Telkomsel and Nokia today announced their collaboration to offer the Nokia Messaging service, which will be commercially available to Telkomsel subscribers from 26 December 2009 onwards.

Telkomsel is the first operator in Indonesia to commercially launch this service which will allow users to enjoy easy access to mobile email on their Nokia (NOK) devices. Telkomsel is also the first operator worldwide to offer Nokia Messaging for Instant Messaging to prepaid consumers.

“As the best and leading mobile lifestyle and solutions provider in the region, we always aim to deliver the best service to all of our customers. We have demonstrated our strong commitment to offering innovative mobile email solutions and are proud to be the first to deliver Nokia Messaging to the Indonesia market and the first to provide prepaid charging for Nokia Messaging’s IM service to meet our consumers’ needs” said Rachel Goh, Telkomsel’s Vice President of Product Lifecycle Management.

“Offering easy set-up and access to several email accounts as well as Instant Messaging all on one device, Nokia Messaging has the potential to become as popular as SMS” said Bob McDougall, General Manager, Nokia Indonesia. “Today, we are pleased to announce Nokia Messaging together with Telkomsel, who will be joining other leading operators in Southeast Asia Pacific to offer this innovative service to their customers”

Nokia Messaging is an easy to set-up and easy to use push email service which allows user to mobilize up to ten personal email accounts on one device. Nokia Messaging supports all leading consumer email solutions, such as Gmail, Windows Live Hotmail and Yahoo! Mail as well as local email service providers. The user can read, send, smart forward, reply to emails, download, read and attach files directly on their mobile phone. Push email technology ensures fast delivery of email to the mobile phone as soon as the email arrives on the email server.Nokia Messaging also allows you to mobilize your IM accounts to enable users to chat with your friends conveniently.

Nokia Messaging service is supported on a wide range of Nokia devices, including the Nokia E71, Nokia E63 and Nokia E52. The service also comes on board in the new Nokia E72 and Nokia E75.

Aboriginals receive a greater say in Pilbara mining operations, as Rio Tinto awards iron ore contract that should see increased employment for indigenous Gurama natives.

Rio Tinto (RTP) has awarded a major new mining contract in its Pilbara iron ore operations to a joint venture between native title holders the Eastern Guruma and mining services company NRW.

The $200 million contract to build, mine and transport iron ore from Rio Tinto’s Western Turner Syncline deposit is the first significant mining joint venture for the Eastern Guruma people, and continues the comprehensive Rio Tinto commitment to indigenous contracting in the Pilbara region.

NRW and Eastern Guruma will build a haul road and truck the ore 15 kilometres to the Tom Price mine for processing and blending with other Pilbara Blend stocks. Required regulatory approvals are being finalised and production is expected to start in July 2010, delivering six million tonnes of high-grade (>60% Fe) iron ore per year.

The four-year contract has been designed to increase Eastern Guruma equity in the joint venture from 25 to 35 per cent as the group builds capacity in mining services. Mandated employment levels will rise each year giving an average of 27 per cent Aboriginal employment across the four-year contract. It also includes a $6 million component specifically for training the Eastern Guruma to develop stand-alone proficiency, and there is potential for the project to become a 50/50 JV.

Rio Tinto Iron Ore chief executive Sam Walsh said: “This is a great initiative. It enables a local Aboriginal contractor as part of the joint venture to develop and mine the Western Turner Syncline deposit. It will allow the Eastern Guruma people to develop capacity in mining services, and have increased participation in the resource development taking place on their country.”

“It is also an important production step for us. Western Turner Syncline will provide high-grade iron ore which will be processed and blended using existing infrastructure in Tom Price and, together with upgrades of rail and port capacity, will support an increase in our production capacity in the Pilbara to 230 million tonnes a year.”

In 2009 Rio Tinto will spend more than $110 million through indigenous contractors in the Pilbara, with nearly $50 million of that being directed through companies affiliated with the Pilbara Aboriginal Contractors Association.  A further $10.5 million will be spent on education and training initiatives.

“This new contract helps ensure the wealth from mining is shared among the traditional owner groups of the region. More importantly, it adds to the wealth of knowledge and experience we need to establish among indigenous businesses in the Pilbara to ensure sustainable, successful operations for years to come.”

Rio Tinto employs more than 650 Aboriginals in its iron ore business, making it the largest non-government employer of indigenous workers in the state, with a particular emphasis on attracting and retaining local people in the Pilbara.

“Rio Tinto considers indigenous participation the highest priority, and we willingly acknowledge this involves an educative component to our projects and operations. We have made it clear to all our aspiring partners and suppliers that, along with the highest safety standards and efficiency, a significant indigenous involvement is critical.”

“The Western Turner Syncline project is a major step in delivering on that commitment. There will be more.”

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Vietnam Mobile Telecom selects Alcatel-Lucent solution to enhance and expand Mobifone networks

Alcatel-Lucent (ALU) has been selected by Vietnam’s CMC Telecom Infrastructure Corporation to deliver its gigabit passive optical network (GPON) solution. CMC TI’s GPON project, the country’s first, will enable the delivery of advanced triple play services – including high-speed Internet, ICT services and interactive, high-definition television/video – to new residential developments and SMEs.

“CMC TI is determined to roll out high-speed broadband services in Vietnam, to propel both residential users and businesses into the digital age. GPON is the ideal technology to efficiently deliver bundled data, video and voice to focused potential users. We selected Alcatel-Lucent’s GPON solution as it provides the required scalability, quality-of-service and operational efficiency,” said Nguyen Duc Thanh, CMC TI CEO.

“Alcatel-Lucent has been active in Vietnam for more than 20 years, and has played a key role in supporting the development of the country’s telecoms infrastructure. This first GPON project in Vietnam is another example of that,” said Olivier Lauras, in charge of Alcatel-Lucent’s activities in Vietnam. “By means of our award-winning GPON solution, CMC TI will be able to address the country’s constantly increasing need for bandwidth and related availability of triple play services.”

Alcatel-Lucent will deploy its 7342 Intelligent Services Access Manager Fiber-to-the-User (ISAM FTTU), the company’s flagship GPON solution for the delivery of ultra-high-speed services to residential and business users. The GPON platform will be complemented by the Alcatel-Lucent 5520 Access Management System (AMS) – Alcatel-Lucent’s next-generation element management system that covers the entire ISAM product portfolio, encompassing DSL as well as fiber-based access.

Alcatel-Lucent’s solution also includes professional services in the areas of project management, network analysis, software integration, technical support and integration of third-party equipment and solutions.

Alcatel-Lucent is currently involved in more than 95 FTTH projects around the world – 80 of which are based on GPON technology.

In the wake of the recent global recession, many investors have looked to Asia to lead the way to recovery.

Emerging economies such as China and India have continued to expand at impressive pace, while Australia was recently one of the first developed markets to raise interest rates. But among these hot zones, Japan remains mired in an economic slump that is threatening to result in another “lost decade” for the world’s second largest economy. Many national stock markets have risen sharply in 2009, but Japanese benchmarks remain nearly flat, unable to gain any traction towards a return to growth.

Despite some hopeful signs – cautious optimism over corporate earnings and unemployment has sprung up – Japan has sunk back to deflation and stocks have been hammered by the yen’s strength relative to the U.S. dollar. Now, the Japanese government is preparing its third massive stimulus package of the year, planning to inject nearly $80 billion in a controversial effort to jump-start the sputtering economy.
Third Time A Charm?

The latest version of the stimulus plan would generate billions of dollars of fiscal spending, including environmental projects and efforts to promote earthquake-proofing of homes to boost the building market. Japan’s stock market has surged over the last week on hopes that the new plan would prove more effective than the first two cash injections this year.

The stimulus was expected to be approved last week, but has now been delayed by political disagreements. Although the plan as proposed includes nearly $80 billion of new spending, some believe that the amount should be more, and that going forward at current levels will result in failure. Although the Democratic Party of Japan won a historic victory in August, prime minister Yukio Hatoyama has been hesitant to overrule his junior coalition partners, including Shizuka Kamei, leader of the People’s New party and minister for financial services. Kamei has said that the government should spend whatever it takes to ensure a recovery.

Some analysts believe the delay of the stimulus reflects the weakness of the current governing alliance, perhaps signaling deeper problems in the Japanese economy in years ahead. Others believe that government efforts should be focused elsewhere, such as the oft-criticized corporate tax system. “Less than 30 percent of Japanese companies booked a profit for tax purposes last year — a figure that implies either that the majority of the economy makes no money at all, or that corporate tax evasion is rife at all levels of business,” writes Leo Lewis.
ETF Plays On Japan

For investors who believe Japan may make a push to catch up with the rest of the world, there are several exchange-traded products offering various levels of exposure to the market (see a complete list here). These ETFs include:

iShares S&P/TOPIX 150 Index Fund (ITF): Linked to the S&P Tokyo Stock Price Index, this ETF offers exposure to many of the largest publicly-traded Japanese companies. Although listed in Japan, ITF’s largest holdings are generally global companies that operate around the globe, such as Toyota , Honda , Mitsubishi , and Canon.

SPDR Russell/Nomura Small Cap Japan ETF (JSC): Whereas ITF features primarily mega-cap companies, JSC focuses on small cap Japanese equities. The index underlying this ETF has a median market capitalization of just $235 million. JSC offers impressive depth of exposure, investing in nearly 400 individual securities.

WisdomTree Japan Total Dividend Fund (DXJ): This ETF invests in dividend-paying companies in Japan, and determines allocations based on cash dividends paid. Many of the largest companies held by this fund are large, well-known companies, including Honda, Toyota, and Panasonic (PC).

Inverse ETF Options

For those who believe the thought of another stimulus package has given false hope to an economy that remains fundamentally weak, there are ways to bet against the Japanese markets through ETFs as well. The ProShares UltraShort MSCI Japan (EWV) seeks to deliver daily returns equal to -200% of the daily returns on the MSCI Japan Index.

Medical Tourism contributes more tha $1Bn to Thai economy

Brunei Darussalam is to ramp up medical research in an effort to combat the rise in lifestyle-related health problems in the Sultanate, while also looking to profit from the burgeoning health tourism industry.

In recent years, there has been a shift in the health-needs of Brunei Darussalam, with an increasing incidence of non-communicable diseases such as diabetes, cancer and obesity putting a strain on the state-funded system.

In order to better deal with these issues and to meet the strategic objectives of the nation’s vision of a healthy and productive community, there had to be an increased focus on research and development, the deputy minister of health, Dato Hj Hazair, told a seminar of medical and administrative professionals on October 29.

“Research and development will be incorporated into our internal process in the context of scaling up efforts to achieve our strategic themes, namely; a comprehensive health care system that emphasises service excellence, a nation that embraces and practices a healthy lifestyle; sustainability through resource optimisation, innovation and excellence; effective policies and regulations that ensure protection for all; transparent and proactive governance,” he said.

This commitment to stepping up medical research is one of the measures outlined in Brunei Darussalam’s latest health policy document, 2035 Health Vision and Strategy, launched by the Ministry of Health in July. One of the key elements of the policy paper focused on dealing with “obesity, cancer, heart diseases, diabetics, tobacco control, oral health, emerging and re-emerging infectious diseases and other preventable risk factors”.

To achieve this, the national health research agenda has to be very clear, said Dato Hj Hazair, as it plays a significant role in orienting investments and performance at the national level.

The need for further research and the developing of plans to combat non-communicable diseases was highlighted at a cardiology conference in Bandar Seri Begawan on November 8. According to Dr Hj Nazar Luqman, a cardiology specialist and the head of the Cardiology Department at the Raja Isteri Pengiran Anak Saleha (RIPAS), there has been a sharp rise in the number of cases of heart failure, due to lifestyle and Sultanate’s ageing population.

“There is ample evidence that hospitalisations for heart failure, the number of deaths associated with it and cost of treatment have significantly increased over the last few decades,” he said. “In Brunei Darussalam, some 30% of cardiology admissions in RIPAS Hospital are due to heart failure. Causes of heart failure like hypertension, diabetes, coronary artery disease and others are quite prevalent and the elderly population has doubled over the last decade.”

While lifestyle illnesses will continue to be a matter of concern for the Sultanate’s public health system, they could also prove to be a revenue earner, with plans in the pipeline to stake a claim for a slice of the international medical and wellness tourism market.

Medical tourism is fast becoming a booming niche segment in the health industry across the region, with countries such as Malaysia and Thailand leading the way in attracting foreigners. On average, Thailand hosts 1m health tourists a year, generating revenue of more than $1bn annually, while Malaysian officials are estimating that its medical facilities will treat up to 625,000 overseas visitors in 2010, almost double the total of 2008.

While Brunei Darussalam is not in a position to contemplate such numbers, by virtue of the small size of its domestic health sector, at least one of the country’s hospitals is looking to develop this niche. Private health service provider Jerudong Park Medical Centre (JPMC) is planning to promote the Sultanate as a medical tourism spot and the centre itself as an option for foreign patients.

According to Tan Seang Tak, JPMC’s general manager, Brunei Darussalam already has the necessary infrastructure to enter the health tourism market.

“Brunei Darussalam can be a very good destination for medical tourism because of good medical facilities available here,” Tan said in an interview with local media in mid-October.

The JPMC is now working with local travel agencies and hotels to offer full holiday and treatment packages to foreign visitors, combining fitness and leisure along with health care, said Tan.

JPMC already serves the foreign health sector, with some 5% of the centre’s revenue coming from overseas clients, mainly from nearby Singapore, Indonesia and Malaysia.

By promoting the concept of medical and wellness tourism, Brunei Darussalam would be able to further diversify its economy, utilise existing facilities and generate additional income, some of which could be devoted to help improve the health of the nation.

Indonesia’s IT industry could be in line for an increase in state support, with the government looking to boost funding for infrastructure while backing calls for greater assistance to the domestic software sector.

In late October, the newly appointed information and communications minister, Tifatul Sembiring, said more needed to be done to promote the development and use of domestic computer software. To accelerate this process, the minister said the distribution of local software products would be coordinated with other ministries in the future.

“We need extra efforts to boost the production of local software products,” said Tifatul. “This is, in turn, solely aimed at improving the quality of the nation’s human resources.”

By increasing the levels of local software, Indonesia could reduce its outlays on imported products, which total around $740m a year, he said.

Another to throw its weight behind strengthening the local information and communications technology (ICT) sector is the Indonesian Chamber of Commerce and Industry (KADIN). In mid-October, the organisation called for the setting up of a fund to provide finance to micro, small and medium-sized ICT players, with funding to come from taxes levied on the telecommunications sector.

It is not the first time that KADIN has proposed state support for the IT industry. Earlier this year, KADIN’s deputy chairman, Anindya Bakrie, said the government should consider putting in place tax incentives and make it easier for IT firms to gain access to credit.

“Currently, the tax on locally made IT products is higher than on the imported ones,” Anindya said. “The IT sector has a huge potential in Indonesia. Despite the lack of incentives and financing access, it’s been growing well in the country. It would grow much faster if the government just provided the incentives and wider access to the financing system.”

Though Anindya said many IT projects, particularly those of small and medium-sized companies, struggle to get financing support, the sector was expanding, with growth this year expected to reach 10%.

However, for Indonesia to get full benefits from a more robust IT industry, and in particular a stronger software segment, it will need to do more to combat software piracy. According to a study by the Business Software Alliance (BSA), the unauthorised copying and use of software in Indonesia is rampant.

Released in September, the BSA report said that 85% of all software in use in Indonesia was pirated, unchanged from the levels recorded in January last year. The report, entitled “Resilience Amid Turmoil: Benchmarking IT Industry Competitiveness 2009″, also lowered Indonesia’s IT competitiveness rating, with its ranking dropping one rung down the ladder to 59th out of the 66 countries assessed. In particular, Indonesia was rated poorly in the categories of IT infrastructure and its research and development environment.

Having thrown his weight behind supporting local research and development firms, Tifatul has also vowed to address Indonesia’s infrastructure shortfalls. Only days after coming to office in late October, the minister said 25,000 remote villages would be fully connected to the phone grid by the end of 2009, while also stepping up an existing programme to distribute computers to villages and smaller communities.

If carried through, such measures would improve IT access across Indonesia. Though penetration rates are high in built-up areas, in rural and more remote regions, internet connectivity levels are well below the national figure of around 11%.

With all but 3m of Indonesia’s estimated 25m internet users still having to rely on dial-up connections, there is a growing need to improve speed and access for net users, something the minister said will be made a priority.

Tifatul has also promised to increase the pace of implementing Indonesia’s e-government programme, giving more people greater access to state services online.

Not only would an enhanced e-government capacity improve the provision of services to the public, it would also reduce the opportunities for collusion, corruption and nepotism through bolstering accountability and transparency, he said.

In the future, all state officials should work under an online system so they would not receive money directly from the general public, he said on October 21 before being confirmed as minister.

As part of his drive to support his portfolio Tifatul has launched a new slogan, “Smooth Communications, Accurate Information”, which he said should be integrated into education programmes to raise awareness of technology.

It will take more than slogans and promises to strengthen Indonesia’s IT sector and lift its competitive ratings, though with the state having given a commitment to support the industry, and having identified what needs to be done, there are grounds for optimism.

Last week was a busy time in Papua New Guinea. On Tuesday the Treasurer presented the 2010 budget to Parliament, and as these things tend to do it had something for everyone, most notably a 7.5 billion Kina ($3.2 billion) increase in spending and no increase in taxes. Major beneficiaries were education and government employees, whose pension benefits rose.

The gap is to be funded by an expected rise in revenues from mineral royalties and taxes as the world economy recovers, and from the long-awaited natural gas boom. The agreement between ExxonMobil and the government on a $10-billion investment in a liquefied natural gas (LNG) project was signed earlier this month and the final project go-ahead will come on December 8, with construction expected to start before the New Year.  In a departure from its normal budget guidelines, which call for any windfall gains from higher mineral prices to be spent on major investment projects and to pay off public debt, this year’s budget allocated over 500 million Kina for additional “priority expenditures.” It’s uncertain how quickly the multiplier effects from the LNG investment will result in higher tax revenues for government, but it’s unlikely that it will happen within the next budget cycle.  Meanwhile, government plans to draw down its trust accounts in anticipation of the coming bonanza.

The Prime Minister declared Wednesday a public holiday for government employees to celebrate its delivery of the “Vision 2050” Plan to make PNG a “richer, safer, and healthier” country by 2040. The festivities began before dawn on Independence Hill with Boy Scouts and Girl Guides offering prayers, and continued with traditional dances and ceremonies interspersed with speeches. At around noon the festivities moved to the national stadium, where the plan itself was unveiled, accompanied by more speeches. There followed a feast of roast pig and beer, and the party continued well into the evening.

Prime Minister Sir Michael Somare called the Vision 2050 document  “a gift from the Government to the people,” and called on the public service to “rise to the occasion and the challenge, lift their game, and with a sense of patriotic spirit, carry out the work required to give full effect to the country’s fresh, long term, strategic development plan.” The Prime Minister went on to proclaim the day, November 18, 2009, “as the date we charted a destiny for our children, their children and generations to come,” and called the Vision 2050 the most significant instrument since adoption of the national constitution in 1975. “The vision is a beacon of fresh hope for our people now and for the generations to come” he said. “The PNG Vision 2050 maps out the future direction our country should take, reflecting the hopes and aspirations of our people.”

I have not read the document, though I understand it is based on seven “pillars” of development, of which government service delivery, wealth creation, and human capital development are said by government to be the most important. It is easy to be sceptical of vision statements. Late in the last decade and early in this one, “Vision 2020” statements were in vogue in many countries and PNG had one of its own, but with only 10 years remaining until 2020 new horizons must be found. At least PNG’s vision statement is brief: at 60 pages it is light reading compared to Afghanistan’s National Development Strategy, introduced in 2008, which weighs in at over 1,000 pages and contains several hundred “priority” actions that government must undertake for the vision to be realized.

But most local people I spoke with were dismissive of Vision 2050 and the hoopla surrounding it. “They should celebrate when it is implemented, not when it is introduced,” said one acquaintance. Letters to the Editors of the national newspapers were even harsher in their criticism. One writer pointed out that most of the goals in PNG’s Vision 2020 remained unachieved, and others stressed that it is easy for politicians to make vague pronouncements about a vision that will come to pass, if at all, after most of them are dead, but that it is much harder to do something concrete and specific about the problems the country faces today.

Personally, I found it most interesting that the Vision was described as a gift by government to the people. PNG in many ways remains a traditional society in which most benefits – land, wives, livestock, money – are given by a village or tribal chief to his subjects. Much of that system has been transferred with little friction into modern governance with its patronage based on tribal, clan, and family relationships. In this context it is understandable that the P.M. and his Ministers, in many ways equivalent to the chief and tribal elders, should consider the Vision and its promised benefits as largesse bestowed on a grateful people. The view that most good things flow from government is not unique to Papua New Guinea, and we can find more than a few traces of it in current-day America, but it is not a mindset that bodes well for the future of private business. Even as they stress the importance of the private sector to economic growth, few career politicians have any real understanding of private business. In Papua New Guinea, where most good things look as if they will come from an enormous joint venture between the government and ExxonMobil, with China’s state-owned Sinopec an important party to the deal, encouraging entrepreneurship may not be the most important preoccupation of government or the citizenry.

On Thursday most government offices remained empty. The senior officials were huddled in various budget-related meetings while most of the others slept off their hangovers, and then there was hardly any point coming into the office on Friday.

My week had started with promise, but quickly slid downhill. My team of consultants, accompanied by a couple of people from the Department of Commerce, flew on Sunday to Manus, PNG’s smallest province by population, which consists of one large island surrounded by hundreds of smaller ones, home to about 50,000 people. The province, known to geographers as the Admiralty Islands, lies in the Bismarck Sea north of the main island of New Guinea. From there it is a straight shot over several thousand miles of ocean to Japan.  Our project terms of reference call for us to evaluate Manus as one of several potential locations for a free trade zone.

American troops landed on Manus in 1944 and seized the island from the Japanese, whereupon it became the staging point for the northward island-hopping campaign that would have culminated in the invasion of mainland Japan had Truman not first dropped the atom bomb to end the war.  Douglas MacArthur spent time there, and at one point over a million servicemen occupied the island while more than a thousand ships were anchored in the harbor.  The base saw some use during the Vietnam War, but not much has happened since then. We visited the Lombrun Naval Base, about 20 miles along the coast from Lorengau town, the provincial capital. Nothing remains of the original jetties, but the 800-square kilometer site is dotted with hundreds of 65-year-old Quonset huts. In recent years the Australians built a new jetty, where two PNG Navy patrol boats were tied up, and a few hundred yards away a tugboat rode at anchor, its sole function to tow the monthly fuel tanker in and out of the harbor. In addition to the Quonset huts and the house where General MacArthur stayed, the U.S. bequeathed a 10,000-ton fuel depot and, on a nearby island, an airbase, which we did not get to see.

A few hundred yards in the opposite direction from the tugboat anchorage, the National Fisheries Authority recently built a fishing pier.  Manus is without doubt a very strategic location from which to stage an Asian war, but the national and provincial governments believe it is equally strategic as a hub for the South Pacific tuna fishery, which accounts for 70 percent of the world’s supply of bluefin tuna, much of it caught within PNG’s 200-mile exclusion zone. The fleet itself comes from everywhere: Japan, Taiwan, Spain, the Philippines. PNG charges royalties on the catch within its waters, but the tuna itself goes mainly to Thailand for processing and the boats either refuel and resupply on the high seas or put in to Guam or Manila.  If the base at Manus were declared a free trade zone it could offer cheap fuel to the fishing boats, and around that an entire resupply and repair industry could develop.

Or so the thinking goes.  The challenges are many. PNG has just raised the minimum hourly wage to nearly a dollar, and even the country’s most enthusiastic boosters admit that the work force is unproductive and uncompetitive, especially compared to places like the Philippines. This gap is likely to worsen as the LNG causes the Kina’s value to appreciate and as the citizens start to receive more generous cash transfers and subsidies from the national government. Manus has no port capable of accommodating container ships – the U.S. forces used front-opening landing vessels to discharge cargos – and it is far from most of the main Southeast Asian and Pacific shipping routes. The national government several years ago granted a Canadian-Australian company a monopoly on imports of refined petroleum products, and this company also operates the country’s only refinery. Fuel is not cheap. Finally, Manus is remote. Even if it had a proper port, the transport costs alone could make it uncompetitive with the likes of Guam or Manila. None of these problems is insurmountable, but the cost for government to fix them – it’s hard to imagine a private investor stepping up to the plate – would run into the hundreds of millions of dollars, a high price to create a few hundred jobs.

Lorengau, which from the sound of it was founded by the Germans when they were the colonial power, has nothing much to recommend it. There is a decent paved road from the airport, which turns into the main drag, along which there are the post office, the provincial government offices, a general wholesaler, a Chinese-owned supermarket, the Air Niugini office, a gas station, the Bank South Pacific office, the open-air market, a scuzzy-looking ice cream place, a public boat landing, and the Harbourside Hotel, where we stayed. That’s it. My room at the Harbourside was clean and harbored no vermin I could see, though management did thoughtfully provide a can of bug spray. Though it sits right on the water, a high chain link fence topped with barbed wire separates the grounds from the sea itself, apparently to keep out the lawless element. This doesn’t matter much anyway, since there are no real beaches and the hard coral bottom comes up almost to the high water line. The hotel bar was a sort of screened terrace with a dangerous-looking green carpet, overlooking the pool, which was filled to a depth of about two feet with slimy green water.

We arrived around noon on Sunday and after checking into the hotel and eating a quick lunch we visited the base. The plan was to meet a few government officials and members of the business community in the evening or the next morning before leaving on the early afternoon flight. The Governor was hosting a dinner that evening, but we met with him in the morning, and then held a quick conference with the “private sector,” at which the participants consisted exclusively of people from provincial government offices apart from the Chairman of the Manus Chamber of Commerce.  Having done our contractual duty with respect to Manus, we got into the hotel bus to go to the airport, but Air Niugini had other plans, cancelling the flight for mechanical reasons. This is no joke in a place served by only four scheduled flights a week, but assurance soon came that they would put on a flight the next day.

With nothing else to do, we set out to explore the town. My partner’s wife’s family hails from Manus, so there was a flock of family members hanging about their hotel room. As we stepped onto the streets of Lorengau Uncle Paul (pictured) appointed himself our guide.

Uncle Paul and friend

Paul himself is an interesting fellow, formerly with the traffic section of the National Police, who was sent to Australia for training and then served in various locations in PNG before taking early retirement and moving back to Manus to live on his pension.  Well-informed about the world, he lives contentedly in this backwater, and although he must own a pair of shoes I never saw him wearing any. He gladly accepted our invitation to drink beer and dine with us, but gave no sign he expected anything at all.

We visited the local market, in which fully half of the merchandise on sale was betel nut and the lime powder and wild mustard pods that are chewed with it. As for the rest, there were some sad-looking bananas, a few lonely pineapples, a large number of local vegetables I couldn’t identify, and stall after stall selling smoked or dried fish. Smoking and drying fish are the only ways to preserve it when there is no refrigeration, and varieties of it are common all over the world, but I couldn’t grasp why, in a seaside town where anyone can go out on the reef in a boat and catch or spear a fish, the people would eat this instead of fresh fish, of which I saw none in the market. The meat section was limited to a woman sitting behind a table on which were arrayed the dried carcasses of a tree dwelling rodent or marsupial about the size of a house cat – known as a cass-cass – whose long naked tails curled up behind them.

One of the tour’s highlights was a stop at the Chinese supermarket. The two tills in the store were manned by the owner and his wife, and what I took to be the couple’s two adolescent sons sat perched like vultures atop stacks of cardboard boxes flanking the store’s entrance, surveying the movements of every customer.  The Chinese are unpopular in PNG for many reasons, but their approach to customer relations may be one of them. The shelves were given over largely to tinned meat and fish. Pork-based lunch meats, corned beef, ox tongue, sardines, mackerel, tuna. SPAM, introduced by the armed forces in WWII, is well-known as one of America’s main contributions to the culture and lifestyle of the South Pacific. Hawaii consumes more of the stuff than any other state, but Hawaiian consumption is dwarfed by that of places like Samoa, Tonga, and Yap. In PNG, however, the original has been supplanted by a proliferation of local brands. In a place like Manus, if you don’t have your own boat to go fishing on the reef SPAM and its equivalents are cheaper than fresh fish.

Immediately following the Second World War the Allied troops departed from PNG and other South Pacific islands, leaving behind anything it was cheaper to abandon than ship home. Wrecked ships and Jeeps, Quonset huts, tires, cigarettes, matches, combat boots, and SPAM. An entire set of religious beliefs and practices, known as cargo cults, sprang up as the supplies ran out and the natives waited vainly for more cargo ships to arrive. Elaborate rituals developed to encourage the gods to send more cargo. These included building landing strips in the jungle for the cargo planes to land and lighting fires along the runways to guide the planes in, as well as performing military parade ground drills with abandoned weapons or sticks.

Most of my meetings in Manus had something of a cargo cult flavor, minus the ritual. “If it was militarily viable then it has to be commercially viable now,” was a frequent refrain. World War II is a constant memory even to those who were born long after the Vietnam War. People in Manus truly believe that they will once again see hundreds of ships riding to anchor in Lombrun Harbor and that jobs and cargo will again become plentiful. Most frightening, they look to my team of consultants to give them the key to that future. There may be things that the provincial and national governments can do to help Manus, but none of them are likely to involve massive infrastructure projects.  I may write something about these possibilities in a future post. But for now, managing those expectations is something close to a full-time job.

This past Thursday in the village of Tari in the Southern Highlands of Papua New Guinea a delegation of senior government ministers and members of Parliament were pelted with stones by an angry mob.

The police fired several shots in the air, which were met by a single shot from the crowd. No casualties were reported. The group was in Tari to hold a forum on the agreements, currently under discussion, for sharing of benefits between government and local landowners from a huge project that will take gas from the Southern Highlands, transport it by pipeline to the capital, Port Moresby, where it will be converted into liquefied natural gas and shipped to China, Japan, and other markets.

Universally referred to as “the LNG,” the project, led by ExxonMobil in partnership with several other companies and the government of Papua New Guinea, will cost an estimated $10 billion to develop, and will produce direct government revenues from royalties, taxes, and the government’s equity stake, of about $30 billion over the 30-year project life. This is a lot of money sloshing around in a country of 6.5 million people. Oil already accounts for a significant chunk of export revenues and there is another, even larger, gas project in the planning stages and several huge mining projects, which together are expected to at least quadruple the country’s GDP over the next 30 years or so.

Papua New Guinea, a country known to most people, if at all, as a land of jungles, cargo cults, and painted cannibals with bones through their noses, both differs from and corresponds to the stereotypes, as most places do.

This is not a travelogue, so I won’t go into detail, but PNG is a country where over 700 distinct languages are spoken, where some people do go around with their bodies painted and noses pierced, and where huge areas covered with jagged mountains and dense forest remain accessible only by jungle footpath. As for cannibalism and cargo cults, their past existence is well-documented but I’ve read and heard nothing about current practice.

The Tari villagers were upset that their area had been excluded from the mapping of development license areas, and feared they would be deprived of their fair share of the revenues. Thursday’s altercation in Tari presages what could become a conflict that expands in scope and intensity to engulf the entire country. The problems are compounded by Papua New Guinea’s system of customary land tenure, which covers over 97% of the national territory.

Communities are now allowed by law to form corporations, which hold the communal land and can enter into contracts with private companies and government agencies. These corporations, known as “landcos,” are in some ways an improvement over the traditional system, but many villagers fear – with reason – that a few insiders, possibly acting in cahoots with politicians, will misappropriate the funds meant to contribute to local development. Endemic corruption makes this more than just a theoretical possibility.

There is an equal risk that the people in these communities will spend all the money on drink and cars and shopping trips to Australia and will end up much worse off for the wealth they have frittered away. There are so many examples from around the world of both kinds of responses to a sudden surge in mineral wealth that there is a name for it: the resource curse. From Native Alaskans, reduced by oil revenues to drunkenness and domestic violence, to Sierra Leoneans who lost their lives or limbs to Charles Taylor’s mad pursuit of diamonds, the world is littered with failed or nearly failed states and communities that would have been far better off if their wealth had remained buried in the ground.

Even leaving aside the most apocalyptic scenarios, the resource curse, which often entails a rapid appreciation of the currency, often destroys most other sectors of the economy, making it impossible for them to export or compete against cheaper imports. Think of Nigeria, formerly a food exporter, which is only now, after 40 years neglect, trying to rebuild its agricultural base.

Apart from a handful of manual laborers, the LNG will employ few Papua New Guineans. The project will require more welders than there are in the entire country, most of whom have inadequate skills and training to do the job. The project is already sucking up most of the available labor in any case. Local businessmen say they lose workers every day, but how could they not? A truck driver who ordinarily would earn $1.25 an hour can make three or four times that much working for ExxonMobil.

To its credit, the national government is aware of all these risks and is determined to combat them. It is working on establishment of a sovereign wealth fund, modeled on those owned by the likes of Norway and Abu Dhabi, to preserve some of the wealth for future generations. It has worked hard to reach agreements with the landcos to ensure that they don’t feel left out of the bonanza, and it has plans to spend money intelligently to upgrade transport infrastructure, increase the supply of electricity, and improve education, training, sanitation, and health care. Senior officials have often expressed the conviction and determination that PNG will transform itself into something resembling Singapore. This may be a dream, but it is certainly possible for the country to follow the example of Botswana, a country that has used its mineral wealth to build a stable and relatively prosperous society.

To its advantage, Papua New Guinea is unlike many other resource-rich countries such as Botswana,  in that it has numerous other industries ripe for development. With hundreds of islands, pristine beaches, rugged mountains, coral reefs, unique ecosystems, and a profusion of unique cultures, the country could make as much money from tourism as it will from natural gas. From diving holidays to big game fishing to jungle trekking and cultural tourism, there is almost an infinity of experiences the country can offer.

But my flight last week from Port Moresby to Buka, in the Bougainville autonomous region (see picture) cost over $1,000 for the round trip (okay, I flew business class, but even in economy it would have cost around $600), similar to the cost of a return economy class fare from Australia, Hong Kong, or Singapore, the nearest international destinations. From Japan, the U.S. or Europe, you’d be doing well to get there and back for less than about $3,000. This means that a family of four, intending to visit, say, three different locations in PNG, would have spent a good $20,000 on airfares alone, before spending a nickel on hotels, meals, drinks, diving lessons, and souvenirs. This may decrease, as government improves airports and civil aviation and allows greater competition in the air. Right now, Qantas and Air Niugini have a virtual monopoly on flights both into and within the country, but at least one private airline has started operating and others could follow.

The Markham Valley in Morobe Province could potentially supply all of PNG with fresh produce and grains, as well as exporting to markets in East Asia and Australia. If Zimbabwe even now can export freshly-picked French beans to supermarkets in the U.K. and Kenya can supply cut flowers to the markets in Amsterdam and Dubai, there is no reason PNG could not do the same in its region. The region is also the source of most of PNG’s coffee, which has begun to develop a premium image in export markets. I have even bought PNG coffee at Trader Joe’s.

If Rwanda and Ethiopia can succeed at this, there is no reason PNG cannot. Projects to improve the Highlands Highway that runs through the valley and the airport and seaport at Lae, could unlock this potential, and a few intelligent irrigation and water management schemes could help, and there are plenty of indications the government and international donors are trying to make this happen. Even now, after a decade of armed separatist conflict and laborious reconstruction, Bougainville produces some of the world’s most coveted cocoa, which commands a premium price with European and Japanese confectioners. It’s not far-fetched to think we will soon see seven-dollar Bougainville-origin chocolate bars in Whole Foods, alongside similar products from Ecuador, Venezuela, and São Tomé.

F. Scott Fitzgerald’s novel This Side of Paradise, and the Rupert Brooke poem Tiara Tahiti from which he took his title, both concern coming of age, loss of innocence, and recognition of one’s own mortality. Both works contain ambivalence about this transformation and it is never entirely clear on which side of the divide paradise truly lies. It depends, of course, on which side of the divide you are standing. It is possible that Papua New Guineans thirty years hence will wake up with a massive hangover amidst the wreckage of what was once their beloved homeland, now strewn with wasted lives and expensive monuments to vanity and greed. It is equally possible that they will look back, if not from the vantage point of a Singapore-like high tech marvel, at least from a position of solid and sustainable prosperity and opportunity.

The choice is not entirely theirs: the global economy and geopolitics are a big part of the equation. But if Papua New Guineans and those who govern them can put aside clan and ethnic rivalry and keep personal greed within acceptable limits, I’d have to rate the chances of success pretty high.

The Philippines boasts one of the few banking sectors around the world to have evaded many of the consequences of the US-led financial turmoil.

Certainly much is owed to lessons learned in the form of strong monetary and fiscal policy reforms after the Asian financial crisis in 1997-98. Relatively conservative banking practices also played a significant role in sheltering the country’s finances during what has proven to be one of the most siginificant economic downturns in recent history.

The overall risk management framework of the banking industry has improved greatly, thanks to sensible banking supervision and monetary guidance. Reforms initiated by the country’s central bank, Bangko Sentral ng Pilipinas (BSP), have created solid fundamentals that are currently underpinning the banking sector today. The BSP’s adoption and implementation of Basel II in July 2007 was a significant step in ensuring that the Philippines’ banking sector is in line with international standards.

Sanjiv Vohra, the country officer of Citibank, told OBG, “There is certainly a correlation between the Asian countries that were impacted by the Asian crisis and those that have managed to limit the effects of the current financial turmoil. Those countries, such as the Philippines, that were affected in 1997-98 have generally been able to implement the necessary reforms to withstand the current crisis.”

In fact, today’s average capital adequacy ratios (CARs) among banks are pushing close to 15%, well above the international standard of 8%. Asset quality ratios also performed well in 2008, as non-performing loans (NPLs) fell below 5% of total assets last year.

Despite the solid progress made in the financial world, other sectors of the Philippine economy, particularly those heavily reliant on foreign demand, such as the manufacturing of semiconductors, have been caught up in the global economic slowdown. The decrease in activity in these sectors is expected to feed through to the banking sector.

Nevertheless, in recognition of its stability, especially within the financial arena, Moody’s Investors Service has upgraded the Philippines credit rating from B to Ba3 for the first time in over four years in late July. In a statement to the press Moody’s executive vice-president, Thomas Byrne, said, “The upgrade was prompted by the relatively high degree of resiliency exhibited by both the country’s financial system and external payments position in the face of the global financial and economic crises.”

Indeed, liquidity in the country has reached a new high as foreign currency reserves have peaked at $39.6bn, while some economies are suffering from declining foreign capital.

Headline inflation, which peaked just 12 months ago at 12.3%, dropped to a record low of 0.2% in July, bringing the average of the first seven months of 2009 to 4.3%, as increases in prices of commodities have slowed recently. The BSP predicts an annual inflation rate between 2.5% and 4.5% in 2009 and 3.5% and 5.5% in 2010.

The dramatic decrease in inflation over the past year has provided the BSP with adequate room for monetary policy easing. The crucial inter-bank lending rate is currently at an all-time low of 4%, having been decreased six times since December 2008.

Responding to questions from local press, the governor of the BSP, Armando Tetangco Jr, said, “We believe our current stance remains appropriate. Nevertheless, we are closely monitoring developments, particularly the firming of global demand to check for any price press build-ups. We will then make adjustments to our stance as needed.”

Perhaps one of the most positive signs of a return to substantial growth is the fact that foreign direct investment (FDI) in the Philippines, which dropped dramatically by 77% in 2008, has posted an 86% increase in the first seven months of 2009, reaching just over $1bn in FDI, according to the BSP. Tetangco later hinted at the emergence of some positive signals, stating, “The emerging signs of stabilisation of global financial markets and economic conditions are expected to encourage the gradual return of capital flows to Asia. With the ongoing realignment in risk perceptions, flows to emerging economies, particularly those with sound macroeconomic policy and good growth prospects, are expected to improve in the second half of 2009 and in 2010.”

Despite the current stability in the sector, some experts have observed a large number of relatively weak small and medium-sized banks in the industry. Consolidation within the sector has slowed due to the current economic climate and it is not likely to see any major movements within the top tier of the banking sector in the remainder of the year. The merger between Philippine National Bank and Allied Bank, which was due to take place in 2008, appears to have stalled again and likely won’t take place for another six to nine months. For its part the BSP has strongly encouraged mergers and acquisitions in an effort to strengthen efficiencies within the sector. Typically mergers are subject to regulatory penalties, which the Monetary Board has been willing to waive if the merging banks are able to prove substantial friction costs.

Although the financial industry of the Philippines remains strong, its overall economic performance continues to be called into question after posting a surprisingly low first quarter of just 0.4% growth. The slow economic growth of the country has created an air of caution among bankers as they have seen some adverse affects on profit margins. However, the financial stability of the country, combined with the resiliency of the economy will certainly bode well for the country in 2010.

The Asia-Pacific region will become a leader in the world’s aviation market in the next 20 years, forecast an executive officer of the Boeing company.

Asia-Pacific will lead the global aviation market with growing demand and become a new center of the world aviation market in the next two decades, according to Kenneth Yata, VP Business Development of Boeing (China) Co., Ltd.

As demand in Europe and the United States slows, the Asia-Pacific region will be a growing market for commercial airplanes in the coming two decades to fit increasing demand for tourism, passenger and freight transport, said Yata.

Passenger flow by air will increase by an average 6.5% per annum in the region for the next two two decades, surpassing the North American and European markets, said Yata.

Currently, Asia-Pacific accounts for 32% of the global air passenger market, the share is likely to rise to 41% by 2028, according to Boeing forecasts.

For Boeing, China will become the second largest market for commercial planes in the next two decades, with the country expected to buy an estimated $400 billion worth of commercial airplanes, or 3,700 units over the period.