A New Start

FT: Harness market forces to share prosperity

Harness market forces to share prosperity

By Lawrence Summers

Published: June 24 2007 19:34 | Last updated: June 24 2007 19:34

When I studied economics in graduate school a generation ago we were taught that it was a “stylised fact” that the US income distribution was very stable. We were shown that the fraction of the population in poverty tracked almost perfectly the performance of median family income over time and that productivity growth and average real wage growth moved together, with both declining sharply after the oil shocks of the 1970s. These observations led naturally to the conclusion that the main way of reducing poverty or increasing the incomes of middle income families was raising the rate of economic growth.

Today, we have another generation’s worth of data including the experience of the information technology-driven re-acceleration of productivity growth in the 1990s. This experience forces a reassessment of the earlier economic orthodoxy. It can no longer plausibly be asserted that the income distribution is relatively static or that average wage growth tracks productivity growth. Indeed, in a recent paper on tax policy prepared for the Hamilton project, my collaborators and I concluded from Congressional Budget Office data that, since 1979, changes in income distribution had raised the pre-tax incomes of the top 1 per cent of the population by $664bn or $600,000 per family – an increase of 43 per cent.

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By definition what one group gains from changes in the distribution of income another group must lose. The lower 80 per cent of families are $664bn poorer than they would be with a static income distribution, which works out to $7,000 less in income per family or a 14 per cent loss. To put this in some perspective, the total gain in median family incomes adjusted for inflation between 1979 and 2004 was only 14 per cent. If middle income families had shared fully in the economy’s income growth over the past generation their incomes would have risen twice as rapidly!

While the most recent data available for performing these calculations come from 2004, it appears that the trend towards increased inequality is continuing and may even be accelerating, and will continue even in years when the price of stocks and other assets does not rise abnormally. It also appears that these trends reflect far more than increases in the financial return from education, as the top 1 per cent of the population has pulled away from the rest of the top 10 per cent and the top 0.1 per cent has pulled away from the rest of the top 1 per cent.

Public policy has been successful in cushioning the impact of these trends but in some cases, such as President George W. Bush’s tax cuts, has actually exacerbated them. Of even greater concern is the growing suspicion that gaps in educational access for children and in life expectancy across the population may well be increasing. The observation that trends of the type observed in the US are also observed in other industrialised countries – in particular the English-speaking countries – suggests that something quite fundamental is at work.

What should be done? As is often the case in economic policy the answers are not entirely clear but probably lie between the extreme positions on offer. In the face of the experience of the past generation it is no longer credible, if it ever was, to argue that the goal of economic policy should be only to increase the size of the economy and that addressing questions of its distribution is populist or divisive. Given what has not happened to the pay cheques of average workers over the period of the information technology-induced acceleration in productivity and cyclical expansion, it is not plausible to suppose that policies that focus only on aggregate economic growth are sufficient to meet current challenges.

Equally, arguments that suggest the only way to raise the incomes of middle-class families is through measures to regulate business practices more heavily or to restrict increases in international trade are very dangerous. As much justified concern as we have about increased inequality, we need to recognise that it could be much worse if the economy had not been able to achieve the combination of under 5 per cent unemployment and sub-3 per cent inflation that we have enjoyed for much of the past decade. This surely would not have happened without the US economy benefiting from greater global integration. As western Europe’s long experience with unemployment rates that in some cases are more than double American rates illustrates, we would be taking great risks if, in the name of benefiting workers, we took steps that made production in the US less competitive in the global marketplace.

The right approach is activist but it embraces activism that goes with – rather than against – the grain of the market system. This is not a new idea. The enduring legacy of the New Deal is not the many measures taken to regulate prices or increase public employment. It is the measures such as securities regulation and Social Security that do not seek to oppose but channel market forces and mitigate their consequences.

The challenge for those running for president of the US in 2008 – a challenge very different from that faced by presidential candidates until very recently – will be to develop a mandate for policy approaches that can ensure prosperity is more fully shared without threatening its fundamental basis.

The writer is Charles W. Eliot university professor at Harvard

Top economists debate Martin Wolf’s and Lawrence Summers’ columns in the FT’s Economists’ Forum

Copyright The Financial Times Limited 2007

FT: Shore thing

Kerzner's trick then was the same as it is today - to offer people the sort of hospitality they have never experienced before. What has changed is that people didn't expect it back then, and now they do. "If you look at the mid-1960s in South Africa, the expectation was governed by what was on offer. It was nothing like what has evolved over the years. It's natural that people's expectations of a great boutique hotel operation is quite different today than it was 30 or 40 years ago. When you compare the first Walt Disney theme park with what it has become today, it is extraordinary the way it has grown. The expectations are quite different."

Colleagues talk about Butch Kerzner in loving, reverential tones. They refer to his people skills and his way of making things happen. "He was a total package," says Steve Ross, who joined the board of Kerzner International, through Butch Kerzner. "If you talk to people on Paradise Island, they all remember Butch. His presence around that whole company, you don't replace that overnight. The company is doing fine, but it still feels the loss of Butch."

Howard Brett "Butch" Kerzner was the antithesis of his father. Not for him the party-going celebrity-filled lifestyle. Neither did he share his father's gruff, intemperate manner. According to colleagues, Butch was the family man: clean-living, passionate and driven about his work. He was polite and charismatic and his private interests included rock-climbing.

Butch was the only one of Kerzner's five children to follow his father into the business. He studied economics at Stanford University, worked on Wall Street and joined Sun International in 1992. He completed the £125m purchase of Paradise Island, dealing with the Mohegan native Americans over the Mohegan Sun gaming development in Connecticut, and negotiated with both Greenwich and Manchester city councils over the rights to run the UK's first super-casino.

"When Butch became CEO, he had a great deal of respect for Sol and his opinions," says Paul O'Neill, one-time president of Kerzner International Bahamas in 2006. "Sol really was a consigliore. He was an adviser to a large degree. They spoke all the time, and they built great relationships with folks they did business with.

"Butch wasn't someone who sought the spotlight, he was very much the businessman, the family man. Sol was a little bit more comfortable on the dance floor, if you know what I mean." Butch's stand-out moment was taking the company private last year, in a $3.8bn buyout which increased the family's stake from 11 per cent to 25 per cent. Yet the family still ended up making more than $400m from the transaction.

"From Butch's standpoint, he wanted a bigger interest in the business; he saw that the company wasn't being valued correctly," Ross says. "He saw the opportunities of being private."

While Kerzner had a vision for resorts and strong attention to detail, his son had strong business nous and deal-making acumen. It was, says Ross, "a tremendous double act". Investors who supported the company going private had the utmost respect for Sol Kerzner and his capabilities, but didn't want to build the company around one person.

Butch Kerzner built a partnership with the Dubai royal family that secured its investment in Kerzner International and was instrumental in securing land for a -second Atlantis resort on the Palm Dubai, which opens next year. He was negotiating with the Singapore government over a casino licence, building the One&Only brand and scouring the world for other development projects.

It suited father and son. Kerzner senior got time to work on The Cove development and think up new visions, and his son's business reputation grew. The succession of the Kerzner empire was taking a logical and compelling route.

Butch Kerzner died on October 11 2006 in a helicopter crash while overlooking potential development sites in the Dominican Republic. "Obviously it's a huge setback in my life. Life wasn't quite the same," says Kerzner, who speaks with affection for his son, demonstrating respect for him as a business partner and pride in seeing the boy make the grade in the same profession.

"I spoke to Sol very soon after it occurred, probably minutes," says O'Neill. "He wanted my wife, Judy, and I to be in the Bahamas, with Vanessa, Butch's wife." O'Neill was five months retired as president of the Bahamas operation. He had been planning to spend more time with his grandchildren and to travel with his wife. "It's a 24/7 business. We just decided that we wanted to take that break."

O'Neill got another call later that evening. It was Kerzner again. "He started talking about the organisation's needs. He wanted me to come back to take an operating role. I immediately agreed to do that, and I was on a plane the next day."

Kerzner arranged a board meeting by conference call. "It was held in a state of shock," recalls Ross. "I remember Sol picking up and saying: 'We've got to do this and this.' You saw the strength of Sol." One of the things someone had to do was make the licence-bid presentation to the Singapore government. Kerzner decided he would do it himself. "Butch was buried on a Friday afternoon, and Sol left for Singapore on the Saturday or Sunday," says Ross. With so little time, the presentation, as put together by Butch Kerzner, was left untouched. "It must have been very tough for Sol. The presentation had Butch speaking on a video tape. You can only imagine what that would have been like for Sol watching it. It had to be unbelievable. I heard he was very strong." Kerzner International lost the Singapore licence contract.

==

Shore thing

By Roger Blitz

Published: June 23 2007 03:00 | Last updated: June 23 2007 03:00

Sol Kerzner is throwing a party, a three-day party. The man once described by Frank Sinatra as "the best saloon-keeper in the world" has got an array of A-list celebrities coming to Paradise Island, his 685-acre beach destination in the Bahamas, to mark the opening of The Cove, the latest phase of his Atlantis resort complex.

Janet Jackson is the headline act for Kerzner's incredible grand opening weekend. John Travolta, Sean Connery, Stevie Wonder, Whitney Houston, Michael Jordan, Lindsay Lohan, Liv Tyler, Rob Lowe and Kanye West also give the event star-studded quality. No expense is spared on the fireworks, the Dom Perignon is in full flow, and sushi, lobster and oysters are in plentiful supply. In Kerzner's world, everything has to be on a grand scale.

Atlantis was big enough even before Kerzner spent $1bn on the Cove expansion. The giant Royal Towers hotel complex has 2,900 bedrooms, including a $25,000-a-night suite, 35 restaurants, a large casino and 20m gallons of pools and lagoons. But The Cove adds a more cosmopolitan edge to the resort, its 600 rooms housed in a Beers and Rockwell-designed hotel slightly away from the more garish Royal Towers.

A tranquil open-air lobby offers an arresting view of the ocean. There are adult-only pools, fine dining and a boutique that wouldn't look out of place in Paris. You can swim with dolphins, or take a ride in the big new spectacular, Aquaventure, a 63-acre water park, complete with harum-scarum rides such as the Leap of Faith, set, for some reason, in a replica Mayan temple.

The Cove is already a success. American families, mainly from the eastern and southern states, fill the place for long weekends or four- to five-day vacations. As Kerzner parties with his family and celebrity friends, Kerzner International, the world's foremost destination resort operator, has notched up another triumph.

A month earlier, Kerzner's mood was altogether darker. A fire overnight near one of the poolside areas is troubling him. He walks up and down the cooking stations at The Cove's Mosaic restaurant, which is busy for breakfast but quiet this lunchtime, and nothing on offer seems to interest him. Staff fuss around his table, and he shows his irritation - he seems to wear a permanently grumpy expression, so that when he smiles occasionally you're rather grateful for it. Pictures from past decades show a bronzed or flushed, well-rounded face. He is no more than five and a bit feet tall, which may explain why boxing was a formative experience in his Johannesburg youth. There is nothing showy about his appearance, his stride perhaps betraying the effects of last year's triple heart bypass.

Kerzner is stilted as he begins to discuss his latest venture. He warms up a bit as the conversation turns to his achievements and the hospitality industry in general. Then, at the end of the lunch, he is asked to head to the beach, a hundred yards from the restaurant, on foot, for a photo-shoot. He grumbles, but relents. The grumble turns into a minor tantrum on the beach walkway when he realises the photographer wants him to step on to The Cove's glorious sand. "I can't be seen in front of my guests like this," he says tetchily. The photo-shoot is abandoned, Kerzner summons a driver and is driven off in a golf buggy, his mood considerably more sour than at the beginning of lunch.

Kerzner is 71 and has been in the hospitality business for almost half a century. One thing he has always valued in that time is publicity, hence the lavish parties, the big-name acts at his resorts and the company's brash number one core value: "Blow away the customer." "I am not mad about shmoozing," he said a few years ago. "I've made some very good friends. But, you know, to me it's really a business."

Kerzner has been married four times. The first ended in divorce, his second wife killed herself and his third was a Miss World winner. His fourth wife is the much younger Heather Murphy, the best friend of a Californian supermodel to whom he had been engaged for some years. He has a rugged, colourful persona and unsettles his staff by going around his resorts finding fault with some detail and "firing" the culprit on the spot. He never actually fires them, but it is his way of showing his displeasure.

His 60-a-day smoking habit induced a heart attack and his Scotch intake is well chronicled, as was his complaint about having to share a room with another man in the Betty Ford clinic. Worry beads have replaced cigarettes and age may have dulled his fondness for ending a long working day with a stint at the roulette wheel. But no one doubts the man's relentless energy. He is, or was, "a humming dynamo", says Chris Brammer, who worked for Kerzner for 10 years as a general manager. "He is not an empathetic person. He and Napoleon would have got on fine," says Brammer. "I believe, to his friends and associates, he was a very close person. To the poor slobs like me, he was a guy you didn't get across. He was a strong leader."

Born in a poor Johannesburg suburb to Russian Jewish immigrants, Solomon Kerzner was the youngest of four children. A welterweight boxing champion at university, he got a degree in chartered accountancy and set up with a top Durban practice. Hospitality was familiar to him. His parents owned a boarding house in Durban. Backed by some of his accountancy clients, he progressed from buying Durban's Palace Hotel to taking an undeveloped site and turning it ino a five-star resort hotel, the Beverly Hills. When it opened in 1964, resort hotels, equipped with an array of sports, entertainment, bars, restaurants and other leisurely pursuits, were a rarity around the world, let alone in South Africa. "I built South Africa's first five-star hotel," Kerzner recalls.

Kerzner's trick then was the same as it is today - to offer people the sort of hospitality they have never experienced before. What has changed is that people didn't expect it back then, and now they do. "If you look at the mid-1960s in South Africa, the expectation was governed by what was on offer. It was nothing like what has evolved over the years. It's natural that people's expectations of a great boutique hotel operation is quite different today than it was 30 or 40 years ago. When you compare the first Walt Disney theme park with what it has become today, it is extraordinary the way it has grown. The expectations are quite different."

Kerzner's ambitions grew. He built a 450-room beach hotel, then found a partner in South African Breweries to create the Southern Sun Hotel luxury chain. He ventured outside South Africa to open Le Saint Geran on Mauritius, the first of what was to become his One&Only luxury hotels brand. But it was back in his homeland that Kerzner really made his international reputation - and his fortune - with his four-hotel resort, Sun City.

Chris Brammer worked for Kerzner's Sun International in the late 1980s. One of his jobs was to persuade customers from the South African suburbs to visit Sun City, which was located some 300km away in Bophuthatswana, one of the 10 bantustans or black tribal reserves set up by the South African apartheid regime. While gambling was banned in South Africa, it was permissible in these homelands, and Kerzner obtained a gaming licence; soon South Africans were enjoying hedonistic weekends and holidays on an unprecedented scale.

Sun City hosted international artists in a 6,000-seater super bowl; golf courses attracted the world's best players; and Miss World was crowned there - yet many criticised this as giving succour to apartheid. Topless dancers and X-rated cinemas were standard, though Brammer says tales of prostitution are false.

Kerzner stamped his mark on the resort with fantastical hotel structures such as the Lost City, surrounded by a 25-acre botanical jungle, and the Cascades. He built water rides and attractions, something that would feature in many of his future projects. And, of course, the casino was centre-stage. "Sun International was the largest self-governing gaming company in the world," says Brammer. "There was no gaming board. The rules we lived by were our own rules."

Brammer recalls a television ad for the resort. A Boer farmer arrives at Sun City on a cart pulled by four oxen. He wins the jackpot, there are coins pouring all over the place, and his prize is a Lamborghini. The next shot is of the farmer sitting in his new car, being escorted out of the door, but, as the camera pulls back we see that the Lamborghini is on the cart, being pulled by the oxen - the farmer can't drive.

Sun International operated under extremely exacting standards. Pouring beer into a glass was taught using a four-page manual. Kerzner set up lavish conferences for his general managers to show them what was possible with a bit of imagination. But the Kerzner obsession for detail was always rammed home. Brammer remembers him opening one conference after a very fine lunch out by the pool at Sun City. "How did you enjoy your lunch?" Kerzner asked.

"Very nice," the general managers said.

"Let me tell you something," Kerzner replied in a rage. "The hot dishes were shit, the desserts were shit, the people responsible for the lunch are shit."

Sun International demanded a doubling of revenue every three years. Kerzner gave his executives excellent salaries and unlimited expense accounts. He gave them the resources to build golf courses with the finest grass from Australia, a fantasy of King Solomon's Mines, man-made lakes and wildlife parks. These standards are reflected in today's practices, and you don't have to look far anywhere in the industry to find someone who used to work for Sun International, Brammer says.

The Sun King, as Kerzner was known, ran into political difficulties. South Africa's post-apartheid justice ministry alleged he had bribed his way to gaming licences by paying substantial sums to tribal leaders in Bophuthatswana and Transkei, another homeland where he won exclusive gaming rights. Kerzner would later admit to one payment involving the Transkei gaming rights, but the case against him ran into the sand.

Kerzner's defence has always rested on two claims. The first was that in the unregulated climate of South Africa's black homelands - set up by the Pretorian regime to stop blacks seeking work in the white cities - that was the way business was done. The second was that Sun City created an industry that gave employment and training to uneducated black South Africans. Nelson Mandela couldn't shower enough praise on Kerzner. If, to the outside world, he was "the sultan of sin", to Mandela he was "by far the greatest entrepreneur in the tourism industry", coming from a family "not only interested in their own enrichment, but willing to give back to their country". When Kerzner handed over a 20m rand cheque for a new hotel school in Johannesburg in 2003, Mandela told his audience: "The Kerzners have... boosted the South African economy with their entrepreneurship."

Kerzner's narrow escape from the South African judiciary did not hamper approval from other gaming regulators. New Jersey gave him a gaming licence in 1997 after concluding that the Transkei payment was "an aberration" in a previous decade. The consent of this and other regulators allowed Kerzner to turn his attention to international developments. Post-apartheid South Africa clawed back some of his -gaming licences, and he sold most of his South African interests. His next move was into the US market, buying up Paradise Island in the Bahamas in 1996. The deal was closed by Kerzner's son, Butch, who was making his way up the business in a quiet but assured manner.

Colleagues talk about Butch Kerzner in loving, reverential tones. They refer to his people skills and his way of making things happen. "He was a total package," says Steve Ross, who joined the board of Kerzner International, through Butch Kerzner. "If you talk to people on Paradise Island, they all remember Butch. His presence around that whole company, you don't replace that overnight. The company is doing fine, but it still feels the loss of Butch."

Howard Brett "Butch" Kerzner was the antithesis of his father. Not for him the party-going celebrity-filled lifestyle. Neither did he share his father's gruff, intemperate manner. According to colleagues, Butch was the family man: clean-living, passionate and driven about his work. He was polite and charismatic and his private interests included rock-climbing.

Butch was the only one of Kerzner's five children to follow his father into the business. He studied economics at Stanford University, worked on Wall Street and joined Sun International in 1992. He completed the £125m purchase of Paradise Island, dealing with the Mohegan native Americans over the Mohegan Sun gaming development in Connecticut, and negotiated with both Greenwich and Manchester city councils over the rights to run the UK's first super-casino.

"When Butch became CEO, he had a great deal of respect for Sol and his opinions," says Paul O'Neill, one-time president of Kerzner International Bahamas in 2006. "Sol really was a consigliore. He was an adviser to a large degree. They spoke all the time, and they built great relationships with folks they did business with.

"Butch wasn't someone who sought the spotlight, he was very much the businessman, the family man. Sol was a little bit more comfortable on the dance floor, if you know what I mean." Butch's stand-out moment was taking the company private last year, in a $3.8bn buyout which increased the family's stake from 11 per cent to 25 per cent. Yet the family still ended up making more than $400m from the transaction.

"From Butch's standpoint, he wanted a bigger interest in the business; he saw that the company wasn't being valued correctly," Ross says. "He saw the opportunities of being private."

While Kerzner had a vision for resorts and strong attention to detail, his son had strong business nous and deal-making acumen. It was, says Ross, "a tremendous double act". Investors who supported the company going private had the utmost respect for Sol Kerzner and his capabilities, but didn't want to build the company around one person.

Butch Kerzner built a partnership with the Dubai royal family that secured its investment in Kerzner International and was instrumental in securing land for a -second Atlantis resort on the Palm Dubai, which opens next year. He was negotiating with the Singapore government over a casino licence, building the One&Only brand and scouring the world for other development projects.

It suited father and son. Kerzner senior got time to work on The Cove development and think up new visions, and his son's business reputation grew. The succession of the Kerzner empire was taking a logical and compelling route.

Butch Kerzner died on October 11 2006 in a helicopter crash while overlooking potential development sites in the Dominican Republic. "Obviously it's a huge setback in my life. Life wasn't quite the same," says Kerzner, who speaks with affection for his son, demonstrating respect for him as a business partner and pride in seeing the boy make the grade in the same profession.

"I spoke to Sol very soon after it occurred, probably minutes," says O'Neill. "He wanted my wife, Judy, and I to be in the Bahamas, with Vanessa, Butch's wife." O'Neill was five months retired as president of the Bahamas operation. He had been planning to spend more time with his grandchildren and to travel with his wife. "It's a 24/7 business. We just decided that we wanted to take that break."

O'Neill got another call later that evening. It was Kerzner again. "He started talking about the organisation's needs. He wanted me to come back to take an operating role. I immediately agreed to do that, and I was on a plane the next day."

Kerzner arranged a board meeting by conference call. "It was held in a state of shock," recalls Ross. "I remember Sol picking up and saying: 'We've got to do this and this.' You saw the strength of Sol." One of the things someone had to do was make the licence-bid presentation to the Singapore government. Kerzner decided he would do it himself. "Butch was buried on a Friday afternoon, and Sol left for Singapore on the Saturday or Sunday," says Ross. With so little time, the presentation, as put together by Butch Kerzner, was left untouched. "It must have been very tough for Sol. The presentation had Butch speaking on a video tape. You can only imagine what that would have been like for Sol watching it. It had to be unbelievable. I heard he was very strong." Kerzner International lost the Singapore licence contract.

"Remarkably well," is how Sol Kerzner describes himself at the moment. "So far, so good." Eight months after Butch's death, he is preparing his next project. The Atlantis Palm in Dubai opens next year and Kerzner will want to be on site getting every last detail right. "I feel very confident it is going to work like a charm," he says.

One challenge that he has yet to scale is the European market. So far it has eluded him, and Dubai will, he hopes, draw customers from the Continent. He also thinks UK visitors will take to The Cove in a way they would not the main Atlantis complex. "We have never until now tried to penetrate that market place," he admits.

Kerzner has also invested some time in getting into prime position for the UK's casino expansion. When the government announced plans for Las Vegas-style casinos, Kerzner's team built relations with the local authorities bidding to run the new licences. When the government scaled down the ambitions, most of the US-based operators picked up their chips and left the table. Kerzner is the last one sitting, having secured operating rights with Manchester, the site for the UK's first super-casino.

Plenty of hurdles stand in the way, not least parliament's unhappiness at the outcome and Manchester's promise to reopen the selection process for the casino's operator. The controversy has brought some unwanted publicity for Kerzner as the UK media portrayed the would-be operator of Manchester as "a vulgar tycoon" with "a shady past". Kerzner admits to feeling sore about the comments. But after a lifetime in the spotlight, another bout of unwanted publicity is hardly likely to deflect him.

More exacting is the long-term succession issue. In the medium term, Kerzner is in the driving seat again, the company's chief executive. As well as bringing Paul O'Neill out of retirement, he also persuaded Bob Cotter, veteran hotels executive who became chief operating officer at Starwood Hotels, to cancel his retirement to come and work his marketing skills on the business.

Kerzner has about a further 150 acres on Paradise Island for a final phase of Atlantis. Once revenues and occupancy rates are firmly established at The Cove, he will turn his attention to how that final phase will work. Cotter sees a healthy pipeline in the upmarket One&Only brand. Dubai will also attract high-end customers. "I think we will likely be at the higher end of the leisure hospitality industry than we have been," Cotter says.

As for an Atlantis elsewhere in the world, he says, you might not find a site like Paradise Island again.

Copyright The Financial Times Limited 2007

FT: A Study in Silence

Many students continued to work for the reformist movement, helping it gain control of municipal councils and win the parliamentary elections in 2000. But with the hardliners relentlessly fighting back, more powerful than the parliament or the presidency, the reformists' dreams went unfulfilled. Their agenda, heavily focused on political change, frustrated many Iranians, who were mainly looking for a better life in a country that has the second-highest oil reserves in the world, but where young people cannot find work after graduation.

It was not surprising that the combination of repression and disillusionment allowed the conservatives eventually to make a political comeback - culminating in the 2005 election of Mahmoud Ahmadi-Nejad, the maverick president backed by radical elements in the regime, who came out of nowhere to win popular support with his simple promise to bring the oil money to ordinary people's homes.

The students I meet seem more concerned about jobs and marriage than revolution, or even reform. Marzieh, 22, is covered from head to toe in a black chador, though her trendy black sunglasses give away a more fashionable side. "What everyone is thinking about now is getting a job," she says. "Politics is not a real concern, though this is a politicised university and everyone knows what's happening in the country. In the past the Islamic Associations were the strongest at the university, but now there isn't a single strong body. It's nothing like the past. That kind of excitement is gone."

Some of the former student leaders are thinking hard about strategy. Momeni, for example, says the way to regain students' trust is to take up the causes that directly affect their lives, rather than trying to sell them unattainable dreams. "In the past we attached great importance to freedom and democracy, and during the last eight years that was part of the discourse of society. For the new generation, individuality, personal freedom, jobs, are more important."
==

A Study in Silence

After a clamp-down in the 1990s, is there any life left in Iran's once-rebellious student body?

By Roula Khalaf

Published: June 23 2007 03:00 | Last updated: June 23 2007 03:00

Mehdi Amini-Zadeh is a "starred" student. A 28-year-old with a studious look, he won a place last year to do a masters degree in political science at Mofid University in Qom, Iran's holy city. But when he went to register the day before classes began, he was told he had been refused entry to his course. "They said the order had come from the intelligence ministry. I later realised that another 21 students in Iran had the same problem. They were all 'starred'."

We are drinking tea in a small Tehran cafe where the mugs are decorated with red hearts. Under dim lights, surrounded by shelves stacked with books and a bar that serves everything but alcohol, Amini-Zadeh tells me of his tireless lobbying to get off the student blacklist. He has three stars, the highest number. He has met politicians and written letters, so far without success.

What lies behind his misfortune is his background as a student leader. In the late 1990s, as a civil engineering undergraduate, he was a member of the general council of the Office to Foster Unity, the umbrella organisation of the mainstream Islamic Associations, which helped stage the student protests that rocked Iran and turned into the worst unrest since the 1979 Islamic revolution that drove the Shah from power.

The July 1999 turmoil started as a peaceful Tehran University rally against the closure of a reformist newspaper, Salam, and proposed restrictive press laws. But a brutal reaction by police and armed vigilantes loyal to hardline elements of the regime set off several days of rioting that spread from Tehran to other major cities.

Amini-Zadeh says it was at dawn, after the original protest, that the police broke down doors, destroyed computers and beat up students in the Tehran University dormitories. There was a demonstration against the dormitory attack, followed by continuing rioting and protests. The troubles ended after six days but they took with them much of the youths' rebellious flame.

Student leaders now look back at the 1999 unrest as a turning point. For them, it was a demonstration of the hardliners' fierce determination to subdue the reform movement led by Mohammad Khatami, the gentle, smiling cleric the students helped elect as president in 1997. It was also the moment when idealistic activists like Amini-Zadeh started to lose faith in Khatami's ability to deliver on his cherished idea of reconciling the Islamic Republic with democracy.

Khatami once called the student movement "a rising star in the dead of night". But his muted support for their demands shattered their hopes, making them question whether he had the mettle to implement political reforms. Still more depressingly, it made them ask whether Iran's parallel system of elected and even more powerful unelected institutions, all answering to a supreme leader, Ayatollah Ali Khamenei, could ever be reformed from within.

Many students continued to work for the reformist movement, helping it gain control of municipal councils and win the parliamentary elections in 2000. But with the hardliners relentlessly fighting back, more powerful than the parliament or the presidency, the reformists' dreams went unfulfilled. Their agenda, heavily focused on political change, frustrated many Iranians, who were mainly looking for a better life in a country that has the second-highest oil reserves in the world, but where young people cannot find work after graduation.

It was not surprising that the combination of repression and disillusionment allowed the conservatives eventually to make a political comeback - culminating in the 2005 election of Mahmoud Ahmadi-Nejad, the maverick president backed by radical elements in the regime, who came out of nowhere to win popular support with his simple promise to bring the oil money to ordinary people's homes.

It is sometimes difficult for outsiders to understand the power of Iran's students - or why the Iranian regime is so wary of them. Students helped overthrow the Shah and then played the leading role in the US embassy hostage crisis. In what Iranians refer to as their own subsequent "cultural revolution", universities were closed down for three years while "cultural imperialism" was purged and replaced with Islamic teachings and thousands of new textbooks.

The "cultural revolution" was imposed with the help of the Islamic Associations of students, a collection of groups in various universities led by religious zealots. In time, disenchanted with the revolution, they evolved into the reformist student movement of the 1990s that spawned leaders such as Amini-Zadeh and helped bring Khatami to power.

Today the student movement is exhausted and in disarray. But not even Ahmadi-Nejad can ignore them. Students staged a noisy demonstration against him when he visited Tehran's Amir Kabir University of Technology in December. Since May, eight students from the university have been arrested, following publication of a cartoon ridiculing Ayatollah Khamenei and other articles that were seen as insulting to Shia clerics. The students say they are innocent and are being set up by their opponents, in retaliation for the protests against the president's visit. The country's population is young - more than half are under 25 and the voting age is 16 - and no one can forget how often students have upended the status quo.

When Ahmadi-Nejad took the reins of government in the summer of 2005, many Iranians feared he would suppress dissent and quickly reverse the social gains made under Khatami. Politicians today say the political atmosphere is "heavier", open criticism of the regime's foreign policy can be costly and the local press applies a stronger dose of self-censorship. Recently, the government has arrested Iranian-Americans working for US institutes, claiming they are part of an American plan for "soft revolution".

There are regular, almost seasonal, attacks on women who allow their veils to slip back on their hair. But, fearful of a youth backlash, Ahmadi-Nejad has largely left the social freedoms achieved under Khatami untouched. So in spite of the crackdowns, women still do allow their headscarves to slip and wear short, tight coats. You can spot young couples holding hands in public and there is none of the sexual segregation imposed in Saudi Arabia.

But the government remains particularly nervous about students. Universities, while quiet, are closely watched. Organisations labelled "radical" by the regime are not allowed to function. Students suspected of troublemaking are sent to university disciplinary committees. Rallies are discouraged. For the first time, Tehran University has a cleric for a dean, and some reform- minded professors who might have stayed long past the retirement age under the Khatami presidency are believed to have been quickly retired over the past year.

"The security forces are very sensitive about networking and organising - this is their Achilles' heel," Abdollah Momeni, another former student leader, told me. Still active in the graduate branch of the Office to Foster Unity, Momeni is a passionate 30-year-old, a fast talker with an often sarcastic, defiant tone. A few months ago at Tehran airport, on his way to the Massachusetts Institute of Technology to deliver a paper on the future of the student movement, he was stopped by what he says was an intelligence agent, and told to turn back. A conservative website later thanked the intelligence ministry for blocking his trip, and accused MIT of plotting to teach Iranians how to stage an east European-style "velvet revolution".

"The student movement is one of the forces that can make the regime vulnerable so there are high restrictions on students. Old vetting procedures are coming back, there are closures of publications, limits on who can continue his education," he says. "But the risks involved in political activities have also increased and that leads to less activism. Students supported an idea called reform and that idea has failed. So they are disillusioned. And there is confusion after the failure, confusion about alternatives."

To get a better sense of students' mood, I make my way to the main campus of Tehran University, known as the "mother university" and home to 30,000 students. It appears, at first sight, no different from a US university, except that what looks like a sports ground turns out to be a giant open space for praying.

On the wall of the dentistry faculty, I notice a painting depicting a young man with a machine gun, a martyr in the 1980s Iran-Iraq war. "Do not permit the forerunners of jihad and martyrdom to be forgotten in the labyrinth of everyday life," reads a quote from Ayatollah Ruhollah Khomeini, the revered father of the Islamic revolution.

The students I meet seem more concerned about jobs and marriage than revolution, or even reform. Marzieh, 22, is covered from head to toe in a black chador, though her trendy black sunglasses give away a more fashionable side. "What everyone is thinking about now is getting a job," she says. "Politics is not a real concern, though this is a politicised university and everyone knows what's happening in the country. In the past the Islamic Associations were the strongest at the university, but now there isn't a single strong body. It's nothing like the past. That kind of excitement is gone."

At the faculty of law and political science, I meet Amir, a 27- year-old who looks out of place with his light hair and western preppy look. He tells me he's preparing to start a doctoral programme, and that he's been around Tehran University since the late 1990s. He was at the dormitory in 1999 and remembers the mayhem, the beatings, and the massive crowds that later poured on to the streets from the university gates.

"Even Khatami whom we loved so much wasn't able to defend our demands at that time. Every day we saw intellectuals and students taken to jail and there was no one to stand up for them. So gradually we became disillusioned, we withdrew, and the regime used the opportunity to dominate."

A leader of an Islamic Association at the university was suspended recently and others were given warnings, he says. "No one says you can't have political activities, but students are warned it's not desirable, or they are summoned by disciplinary committees." He resigned from his Islamic Association recently, convinced there was no future for them in today's Iran. "Now I prefer to work for non- governmental organisations outside the university, especially through the internet, and I have my own blog."

A powerful student force at Iran's universities these days, says Amir, is the Basij Islamic militia. Created by Khomeini and since then under the command of the elite Revolutionary Guards, the Basij helped suppress students during the Khatami years. In 2005, they voted for Ahmadi-Nejad. But with their favoured leaders in full control, even the Basijis have mellowed. "In the late 1990s the university was always the scene of conflict between the Basij and the Islamic Associations. But now there are no real activities for the Basij to oppose."

Professors, too, say they have noticed the change in Basij behaviour. "They don't behave like a battalion, they have roundtables and conferences, they invite me to speak, and they look tolerant," says Hamid Reza Jalaei-Pour, a Tehran University sociology professor who is writing a book on the student movement. In his apartment, he tells me that former student leaders like Amini-Zadeh and Momeni are now a tiny, quirky minority out of touch with the mainstream.

"They talk together but they don't have an office because the conservatives won't let them use student facilities any more." But he warns me not to dismiss Iran's student movement. Though most of the Islamic Associations called for a boycott of the 2005 presidential election, they told students to vote in the more recent local council polls, in which the reformists did well and the president's allies were beaten.

How far can the reformist students go? "The future of the student movement depends on the behaviour of the state. You can't have a new movement emerge if the state is controlling everything. Movements also develop when the political price is low. So either a democratic government allows it or the government has to collapse. Otherwise the price is too high." Part of the dilemma, explains Jalaei-Pour, is that women now make up 62 per cent of the university student body. "Women are not radical in their politics. They are more conservative, they study and they go home."

Iran's student movement occasionally still manages to cause a stir. Students talk with excitement about the protest against Ahmadi- Nejad when he visited Amir Kabir University of Technology. The most radical of Tehran's universities, Amir Kabir was never likely to greet the president with open arms, and his insistence on giving a speech there enraged students.

Though the visit was carefully organised and the hall packed with loyal Basij students, the president's young critics forced their way in, chanting "down with the dictator" and "forget the Holocaust and think about us". (Ahmadi-Nejad has, notoriously, questioned whether the Holocaust took place.) A few even dared to burn his portrait.

I visit Amir Kabir on a cool winter afternoon in Tehran - and I immediately feel the tension. A guard tells me to wait for an escort. A bearded minder arrives more than half an hour later. As a colleague and I walk in, a student points to our escort and quips: "Don't lie to them."

The minder is polite and happy to take me to the Basij office, where two students, who say they are "non-active" members of the organisation, agree to speak, but only outside the building. Mohammad, an aerospace engineering student, puts on a brave face when I ask about the president's visit. "We feel proud that our president came to a more politically oriented university and was willing to answer questions. Students who were critical had a chance to ask questions. He was unhappy that the students behaved in such a way that satisfied people hostile to this country. But he later invited representatives of students to go to his office and have a private meeting with him, though they refused. He also said all students who criticised him were like his children. Anyway, criticism is good."

I ask the minder to take me to the office of the Islamic Association, which I suspect organised the protest. He says the office of one Islamic Association is closed for the day; the other has been closed permanently.

I stop to chat to a group of 20-year-old students who giggle when I ask whether they had attended the president's speech. "It was excellent," says one of the girls. "We weren't let in at first. The Basij students from other universities had filled the space. But we forced ourselves in, we were naughty and the president tolerated us. We were chanting 'death to the dictator' and the others [the Basij] were chanting 'Ahmadi-Nejad we love you'. It was a battle of slogans."

A colleague contacts some of the Amir Kabir student leaders by telephone and we meet at a restaurant nearby. Ali Azizi, a tall, composed engineering student, explains that the Islamic Association he represents had an election last year but the university rejected the result, declared the organisation illegal and bulldozed its building. "We protested. We gathered students around us. To stop us, the university stopped me and two others from continuing our education for one term, after a disciplinary committee summoned us and accused us of staging the unrest."

He and two of his friends say it was their association that organised the protest against Ahmadi-Nejad, an event they consider a highlight in their student struggle. "Ahmadi-Nejad was trying to show that the protest wasn't serious and that he could handle it, and there were many more Basij students in the hall than critics of the president. But he couldn't talk for five minutes without being interrupted. And he couldn't do anything to us afterwards because Iran is under international pressure," says Ali.

Amini-Zadeh, the "starred" former student leader, tells me such protests show students still have a voice. "It's the students who raise violations of human rights and defend the rights of political prisoners. Ahmadi-Nejad was told 'no' in the most blatant way and it was the first direct challenge to him." But Amini-Zadeh acknowledges that students need a new cause. "During the Khatami period the strategy was clear: you have to win elections and try to reform parts of the system. But that turned into a failed strategy. The problem we have now is that we don't have an alternative. Ahmadi-Nejad is rejected at Amir Kabir but no one says what the alternative is. It's not just the problem of the student movement but the problem of the whole political system."

Some of the former student leaders are thinking hard about strategy. Momeni, for example, says the way to regain students' trust is to take up the causes that directly affect their lives, rather than trying to sell them unattainable dreams. "In the past we attached great importance to freedom and democracy, and during the last eight years that was part of the discourse of society. For the new generation, individuality, personal freedom, jobs, are more important."

Roula Khalaf is the FT's Middle East editor.

Copyright The Financial Times Limited 2007

The Reluctant Dragon

The Reluctant Dragon

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For the 1941 Disney film, see The Reluctant Dragon (film).

The Reluctant Dragon is an 1898 children's story by Kenneth Grahame (originally published as a chapter in his book Dream Days), which served as the key element to the 1941 feature film with the same name from Walt Disney Productions.

In Grahame's story, a young boy discovers an erudite, mushroom-loving dragon living in the Downs above his home. The two become friends, but soon afterwards the dragon is discovered by the townsfolk, who send for St George to rid them of it. St George, by this time, is quite elderly and has little interest in slaying dragons, though he resolves to do it as it is his duty. The boy introduces St George to the dragon, and the two decide that it would be better for them not to fight. Eventually, they decide to stage a fake joust between the two combatants. The dragon appears to have died, and the townsfolk rejoice (though not all of them, as some had placed bets on the dragon winning). St George then reveals that the dragon had not died, and assures the townsfolk that he is not dangerous. The dragon is then accepted by the people, and composes a valedictory poem.

"Here's a dragon of taste, charm and wit,

Who's been round the world quite a bit,

Dare I state off the cuff, I have travelled enough,

There's a place I've found friends—this is it.

In conclusion I'd just like to say,

That's it's been a remarkable day,

You've all been so kind, I'm sure you won't mind,

If I tell you I think I might stay..."

http://en.wikipedia.org/wiki/The_Reluctant_Dragon

                                                                                                                                                            

		The Reluctant Dragon and The Wind in the Willows Presented by Singapore Lyric Opera

                                                       

My Neighbor Totoro (1993) - Roger Ebert

Here is a children's film made for the world we should live in, rather than the one we occupy. A film with no villains. No fight scenes. No evil adults. No fighting between the two kids. No scary monsters. No darkness before the dawn. A world that is benign. A world where if you meet a strange towering creature in the forest, you curl up on its tummy and have a nap.

Miyazaki's films are above all visually enchanting, using a watercolor look for the backgrounds and working within the distinctive Japanese anime tradition of characters with big round eyes and mouths that can be as small as a dot or as big as a cavern. They also have an unforced realism in the way they notice details; early in ''Totoro,'' for example, the children look at a little waterfall near their home, and there on the bottom, unremarked, is a bottle someone threw into the stream.

''My Neighbor Totoro'' is based on experience, situation and exploration--not on conflict and threat.

Notice how calmly and positively the scene has been handled, with the night and the forest treated as a situation, not a threat. The movie requires no villains. I am reminded that ''Winnie the Pooh'' also originally had no evil characters--but that in its new American version evil weasels have been written into A. A. Milne's benign world.

There are two family emergencies: A visit to the hospital to visit their mother, who wants to hear all about their new house, and another occasion when Setsuki gets a call from the doctor and needs to contact her father in the city. In both scenes, the mother's illness is treated as a fact of life, not as a tragedy sure to lead to doom.

It is also rich with human comedy in the way it observes the two remarkably convincing, lifelike little girls (I speak of their personalities, not their appearance). It is awe-inspiring in the scenes involving the totoro, and enchanting in the scenes with the Cat Bus. It is a little sad, a little scary, a little surprising and a little informative, just like life itself. It depends on a situation instead of a plot, and suggests that the wonder of life and the resources of imagination supply all the adventure you need.

==

My Neighbor Totoro  (1993)

 

Roger Ebert / December 23, 2001  

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Here is a children's film made for the world we should live in, rather than the one we occupy. A film with no villains. No fight scenes. No evil adults. No fighting between the two kids. No scary monsters. No darkness before the dawn. A world that is benign. A world where if you meet a strange towering creature in the forest, you curl up on its tummy and have a nap.

''My Neighbor Totoro'' has become one of the most beloved of all family films without ever having been much promoted or advertised. It's a perennial best seller on video. On the Internet Movie Database, it's voted the fifth best family film of all time, right behind ''Toy Story 2'' and ahead of ''Shrek.'' The new Anime Encyclopedia calls it the best Japanese animated film ever made. Whenever I watch it, I smile, and smile, and smile.

This is one of the lovingly hand-crafted works of Hayao Miyazaki, often called the greatest of the Japanese animators, although his colleague at the Ghibli Studios, Isao Takahata, may be his equal. Remarkable that ''Totoro'' and Takahata's ''The Grave of the Fireflies,'' now both in my Great Movies selection, were released on the same double bill in 1988. Miyazaki has not until very recently used computers to help animate his films; they are drawn a frame at a time, the classic way, with the master himself contributing tens of thousands of the frames.

Animation is big business in Japan, commanding up to a quarter of the box office some years. Miyazaki is the ''Japanese Disney,'' it's said, although that is a little unfair, since Walt Disney was more producer and visionary than animator, and Miyazaki rolls up his sleeves and draws his films himself. His ''Princess Mononoke'' (1999) outgrossed ''Titanic'' in Japan, and his newest film, ''Spirited Away,'' outgrossed ''Mononoke'' when it was released in July 2001. Of his nine other major films, those best known in the U.S. are ''Kiki's Delivery Service'' (1989), ''Castle in the Sky'' (1986), ''Warriors of the Wind'' (1984) and ''The Castle of Cagliostro'' (1979).

Miyazaki's films are above all visually enchanting, using a watercolor look for the backgrounds and working within the distinctive Japanese anime tradition of characters with big round eyes and mouths that can be as small as a dot or as big as a cavern. They also have an unforced realism in the way they notice details; early in ''Totoro,'' for example, the children look at a little waterfall near their home, and there on the bottom, unremarked, is a bottle someone threw into the stream.

The movie tells the story of two young sisters, Satsuki and Mei Kusakabe. As the story opens, their father is driving them to their new house, near a vast forest. Their mother, who is sick, has been moved to a hospital in this district. Now think about that. The film is about two girls, not two boys or a boy and a girl, as all American animated films would be. It has a strong and loving father, in contrast to the recent Hollywood fondness for bad or absent fathers. Their mother is ill; does illness exist in American animation?

When they ask a neighbor boy how to find their new house, we see, but they don't, that he makes a face. Later he tells them it is haunted. But not haunted in the American sense, with ghosts or fearsome creatures. When Mei and Satsuki let light into the gloom, they get just a glimpse of little black fuzzy dots scurrying to safety. ''Probably just dust bunnies,'' says their father, but there is an old nanny who has been hired to look after them, and she confides that they are ''soot sprites,'' which like abandoned houses, and will pack up and leave when they hear the sound of laughter.

Consider the way the children first approach the house. It has a pillar on its porch that is almost rotted through, and they gingerly push it a little, back and forth, showing how precariously it holds up the roof. But it does hold up the roof, and we avoid the American cliche of a loud and sensational collapse, with everyone scurrying to safety. When they peek into the house and explore the attic, it's with a certain scariness--but they disperse it by throwing open windows and waving to their father from the upper floor.

And consider that the father calmly accepts their report of mysterious creatures. Do sprites and totoros exist? They certainly do in the minds of the girls. So do other wonderful creatures, such as the Cat Bus, which scurries through the forest on eight quick paws, its big eyes working as headlights.

''While it's a little hard to tell whether the adults really believe in them,'' writes the critic Robert Plamondon, ''not once does Miyazaki trot out the hoary children's literature chestnut of 'the adults think I'm a liar, so I'm going to have to save the world by myself.' This accepting attitude towards traditional Japanese spirit-creatures may well represent an interesting difference between our two cultures.''

''My Neighbor Totoro'' is based on experience, situation and exploration--not on conflict and threat. This becomes clear in the lovely extended sequences involving totoros--which are not mythological Japanese forest creatures, but were actually invented by Miyazaki just for this movie.

Little Mei finds the first baby totoro, which looks like a bunny, scurrying around their yard, and follows it into the forest. Her father, home alone and absorbed in his work, doesn't notice her absence. The baby leads her down a leafy green tunnel and then there's a soft landing on the stomach of a vast slumbering creature. Miyazaki doesn't exploit cliches about the dark and fearsome forest; when Setsuki and her father go looking for Mei, they find her without much trouble--sleeping on the ground, for the totoro has disappeared.

Later, the girls go to meet their father's bus. But the hour grows late and the woods grow dark. Silently, casually, the giant totoro joins them at the bus stop, standing protectively to one side like an imaginary friend. It begins to rain. The girls have umbrellas, and give one to the totoro, who is delighted by the raindrops on the umbrella, and jumps up and down to shake loose a cascade of drops from the trees. Then the bus arrives. Notice how calmly and positively the scene has been handled, with the night and the forest treated as a situation, not a threat. The movie requires no villains. I am reminded that ''Winnie the Pooh'' also originally had no evil characters--but that in its new American version evil weasels have been written into A. A. Milne's benign world.

There are two family emergencies: A visit to the hospital to visit their mother, who wants to hear all about their new house, and another occasion when Setsuki gets a call from the doctor and needs to contact her father in the city. In both scenes, the mother's illness is treated as a fact of life, not as a tragedy sure to lead to doom.

There is none of the kids-against-adults plotting of American films. The family is seen as a safe, comforting haven. The father is reasonable, insightful and tactful, accepts stories of strange creatures, trusts his girls, listens to explanations with an open mind. It lacks those dreary scenes where a parent misinterprets a well-meaning action and punishes it unfairly.

I'm afraid that in praising the virtues of ''My Neighbor Totoro'' I have made it sound merely good for you, but it would never have won its worldwide audience just because of its warm heart. It is also rich with human comedy in the way it observes the two remarkably convincing, lifelike little girls (I speak of their personalities, not their appearance). It is awe-inspiring in the scenes involving the totoro, and enchanting in the scenes with the Cat Bus. It is a little sad, a little scary, a little surprising and a little informative, just like life itself. It depends on a situation instead of a plot, and suggests that the wonder of life and the resources of imagination supply all the adventure you need.

==

FT: The grail seeker who came good

The grail seeker who came good

By James Wilson and Chris Nuttall

Published: June 19 2007 17:26 | Last updated: June 19 2007 17:26

Transitive, a young British software company, was born to bridge the most daunting of gaps. In its six-year existence it has handled two big divides with assurance: first, it made a quantum leap to enable applications to run on different computer systems; and second, it crossed the gulf between Silicon Valley and its European home.

In Transitive’s offices in Manchester, dozens of computer scientists work on technology that allows applications written for one operating system and processor to run on a different system and processor, without the expense and complication of software rewrites. Eight time zones away in California, Transitive’s chief executive and marketing staff are finding growing enthusiasm for their product from some of the biggest names in computing.

Steve Jobs, Apple’s chief executive, renamed Transitive’s software Rosetta, after the Rosetta Stone – the key to translating the untranslatable. His company gave Transitive its breakthrough two years ago when its software paved the way for programs written for Apple’s PowerPC-based computers to run on Intel-based Macs, allowing Apple to switch the processors it used with relative ease. Jobs praised the smooth switchover and more than 6m Macs now use Transitive’s technology. Hewlett-Packard, IBM, Intel and Sun Microsystems have gone on to become customers and partners.

Bob Wiederhold, Transitive’s chief executive, says the products decouple software applications from computer hardware and are “changing people’s expectations about the useful life of their software”. Alasdair Rawsthorne, the company’s founder and chief technology officer, says the company’s deal with IBM, in particular, is proof of the company’s prospects. “We have a great beachhead in our potential markets,” he says.

Transitive’s story is instructive for British start-ups that may feel Silicon Valley is beyond their reach or an unnecessary complication. Mr Rawsthorne, who started the company based on a research project at Manchester University, is clear that Transitive needed a US presence from its earliest days. With support from Pond Venture Partners, one of its first venture capital backers along with Manchester Technology Fund, Transitive straddled the Atlantic, getting closer to clients in the US while retaining a talented group of software engineers in the UK.

Richard Irving, managing partner at Pond – named for its transatlantic outlook – says: “There is plenty of great technology in Europe but unfortunately most of the venture capital funds [there] are staffed with people that don’t understand technology and consequently can’t appraise the company until it’s become well established, so when the company is at the seed stage it makes it pretty unmarketable to the European VC.

“We met Transitive when they were a bunch of academics and post-grad students . . . they had phenomenal technology but no idea how to write a business plan. We looked into it and of course wanted to invest.”

Mr Irving also makes the point that US companies tend to be earlier adopters of innovation and are consequently better customers. Mr Rawsthorne says: “The openness to new technology of the big tech companies is much more apparent in the US than in Europe. It is something about the US can-do culture. In Europe companies always come up with 100 different reasons why they shouldn’t do something.”

Transitive’s revenues in 2006 were $5.6m, up from $2.4m in 2005. It has about 15 people in Los Gatos, including Mr Wiederhold, and 85 in Manchester, including Mr Rawsthorne. The far-flung organisation has its advantages, says Mr Rawsthorne: software engineers in the UK can get in a full day’s work before briefing marketing staff in the US at the start of their working day.

Mr Irving says: “You have to get comfortable with communicating across a few thousand miles, and Transitive have been fantastic at that: they’ve never had the problem of one location pointing the finger at another.”

For Mr Rawsthorne, Transitive’s development meant deciding to stand aside from the leadership of the company and welcome an experienced chief executive (Mr Wiederhold is the second in the role). He reflects: “In the very first days I might have had aspirations in that direction but I quickly got comfortable with the idea that there was a role I could play as a senior technologist, different from a CEO role where you are responsible for all the operations and all the public face.” The structure emerged in the first few months of talking to Pond, even before the spin-out.

“I have no regrets about not being the big cheese. I am quite relieved,” he says. But it is clear he feels a sense of loss as he reflects on how the company has grown.

“For the first group of people I wrote all the job offers, signed the leases and bought all the first computers on my credit card,” he says. “Now I can concentrate 100 per cent on one thing but there is still a feeling that I used to do a lot more stuff. There is a lot going on that I do not know about.”

Transitive’s plans are, like its full customer list, kept under wraps. Its future could entail a sale to a big technology company or an initial public offering. But with its technology working on desktop computers and servers, it is eyeing other markets. These could be in handheld devices or anything with a semiconductor in its innards.

Mr Wiederhold, 47, forecasts opportunities in defence and aerospace and says Transitive’s products could also work for games consoles. “We were a little bit too late for the last cycle – Microsoft moved from an x86 to a PowerPC processor, we think we could have provided them with a great solution to running old games on the new [Xbox 360] system,” he says. “Anywhere that you have software running on one processor and you want to get it to run on another, we can dramatically cut the risks.”

Mr Rawsthorne, 54, who still does some teaching at Manchester University, says he has had “way too much fun” to end his entrepreneurial career with only one start-up under his belt.

“Eventually I want to go back to the university and do it all over again,” he says. “I am looking forward to finding an impossible problem that has not been worked to death and creating something interesting. I am looking forward to Transitive being able to do without me. I can see that it has grown up, pat it on the back and send it on its way.”

How Transitive set technology free

Transitive has found what some describe as the Holy Grail of computing.

Others have been able to write software that allows programmes designed for one computer processor and operating system to work with a different combination, but they have suffered from poor, slower-running performance.

Transitive’s QuickTransit software carries out this translation without any noticeable deterioration in performance. In many instances, the programmes run much faster as companies are trading up from older systems to faster processors in the latest hardware, while still using the same software.

The effect is to unshackle companies from legacy systems. The fear that they will have to abandon familiar programmes to upgrade to new equipment can discourage change.

Silicon Valley companies view Transitive’s software as opening up new markets. Diane Bryant, vice-president of Intel’s Server Platforms group, sees Transitive as luring companies across to using its high-end Itanium processors by making programs written for Sun’s Sparc processors and Solaris operating system run seamlessly on Itanium.

“Transitive has a great technology and we are working with them as a way of opening up the application space,” she says.

Secret ingredient: Manchester graduates

Transitive attributes much of its success to its core of Manchester computer scientists.

Alasdair Rawsthorne, who has been at the university for 30 years, founded the company with his research group of students, all but one of whom is still with the company. Now about two-thirds of Transitive’s Manchester staff are graduates from the university. Mr Rawsthorne calls it “a unique pipeline”.

“The university pours out loads of really good computer scientists who want to stay in Manchester if there is something interesting for them to do,” he says.

Transitive believes its marketing staff are best based in the US but Richard Irving, managing partner at Pond Venture Capital, one of Transitive’s investors, says: “There’s no reason to move the R&D [to California]. Quite the opposite – the University of Manchester has a great
computer science school so you are going to get the best graduates every year.”

Manchester is also a cheaper place to base staff than the US. The distance, moreover, means Transitive is relatively safe from the battles for talented staff that rumble through Silicon Valley, inflating salaries and accelerating turnover.

“If we were in Silicon Valley there would be headhunters calling our staff several times a day,” Mr Rawsthorne says.

Copyright The Financial Times Limited 2007

FT: The enduring appeal of Hong Kong as a venue for arbitration

The enduring appeal of Hong Kong as a venue for arbitration

By Peter Yuen

Published: June 20 2007 03:00 | Last updated: June 20 2007 03:00

Arbitration is the preferred method of dispute resolution for foreign investors in China. For a variety of reasons, foreign parties also prefer to arbitrate outside China.

However, the first question confronting any party wishing to arbitrate China-related disputes outside China is does Chinese law permit the parties to do so? The answer, at least for now,

is a qualified Yes.

Mainland Chinese law permits the parties to

a "foreign-related" contract to choose their method of resolving disputes. "Foreign-related" cases are those involving at least one foreign party or, if they are both Chinese parties, cases where either the facts establishing the legal relationship between the parties occurred in

a foreign country or the subject matter in dispute

is in a foreign country.

This seems straightforward enough. However, foreign investors investing in China through China-incorporated subsidiaries sometimes do not realise that disputes involving these subsidiaries on the one hand, and pure Chinese domestic entities on the other, are "domestic" disputes, meaning that the parties must resolve their disputes within China, at least if they want their awards to be enforceable there.

But what about arbitrating in Hong Kong? Is Hong Kong arbitration "foreign" or "domestic" for this purpose? Since July 1997, Hong Kong has been part of China and therefore arbitrations in Hong Kong ought not to be regarded as "foreign" arbitrations.

How the Chinese courts will deal with applications to enforce such awards remains unclear, although

I am not aware of any courts in China having refused to enforce a Hong Kong award on this basis.

What is true, however, is that an increasing number of "domestic" contracts under Chinese law (where both parties are Chinese domestic entities) are providing for arbitration

in Hong Kong.

For example, the Hong Kong International Arbitration Centre (HKIAC) was involved in 394 cases during 2006. Of those, 18 involved pure mainland parties whose arbitration clause specified Hong Kong as the place of arbitration.

This compares with 15 cases in 2005, 20 in 2004, 14 in 2003, 13 in 2002, seven in 2001 and five in 2000.

The trend contrasts with that of the Stockholm Chamber of Commerce,

the traditional choice for conducting China-related disputes, where the number of China-related cases

has fallen - from 15 in

2002 to five in 2006.

So why is Hong Kong gaining ground as a centre for arbitration for mainland contracts, even though its precise status is uncertain under mainland law?

One important factor is that Hong Kong has arbitration legislation that reflects best international arbitral practice. Hong Kong and Beijing have

also agreed on a mechanism to allow reciprocal enforcement of arbitral awards.

However, most practitioners would agree that the territory's real advantage over Stockholm

- and other European venues - is the perception that its arbitrators are

more culturally attuned to mainland business practice,together with the advantage of relatively close proximity to the Chinese parties.

There is also a readily available pool of qualified arbitration practitioners and counsel who are culturally sensitive to the needs of Chinese clients.Hong Kong has established specialist arbitration judges, and

this, coupled with the pro-arbitration attitude

of the courts, will ensure greater certainty and better judicial decisions that help facilitate the arbitration process.

Given these advantages, there is every reason to believe that Hong Kong

will continue to see an increasing number of China-related arbitrations.

The writer is a partner in Freshfields Bruckhaus Deringer's Hong Kong office

Copyright The Financial Times Limited 2007

FT: Handset outsourcing

Handset outsourcing

Published: June 19 2007 12:26 | Last updated: June 19 2007 19:48

Nokia is rightly proud of its latest handsets, those “artful fusion(s) of materials and technology”. But at least some of the glory must go to the lesser known Hon Hai, the world’s largest contract electronics maker.

Taiwan, home to the Hon Hai group, has attracted hordes of manufacturers of PCs and electronic gadgets. Cost is naturally a big factor: consultancy Visiongain believes companies can shave 10-20 per cent off materials costs, which comprise the lion’s share of the bill, and a further 5-10 per cent off labour. But there are other advantages, including expertise and speed in getting handsets to market. Making it cheaper to develop a broader range of models means being less vulnerable to flops. And manufacturers’ global reach makes them perfect partners for global players – particularly as the latter sell more into emerging markets.

Handset outsourcing continues to move further up the value chain: into design, component procurement and research and development. That partly reflects margin pressure at the big handset makers, and partly the growing competence of the manufacturers. It also illustrates the trend towards selling into emerging markets, where handsets tend to be cheaper and more readily outsourced. Visiongain estimates that almost half of all handsets will be outsourced by 2010, from 30 per cent now.

There are a few clouds on the horizon, including Taipei’s restrictions on investment in mainland China – Taiwanese manufacturers typically use factories in China to make their numbers stack up. At least there are ways around this, such as setting up subsidiaries in Hong Kong. More worrying for groups such as Nokia is the manufacturers’ push into branded goods in China. Given the latter’s efficiency and scale, they would prove formidable competitors in some of the world’s fastest growing markets. As for investors, it pays to be a geek and take a peek beneath the cover. While Nokia’s share price has risen an impressive 35 per cent in the past 12 months, Hon Hai is up 67 per cent.

Copyright The Financial Times Limited 2007

FT: Spotlight: Nguyen Minh Triet - Vietnam’s business-friendly face

Spotlight: Nguyen Minh Triet - Vietnam’s business-friendly face

By Amy Kazmin

Published: June 15 2007 18:18 | Last updated: June 15 2007 18:18

As a mathematics and political science student at the elite Saigon University in the early 1960s, Nguyen Minh Triet, the son of a farming family, was caught up in the leftist student movement, joining – in the words of his official biography – “the revolutionary base”.

For a decade after his graduation, Mr Triet was an activist in southern Vietnam with the Communist party’s youth movement, an organisation that drummed up popular support for the communist resistance to the US-backed Saigon regime. He was also sent to the battlefield in My Tho province, the site of heavy fighting between US-backed forces and Viet Cong guerrillas.

But with the communist-ruled, reunified Vietnam now focusing on “the battlefield of the market”, Mr Triet , the president, will next week make his first visit to his old war-time enemy, the US, now Vietnam’s biggest single trading partner.

Mr Triet, who became president last June, makes an appropriate emissary for the economically burgeoning “new” Vietnam, which is now capturing the imagination of many western foreign investors hungry for a piece of the action in one of Asia’s fastest-growing economies.

Charming, business-friendly and eager to project himself as responsive to the public, Mr Triet is one of the new generation of Vietnamese communist leaders who are trying to steer the country on a course of rapid economic growth and development, while ensuring that the party maintains tight control over the country’s political life.

In the 1990s, he presided over a period of spectacular industrial development in his home province. Later, as Communist party chief in Ho Chi Minh City, he earned a reputation as a corruption fighter for taking down the kingpin of the city’s criminal underworld, who had connections to several senior party officials.

“He really represents this generation of the so-called renovators,” said a western diplomat in Hanoi. “He is a good communicator, is quite modest in his attitude and has a good image in the population.”

Mr Triet gained credentials as an economic reformer in the 1990s, as chief of what is now known as Binh Duong province, then a little-developed, primarily agricultural inland area north of Ho Chi Minh City, as Saigon was renamed after the war.

While Hanoi was still agonising over issues of how much it should relax its hold over the state- controlled economy – and antagonising many investors in the process – Mr Triet laid the foundations for an economic boom in his province, opening its doors to foreign direct investment and encouraging locals to set up their own businesses.

“He was one of the main breakers of the rules – one of the main breakers of the orthodox system,” says Thomas Vallely, director of the Vietnam program at the Kennedy School for Government. “My clear impression is that he was experimenting without permission.” It was an experiment that evidently paid off. Today Binh Duong is one of the prime sites for foreign direct investment, generating a significant portion of Vietnam’s booming export industries.

In 1997, Mr Triet was moved to Ho Chi Minh City, the booming business capital, where he led a crackdown on a notorious local Mafia don, “Nam Cam,” or “Fifth Orange”, who ran brothels, gambling dens and other illegal businesses with the tacit tolerance of high-ranking government officials, including two members of the elite central committee, and lower-ranking police officers.
More than 155 people were tried in the case.

Given the Mafia don’s high-level connections, Mr Triet “really took a lot of risk in this case”, the Hanoi- based diplomat said.

As president, Mr Triet is officially the head of state but the role is largely ceremonial, compared with the more powerful roles of the prime minister, and the secretary-general of the Communist party. Yet, as part of Vietnam’s ruling “troika”, Mr Triet has ended up with at least one crucial portfolio – heading a committee overseeing reforms of the justice system, essential if Vietnam’s economy is to continue to progress.

During his first trip to the US, Mr Triet hopes to focus attention on the two countries’ soaring bilateral trade, which was valued at $7.8bn (€5.8bn, £3.96bn) in 2005, and to woo fresh foreign investment from US companies.

His itinerary includes a visit to New York where he is expected to meet the leaders of big US companies, including General Electric, Intel and American International Group.

But there is little doubt that Mr Triet will also be criticised for Vietnam’s human rights record when he meets George W. Bush, US president, and other US politicians.

In recent months, Hanoi has come under fire for a harsh crackdown on dissent, in which several dissidents – including two human rights lawyers, a Roman Catholic priest and members of an outlawed trade union – have been sentenced to imprisonment.

Mr Triet has publicly rejected criticism of the crackdown, insisting that Hanoi respects human rights but must punish those who violate Vietnamese laws. Yet the criticism is likely to be reiterated on the trip.

“As much as Vietnam would like that issue to go away, it’s not going to,” Mr Vallely says. “That is going to be part of the bilateral relationship, and that is the price Vietnam pays for relations with
the US.”

Copyright The Financial Times Limited 2007

CNA: Ministerial forum discusses rise of empowered web users

       

This                   story was printed from channelnewsasia.com

                                 

Title :           Ministerial forum discusses rise of empowered web users           By             :             Date :           18 June 2007 2026 hrs (SST)           URL :           http://www.channelnewsasia.com/stories/singaporelocalnews/view/283004/1/.html                                                                                   SINGAPORE: Ministers and senior officials from 16 Asian and Middle East countries met in Singapore on Monday to discuss the next generation of web applications and its impact on users. The one-day Infocomm Media Business Exchange Ministerial Forum was chaired by Minister for Information, Communications and the Arts Dr Lee Boon Yang. The theme this year was "Web 2.0: Rise of the Empowered User", with the focus on its impact on user empowerment. The Ministry of Information, Communications and the Arts said the closed-door forum was an opportunity for dialogue and reflection. The ministers and senior officials had a useful discussion with industry players on the role governments, businesses and societies would play in maximising the benefits of Web 2.0 while at the same time managing the new set of challenges it might bring. During the forum, Chief Technology Officer of Linden Lab Cory Ondrejka, and CEO of Infocomm Development Authority Chan Yeng Kit made presentations on the Second Life phenomenon and the technology and philosophy behind Web 2.0. - CNA/yy

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