January 7, 2009
Dossier From India Gives New Details of Mumbai Attacks
By SOMINI SENGUPTA
From www.nytimes.com
NEW DELHI — In the beginning, they were 32. A squad of suicide bombers raised in Pakistan, they were taught how to make bombs, withstand interrogation, and fight to their death.
They were whittled down to 10, and on a Saturday morning in November, they set sail from Karachi with coordinates plotted on a global positioning set. Once in Mumbai, they went on a killing spree, leaving 163 dead, all the while receiving detailed instructions and pep talks from their handlers across the border. Details of their gory mission have been compiled by Indian authorities and officially shared Monday with the Pakistani government. The New York Times has seen a copy of the dossier.
The information seems designed to achieve at least two Indian objectives. First, it seeks to demonstrate that the attackers were sent from Pakistan. It contains photographs of materials found on the fishing trawler, from a bottle of Mountain Dew soda packaged in Karachi to pistols that bore the markings of a gun manufacturer in Peshawar to a Pakistani-made matchbox, detergent powder, and shaving cream, called “Touchme.”
Second, it seeks to rally international support for the Indian effort to squeeze Pakistan. It contains a list of 26 foreigners killed in the attacks, chronicles India’s efforts in recent years to persuade Pakistan to investigate suspects involved in terror attacks inside India and shut down terror training camps inside Pakistani territory. In its final pages, it demands that Pakistan hand over “conspirators” to face trial in India and comply with its promise to stop terrorist groups from functioning inside its territory. It was shared this week with diplomats from friendly nations; one described it as “comprehensive,” another as “convincing.”
Although the dossier takes pains not to blame serving or former officials in Pakistan’s army or spy agency, Indian officials have consistently hinted at their complicity, at least in training the commando-style fighters who carried it out. On Tuesday, the Indian Prime Minister, Manmohan Singh, upped the ante but stopped short of making a direct accusation. “There is enough evidence to show that, given the sophistication and military precision of the attack, it must have had the support of some official agencies in Pakistan,” he said.
Pakistan on Tuesday rejected the Indian allegation. “Scoring points like this will only move us further away from focusing on the very real and present danger of regional and global terrorism,” Sherry Rehman, Pakistan’s Information Minister, said in a statement, according to the Associated Press. “It is our fond resolve to insure that non-state actors to do not use Pakistan’s soil to launch terrorist attack any where in the world.”
Pakistan has said it is examining the information dispatched by India.
The dossier, along with a power-point presentation made to diplomats here, narrates a journey of zeal, foibles and careful planning, one whose blow-by-blow media coverage was followed by handlers, believed to be in Pakistan, and used in turn to caution the gunmen on the ground about the movement of Indian security forces and motivate them to keep fighting.
“Everything is being recorded by the media. Inflict the maximum damage. Keep fighting. Don’t be taken alive,” says a caller to a gunman inside the Oberoi Hotel close to 4 a.m. on the first day of the three-day siege.
“Throw one of two grenades at the Navy and police teams, which are outside,” came one instruction to the gunmen inside the Taj Mahal hotel.
“Keep two magazines and three grenades aside and expend the rest of your ammunition,” went another set of instructions to the attackers inside Nariman House, which housed an Orthodox Jewish center, on the second evening, with a directive to “conclude” the operation the next morning.
The telephone conversations, selected transcripts of which have been compiled in the dossier, chronicle a steady exchange between the attackers in Mumbai and their counselors.
At the Taj, they are asked whether they have set the hotel on fire; one of the attackers says he is preparing a mattress for that purpose. At the Oberoi, one of them asks whether to spare women (“kill them,” comes the terse reply) and Muslims (he is told to release them and kill the rest, all the while keeping the phone line open so their interlocutors can hear the gunfire). At Nariman House, a residential building which housed a Jewish community center, they are told how to damage India’s standing with a key ally, Israel.
“Keep in mind that the hostages are of use only as long as you do not come under fire because of their safety,” a handler, identified only as Wassi, exhorts. “If you are still threatened, then don’t saddle yourself with the burden of the hostages. Immediately kill them.”
“Yes, we shall do accordingly,” the gunman inside Nariman House replies. “God willing.”
“If the hostages are killed, it will spoil relations between India and Israel,” Wassi continues.
According to the investigation, the 10 men boarded a small boat in Karachi at 8 a.m. on Nov. 22, sailed a short distance before boarding a bigger carrier called the Al-Husseini, believed to be owned by Zaki-ur-Rehman Lakhvi, a key operative of a banned Pakistan-based terrorist group called Lashkar-e-Taiba. The following day, the 10 men took over an Indian fishing trawler, called the MV Kuber, killed four of its crew members, spared its captain, Amar Singh Solanki, and sailed 550 nautical miles across the Arabian Sea.
Each man had two-hour watch duties on board. Each carried individual weapon packs: a Kalashnikov, a 9-millimeter pistol, ammunition, hand grenades and a bomb, weighing 8 kilograms and containing a military-grade explosive called RDX, steel ball bearings and a timer with instructions inscribed in Urdu.
By 4 p.m. on Nov. 26, the trawler approached the shores of Mumbai. The leader of the crew, identified by Indian investigators as Ismail Khan, 25, from a town called Dera Ismail Khan in the Northwest Frontier Province, contacted their handlers and received instructions. When darkness set in, they killed the captain of the trawler, Mr. Solanki. Then they boarded a motorized dinghy, the engine of which, Indian investigators say, bore marks from a Lahore-based importing company. They reached Mumbai at about 8:30 p.m., and in five teams of two, set upon their targets: the city’s busiest railway station known as Victoria Terminus, a tourist haunt called Café Leopold, the Jewish center in Nariman House, and two luxury hotels, the Taj and Oberoi.
They made one mistake. As they were leaving the fishing trawler, they told their handlers later on the phone, the waves were high and another boat was approaching, which they feared was an Indian Navy ship. They left behind Ismail Khan’s satellite phone; it was recovered by Indian investigators and its photograph included in the dossier. A GPS, also recovered from the trawler suggests they kept a safe distance of at least 60 kilometers from Indian shore until they got closer to Mumbai.
The gunmen seemed to use Indian mobile phones during the course of the attacks. Their counselors, 6 in all, used Voice-Over-Internet-Protocol numbers, including one from an American company called “Callphonex.”
The telephone calls stop, inexplicably, about 24 hours into the attacks.
The last call transcript in the dossier is at 10:26 p.m. on Nov. 27, between a gunman inside Nariman House and his interlocutor. “Brother you have to fight,” says the caller. “This is a matter of the prestige of Islam.”
By the morning of Nov. 29, Indian forces had killed 9 of the fighters.
And then, there was one: the sole survivor, Mohammed Ajmal Kasab, is in the custody of the Mumbai police. His interrogation turned up the most frightening detail. He was part of a cadre of 32 would-be suicide bombers, that was later joined by an additional three men. A team of six went to Indian-administered Kashmir, Mr. Kasab told his interrogators.
Ten were kept in isolation for more than three months, in a house near Karachi, until they were instructed to go to Mumbai.
The dossier says nothing about what happened to the remaining trainees. Whether or where they will strike next remains a mystery.
Richard A. Oppel Jr. contributed reporting from Islamabad, Pakistan.
Showing posts with label India. Show all posts
Showing posts with label India. Show all posts
Tuesday, January 6, 2009
Monday, December 22, 2008
The Anti Greenspan - Indian Central Banking
from www.nytimes.com
December 20, 2008
How India Avoided a Crisis
By JOE NOCERA
MUMBAI
“What has taken a number of us by surprise is the lack of adequate supervision and regulation,” Rana Kapoor was saying the other day. “This was despite the fact that Enron had happened and you passed Sarbanes-Oxley. We don’t understand it. Maybe it’s because we sit in a more controlled economy but ....” He smiled sweetly as his voice trailed off, as if to take the sting off his comments. But they stung nonetheless.
Mr. Kapoor is an Indian banker, a former longtime Bank of America executive with a Rutgers M.B.A. who, along with his business partner and brother-in-law, Ashok Kapur, was granted government permission four years ago to start a private bank, which they called Yes Bank. In the United States, Yes Bank is the kind of name a go-go banker might give to, say, a high-flying mortgage lender in the middle of a bubble. (You can even imagine the slogan: “Yes is part of our name!”) But Yes Bank is not exactly the Washington Mutual of India. One news release it hands out to reporters who come calling is an excerpt from a 2007 survey by The Financial Express: “#1 on Credit Quality amongst 56 Banks in India,” reads the headline.
I arrived in Mumbai three weeks after the terrorist attacks that killed 200 people — including, tragically, Yes Bank’s co-founder Mr. Kapur, who had served as the company’s nonexecutive chairman and was gunned down while having dinner at the Oberoi Hotel. (His wife and two dinner companions miraculously escaped.)
My hope in traveling to Mumbai was to learn about the current state of Indian business in the wake of both the credit crisis and the attacks. But in my first few days in this grand, sprawling, chaotic city, what I mainly heard, especially talking to bankers, was about America, not India. How could we have brought so much trouble on ourselves, and the rest of the world, by acting in such an obviously foolhardy manner? Didn’t we understand that you can’t lend money to people who lack the means to pay it back? The questions were asked with a sense of bewilderment — and an occasional hint of scorn. Like most Americans, I didn’t have any good answers. It was a bubble, I would respond with a sheepish shrug, as if that were an adequate explanation. It isn’t, of course.
“In India, we never had anything close to the subprime loan,” said Chandra Kochhar, the chief financial officer of India’s largest private bank, Icici. (A few days after I spoke to her, Ms. Kochhar was named the bank’s new chief executive, in a move that had long been anticipated.) “All lending to individuals is based on their income. That is a big difference between your banking system and ours.” She continued: “Indian banks are not levered like American banks. Capital ratios are 12 and 13 percent, instead of 7 or 8 percent. All those exotic structures like C.D.O. and securitizations are a very tiny part of our banking system. So a lot of the temptations didn’t exist.”
And when I went to see Deepak Parekh, the chief executive of HDFC, which was founded in 1977 as the country’s first specialized mortgage bank, practically the first words out of his mouth were these: “We don’t do interest-only or subprime loans. When the bubble was going on, we did not change any of our policies. We did not change any of our systems. We did not change our thought process. We never gave more money to a borrower because the value of the house had gone up. Citibank has a few home equity loans, but most banks in India don’t make those kinds of loans. Our nonperforming loans are less than 1 percent.”
Yet two years ago, the Indian real estate market — commercial and residential alike — was every bit as frothy as the American market. High-rises were being slapped up on spec. Housing developments were sprouting up everywhere. And there was plenty of money flowing into India, mainly from private equity and hedge funds, to fuel the commercial real estate bubble in particular. Goldman Sachs, Carlyle, Blackstone, Citibank — they were all here, throwing money at developers. So why did the Indian banks stay on the sidelines and avoid most of the pain that has been suffered by the big American banks?
Part of the reason is cultural. Indians are simply not as comfortable with credit as Americans. “A lot of Indians, when you push them, will say that if you spend more than you earn you will get in trouble,” an Indian consultant told me. “Americans spent more than they earned.”
Mr. Parekh said, “Savings are important. Joint families exist. When one son moves out, the family helps them. So you don’t borrow so much from the bank.” Even mortgage loans tend to have down payments in India that are a third of the purchase price, a far cry from the United States, where 20 percent is the new norm. (Let’s not even think about what they used to be.)
But there was also another factor, perhaps the most important of all. India had a bank regulator who was the anti-Greenspan. His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India. Seventy percent of the banking system in India is nationalized, so a strong regulator is critical, since any banking scandal amounts to a national political scandal as well. And in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time.
“He basically believed that if bankers were given the opportunity to sin, they would sin,” said one banker who asked not to be named because, well, there’s not much percentage in getting on the wrong side of the Reserve Bank of India. For all the bankers’ talk about their higher lending standards, the truth is that Mr. Reddy made them even more stringent during the bubble.
Unlike Alan Greenspan, who didn’t believe it was his job to even point out bubbles, much less try to deflate them, Mr. Reddy saw his job as making sure Indian banks did not get too caught up in the bubble mentality. About two years ago, he started sensing that real estate, in particular, had entered bubble territory. One of the first moves he made was to ban the use of bank loans for the purchase of raw land, which was skyrocketing. Only when the developer was about to commence building could the bank get involved — and then only to make construction loans. (Guess who wound up financing the land purchases? United States private equity and hedge funds, of course!)
Then, as securitizations and derivatives gained increasing prominence in the world’s financial system, the Reserve Bank of India sharply curtailed their use in the country. When Mr. Reddy saw American banks setting up off-balance-sheet vehicles to hide debt, he essentially banned them in India. As a result, banks in India wound up holding onto the loans they made to customers. On the one hand, this meant they made fewer loans than their American counterparts because they couldn’t sell off the loans to Wall Street in securitizations. On the other hand, it meant they still had the incentive — as American banks did not — to see those loans paid back.
Seeing inflation on the horizon, Mr. Reddy pushed interest rates up to more than 20 percent, which of course dampened the housing frenzy. He increased risk weightings on commercial buildings and shopping mall construction, doubling the amount of capital banks were required to hold in reserve in case things went awry. He made banks put aside extra capital for every loan they made. In effect, Mr. Reddy was creating liquidity even before there was a global liquidity crisis.
Did India’s bankers stand up to applaud Mr. Reddy as he was making these moves? Of course not. They were naturally furious, just as American bankers would have been if Mr. Greenspan had been more active. Their regulator was holding them back, constraining their growth! Mr. Parekh told me that while he had been saying for some time that Indian real estate was in bubble territory, he was still unhappy with the rules imposed by Mr. Reddy. “We were critical of the central bank,” he said. “We thought these were harsh measures.”
“For a while we were wondering if we were missing out on something,” said Ms. Kochhar of Icici. Banks in the United States seemed to have come up with some magical new formula for making money: make loans that required no down payment and little in the way of verification — and post instant, short-term, profits.
As Luis Miranda, who runs a private equity firm devoted to developing India’s infrastructure, put it: “We kept wondering if they had figured out something that we were too dense to figure out. It looked like they were smart and we were stupid.” Instead, India was the smart one, and we were the stupid ones.
Ms. Kochhar said that the underlying risks of having “a majority of loans not owned by the people who originated them” was not apparent during the bubble. Now that those risks have been made painfully clear, every banker in India realizes that Mr. Reddy did the right thing by limiting securitizations. “At times like this, you tend to appreciate what he did more than we did at the time,” said Mr. Kapoor. “He saved us,” added Mr. Parekh.
As the credit crisis has spread these past months, no Indian bank has come close to failing the way so many United States and European financial institutions have. None have required the kind of emergency injections of capital that Western banks have needed. None have had the huge write-downs that were par for the course in the West. As the bubble has burst, which lenders have taken the hit? Why, the private equity and hedge fund lenders who had been so eager to finance land development. Us, in others words, rather than them. Why is that not a surprise?
When I asked Mr. Kapoor for his take on what had happened in the United States, he replied: “We recognize it as a problem of plenty. It was perpetuated by greedy bankers, whether investment bankers or commercial bankers. The greed to make money is the impression it has made here. Anytime they wanted a loan, people just dipped into their home A.T.M. It was like money was on call.”
So it was. And our regulators, unlike theirs, just stood by and let it happen. The next time we’re moving into bubble territory, perhaps we can take a page from Mr. Reddy’s book — sometimes it’s better to apply the brakes too early than too late. Or, as was the case with Mr. Greenspan, not at all.
•
None of this is to say that the global credit crisis hasn’t affected India. It certainly has. I’ll be back after the holidays with more columns from India, including how Sept. 15 — the day Lehman Brothers defaulted — changed everything, even here, on the other side of the world.
This article speaks for itself. Its seems like Mr. Reddy did his job. Greenspan on the other hand....
December 20, 2008
How India Avoided a Crisis
By JOE NOCERA
MUMBAI
“What has taken a number of us by surprise is the lack of adequate supervision and regulation,” Rana Kapoor was saying the other day. “This was despite the fact that Enron had happened and you passed Sarbanes-Oxley. We don’t understand it. Maybe it’s because we sit in a more controlled economy but ....” He smiled sweetly as his voice trailed off, as if to take the sting off his comments. But they stung nonetheless.
Mr. Kapoor is an Indian banker, a former longtime Bank of America executive with a Rutgers M.B.A. who, along with his business partner and brother-in-law, Ashok Kapur, was granted government permission four years ago to start a private bank, which they called Yes Bank. In the United States, Yes Bank is the kind of name a go-go banker might give to, say, a high-flying mortgage lender in the middle of a bubble. (You can even imagine the slogan: “Yes is part of our name!”) But Yes Bank is not exactly the Washington Mutual of India. One news release it hands out to reporters who come calling is an excerpt from a 2007 survey by The Financial Express: “#1 on Credit Quality amongst 56 Banks in India,” reads the headline.
I arrived in Mumbai three weeks after the terrorist attacks that killed 200 people — including, tragically, Yes Bank’s co-founder Mr. Kapur, who had served as the company’s nonexecutive chairman and was gunned down while having dinner at the Oberoi Hotel. (His wife and two dinner companions miraculously escaped.)
My hope in traveling to Mumbai was to learn about the current state of Indian business in the wake of both the credit crisis and the attacks. But in my first few days in this grand, sprawling, chaotic city, what I mainly heard, especially talking to bankers, was about America, not India. How could we have brought so much trouble on ourselves, and the rest of the world, by acting in such an obviously foolhardy manner? Didn’t we understand that you can’t lend money to people who lack the means to pay it back? The questions were asked with a sense of bewilderment — and an occasional hint of scorn. Like most Americans, I didn’t have any good answers. It was a bubble, I would respond with a sheepish shrug, as if that were an adequate explanation. It isn’t, of course.
“In India, we never had anything close to the subprime loan,” said Chandra Kochhar, the chief financial officer of India’s largest private bank, Icici. (A few days after I spoke to her, Ms. Kochhar was named the bank’s new chief executive, in a move that had long been anticipated.) “All lending to individuals is based on their income. That is a big difference between your banking system and ours.” She continued: “Indian banks are not levered like American banks. Capital ratios are 12 and 13 percent, instead of 7 or 8 percent. All those exotic structures like C.D.O. and securitizations are a very tiny part of our banking system. So a lot of the temptations didn’t exist.”
And when I went to see Deepak Parekh, the chief executive of HDFC, which was founded in 1977 as the country’s first specialized mortgage bank, practically the first words out of his mouth were these: “We don’t do interest-only or subprime loans. When the bubble was going on, we did not change any of our policies. We did not change any of our systems. We did not change our thought process. We never gave more money to a borrower because the value of the house had gone up. Citibank has a few home equity loans, but most banks in India don’t make those kinds of loans. Our nonperforming loans are less than 1 percent.”
Yet two years ago, the Indian real estate market — commercial and residential alike — was every bit as frothy as the American market. High-rises were being slapped up on spec. Housing developments were sprouting up everywhere. And there was plenty of money flowing into India, mainly from private equity and hedge funds, to fuel the commercial real estate bubble in particular. Goldman Sachs, Carlyle, Blackstone, Citibank — they were all here, throwing money at developers. So why did the Indian banks stay on the sidelines and avoid most of the pain that has been suffered by the big American banks?
Part of the reason is cultural. Indians are simply not as comfortable with credit as Americans. “A lot of Indians, when you push them, will say that if you spend more than you earn you will get in trouble,” an Indian consultant told me. “Americans spent more than they earned.”
Mr. Parekh said, “Savings are important. Joint families exist. When one son moves out, the family helps them. So you don’t borrow so much from the bank.” Even mortgage loans tend to have down payments in India that are a third of the purchase price, a far cry from the United States, where 20 percent is the new norm. (Let’s not even think about what they used to be.)
But there was also another factor, perhaps the most important of all. India had a bank regulator who was the anti-Greenspan. His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India. Seventy percent of the banking system in India is nationalized, so a strong regulator is critical, since any banking scandal amounts to a national political scandal as well. And in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time.
“He basically believed that if bankers were given the opportunity to sin, they would sin,” said one banker who asked not to be named because, well, there’s not much percentage in getting on the wrong side of the Reserve Bank of India. For all the bankers’ talk about their higher lending standards, the truth is that Mr. Reddy made them even more stringent during the bubble.
Unlike Alan Greenspan, who didn’t believe it was his job to even point out bubbles, much less try to deflate them, Mr. Reddy saw his job as making sure Indian banks did not get too caught up in the bubble mentality. About two years ago, he started sensing that real estate, in particular, had entered bubble territory. One of the first moves he made was to ban the use of bank loans for the purchase of raw land, which was skyrocketing. Only when the developer was about to commence building could the bank get involved — and then only to make construction loans. (Guess who wound up financing the land purchases? United States private equity and hedge funds, of course!)
Then, as securitizations and derivatives gained increasing prominence in the world’s financial system, the Reserve Bank of India sharply curtailed their use in the country. When Mr. Reddy saw American banks setting up off-balance-sheet vehicles to hide debt, he essentially banned them in India. As a result, banks in India wound up holding onto the loans they made to customers. On the one hand, this meant they made fewer loans than their American counterparts because they couldn’t sell off the loans to Wall Street in securitizations. On the other hand, it meant they still had the incentive — as American banks did not — to see those loans paid back.
Seeing inflation on the horizon, Mr. Reddy pushed interest rates up to more than 20 percent, which of course dampened the housing frenzy. He increased risk weightings on commercial buildings and shopping mall construction, doubling the amount of capital banks were required to hold in reserve in case things went awry. He made banks put aside extra capital for every loan they made. In effect, Mr. Reddy was creating liquidity even before there was a global liquidity crisis.
Did India’s bankers stand up to applaud Mr. Reddy as he was making these moves? Of course not. They were naturally furious, just as American bankers would have been if Mr. Greenspan had been more active. Their regulator was holding them back, constraining their growth! Mr. Parekh told me that while he had been saying for some time that Indian real estate was in bubble territory, he was still unhappy with the rules imposed by Mr. Reddy. “We were critical of the central bank,” he said. “We thought these were harsh measures.”
“For a while we were wondering if we were missing out on something,” said Ms. Kochhar of Icici. Banks in the United States seemed to have come up with some magical new formula for making money: make loans that required no down payment and little in the way of verification — and post instant, short-term, profits.
As Luis Miranda, who runs a private equity firm devoted to developing India’s infrastructure, put it: “We kept wondering if they had figured out something that we were too dense to figure out. It looked like they were smart and we were stupid.” Instead, India was the smart one, and we were the stupid ones.
Ms. Kochhar said that the underlying risks of having “a majority of loans not owned by the people who originated them” was not apparent during the bubble. Now that those risks have been made painfully clear, every banker in India realizes that Mr. Reddy did the right thing by limiting securitizations. “At times like this, you tend to appreciate what he did more than we did at the time,” said Mr. Kapoor. “He saved us,” added Mr. Parekh.
As the credit crisis has spread these past months, no Indian bank has come close to failing the way so many United States and European financial institutions have. None have required the kind of emergency injections of capital that Western banks have needed. None have had the huge write-downs that were par for the course in the West. As the bubble has burst, which lenders have taken the hit? Why, the private equity and hedge fund lenders who had been so eager to finance land development. Us, in others words, rather than them. Why is that not a surprise?
When I asked Mr. Kapoor for his take on what had happened in the United States, he replied: “We recognize it as a problem of plenty. It was perpetuated by greedy bankers, whether investment bankers or commercial bankers. The greed to make money is the impression it has made here. Anytime they wanted a loan, people just dipped into their home A.T.M. It was like money was on call.”
So it was. And our regulators, unlike theirs, just stood by and let it happen. The next time we’re moving into bubble territory, perhaps we can take a page from Mr. Reddy’s book — sometimes it’s better to apply the brakes too early than too late. Or, as was the case with Mr. Greenspan, not at all.
•
None of this is to say that the global credit crisis hasn’t affected India. It certainly has. I’ll be back after the holidays with more columns from India, including how Sept. 15 — the day Lehman Brothers defaulted — changed everything, even here, on the other side of the world.
This article speaks for itself. Its seems like Mr. Reddy did his job. Greenspan on the other hand....
Thursday, September 11, 2008
7 years after....its about damn time!!!!!!!
September 11, 2008
Bush Said to Give Orders Allowing Raids in Pakistan
By ERIC SCHMITT and MARK MAZZETTI
WASHINGTON — President Bush secretly approved orders in July that for the first time allow American Special Operations forces to carry out ground assaults inside Pakistan without the prior approval of the Pakistani government, according to senior American officials.
The classified orders signal a watershed for the Bush administration after nearly seven years of trying to work with Pakistan to combat the Taliban and Al Qaeda, and after months of high-level stalemate about how to challenge the militants’ increasingly secure base in Pakistan’s tribal areas.
American officials say that they will notify Pakistan when they conduct limited ground attacks like the Special Operations raid last Wednesday in a Pakistani village near the Afghanistan border, but that they will not ask for its permission.
“The situation in the tribal areas is not tolerable,” said a senior American official who, like others interviewed for this article, spoke on condition of anonymity because of the delicate nature of the missions. “We have to be more assertive. Orders have been issued.”
The new orders reflect concern about safe havens for Al Qaeda and the Taliban inside Pakistan, as well as an American view that Pakistan lacks the will and ability to combat militants. They also illustrate lingering distrust of the Pakistani military and intelligence agencies and a belief that some American operations had been compromised once Pakistanis were advised of the details.
The Central Intelligence Agency has for several years fired missiles at militants inside Pakistan from remotely piloted Predator aircraft. But the new orders for the military’s Special Operations forces relax firm restrictions on conducting raids on the soil of an important ally without its permission.
Pakistan’s top army officer said Wednesday that his forces would not tolerate American incursions like the one that took place last week and that the army would defend the country’s sovereignty “at all costs.”
It is unclear precisely what legal authorities the United States has invoked to conduct even limited ground raids in a friendly country. A second senior American official said that the Pakistani government had privately assented to the general concept of limited ground assaults by Special Operations forces against significant militant targets, but that it did not approve each mission.
The official did not say which members of the government gave their approval.
Any new ground operations in Pakistan raise the prospect of American forces being killed or captured in the restive tribal areas — and a propaganda coup for Al Qaeda. Last week’s raid also presents a major test for Pakistan’s new president, Asif Ali Zardari, who supports more aggressive action by his army against the militants but cannot risk being viewed as an American lap dog, as was his predecessor, Pervez Musharraf.
The new orders were issued after months of debate inside the Bush administration about whether to authorize a ground campaign inside Pakistan. The debate, first reported by The New York Times in late June, at times pitted some officials at the State Department against parts of the Pentagon that advocated aggressive action against Qaeda and Taliban targets inside the tribal areas.
Details about last week’s commando operation have emerged that indicate the mission was more intrusive than had previously been known.
According to two American officials briefed on the raid, it involved more than two dozen members of the Navy Seals who spent several hours on the ground and killed about two dozen suspected Qaeda fighters in what now appeared to have been a planned attack against militants who had been conducting attacks against an American forward operating base across the border in Afghanistan.
Supported by an AC-130 gunship, the Special Operations forces were whisked away by helicopters after completing the mission.
Although the senior American official who provided the most detailed description of the new presidential order would discuss it only on condition of anonymity, his account was corroborated by three other senior American officials from several government agencies, all of whom made clear that they supported the more aggressive approach.
Pakistan’s government has asserted that last week’s raid achieved little except killing civilians and stoking anti-Americanism in the tribal areas.
“Unilateral action by the American forces does not help the war against terror because it only enrages public opinion,” said Husain Haqqani, Pakistan’s ambassador to Washington, during a speech on Friday. “In this particular incident, nothing was gained by the action of the troops.”
As an alternative to American ground operations, some Pakistani officials have made clear that they prefer the C.I.A.’s Predator aircraft, operating from the skies, as a method of killing Qaeda operatives. The C.I.A. for the most part has coordinated with Pakistan’s government before and after it has launched missiles from the drone. On Monday, a Predator strike in North Waziristan killed several Arab Qaeda operatives.
A new American command structure was put in place this year to better coordinate missions by the C.I.A. and members of the Pentagon’s Joint Special Operations Command, made up of the Army’s Delta Force and the Navy Seals.
The move was intended to address frustration on the ground about different agencies operating under different marching orders. Under the arrangement, a senior C.I.A. official based at Bagram air base in Afghanistan was put in charge of coordinating C.I.A. and military activities in the border region.
Spokesmen for the White House, the Defense Department and the C.I.A. declined to comment on Wednesday about the new orders. Some senior Congressional officials have received briefings on the new authorities. A spokeswoman for Senator Carl Levin, a Michigan Democrat who leads the Armed Services Committee, declined to comment.
American commanders in Afghanistan have complained bitterly that militants use sanctuaries in Pakistan to attack American troops in Afghanistan.
“I’m not convinced we’re winning it in Afghanistan,” Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, told the House Armed Services Committee on Wednesday. “I am convinced we can.”
Toward that goal, Admiral Mullen said he had ordered a comprehensive military strategy to address the border region between Pakistan and Afghanistan.
The commando raid last week and an increasing number of recent missile strikes are part of a more aggressive overall American campaign in the border region aimed at intensifying attacks on Al Qaeda and the Taliban in the waning months of the Bush administration, with less than two months to go before November elections.
State Department officials, as well as some within the National Security Council, have expressed concern about any Special Operations missions that could be carried out without the approval of the American ambassador in Islamabad.
The months-long delay in approving ground missions created intense frustration inside the military’s Special Operations community, which believed that the Bush administration was holding back as the Qaeda safe haven inside Pakistan became more secure for militants.
The stepped-up campaign inside Pakistan comes at a time when American-Pakistani relations have been fraying, and when anger is increasing within American intelligence agencies about ties between Pakistan’s Inter-Services Intelligence Directorate, known as the ISI, and militants in the tribal areas.
Analysts at the C.I.A. and other American spy and security agencies believe not only that the bombing of India’s embassy in Kabul, Afghanistan, in July by militants was aided by ISI operatives, but also that the highest levels of Pakistan’s security apparatus — including the army chief, Gen. Ashfaq Parvez Kayani — had knowledge of the plot.
“It’s very difficult to imagine he was not aware,” a senior American official said of General Kayani.
American intelligence agencies have said that senior Pakistani national security officials favor the use of militant groups to preserve Pakistan’s influence in the region, as a hedge against India and Afghanistan.
In fact, some American intelligence analysts believe that ISI operatives did not mind when their role in the July bombing in Kabul became known. “They didn’t cover their tracks very well,” a senior Defense Department official said, “and I think the embassy bombing was the ISI drawing a line in the sand.”
Instead of getting bogged down in Iraq...this strategy or squeezing Pakistan between Indian and US special ops operating from Afghanistan is 7 years too late....Better late than never! Pakistan's ISI is a government sanctioned pro-terrorism intelligence organization and one of the most deadly and destabilizing entities in the world. They're one of the pillars behind the Taliban and Al Qaeda. They originally helped Americans with managing the Afghani "freedom fighters" during the Russian invasion and now they're working against us. The question, I am everyone has is where are Pakistan's nukes? Hopefully are either being watched by us (US) or have been "secured" by us as has been previously reported.
Bush Said to Give Orders Allowing Raids in Pakistan
By ERIC SCHMITT and MARK MAZZETTI
WASHINGTON — President Bush secretly approved orders in July that for the first time allow American Special Operations forces to carry out ground assaults inside Pakistan without the prior approval of the Pakistani government, according to senior American officials.
The classified orders signal a watershed for the Bush administration after nearly seven years of trying to work with Pakistan to combat the Taliban and Al Qaeda, and after months of high-level stalemate about how to challenge the militants’ increasingly secure base in Pakistan’s tribal areas.
American officials say that they will notify Pakistan when they conduct limited ground attacks like the Special Operations raid last Wednesday in a Pakistani village near the Afghanistan border, but that they will not ask for its permission.
“The situation in the tribal areas is not tolerable,” said a senior American official who, like others interviewed for this article, spoke on condition of anonymity because of the delicate nature of the missions. “We have to be more assertive. Orders have been issued.”
The new orders reflect concern about safe havens for Al Qaeda and the Taliban inside Pakistan, as well as an American view that Pakistan lacks the will and ability to combat militants. They also illustrate lingering distrust of the Pakistani military and intelligence agencies and a belief that some American operations had been compromised once Pakistanis were advised of the details.
The Central Intelligence Agency has for several years fired missiles at militants inside Pakistan from remotely piloted Predator aircraft. But the new orders for the military’s Special Operations forces relax firm restrictions on conducting raids on the soil of an important ally without its permission.
Pakistan’s top army officer said Wednesday that his forces would not tolerate American incursions like the one that took place last week and that the army would defend the country’s sovereignty “at all costs.”
It is unclear precisely what legal authorities the United States has invoked to conduct even limited ground raids in a friendly country. A second senior American official said that the Pakistani government had privately assented to the general concept of limited ground assaults by Special Operations forces against significant militant targets, but that it did not approve each mission.
The official did not say which members of the government gave their approval.
Any new ground operations in Pakistan raise the prospect of American forces being killed or captured in the restive tribal areas — and a propaganda coup for Al Qaeda. Last week’s raid also presents a major test for Pakistan’s new president, Asif Ali Zardari, who supports more aggressive action by his army against the militants but cannot risk being viewed as an American lap dog, as was his predecessor, Pervez Musharraf.
The new orders were issued after months of debate inside the Bush administration about whether to authorize a ground campaign inside Pakistan. The debate, first reported by The New York Times in late June, at times pitted some officials at the State Department against parts of the Pentagon that advocated aggressive action against Qaeda and Taliban targets inside the tribal areas.
Details about last week’s commando operation have emerged that indicate the mission was more intrusive than had previously been known.
According to two American officials briefed on the raid, it involved more than two dozen members of the Navy Seals who spent several hours on the ground and killed about two dozen suspected Qaeda fighters in what now appeared to have been a planned attack against militants who had been conducting attacks against an American forward operating base across the border in Afghanistan.
Supported by an AC-130 gunship, the Special Operations forces were whisked away by helicopters after completing the mission.
Although the senior American official who provided the most detailed description of the new presidential order would discuss it only on condition of anonymity, his account was corroborated by three other senior American officials from several government agencies, all of whom made clear that they supported the more aggressive approach.
Pakistan’s government has asserted that last week’s raid achieved little except killing civilians and stoking anti-Americanism in the tribal areas.
“Unilateral action by the American forces does not help the war against terror because it only enrages public opinion,” said Husain Haqqani, Pakistan’s ambassador to Washington, during a speech on Friday. “In this particular incident, nothing was gained by the action of the troops.”
As an alternative to American ground operations, some Pakistani officials have made clear that they prefer the C.I.A.’s Predator aircraft, operating from the skies, as a method of killing Qaeda operatives. The C.I.A. for the most part has coordinated with Pakistan’s government before and after it has launched missiles from the drone. On Monday, a Predator strike in North Waziristan killed several Arab Qaeda operatives.
A new American command structure was put in place this year to better coordinate missions by the C.I.A. and members of the Pentagon’s Joint Special Operations Command, made up of the Army’s Delta Force and the Navy Seals.
The move was intended to address frustration on the ground about different agencies operating under different marching orders. Under the arrangement, a senior C.I.A. official based at Bagram air base in Afghanistan was put in charge of coordinating C.I.A. and military activities in the border region.
Spokesmen for the White House, the Defense Department and the C.I.A. declined to comment on Wednesday about the new orders. Some senior Congressional officials have received briefings on the new authorities. A spokeswoman for Senator Carl Levin, a Michigan Democrat who leads the Armed Services Committee, declined to comment.
American commanders in Afghanistan have complained bitterly that militants use sanctuaries in Pakistan to attack American troops in Afghanistan.
“I’m not convinced we’re winning it in Afghanistan,” Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, told the House Armed Services Committee on Wednesday. “I am convinced we can.”
Toward that goal, Admiral Mullen said he had ordered a comprehensive military strategy to address the border region between Pakistan and Afghanistan.
The commando raid last week and an increasing number of recent missile strikes are part of a more aggressive overall American campaign in the border region aimed at intensifying attacks on Al Qaeda and the Taliban in the waning months of the Bush administration, with less than two months to go before November elections.
State Department officials, as well as some within the National Security Council, have expressed concern about any Special Operations missions that could be carried out without the approval of the American ambassador in Islamabad.
The months-long delay in approving ground missions created intense frustration inside the military’s Special Operations community, which believed that the Bush administration was holding back as the Qaeda safe haven inside Pakistan became more secure for militants.
The stepped-up campaign inside Pakistan comes at a time when American-Pakistani relations have been fraying, and when anger is increasing within American intelligence agencies about ties between Pakistan’s Inter-Services Intelligence Directorate, known as the ISI, and militants in the tribal areas.
Analysts at the C.I.A. and other American spy and security agencies believe not only that the bombing of India’s embassy in Kabul, Afghanistan, in July by militants was aided by ISI operatives, but also that the highest levels of Pakistan’s security apparatus — including the army chief, Gen. Ashfaq Parvez Kayani — had knowledge of the plot.
“It’s very difficult to imagine he was not aware,” a senior American official said of General Kayani.
American intelligence agencies have said that senior Pakistani national security officials favor the use of militant groups to preserve Pakistan’s influence in the region, as a hedge against India and Afghanistan.
In fact, some American intelligence analysts believe that ISI operatives did not mind when their role in the July bombing in Kabul became known. “They didn’t cover their tracks very well,” a senior Defense Department official said, “and I think the embassy bombing was the ISI drawing a line in the sand.”
Instead of getting bogged down in Iraq...this strategy or squeezing Pakistan between Indian and US special ops operating from Afghanistan is 7 years too late....Better late than never! Pakistan's ISI is a government sanctioned pro-terrorism intelligence organization and one of the most deadly and destabilizing entities in the world. They're one of the pillars behind the Taliban and Al Qaeda. They originally helped Americans with managing the Afghani "freedom fighters" during the Russian invasion and now they're working against us. The question, I am everyone has is where are Pakistan's nukes? Hopefully are either being watched by us (US) or have been "secured" by us as has been previously reported.
Tuesday, June 17, 2008
China + 1 Manufacturing
from www.nytimes.com
June 18, 2008
Labor Costs Rise, and Manufacturers Look Beyond China
By KEITH BRADSHER
HANOI — Canon is no longer building or expanding factories in China, but the company is doubling its workforce at a printer factory outside Hanoi to 8,000.
Nearby, Nissan is expanding a vehicle engineering center. Hanesbrands, the underwear company based in Winston-Salem, N.C., is building two new factories here, as is the Texhong Textile Group from Shanghai.
China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call “China plus one,” establishing or expanding Asian bases outside China, particularly in Vietnam.
A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.
More than corporate profit margins are at stake. When the cost of making goods in Asia rises, American consumers inevitably feel pain. The Labor Department said Thursday that import prices were 4.6 percent higher in May than a year earlier for goods from China and 6.4 percent higher for goods from southeast Asia.
Companies are using the China-plus-one strategy to mitigate the risks of overdependence on factories in one country.
Multinational corporations are “thinking about all the world and keeping a balance” between China and other countries, said Edward Kang, the chief executive of Ever-Glory International, a sportswear manufacturer in Nanjing, China. Ever-Glory, which sells to Wal-Mart and Kohl’s, is building a factory in Vietnam to supplement its three factories in China.
Companies remaining in China are desperately seeking to control costs.
“We will maintain our capacity in China, but we will make it more automatic and reduce the number of employees,” said Laurence Shu, the chief financial officer of Shanghai-based Texhong, one of the world’s largest manufacturers of cotton and spandex fabric.
To limit labor costs, Hanesbrands is building a largely automated factory in Nanjing. But the company is also building a factory in Vietnam, in addition to a factory it bought here, and two more in Thailand.
Gerald Evans, the president of global supply chain at Hanesbrands, said that compared to China, “we found more ready availability of both land and labor in both Vietnam and Thailand.” Hanesbrands will be shifting some manufacturing from Mexico and Central America to Asia.
In China, where rural villages are running low on able-bodied young workers to send to factories, wages are rising more than 10 percent a year for many assembly-line workers. And pay is rising even faster for skilled workers, like machinery repair technicians, company executives said.
In coastal provinces with ready access to ports for exports, even unskilled workers now earn $120 a month for a 40-hour work week, and often considerably more. Factory workers in Vietnam still earn as little as $50 a month for a 48-hour work week that includes a full day on Saturdays.
Texhong estimates that average labor costs per textile industry worker in China will rise 16 percent this year, including increases in benefits costs — on top of a 12 percent increase last year. New regulations are making it harder for companies to avoid paying for benefits, like pensions, further increasing labor costs.
When those increases are combined with a currency rising against the dollar at an annual pace of up to 10 percent, labor costs in China are now climbing at 25 percent a year or more in dollar terms.
Inflation in China — more than 8 percent in February, March and April and 7.7 percent in May — raises the prospect that labor costs will soar even faster soon. That could push up prices for a wide range of goods exported to the United States.
China is also phasing out its practice of charging lower corporate tax rates for foreign-owned companies. By contrast, Vietnam still offers foreign investors a corporate tax rate of zero for the first four years, and half the usual rate of 10 percent for the next four years.
Foreign direct investment in China has grown by a third over the last three years. By contrast, foreign direct investment has more than doubled in this period in the Philippines, quintupled in India, and soared more than eight-fold in Vietnam.
Faster rates of increase in other Asian countries partly reflect lower starting points. but investment is still growing quickly, and now it’s growing from high levels. For example, foreign investment in Vietnam reached nearly $18 billion last year.
A popular saying among Western investors these days is that Vietnam is the next China. Cambodia, with even lower wages attracting garment manufacturers, is called the next Vietnam.
But how long those analogies will hold — in a world where economies evolve from agriculture to manufacturing to services in a couple of decades — is unclear.
As foreign investors leap into each new country, they drive up the cost of workers and goods, a dynamic that makes it less likely that a shift in investment patterns will hold down inflation in American imports.
A recent survey by Grant Thornton, the global accounting and consulting firm, found that companies were more worried about attracting and retaining key staff in Vietnam than anywhere else in the world. (China was a close second.)
“We trained them, we educated them and then they quit,” said Akira Akashi, the chairman of Nissan Techno, a division of Nissan that designs vehicles.
The company plans to expand to 1,400 engineers in Vietnam by 2010. Beginning engineers here still earn just $200 a month, less than half the salary in China and less than a tenth of American and Japanese salaries.
Even blue-collar labor is becoming harder to find. In addition to the size of the labor force, infrastructure is also likely to be a brake on how fast China plus one can expand. Most countries in Asia, including Vietnam, have not improved transportation links as quickly as China has. Lengthy traffic jams slow down shipments and drive up costs.
Vietnam’s biggest selling point for many companies is its political stability. Like China, it has a nominally Communist, one-party system that crushes dissent, keeps the military under tight control and changes government policies and leaders slowly.
“Communism means more stability,” Mr. Shu, the chief financial officer of Texhong, said, voicing a common view among Asian executives who make investment decisions. At least a few American executives agree, although they never say so on the record.
Democracies like those in Thailand and the Philippines have proved more vulnerable to military coups and instability. A military coup in Thailand in September 2006 was briefly followed by an attempt, never completed, to impose nationalistic legislation penalizing foreign companies.
“That sent the wrong signal that we would not welcome foreign investment — this has ruined the confidence of investors locally and internationally,” finance minister Surapong Suebwonglee said in an interview in Bangkok.
Yet, like China, Vietnam does not offer complete tranquillity either. For instance, workers are becoming more vocal and staging more strikes, despite a government ban on independent unions.
Nearly 20,000 workers walked out this spring at a Nike shoe factory run by a Taiwanese contractor. The workers only went back to work when given a 10 percent raise, to $55 a month, and a larger meal subsidy.
That restive pattern is evident in the only country with enough workers to accommodate more than a fraction of the investment China sees: India, which demographers expect to surpass China in population in the next two decades.
But many companies are leery of poor roads and congested ports in India, as well as long sailing times for components that must be shipped from existing factories in China.
And even in India, workers with industrial skills or the ability to speak English are increasingly scarce — and their wages have been rising by 10 to 20 percent a year.
That has led to worries about India’s long-term competitiveness, even at companies investing heavily there, like Ford, which is planning to spend $500 million on factory expansion.
“I keep saying to our people, ‘How long will it be until we’re priced out of the market?’ ” said John Parker, Ford’s executive vice president for Asia, Pacific and Africa. “The impact of that some day is you’re no longer low-cost.”
As a long term investor, it would be worth keeping a Vietnam ETF in your portfolio at some point. I have not researched it yet or determined a good entry point.
June 18, 2008
Labor Costs Rise, and Manufacturers Look Beyond China
By KEITH BRADSHER
HANOI — Canon is no longer building or expanding factories in China, but the company is doubling its workforce at a printer factory outside Hanoi to 8,000.
Nearby, Nissan is expanding a vehicle engineering center. Hanesbrands, the underwear company based in Winston-Salem, N.C., is building two new factories here, as is the Texhong Textile Group from Shanghai.
China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call “China plus one,” establishing or expanding Asian bases outside China, particularly in Vietnam.
A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.
More than corporate profit margins are at stake. When the cost of making goods in Asia rises, American consumers inevitably feel pain. The Labor Department said Thursday that import prices were 4.6 percent higher in May than a year earlier for goods from China and 6.4 percent higher for goods from southeast Asia.
Companies are using the China-plus-one strategy to mitigate the risks of overdependence on factories in one country.
Multinational corporations are “thinking about all the world and keeping a balance” between China and other countries, said Edward Kang, the chief executive of Ever-Glory International, a sportswear manufacturer in Nanjing, China. Ever-Glory, which sells to Wal-Mart and Kohl’s, is building a factory in Vietnam to supplement its three factories in China.
Companies remaining in China are desperately seeking to control costs.
“We will maintain our capacity in China, but we will make it more automatic and reduce the number of employees,” said Laurence Shu, the chief financial officer of Shanghai-based Texhong, one of the world’s largest manufacturers of cotton and spandex fabric.
To limit labor costs, Hanesbrands is building a largely automated factory in Nanjing. But the company is also building a factory in Vietnam, in addition to a factory it bought here, and two more in Thailand.
Gerald Evans, the president of global supply chain at Hanesbrands, said that compared to China, “we found more ready availability of both land and labor in both Vietnam and Thailand.” Hanesbrands will be shifting some manufacturing from Mexico and Central America to Asia.
In China, where rural villages are running low on able-bodied young workers to send to factories, wages are rising more than 10 percent a year for many assembly-line workers. And pay is rising even faster for skilled workers, like machinery repair technicians, company executives said.
In coastal provinces with ready access to ports for exports, even unskilled workers now earn $120 a month for a 40-hour work week, and often considerably more. Factory workers in Vietnam still earn as little as $50 a month for a 48-hour work week that includes a full day on Saturdays.
Texhong estimates that average labor costs per textile industry worker in China will rise 16 percent this year, including increases in benefits costs — on top of a 12 percent increase last year. New regulations are making it harder for companies to avoid paying for benefits, like pensions, further increasing labor costs.
When those increases are combined with a currency rising against the dollar at an annual pace of up to 10 percent, labor costs in China are now climbing at 25 percent a year or more in dollar terms.
Inflation in China — more than 8 percent in February, March and April and 7.7 percent in May — raises the prospect that labor costs will soar even faster soon. That could push up prices for a wide range of goods exported to the United States.
China is also phasing out its practice of charging lower corporate tax rates for foreign-owned companies. By contrast, Vietnam still offers foreign investors a corporate tax rate of zero for the first four years, and half the usual rate of 10 percent for the next four years.
Foreign direct investment in China has grown by a third over the last three years. By contrast, foreign direct investment has more than doubled in this period in the Philippines, quintupled in India, and soared more than eight-fold in Vietnam.
Faster rates of increase in other Asian countries partly reflect lower starting points. but investment is still growing quickly, and now it’s growing from high levels. For example, foreign investment in Vietnam reached nearly $18 billion last year.
A popular saying among Western investors these days is that Vietnam is the next China. Cambodia, with even lower wages attracting garment manufacturers, is called the next Vietnam.
But how long those analogies will hold — in a world where economies evolve from agriculture to manufacturing to services in a couple of decades — is unclear.
As foreign investors leap into each new country, they drive up the cost of workers and goods, a dynamic that makes it less likely that a shift in investment patterns will hold down inflation in American imports.
A recent survey by Grant Thornton, the global accounting and consulting firm, found that companies were more worried about attracting and retaining key staff in Vietnam than anywhere else in the world. (China was a close second.)
“We trained them, we educated them and then they quit,” said Akira Akashi, the chairman of Nissan Techno, a division of Nissan that designs vehicles.
The company plans to expand to 1,400 engineers in Vietnam by 2010. Beginning engineers here still earn just $200 a month, less than half the salary in China and less than a tenth of American and Japanese salaries.
Even blue-collar labor is becoming harder to find. In addition to the size of the labor force, infrastructure is also likely to be a brake on how fast China plus one can expand. Most countries in Asia, including Vietnam, have not improved transportation links as quickly as China has. Lengthy traffic jams slow down shipments and drive up costs.
Vietnam’s biggest selling point for many companies is its political stability. Like China, it has a nominally Communist, one-party system that crushes dissent, keeps the military under tight control and changes government policies and leaders slowly.
“Communism means more stability,” Mr. Shu, the chief financial officer of Texhong, said, voicing a common view among Asian executives who make investment decisions. At least a few American executives agree, although they never say so on the record.
Democracies like those in Thailand and the Philippines have proved more vulnerable to military coups and instability. A military coup in Thailand in September 2006 was briefly followed by an attempt, never completed, to impose nationalistic legislation penalizing foreign companies.
“That sent the wrong signal that we would not welcome foreign investment — this has ruined the confidence of investors locally and internationally,” finance minister Surapong Suebwonglee said in an interview in Bangkok.
Yet, like China, Vietnam does not offer complete tranquillity either. For instance, workers are becoming more vocal and staging more strikes, despite a government ban on independent unions.
Nearly 20,000 workers walked out this spring at a Nike shoe factory run by a Taiwanese contractor. The workers only went back to work when given a 10 percent raise, to $55 a month, and a larger meal subsidy.
That restive pattern is evident in the only country with enough workers to accommodate more than a fraction of the investment China sees: India, which demographers expect to surpass China in population in the next two decades.
But many companies are leery of poor roads and congested ports in India, as well as long sailing times for components that must be shipped from existing factories in China.
And even in India, workers with industrial skills or the ability to speak English are increasingly scarce — and their wages have been rising by 10 to 20 percent a year.
That has led to worries about India’s long-term competitiveness, even at companies investing heavily there, like Ford, which is planning to spend $500 million on factory expansion.
“I keep saying to our people, ‘How long will it be until we’re priced out of the market?’ ” said John Parker, Ford’s executive vice president for Asia, Pacific and Africa. “The impact of that some day is you’re no longer low-cost.”
As a long term investor, it would be worth keeping a Vietnam ETF in your portfolio at some point. I have not researched it yet or determined a good entry point.
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