budget of the military.

Reyes denied the allegations against him and filed graft charges against Rabusa in the Office of the Ombudsman. Villanueva and Cimatu also vehemently denied the allegations.

Beset by controversy, Reyes committed suicide on February 8.

Slush fund

In a succeeding hearing, Rabusa said the AFP chiefs of staff as well as other officers also had a slush fund of P20 million for their personal and operational use. The fund was replenished by allocations skimmed off the salaries and operational expenses of military units.

Also brought up were the unexplained assets of former military comptroller Jacinto Ligot and his wife, Erlinda, in the country and in the United States.

The Senate hearings prompted the Bureau of Internal Revenue to file in the Department of Justice (DOJ) multimillion-peso tax evasion complaints against Garcia and Ligot, and their wives, in March.

Plunder complaints

In April, Rabusa filed plunder complaints against various military officials for their alleged involvement in the military fund scam. The main respondents were Abu, Villanueva and Cimatu, Ligot and Garcia.

Along with his complaint, Rabusa presented to the DOJ over 20 folders containing pieces of evidence, such as receipts, checks and other documents, to prove, he said, how money was misused during the tenures of Abu, Villanueva and Cimatu. Inquirer Research

China wants to takeover US Military Power - Control Japan & Philippines chain

U.S. CVN 78 Aircraft Carrier - USS Gerald R. Ford - First new class of nuclear-powered carriers. The Ship is designed to carry drones and launched figter planes more quickly.

The USS Gerald R. Ford was supposed to help secure another half century of American naval supremacy. The hulking aircraft carrier taking shape in a dry dock in Newport News, Va., is designed to carry a crew of 4,660 and a formidable arsenal of aircraft and weapons.

But an unforeseen problem cropped up between blueprint and expected delivery in 2015: China is building a new class of ballistic missiles designed to arc through the stratosphere and explode onto the deck of a U.S. carrier, killing sailors and crippling its flight deck.

Since 1945, the U.S. has ruled the waters of the western Pacific, thanks in large part to a fleet of 97,000-ton carriers—each one "4.5 acres of mobile, sovereign U.S. territory," as the Navy puts it. For nearly all of those years, China had little choice but to watch American vessels ply the waters off its coast with impunity.

Now China is engaged in a major military buildup. Part of its plan is to force U.S. carriers to stay farther away from its shores, Chinese military analysts say. So the U.S. is adjusting its own game plan. Without either nation saying so, both are quietly engaged in a tit-for-tat military-technology race. At stake is the balance of power in a corner of the seas that its growing rapidly in importance.

Pentagon officials are reluctant to talk publicly about potential conflict with China. Unlike the Soviet Union during the Cold War, Beijing isn't an explicit enemy. During a visit to China last month, Michele Flournoy, the U.S. undersecretary of defense for policy, told a top general in the People's Liberation Army that "the U.S. does not seek to contain China," and that "we do not view China as an adversary," she recalled in a later briefing.

Nevertheless, U.S. military officials often talk about preparing for a conflict in the Pacific—without mentioning who they might be fighting. The situation resembles a Harry Potter novel in which the characters refuse to utter the name of their adversary, says Andrew Krepinevich, president of the Center for Strategic and Budgetary Assessments, a think tank with close ties to the Pentagon. "You can't say China's a threat," he says. "You can't say China's a competitor."

China's state media has said its new missile, called the DF-21D, was built to strike a moving ship up to about 1,700 miles away. U.S. defense analysts say the missile is designed to come in at an angle too high for U.S. defenses against sea-skimming cruise missiles and too low for defenses against other ballistic missiles.

Even if U.S. systems were able to shoot down one or two, some experts say, China could overwhelm the defenses by targeting a carrier with several missiles at the same time.

As such, the new missile—China says it isn't currently deployed—could push U.S. carriers farther from Chinese shores, making it more difficult for American fighter jets to penetrate its airspace or to establish air superiority in a conflict near China's borders.

In response, the Navy is developing pilotless, long-range drone aircraft that could take off from aircraft carriers far out at sea and remain aloft longer than a human pilot could do safely. In addition, the Air Force wants a fleet of pilotless bombers capable of cruising over vast stretches of the Pacific.

The gamesmanship extends into cyberspace. U.S. officials worry that, in the event of a conflict, China would try to attack the satellite networks that control drones, as well as military networks within the U.S. The outcome of any conflict, they believe, could turn in part on who can jam the other's electronics or hack their computer networks more quickly and effectively.

Throughout history, control of the seas has been a prerequisite for any country that wants to be considered a world power. China's military buildup has included a significant naval expansion. China now has 29 submarines armed with antiship cruise missiles, compared with just eight in 2002, according to Rand Corp., another think tank with ties to the military. In August, China conducted a sea trial of its first aircraft carrier—a vessel that isn't yet fully operational.

At one time, military planners saw Taiwan as the main point of potential friction between China and the U.S. Today, there are more possible flash points. Tensions have grown between Japan and China over islands each nation claims in the East China Sea. Large quantities of oil and gas are believed to lie under the West Philippines Sea (South China Sea), and China, Vietnam, the Philippines and other nations have been asserting conflicting territorial claims on it. Last year, Vietnam claimed China had harassed one of its research vessels, and China demanded that Vietnam halt oil-exploration activities in disputed waters. The Philippines protested also against china for firing the Filipino fishermen in the waters under the Philippines Territory, China also harassed the PNOC – Philippines State Owned Exploration vessel conducting Survey in the Philippines Economic Zone and inside Philippines territory but china dismissed the protest of the Philippines and replied "We owned everything".

A few years ago, the U.S. military might have responded to any flare-up by sending one or more of its 11 aircraft carriers to calm allies and deter Beijing. Now, the People's Liberation Army, in additional to the missiles it has under development, has submarines capable of attacking the most visible instrument of U.S. military power.

"This is a rapidly emerging development," says Eric Heginbotham, who specializes in East Asian security at Rand. "As late as 1995 or 2000, the threat to carriers was really minimal. Now, it is fairly significant. There is a whole complex of new threats emerging."

Beijing's interest in developing anticarrier missiles is believed to date to the Taiwan Strait crisis of 1996. The Chinese government, hoping to dissuade voters in Taiwan from re-electing a president considered pro-independence, conducted a series of missile tests, firing weapons into the waters off the island. President Bill Clinton sent two carrier battle groups, signaling that Washington was ready to defend Taiwan—a strategic setback for China.

The Chinese military embarked on a military modernization effort designed to blunt U.S. power in the Pacific by developing what U.S. military strategists dubbed "anti-access, area denial" technologies.

"Warfare is about anti-access," said Adm. Gary Roughead, the recently retired U.S. chief of naval operations, last year. "You could go back and look at the Pacific campaigns in World War II, [when] the Japanese were trying to deny us access into the western Pacific."

In 2004, Chinese President Hu Jintao unveiled a new military doctrine calling for the armed forces to undertake "new historic missions" to safeguard China's "national interests." Chinese military officers and experts said those interests included securing international shipping lanes and access to foreign oil and safeguarding Chinese citizens working overseas.

At first, China's buildup was slow. Then some headline-grabbing advances set off alarms in Washington. In a 2007 test, China shot down one of its older weather satellites, demonstrating its ability to potentially destroy U.S. military satellites that enable warships and aircraft to communicate and to target bases on the Chinese mainland.

The Pentagon responded with a largely classified effort to protect U.S. satellites from weapons such as missiles or lasers. A year after China's antisatellite test, the U.S. demonstrated its own capabilities by blowing up a dead spy satellite with a modified ballistic-missile interceptor.

Last year, the arms race accelerated. In January, just hours before then U.S. Defense Secretary Robert Gates sat down with Chinese President Hu to mend frayed relations; China conducted the first test flight of a new, radar-evading fighter jet. The plane, called the J-20, might allow China to launch air attacks much farther afield—possibly as far as U.S. military bases in Japan and Guam.

The aircraft carrier China launched in August was built from a hull bought from Ukraine. The Pentagon expects China to begin working on its own version, which could become operational after 2015—not long after the USS Gerald R. Ford enters service.

American military planners are even more worried about the modernization of China's submarine fleet. The newer vessels can stay submerged longer and operate more quietly than China's earlier versions. In 2006, a Chinese sub appeared in the midst of a group of American ships, undetected until it rose to the surface.

Sizing up China's electronic-warfare capabilities is more difficult. China has invested heavily in cybertechnologies, and U.S. defense officials have said Chinese hackers, potentially working with some state support, have attacked American defense networks. China has repeatedly denied any state involvement.

China's technological advances have been accompanied by a shift in rhetoric by parts of its military. Hawkish Chinese military officers and analysts have long accused the U.S. of trying to contain China within the "first island chain" that includes Japan and the Philippines, both of which have mutual defense treaties with the U.S., and Taiwan, which the U.S. is bound by law to help defend. They now talk about pushing the U.S. back as far as Hawaii and enabling China's navy to operate freely in the western Pacific, the Indian Ocean and beyond.

"The U.S. has four major allies within the first island chain, and is trying to starve the Chinese dragon into a Chinese worm," Maj. Gen. Luo Yuan, one of China's most outspoken military commentators, told a conference in September.

China's beefed up military still is a long way from having the muscle to defeat the U.S. Navy head-to-head. For now, U.S. officials say, the Chinese strategy is to delay the arrival of U.S. military forces long enough to take control of contested islands or waters.

Publicly, Pentagon leaders such as Mr. Gates and Adm. Mike Mullen, former chairman of the Joint Chiefs of Staff, have said the U.S. would like to cultivate closer military-to-military ties with China.

Privately, China has been the focus of planning. In 2008, the U.S. military held a series of war games, called Pacific Vision, which tested its ability to counter a "near-peer competitor" in the Pacific. That phrase is widely understood within the military to be shorthand for China.

"My whole impetus was to look at the whole western Pacific," says retired Air Force Gen. Carrol "Howie" Chandler, who helped conduct the war games. "And it was no secret that the Chinese were making investments to overcome our advantages in the Pacific."

Those games tested the ability of the U.S. to exercise air power in the region, both from land bases and from aircraft carriers. People familiar with the exercises say they informed strategic thinking about potential conflict with China. A formal game plan, called AirSea Battle, now is in the works to develop better ways to fight in the Pacific and to counter China's new weapons, Pentagon officials say.

The Navy is developing new weapons for its aircraft carriers and new aircraft to fly off them. On the new Ford carrier, the catapult that launches jets off the deck will be electromagnetic, not steam-powered, allowing for quicker takeoffs.

The carrier-capable drones under development, which will allow U.S. carriers to be effective when farther offshore, are considered a breakthrough. Rear Adm. William Shannon, who heads the Navy's office for unmanned aircraft and strike weapons, compared the drone's debut flight last year to a pioneering flight by Eugene Ely, who made the first successful landing on a naval vessel in 1911. "I look at this demonstration flight…as ushering us into the second 100 years of naval aviation," he said.

The Air Force wants a longer-range bomber for use over the Pacific. Navy and Air Force fighter jets have relatively short ranges. Without midair refueling, today's carrier planes have an effective range of about 575 miles.

China's subs, fighter planes and guided missiles will likely force carriers to stay farther than that from its coast, U.S. military strategists say.

"The ability to operate from long distances will be fundamental to our future strategy in the Pacific," says Andrew Hoehn, a vice president at Rand. "You have to have a long-range bomber. In terms of Air Force priorities, I cannot think of a larger one."

The U.S. also is considering new land bases to disperse its forces throughout the region. President Barack Obama recently announced the U.S. would use new bases in Australia, including a major port in Darwin. Many of the bases aren't expected to have a permanent American presence, but in the event of a conflict, the U.S. would be able to base aircraft there.

In light of China's military advances and shrinking U.S. defense budgets, some U.S. military officers have begun wondering whether the time has come to rethink the nation's strategic reliance on aircraft carriers like the USS Ford. A successful attack on a carrier could jeopardize the lives of as many as 5,000 sailors—more than all the troops killed in action in Iraq.

"The Gerald R. Ford is just the first of her class," wrote Navy Captain Henry Hendrix and retired Marine Corps Lt. Col. Noel Williams in an article in the naval journal Proceedings last year. "She should also be the last."

Friday, January 6, 2012

US defense focus on China & Iran in the Spotlight

Friday's national Chinese newspapers examine the US defense review and its focus on China, as well as possible talk on Iran sanctions.

The Global Times runs multiple reports on the announcement made by US President Barack Obama which puts priority on countering attempts by China and Iran to block US power projection capabilities in the West Philippines Sea (South China Sea) and the Strait of Hormuz.

An academic quoted by the paper says such strategy is "very unfavorable to China", but the country should "stay calm and keep developing itself in the next decade".

At the same time, China Daily and Shanghai Morning Post report that US Treasury Secretary Timothy Geithner may discuss sanctions on Iran with Chinese leaders when he visit Beijing next week.

The Global Times warns in its editorial that future friendship demonstrated by Washington to Beijing "could only be obtained 'by force', but not 'coaxing' and 'begging'".

It further says the latest strategic adjustment by the US is a reminder of the importance of Iran to China "whether we like it or not", and China's society should not decide on how it should treat Iran based on US thinking.

In other diplomatic news, the People's Daily reports meetings between parliament speaker Wu Bangguo with the deputy speaker from the Vietnamese parliament, between Premier Wen Jiabao and Pakistani Chief of Army Staff Ashfaq Parvez Kayani, and between Politburo member Zhou Yongkang and Vietnamese Public Security Minister Tran Dai Quang.

And as the country is still in the throes of a hectic period of railway ticket booking for the Chinese New Year, Hong Kong's Ming Pao Daily News picks up a open letter by a migrant worker named Huang Qinghong.

Mr. Huang criticised the Railway Ministry for treating them unfairly by launching the online ticketing system, with the fact that most migrant workers do not know how to work computers being ignored.

People's Daily also publishes a commentary which suggests that the ministry should be more considerate, so as to encourage integration between migrant workers and the general urban population.

On the environment, various papers reports that the city of Beijing will finally release monitoring data on the PM2.5 particulates in the air - something that many netizens have been campaigning for.

China Daily says the local government in Tibet spent 3.2bn yuan ($507m; £327m) last year to turn the area into an "ecological security barrier". Measures include conservation of pastureland and wetland in the territory.

Beijing News also publishes a picture which shows a stretch of Xiangjiang River in the central city of Changsha completely dried up, and residents starting to grow vegetables on the riverbed.

USA will station warships in the Philippines & Singapore

The U.S. Navy said it would station several new coastal combat ships in Singapore and perhaps in the Philippines in coming years, moves likely to fuel China's fears of being encircled and pressured in the West Philippines Sea (South China Sea) dispute.

Regional defense analysts said the ships were small, but agreed the symbolism of the moves, which come after Washington announced it was increasing its engagement in Asia, would upset Beijing.

Last month the United States and Australia announced plans to deepen the U.S. military presence in the Asia-Pacific region, with 2,500 U.S. Marines operating out of a de facto base in Darwin in northern Australia.

In coming years, the U.S. Navy will increasingly focus on the strategic "maritime crossroads" of the Asia-Pacific region, Chief of Naval Operations Admiral Jonathan Greenert wrote in the December issue of Proceedings, published by the U.S. Naval Institute.

He said the navy planned to "station several of our newest littoral combat ships at Singapore's naval facility," in addition to the plans announced by President Barack Obama for marines to be based in Darwin from next year.

"This will help the navy sustain its global forward posture with what may be a smaller number of ships and aircraft than today," he wrote.

Littoral combat ships are shallow draft vessels that operate in coastal waters and can counter coastal mines, quiet diesel submarines and small, fast, armed boats.

"If we put this into context, it's a fairly small scale of deployment and the combat ships are relatively small vessels," said Euan Graham, senior fellow in the Maritime Security Programme at Singapore's S. Rajaratnam School of International Studies.

"Encirclement is a phrase that does come up in Chinese debate about the U.S. strategy. They won't be happy about it, but there's nothing much that they can do to stop it."

Greenert wrote the ships would focus on the West Philippines Sea (South China Sea), conducting operations to counter piracy and trafficking, both of which are endemic in the area.

"Similarly, 2025 may see P-8A Poseidon aircraft or unmanned broad area maritime surveillance aerial vehicles periodically deploy to the Philippines or Thailand to help those nations with maritime domain awareness."

One source briefed on navy plans said there has also been discussion about stationing ships in the Philippines.

BIGGEST THREAT

The disputed ownership of the oil-rich reefs and islands in the West Philippines Sea (South China Sea) is one of the biggest security threats in Asia. The sea is claimed wholly or in part by China, Taiwan, the Philippines, Malaysia, Vietnam and Brunei.

The shortest route between the Pacific and Indian Oceans, it has some of the world's busiest shipping lanes. More than half the globe's oil tanker traffic passes through it.

Obama told Chinese Premier Wen Jiabao at a regional summit in November that the United States wanted to ensure the sea lanes were kept open and peaceful. Wen was described by U.S. officials as being "grouchy" later at the summit, when other Asian countries aligned with Washington.

The Chinese premier said "outside forces" had no excuse to get involved in the complex maritime dispute, a veiled warning to the United States and other countries to keep out of the sensitive issue.

"A modest marine presence in Australia - 2,500 marines is not a large offensive force by any means - and ships in Singapore do not mean it's all about China," Paul Dibb, the head of the Strategic and Defense Studies Centre at the Australian National University, told Reuters.

"But having said that, China is being increasingly assertive on the high seas. So while I don't see the U.S. as encircling China, it would be silly to say China wasn't part of it."

CLOSELY WATCHED

These developments on the littoral combat ships (LCS) are being closely watched by Lockheed Martin Corp, Australia's Austal, General Dynamics Corp and other arms makers that are building two models of the new warships for the U.S. Navy, and hope to sell them to other countries in coming years.

"Because we will probably not be able to sustain the financial and diplomatic cost of new main operating bases abroad, the fleet of 2025 will rely more on host-nation ports and other facilities where our ships, aircraft, and crews can refuel, rest, resupply, and repair while deployed," Greenert wrote in the naval magazine.

Ernie Bower, who is with the Centre for Strategic and International Studies, said the emerging strategy for Southeast Asia would be far different from the big U.S. bases established in Japan and South Korea in the past.

"We're exploring a new arrangement with a smaller footprint, that is mission-specific, and culturally and politically more palatable to countries," he said, adding it would be difficult for Washington to drum up much political support for big bases in the region. Forward-stationing versus permanent bases would also save the navy money, he said.

Greenert did not provide a timetable for the LCS stationing in Singapore.

In the Philippines, a U.S. ally that has clashed several times with China over the West Philippines Sea (South China Sea) dispute, the moves were welcomed.

"We're together in Asia Pacific and we face common security challenges," said defense spokesman Peter Paul Galvez.

"We see several security challenges where we actually need inter-operability and interplay exercises including disasters, threats of terrorism, freedom of navigation, piracy and human trafficking. We cannot deny that we need their assistance in that aspect."

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