Monday, November 30, 2009

Dubai teetering on the brink of financial collapse

Dubai markets have collapsed on the first day of local trading since the collapse of the state-owned Dubai World conglomerate. There was no trading last week in Dubai because of the Eid al-Adha festival and analysts had predicting carnage when the exchange opened for the first time since the crisis broke. They have not been proven wrong. According to Al Jazeera's Dan Nolan the financial indicators are “all flashing red” and the main bourse dropped 5.6 per cent instantly. Major securities in the construction and banking sectors fell to almost the 10 per cent maximum allowed. And the Nakheel property developer at the centre of Dubai World’s problems took its bonds off the Dubai and Nasdaq stock exchanges. (photo credit: Joi)

The meltdown followed the reaction of markets around the world which fell on Thursday after the Dubai government requested a debt standstill. The government's investment arm, Dubai World, asked investors for extra time to make its debt payments. The conglomerate known as “Dubai's flag bearer in global investments” is now $60bn in debt and has sought a six-month moratorium on repayments. This amount is greater than Dubai’s GDP meaning that the Gulf emirate is now officially bust and the construction boom economy that turned Dubai into an international business powerhouse has collapsed spectacularly.

The Dubai news sent shockwaves through world markets. The emirate was already in a bad way having borrowed $80 billion to fuel the boom. In the global recession investors are now deserting Dubai in droves as it becomes "toxic". Profits have declined and assets are worth a fraction of the inflated boom prices paid. Dubai's ruler Sheik Mohammed bin Rashid Al Maktoum has been feeling the pressure of the crisis. The Al Maktoum family has run the emirate since 1833 and brooks no criticism of its rule. He told journalists to “shut up” last week when they questioned him about tensions between Dubai and the other senior emirate partner Abu Dhabi.

There was more blatant media censorship yesterday. Authorities removed yesterday’s London Sunday Times from circulation featured a double-page spread graphic illustrating Al Maktoum sinking in a sea of debt. An executive of the paper in Dubai said The National Media Council ordered the paper blocked by distributors without providing a reason. UAE's media code prohibits publications from criticising the emirs and local media slammed international press coverage of the debt crisis.

International markets were calmed after the UAE’s Central Bank offered to stand behind Dubai World’s debts. Abu Dhabi's emir, Khalifa bin Zayed bin Sultan al-Nahyan, who is also president of the UAE, has said his government will bail out his debt-laden neighbour. Later this week, the Emirates Government will announce a rescue package. This will underwrite payment of a $4 billion bond for Nakheel, Dubai World's real estate developer, which matures in two weeks.

However Abu Dhabi may extract a high price for bailing out Dubai. It could take over lucrative assets such as the Emirates airline, Dubai ports business and the International Financial Centre. It may also seek to impose stricter Islamic standards on acceptable public behaviour. Abu Dhabi always looked askance at Dubai’s ostentatious wealth which was based on a brash culture of borrowing and exploitation of cheap labour. Without Abu Dhabi’s oil, Dubai launched an ambitious strategy of economic growth which turned an Arab fishing village into a global trading metropolis in 30 years.

Meanwhile the government lured construction workers from India, Pakistan and China with promises of big wages. They arrived in their hundreds of thousands only to find they were indentured, had their passports confiscated on arrival, hit with huge "fees" for their travel and accommodation and attacked by police if they had the temerity to strike for better conditions. They were also forced to live in slum conditions hidden away from the ostentatious wealth of the city. As Johann Hari in the Huffington Post wrote, Dubai is “a dictatorship based on slaves”. Abu Dhabi may bail its sister city out now, but as Hari says “there is no Bank of Morality that could provide a bailout for this sinister mirage in the desert.”

An Australian apology: Why the Greens should vote for the CPRS

With the world still not quite ready yet for climate peace, there is only one reason to sign the Federal Government's Carbon Pollution Reduction Scheme into law before Copenhagen. That reason is not about the “good faith” of an expedient political bargain that will be just as valid in February. Nor is not about being good for the environment because that is unproven. It is certainly not about the soul of the Liberal Party (though the extraordinary public immolation of Malcolm Turnbull is quickly burning all its bridges). Nor for that matter is a CPRS about making Kevin Rudd look good on the world stage - he doesn’t need any more help with that.

No, the only thing a Senate agreement this week will be good for is to do something Rudd is quite good at: apologising.

The CPRS is a statement of intent for an emissions trading scheme. For twenty years or more the world’s nations have known climate change is a serious issue. For the last ten the world has been on an irreversible path towards an ETS as a solution. The Kyoto Protocol was the first imperfect draft. Like any multi-lateral compromise it was a botched beast to begin with. It was fatally undermined by the lack of inclusion of the BRIC countries and then destroyed when the Bush 43 administration reneged on the US’s promise to take part.

Of the developed nations, only Australia also opted out. Australia knew the climate science but as a country highly addicted to carbon was reluctant to accept the long-term diagnosis. It decided the survival of Australia’s carbon industries was too important to risk to a global treaty and opted out. It wasn’t until 2007 and defeat staring him in the face that John Howard bowed to the inevitable and made an ETS Government policy. As Alan Koehler noted today, it is mostly his scheme that is before parliament.

But whether it is Howard's or Rudd's or Turnbull's is immaterial. What matter is that Australia will eventually have an ETS of sorts. It will pay dearly for the unnecessary years of delay and for this will have no one to blame but itself. But others too may want to apportion blame at the price of Australia’s prevarication. The country is the most serious per capita carbon emitter in the world and has thumbed its nose at collective action for 12 years. Why should Bangladesh or Malaysia rein in its emissions when rich Australia won’t?

Australia relied on the US to get away with its unilateralism. But as a country reliant on what it digs out of the country to survive, this is dangerous behaviour. Many nations and would-be trading partners have not forgotten Australia’s selfishness over Kyoto.Therefore it is important Australia goes to Copenhagen with an attitude more in keeping with its supposed reputation for mateship. An ETS signed in law would be a good apology for inaction in the past.

For sure, Labor’s CPRS is seriously flawed. The plan is a dog’s breakfast that will initially reward the polluters and pass the problem on to other nations to solve. The bill's various carrots will probably add to emissions in the short term. But it is the only proposal on the table at the moment that is likely to pass parliament. And passing it would make it a defining statement about Australia’s sense of responsibility as a good citizen to the rest of the world.

It is not like we don't know the consequences. There have been 13 enquiries on Climate change since the last election all of them pointing towards an emissions trading regime. By signing a CPRS into law prior to Copenhagen, Australia is telling the world we are serious about addressing climate change. The Greens should support this position. There is nothing in the legislation that cannot be fixed when the Greens get the balance of power.

Greens Senator Christine Milne probably knows more about climate change than anyone else in the parliament but she must surely know there are no other realistic proposals on the table. She also knows Australia’s responsibility to the wider world as part of the developed nations that actually use all the energy. On Thursday she told parliament that one of the frustrations in the negotiations leading up to Copenhagen is getting the West to agree on an ETS financial mechanism that favours developing countries.

Milne's frustration is understandable. This is undoubtedly a problem and one that Australia can play a much bigger part in resolving. But developing nations won’t hear the Senator pious wishes. If they think of the Australian Greens at all it will be that they voted against the CPRS. The party is playing Greener than Thou politics but it means they end up taking sides with the denialists. They may want a perfect ETS but that is not on the table. What is on offer is an apology. They should vote for that.

Friday, November 27, 2009

The Copenhagen Diagnosis

While the media gorges itself on the blood sport of the Australian federal coalition leadership challenge, an important new document outlining the seriousness of climate change has been almost completely ignored. The Copenhagen Diagnosis is a summary of the global warming peer reviewed science of the last few years. Produced by a team of 26 scientists led by the University of NSW Climate Research Centre, the Diagnosis shows that the effects of global warming have gotten worse in the last three years. It is a timely update to UN’s Intercontinental Panel on Climate Change 2007 Fourth Assessment document (IPCC AR4) ahead of the Copenhagen conference. (photo credit: m.o.o.f)

While denialists will ignore this as they have all other science gone before it, the diagnosis report (pdf) is sobering reading for anyone concerned about the planet. Researchers found greenhouse gas emissions, global temperatures, ice-cap melting and rising sea levels have all increased since IPCC AR4. Global carbon dioxide emissions have risen by 40 percent in two decades. The global temperature has increased half a degree in the last 25 years. The Greenland and Antarctic ice-sheets are disappearing faster than ever and the sea level has risen 50 millimeters in the last 15 years.

The document unambiguously sheets home the blame on the century long temperature increase on human factors and says the turning point “must come soon”. If we are to limit warming to 2 degrees above pre-industrial values, global emissions must peak by 2020 at the latest and then decline rapidly. The scientists warned that waiting for higher levels of scientific certainty could mean that some tipping points will be crossed before they are recognised. By 2050 we will effectively need to be in a post-carbon economy if we are to avoid unlivable temperatures.

The document puts the lie to the constant refrain of denialists is that temperatures have gone down since 1998. The reality is that the last ten years have been warmer than the previous ten and the long-term trend is unambiguously upward. In 2008 there were two temporary cooling influences, a La Nina (ENSO) and low solar output (the lowest level of the last 50 years). The Copenhagen Diagnosis says these two factors should have resulted in the 2008 temperature being among the coolest in the instrumental era, whereas it turned out to be the ninth warmest on record.

Ten year variations such as sunspots and ENSO are the reason why the IPCC choose 25 year cycles to show trend lines. Nevertheless most NASA measures of the 1990s have shown a warming between 0.17 and 0.34 °C and with an increase of 0.19 °C between 1998 and 2008. The British Hadley Centre’s most recent data had smaller warming trend of 0.11 °C for 1999-2008 but this excluded the Arctic, which has warmed particularly strongly in recent years. The Northwest and Northeast Passages were simultaneously ice-free in 2008 for the first time in living memory and the feat was repeated in the 2009 Northern summer.

The document says climate change will almost certainly cause more extreme weather events. This means more frequent hot days, hot nights and heat waves, fewer cold days and cold nights, more frequent heavy rain, more intense and longer droughts over wider areas, and an increase in intense tropical cyclone activity in the North Atlantic. There is also evidence of more drought, typhoons and bushfires all linked to anthropogenic climate change.

The document is timely as the Australian parliament debates the Carbon Pollution Reduction Scheme. Whatever the merits of the scheme, its opponents should remember just one in four Australians think climate change fears are exaggerated. The other 75 percent may not agree on what to do but accept their scientists are telling them there is a problem. They look to lawmakers to chart out a future to best ride out the unpleasant shocks to come not to pretend the shocks do not exist.

This is why Copenhagen is happening in a week's time. None of the 198 governments want to be there and none will win from climate change. But all recognise it exists and needs to be dealt at the global level. Other than the powerless Pacific island nations, no country is yet obviously threatened enough to make it a success. The vested interest of each government will ensure less action will occur than is needed. Copenhagen will result in pious platitudes and not much concrete action.

Australia has a small but significant role to play to ensure there isn’t a tragedy of the commons. It consumes less than 2 percent of the world’s resources but that is a significant amount for a country with just 0.003 percent of the world’s people. Labor’s Carbon Pollution Reduction Scheme is unlikely to reduce carbon usage by much if at all. Yet its potency as a symbol is undeniable. The CPRS is a referendum on climate change. This is something the Nationals and right-wing Liberals intuitively understand and the Greens do not. The Greens have missed a golden opportunity to be on the side of the symbol (and they can fix it when they gain the balance of power after the next election). In a rare moment of sense among the Liberal horserace shenanigans, Malcolm Turnbull expressed it best yesterday. No political party with any pretensions to govern responsibly can afford to turn their back on climate change.

The exact future of climate may be unknowable but the study of our past is providing overwhelming evidence of trends that simply cannot be ignored. Scepticism is justified only when the facts are unclear or ambiguous and the Copenhagen diagnosis is neither. A simple fact needs to be stated and there is no polite way to say it. Those people who say anthropogenic global warming is a myth are either liars protecting vested interests or mental incompetents. Either way, the only proper course is to ignore them. The stakes are too high.

Thursday, November 26, 2009

Ripoll Committee report tells a tale of Storm Financial greed

Bernie Ripoll’s parliamentary committee handed down its long-awaited report (pdf) into financial services this week. The report commissioned in the wake of the Storm Financial collapse identified several shortcomings with the current market-based regime of financial services regulation. It has proposed legislative changes to ensure financial advisers place their clients’ interests ahead of their own. However it stopped short at calling for an immediate outright ban on financial commissions. These commissions are often the subject of severe conflicts of interests which are not disclosed to customers.

The current regulation of financial service providers is governed by the so-called "efficient markets theory" of the 1997 Wallis Report. This is the “light touch” belief that markets drive efficiency and that regulatory intervention should be kept to a minimum to allow markets to achieve maximum efficiency. The only regulation that protects investors is limited to conduct and disclosure requirements on Australian Financial Services Licence holders. ASIC issues these licences which are mandatory for all financial services businesses but are easy to get.

The Corporations Act 2001 has conflict of interest disclosure provisions but did not include margin lending until October this year. Margin calls are the practice of lending for the purpose of investing with the loan secured against the value of the borrower's portfolio. When the value of the equity falls below an agreed proportion of the portfolio value, a margin call requires the borrower to either contribute additional equity or sell shares.

There are 18,000 financial advisers in Australia, the vast majority of which rely on commission-based remuneration rather than fee for service. They get their money from product manufacturers on the funds invested by retail investors. The manufacturers recover the costs from the overall charges within the investment products. Storm Financial were past masters at hiding their fees.

Ripoll said the Storm Financial collapse had a “catastrophic effect” on many investors. These are the people who did not get an opportunity to respond to margin calls and were sold out of their portfolios at the very bottom of the market in late 2008. 3,000 out of Storm’s 14,000 clients had leveraged investments. The Townsville-based company encouraged these people to take out loans against their equity to generate a lump sum to invest in the share market.

Clients had a margin loan with an 80 to 90 percent loan to value ratio (LVR) and Storm charged a fee of seven percent for their services. Storm tendered out the margin loans to either Commonwealth Bank or Macquarie Investment Lending. Clients were encouraged to increase the size of these loans on the basis of increased home value. The paperwork left a lot to be desired with many signing blank loan applications or had their income figures or asset values overstated.

The problem was that leveraged investments work well in a rising market but losses are also magnified in the event of a sudden fall. When world markets collapsed in September 2008, many loans fell into margin call territory. The 90 percent LVR suddenly became Storm's Achilles heel. The remaining 10 percent was not enough to clear home loan debts. In addition, many clients said they might have been able to repay but neither Storm nor the bank issued a margin call warning them of the problem. They didn’t find out until December when they moved into negative equity after their portfolios have been sold down at the bottom of the market without their knowledge, maximising their losses. They were bankrupt.

Storm and the banks could not agree whose fault that was. Storm said bank information during this time was outdated while the banks said Storm were unresponsive with margin loan queries. The banks said they used the same approach with other financial groups, none of which had the same issues as Storm about advising clients. The banks said it was the advisers’ responsibility to resolve the margin call with the end customer. Storm, meanwhile, used a 2002 margin call precedent to claim it was the banks’ responsibility to inform the customer.

In December Storm co-director Emmanuel Cassimatis met senior Commonwealth staff to arrange to consolidate client debt into a large corporate debt facility to be repaid over three to four years. Cassimatis asked for a further loan to cover his customers’ margin calls. Commonwealth turned this proposal down. Cassimatis blamed this decision on Storm’s demise. But Commonwealth’s hands were tied - Storm had already been pronounced insolvent. The bank called in a $10 million loan.

This did not stop Cassimatis paying a $2 million dividend to himself and his wife and co-director Julie Cassimatis. The payment was frozen after an ASIC-initiated court action in February. Storm then sacked its 115 strong workforce and Worrells were appointed liquidators in March. Despite the collapse, there were plenty of rich pickings to be had. The Cassimatises had boasted a fortune of about $450 million and were listed at number 22 on the 2008 Sunday Mail's Queensland Top 100 Rich List. Everyone scrambled for a bite of a juicy cherry.

In February, Federal Parliament appointed a Joint Committee on Corporations and Financial Services. Its role was to examine the role played by financial advisers in collapses such as Storm and Opes Prime. It would also look at the role of commissions in the financial services industry and licensing and consumer protection measures in place. The inquiry was announced a day after ASIC chair Tony D'Aloisio noted an "inherent conflict" concerning financial advice in Australia's corporations law.

Ripoll’s committee noted a major flaw in Storm’s “one size fits all” financial advice irrespective of client circumstances. This aggressive leveraged investment strategy was inappropriate for people on average incomes or about to retire. Ripoll also noted Storm downplayed the risk customers could lose their family homes while overselling the notion of professional indemnity insurance.

The report called for the legislation of fiduciary duty which would require financial advisers to place their clients’ interests ahead of their own. Wikipedia defines a fiduciary duty as a legal or ethical relationship of confidence or trust between two or more parties. This law would address the issue of the conflict of interest of financial advisers. However Ripoll stopped short at calling for a ban on commissions from product manufacturers and supported the banks’ view they subsidise the cost of advice. Instead it called for more self-regulation and a longer term shift away from commissions.

The Institute of Actuaries was blunt in its submission and rejected complaints about expensive commission-free advice. Advice is expensive, it said, and not required by the 90 percent of people whose best investment advice is to pay off the mortgage or put money into super. However, people who do need it ought to be able see what that advice is. “The profession has to stand on its own two feet,” they said. “People need to understand that this is the cost of that advice.”

Wednesday, November 25, 2009

Philippines massacre leads to emergency rule

Philippines President Gloria Arroya has placed three southern provinces under emergency rule after the death toll rose to 46 in a high-profile massacre on the island of Mindanao yesterday. A presidential palace directive stated that the provinces Maguindanao, Sultan Kudarat and the city of Cotabato were placed under a state of emergency “for the purpose of preventing and suppressing lawless violence in the area”. The death toll almost doubled overnight after police and soldiers found 22 bodies in a hillside mass grave to add to the 24 dead they found at the scene a day earlier. The massacre of journalists, supporters and relatives of a candidate for local governor has shocked a region used to turmoil and bloodshed. The wife and sister of local gubernatorial candidate, Esmael Mangudadatu, were among the dead and Mangudadatu has accused a political opponent from a rival Amputuan clan of being behind the slayings. (photo credit: Agence France Press)

About 100 armed men intercepted the convoy yesterday as they drove to the Commission on Elections provincial office in Shariff Aguak town, Maguindanao. The convoy was led by Ebrahim Mangudadatu, who was about to file the candidacy for governor of Maguindanao in the provincial capital Shariff Aguak on behalf of his brother of Ishmael. Mangudadatu’s wife rang her husband to say that she and 50 others had been kidnapped by “Ampatuan’s men”. It was the last time the couple spoke. Mrs Mangudadatu and the other victims were brought to a nearby hinterland where they were executed one after another. Many were beheaded.

According to the massacre was the result of a long-running feud between two influential families. The Mangudadatus and Ampatuans were former allies but had a falling out when Esmael declared his intention to run for Maguindanao governor against the governor’s son. They say the attack was led by Datu Unsay Mayor Datu Andal Ampatuan Jr., also known as “Datu Unsay”. His father Data Unsay snr has been the political powerhouse in Maguindanao for many years and Data Unsay jr now has designs on the governorship with the aid of powerful friends. Mindanao rebels say that the local police boss was also implicated in the shooting.

About 34 journalists were in the convoy to cover the candidacy. Paris-based Reporters Sans Frontieres are waiting for confirmation that at least 20 of them were killed in the attack which would make it the largest single massacre of journalists ever. At the time of writing, RSF said at least 12 journalists had died in the attack. “Never in the history of journalism have the news media suffered such a heavy loss of life in one day,” they said in statement. “We convey our condolences and sympathy to all journalists in the Philippines, who are in state of shock after this appalling massacre.”

Television station UNTV confirmed that four of their employees were among those killed. The National Union of Journalists of the Philippines has urged the government to move to "ensure swift justice on the perpetrators, no matter who they are". Today 100 journalists wearing black shirts and black arm bands with the words, "Stop Killing Journalists," staged a protest against the killings in Manila. Another 200 denounced the massacre in southern Davao city.

Many are also blaming President Arroya for the lawlessness of Philippines southernmost provinces in the run-up to the 2010 election. Maguindanao is part of the Autonomous Region in Muslim Mindanao which is the only part of the country to have its own government. The ARMM is also the poorest of Philippines’ 17 regions by some considerable margin (the next poorest has twice the per capita income of the ARMM). 120,000 people have died in the Muslim insurgency that has lasted over 30 years. Many politicians and elected officials in the region maintain well-equipped private armies tolerated well beyond the reach of Manila. According to Al Jazeera, Governor Ampatuan delivered crucial votes to swing 2004 elections in her favour, so people in the province fear he may not be punished even if he is found to be behind the killing.

Tuesday, November 24, 2009

Optimistic Sierra Leone president looks for foreign investment

Sierra Leone President Ernest Bai Koroma has called on the west to invest in his country on a visit to London. Koroma told the BBC the West African nation is “open” to investment in tourism and mineral investment in bauxite, iron ore and diamonds. Koroma was spruiking his message at a conference last week in the British capital where he also hailed the recent Anadarko Petroleum’s discovery of offshore oil. (photo of Freetown by stringer_bel)

Koroma was assisted in call for investment by former British Prime Minister Tony Blair. While Blair’s reputation elsewhere has been sullied by his involvement in the war in Iraq, he remains a hero in Sierra Leone for the troops he sent in 2000 to end the conflict. He is still involved as an adviser to President Koroma and he was cheered as he spoke to the London investment conference. "[Sierra Leone has] got massive natural resources, wonderful possibilities commercially in agriculture, tourism, mining," said Blair. "What it's got now for the first time is a stable system of government with a president who genuinely wants to make change, root out corruption."

Blair also praised Koroma’s attempt’s stamp out corruption which has been a major drawback since the country returned to peace at the turn of the century. By 2002 the country’s Anti-Corruption Commission had investigated 500 cases but relied on the Justice Ministry to follow the cases up. Politicians were not always keen to act leaving Sierra Leone languishing at the bottom end of Mo Ibrahim’s African Governance Act. But recently Koroma has shown signs of stiffening up by sacking two ministers after they appeared in court on graft charges.

Meanwhile Sierra Leone's parliament has also approved a new mining act last week that is designed to boost government revenue and increase transparency in the sector. The Mines and Minerals Act 2009 followed the recommendations of report earlier this year by the National Advocacy Coalition on Extractives. The report argued that because of generous tax incentives, weak capacity and official corruption, the government has not previously received a fair share of mining proceeds. With commodity prices rising again and a recent oil discovery in the country, the government had been keen to introduce new regulations before investors begin a new mining phase.

In September Sierra Leone also signed the Comprehensive Africa Agriculture Development Programme (CAADP) Compact. formally adopting the African Union initiative, drafted in Maputo in 2003. The CAADP aims to ensure Africa's agricultural development as a catalyst for socio-economic growth and its goal is to eliminate hunger and reduce poverty through agriculture. At the signature ceremony Koroma said close to two thirds of his people rely on agriculture for their livelihoods and it contributes almost half of the Gross Domestic Product. “We regard CAADP as being pivotal to our poverty and hunger eradication efforts”, he said.

There is still a long way to go for one of Africa’s poorest countries. 50,000 Sierra Leoneans died in the civil war that racked the country during the 1990s. The UN Development Program judged Sierra Leone the world’s least developed country in 2000. Since then the country has undergone two successful elections. Koroma won the most recent election in 2007 winning a run-off against incumbent vice-president Solomon Berewa. Koroma has followed from the previous administration concentrating on nation rebuilding.

But not everyone agrees the country is on the right track One of Sierra Leone's most popular artists, Emerson Bockarie has released a song "Yesterday Betteh Pass Tiday", recorded in Krio which unfavourably compares the current government to the one it replaced in 2007. The song highlights corruption, the high cost of living, nepotism, tribalism, poor service delivery, poor government salaries and a static economy. Freetown trader Salamatu Bah was inclined to give Koroma’s administration the benefit of the doubt. "The government is trying, and things are better now than before,” said Bah. “The argument should not be which regime is the better or worse - we have voted for change and change is what we demand."

Sunday, November 22, 2009

ASIC One.Tel trial slams Packer and Murdoch's "forgetfulness"

Last week, the NSW Supreme Court ruled in favour of One.Tel directors Jodee Rich and Mark Silbermann in their long-running case against the Australian Securities and Investment Commission. Justice Robert Austin said ASIC’s contentions were “superficial” and awarded costs of $15m to the defendants, leaving the taxpayer with a bill of $40m. Austin slammed ASIC’s reams of evidence as “unpersuasive when the underlying financial detail was investigated.” (photo of NSW Supreme Court by angusf)

The full transcript tells of a remarkable case that was treated only superficially by many parts of the Australian media because of the bad light it cast the country’s two main media families: the Murdochs and the Packers. In particular the scions James Packer and Lachlan Murdoch come out of the affair with their reputations badly damaged and capable of Alexander Downer-like feats of forgetfulness.

But only the Fairfax run Sydney Morning Herald were keen to run with the story of the “billionaires’ forgetfulness”. It was the executive directors that faced the music after the telecommunications company collapsed in 2001. Rich and Silbermann were two of One.Tel’s four executive directors. Rich was joint chief executive and Silbermann was finance director. The other two Brad Keeling and John Greaves settled out of court. Rich alleged former Prime Minister John Howard used his brother Stan to pressure him to also settle because of Kerry Packer’s interest in the case. Although James Packer was a non-executive director, the judge said he was substantially involved in One.Tel’s day-to-day affairs. Rodney Adler and Lachlan Murdoch were also non-executive directors during this time.

The key to the case was One.Tel’s financial position in the first four months of 2001. ASIC’s case was that the reality was much worse than public presented and the defendants deliberately withheld this information from the board. But the defendants said One.Tel’s position in those months was inextricably linked with Packer’s Publishing and Broadcasting Ltd and Murdoch’s News Ltd. At the time, PBL and News told the ASX they were “misled” by the directors.

ASIC then sought orders for the defendants be disqualified from managing or being a director of any company. The eventual judgement eight years later was a massive case with 104 affidavits, 425 exhibits, 37 witnesses, 232 hearing days, 16,642 pages of evidence and 4,384 pages of final written submissions. The main reason for this was the complex nature of ASIC’s case. It tried to prove that the defendants breached their statutory duty of care and diligence by failing to disclose to the board the true financial position of a large multi-national company over four months. The defendants meanwhile attempted to show that the end result of voluntary administration was related to the way One.Tel was governed from inception as well as the complex relationship with the Packer and Murdoch families, including the extent to which PBL and News influenced decisions.

The key failure for ASIC came when Justice Austin rejected over half of the evidence of its key witness forensic accountant. PricewaterhouseCoopers partner Paul Carter was retained by ASIC to prepare a report on its evidence but much of that evidence came from people who were not called at the trial and Austin ruled it inadmissible. ASIC then used other means including complex financial documents and tables of financial information based on daily cash flow spreadsheets, management accounts, trial balances and aged creditor reports. However Austin was unimpressed by much of this material which was often merely data and did not materially add to the case against Rich and Silbermann.

Justice Austin was also unimpressed by the “strength of recollection” of the testimony of Packer and Murdoch. Packer admitted he had deliberately tried to forget the events of the period. Rich’s lawyers successfully undermined ASIC’s claim Packer was a “thoughtful and intelligent” witness. Justice Austin said Packer’s evasiveness in cross-examination, argumentativeness, and his inability to remember key details undermined his reliability. Justice Austin also said Packer’s evidence over whether his father Kerry made any money out of One.Tel was “confusing and unsatisfactory.” In 9 days of testimony, Packer said “he could not recall” more than 1,500 times.

Lachlan Murdoch was also equally vague and suffering from as poor memory as James Packer. Murdoch used the phrase “I do not recall” almost 900 times which amounted to a daily rate higher than Packer. However, Justice Austin said the implication of Murdoch’s evidence was less damaging because he operated at a distance from One.Tel, “both physically and in terms of engagement.” According to Austin, Murdoch played the News Corp company line happy that PBL was the lead investor close to the business and he distinguished between the company position and his own position as a director of One.Tel.

At the end of 3,800 pages Justice Austin’s conclusions were brief enough. “ASIC has failed to prove its pleaded case against either of the defendants. Therefore judgment should be entered for Mr Rich and Mr Silbermann in the proceedings.” ASIC is now reviewing the judgement and considering whether there are grounds for an appeal. ASIC Chairman Tony D’Aloisio said last week the case should provide important guidance to executives and directors on the exchange of information between the board and management. “‘The case has also provided important guidance to ASIC on how to run similar matters in the future,” he said.

Ian Ramsay, director of centre for corporate law at Melbourne University, agreed the judgement gave some “strong lessons” for ASIC. Speaking on ABC’s Inside Business today, Ramsay said ASIC brought a case that was far too broad. Ramsay noted the case may be of some help to the special purpose liquidator’s claim on $230 million against Packer and Murdoch for a cancelled rights issue. ASIC didn’t have to prove the defendants intentionally misled the board or withheld information from it, but only that they breached their duty of care and diligence to keep the board informed of the company's financial position. Given that ASIC failed to prove this, it left open the question whether the other directors including Packer and Murdoch were careless in failing to find out. That question has yet to be decided.

Friday, November 20, 2009

Britain’s aid donation won’t tackle root cause of Ethiopian famines

Britain announced the release yesterday of a food package of $316 million (US) to support the provision of basic services, social protection and humanitarian assistance in Ethiopia. The UK Minister of State for International Development, Gareth Thomas made the announcement on a visit to Addis Ababa saying there was a “robust mechanism” to make sure that the money is used as intended. This means paying close attention to political developments and the regime of Meles Zenawi who has been Prime Minister since 1995 and de facto leader since 1991. (photo credit: Turkairo)

The British bequest came two months after the World Bank signed two financing agreements amounting to $65 million for tourism development and enhance agricultural productivity. The first agreement for $35 million will finance sustainable tourism development projects and the remaining $30 million is set aside for agricultural projects. The World Bank Country Director said they would assist Ethiopia to tap its rich resources in the agriculture sector and encourage it to become self-sufficient in food production.

The need has become urgent as Ethiopia teeters on the verge of another debilitating famine. This is Ethiopia’s fourth successive year of lack of rain and when the rains do come it is often in the form of torrential showers causing floods and landslides. While the country has recovered from the disastrous 1984 famine (during the reign of Dictator Mengistu), some of the country remains particularly exposed, especially the far eastern region bordering war-torn Somalia. The conflict has created a refugee crisis and disrupted food production making already poor people even more vulnerable. The Zenawi government said the number in need of urgent assistance during the period October to December 2009 has increased from 4.9 million people to 6.2 million.

The British envoy made no mention of the famine in the Horn of Africa in his visit or Zenawi’s role in it but others have not been so coy. Writing in The Times last month, Sam Kiley noted the drought is the region’s worst in 47 years but foreign aid was not helping. On the contrary, said Kiley, it was “the principal reason for Africa’s accumulated agony.” Kiley quotes the Oxfam paper Band Aids and Beyond, which says that between 70 and 90 per cent of all US aid to Ethiopia has been food. But while the US was feeding the country, Ethiopia spent billions on a debilitating war with neighbour Eritrea. Riley says that only education can stop the vicious cycle of dependence.

African researchers Julian Morris and Karol Boudreaux agree with Riley that Ethiopia has not dealt adequately with the risk of famine. Writing in Business Daily they say the lack of rains are common to other parts of the world where they “routinely face droughts yet avoid famine.” Global deaths from drought-related famines have fallen by 99.9 per cent since the 1920s. The reason for this is specialisation and trade which increased food production and enabled vulnerable people in drought-prone regions to diversify. But the planned central economies of countries such as Ethiopia have provided no incentives to improve the land.

Under the 1995 Constitution, Ethiopian farmers cannot own their land. This means they cannot use mortgages for capital investment in machinery, seeds, fertilisers or irrigation. The net result is that farmers sub-divide their properties leading to environmental degradation and lower crop yield. This is exacerbated by government policies restricting movement to cities. The end result is a crippling cycle of forcing people to remain smallholder farmers, denying them opportunities in cities, compelling them to migrate and making them ruin the land through subdivision. Not everyone agrees that Africa should be judged by western lights. Nevertheless The Times and Morris & Boudreaux, present persuasive cases that Ethiopia’s famines are caused by bad government policies, not bad weather.

Wednesday, November 18, 2009

This Sporting Life: Crawford Report exposes Australia’s Olympic scam

A new report into Australian sport has blasted the idiotic obsession with the Olympic medal count and said it has not resulted in improvements at grassroots level or done enough to combat obesity. The Independent Sports Panel presented The Future of Australian Sport to the Minister of Sport Kate Ellis today to a predictable backlash from the vested interest of Australian Olympic Commission head John Coates. The Crawford report (named for its chair businessman David Crawford) dismissed the AOC call for an extra $100 million to ensure top five status in the 2012 medal count as "not an appropriate measure of Australian performance.” Instead it calls for funding to be re-routed towards grassroots participation and recommends a reform of Australian sporting institutions. (photo credit: Will Palmer)

As Crikey notes many Olympic sports have minimal community participation compared to popular sports like netball and cricket. Yet the Olympics has been a central focus since the 1976 Montreal Games when Australia came away without a single gold medal. Most of the 2007 $90 million federal sports budget was spent on Olympic events. But the Crawford Report says there is so little accounting or accountability in Australian sport that it is impossible to say how much is spent, and to what effect.

It says the only data available is 2000-2001 ABS figures which found Australia spends $2.1 billion on sport. 90 percent of this figure was spent by state and local governments for the upkeep of sporting facilities and participation. Yet there were no performance measures for community sport that matched the overblown Olympic medal count indicators. The report said elite performance in non-Olympic sports and the general health and fitness of Australians need also to be considered in determining the success of Australian sport.

A re-assessment of sporting priorities is necessary, says the report. 80 percent of the commonwealth $90m budget is spent on the Olympics. This means there are some ridiculous discrepancies. Archery gets more money than Australia’s national game of cricket. Water polo gets more money than golf, tennis and lawn bowls combined. This is particularly problematic as these three sports are considered “whole of lifetime” contributors to preventative health care.

Meanwhile the cost of Olympic medals has never been adequately scrutinised. The report estimated each gold medal costs about $15 million with another $4 million for each silver and bronze. Yet there is no evidence that the Olympics lead to higher sports participation. The cost of medals is only likely to increase as other countries invest heavily in their own Olympic programs, often based on Australia’s own successful Institute of Sport model.

The AOC has requested an additional $100 million in funding to maintain Australia’s “top five” medal status. But the stupidity of this target is reflected in the medal discrepancies that favour individual events rather than team events. For instance, there are just two golds in hockey and basketball, but there are 16 in canoe/kayaking. Yet it is the team sports that are far more important to society as a whole. “If we are truly interested in a preventative health agenda through sport,” said the report, “then much of [the federal sports budget] may be better spent on lifetime participants than almost all on a small group of elite athletes who will perform at that level for just a few years.”

The Crawford Report was correct in suggesting Olympic spending was an outrageous waste of money purely to assuage the country’s international inferiority complex. And if there was any doubt the report was correct, it was removed by Coates himself with his nonsensical description that “it was un-Australian to settle for second best”. Coates called the report “disrespectful” and claimed Olympic funding was “vitally important to the nation”. He could, of course, offer no proof why this was so important other than to keep his own gravy train running. Crawford is correct; it is time to ditch the stupid fascination with the television news-friendly medal counts – they do little more than give the nation a few moments of vicarious pride every four years. It is time to better spend the money on the work-a-day sports that get people out of their armchairs for more than just a cheer.

Tuesday, November 17, 2009

Timor Sea oil slick may now be lapping Indonesian shores

The West Timor Care Foundation has sent the Australian Greens a video claiming the 10-week Montara oil spill is now lapping the south shores of the island of Timor. The five minute video shows some oil slicks and dead fish in local fishing grounds (though when I entered the location coordinates shown in the video it oddly came up in Philippine waters). The government also doubts the slick has approached the Indonesian coastline and has announced no compensation measures as yet.

But while there is doubt over this video, there is little doubt that that Montara spill is a major catastrophic event happening most out of reach of Australian news cameras. From 21 August to 3 November a possible 140,000 barrels of light crude oil, gas and condensate leaked into the sea. Well owners PTTEP claimed the well leaked 400 barrels of oil a day but could never back up this estimate. The Australian government said the maximum flow could be as much as 2,000 barrels a day. After four unsuccessful attempts to fix it, it was eventually plugged when heavy mud was successfully injected into the underground leaking well. The spill was complicated by a major fire on the rig which was put out two days earlier.

But the vast amount of oil leaked into the sea continues to cause havoc. Both West and East Timor authorities have asked Australia to take urgent actions to stop the impact on their island. The governor of East Nusa Tenggara (Indonesian West Timor) said Australia must take “immediate measures” to halt the spill. Meanwhile East Timorese President Jose Ramos Horta says the slick is impacting local fishermen’s livelihood and has requested compensation from Australia.

The Montara wellhead on the West Atlas rig is in Australian waters 250km northwest of the Truscott air base in Western Australia's Kimberley region and another 250km from the south Timor coastline. The rig is owned by Thai based oil company PTT Exploration and Production Public Company (commonly known as PTTEP) and run by its Australian subsidiary PTTEP Australasia Company Limited (PTTEP AA).

The problem started when a concrete plug 2.6km below the ocean floor cracked open leaking sweet crude oil, gas and condensate into the Timor Sea. The cause is not yet been announced. However an unnamed industry insider told PTTEP knows what caused the problem. The source was working for PTTEP near the West Atlas rig on the day the leak occurred. He said one of six wells they were drilling began to leak because the company took corners by not plugging the well securely because they did not expect oil flow.

The company then went into panic mode as their increasingly desperate efforts failed to plug the leak. After three failed attempts, they invited Texan well control company Boots & Coots to review their operation. Other local industry companies Woodside, Inpex, Vermillion, AGR Petroleum Services and Apache also became involved on a “without prejudice” basis (to avoid liability) as the reputation of the Australian oil drilling industry plummeted. The rig then caught fire on the fourth attempt and took three days to put out. The leak was eventually plugging by steering a drill through rock 2.6km below the seabed to a 25cm diameter pipe.

After the problem was fixed, Resource Minister Martin Ferguson announced an inquiry into the matter to be headed by former senior public servant David Borthwick. The terms of reference are to report on the causes, the adequacy of the regulatory regime in response, the performance of those carrying out the response, environmental impacts and PTTEP’s role. Borthwick will have six months to carry out his investigation. The Australian Marine Conservation Society said the oil slick will leave a legacy for decades and called on the government to impose heavy sanctions and penalties on those responsible.

Greens Senator Rachel Siewert is also concerned the consequential impacts to Indonesia and East Timor may be outside Borthwick’s terms of reference. Minister Ferguson claims the spill is over 200kms from the Indonesian coastline. But Siewart called on the government to investigate the Timorese reports of oil contamination to see if they are linked to the Montara rig. "Australians expect that we will do the right thing by our near neighbours,” she said. “The Prime Minister needs to promise that he will ensure the company takes responsibility for impacts outside of Australian waters.”

Sunday, November 15, 2009

APEC Declaration is another fatal blow for Copenhagen talks

The two-day APEC economic leaders’ summit in Singapore has ended with a leaders’ declaration that promoted free trade but promised little action on climate change three weeks ahead of Copenhagen. Kevin Rudd joined 20 other Pacific Rim leaders in Singapore including US’s Barack Obama and China’s Hu Jintao. The key output phrase was “a new growth paradigm” and support for the recent Pittsburgh G20 commitments for global recovery. But a proposal to include a 50 percent emissions reduction target by 2050 was scrapped under pressure from China. (photo credit Xinhua/Xu Jinquan)

The proposal was in a draft version of the declaration but was removed in the final version. The declaration did acknowledge anthropogenic climate change as one of the biggest global challenges (a fact someone should tell prominent members of Australia’s main opposition party). The Singapore conference embraced recent world statements on climate change at Pittsburgh and L’Aquila and reaffirmed its intention to work towards an “ambitious outcome” in Copenhagen now just 22 days away.

However that looks completely unrealistic with the “50 by 2050” target kyboshed by China and the declaration was reduced to wishy-washy aspirational (ie non-binding) targets. These were a reiteration of the 2007 Sydney targets of reducing energy intensity by at least 25 percent by 2030 and increasing forest cover in the region by at least 20 million hectares of all types of forests by 2020. The conference also welcomed the May 2009 Manado Declaration on climate impact on ocean health – but again this is so far non binding.

The lack of prescribed targets does not bode well for the Copenhagen The APEC nations are responsible for 60 percent of the world’s carbon emissions. According to the Vancouver Sun, the leaders agreed at a breakfast meeting this morning that agreement on a binding treaty will have to wait at least until next year or beyond. They quoted Canadian Prime Minister Stephen Harper who said there were significant areas of disagreement. "That said, there was a fair consensus…a broader political agreement, is still achievable at Copenhagen and that's what everybody is aiming for,” he said.

But the host of the Copenhagen talks will be bitterly disappointed by the outcome. Danish Prime Minister Lars Lokke Rasmussen had flown to Singapore specifically to attend "informal breakfast meeting". Once it was clear to him that China was not going to commit to binding targets, he got Obama’s support for a two-stage process. This would involve a face-saving (but mostly meaningless) political accord at Copenhagen next month and the setting of a new deadline in late 2010 (after Congress has approved Obama’s ETS) for global agreement on targets, levels of funding and verification of commitments.

But even then China will continue to be the main stumbling block. China Daily quotes leader Hu Jintao pushing the idea of “common but differentiated responsibilities”. This is China-speak for ensuring so-called developed countries do more than developing countries to address climate change. Jintao is supporting in this by the Kyoto Protocol and he is right to suggest that the high carbon-usage countries should do their fair share. But this also gives China the excuse to continue its own high-polluting ways well beyond 2012.

Australian Prime Minister Kevin Rudd played down the Singapore disagreements in similar fashion to Stephen Harper. But his praise for the “tenor of the contribution” was undermined by a further weakening in his own tepid response to climate change. The federal government announced today it has excluded agriculture from the cap and trade scheme in a bid to win opposition support for the second reading of the ETS bill later this month. However even this latest move is unlikely to win over the divided Coalition over. Its pro-ETS members are still demanding further concessions in the coal and electricity sectors while anti-ETS members would even vote that down. It is likely that any bill that will pass the house this year will be a trading scheme in name only. In Australia, as everywhere else, national interest will trump the planet’s interest every time.

Media140: Internet political economy in Asia and Africa

This is my sixth and final post about the Media140 conference in Sydney last week. I've enjoyed putting together my reflections of an important event and I’d encourage readers to check out Julie Posetti’s (Sydney Media140's editorial director) excellent overview and discussion of where it might lead next. See also my prior posts about my initial impressions, and the speeches of Mark Scott, Posetti, Mark Colvin and Jason Wilson, and Jay Rosen. (photo by Derek Barry)

I wanted to finish off by talking about some of the underexplored political economy of the Internet. The presentations of Riyaad Minty and Jude Mathurine brought some of the brightest ideas of Asia and Africa to Friday’s events. Both presenters are South African of similar age with a fascination for all things new media working in different fields. Minty was a digital entrepreneur at 19 before joining Al Jazeera in 2006 as a new media analyst. Jude Mathurine went into education and advocacy and is now head of the new media lab at Rhodes University in Grahamstown, Eastern Cape Province.

Minty’s presentation was a quick introduction to how the new media team in Doha promotes Al Jazeera online. Minty noted that Al Jazeera is broken into six major functions: Arabic, English, documentary, sport, training and research and his group is involved with all of them. Their job is to ensure the brand stays relevant in the new digital age. Their mantra is “people trust people” so Al Jazeera has been personalising its message in what Minty called a “virtuous circle” of old and new tools and old and new audiences.

He discussed how Al Jazeera covered Operation Cast Lead (Israel’s 2008 invasion of Gaza). According to the UN Goldstone Report this was a particularly brutal occupation and unsurprisingly Israel didn’t want the media around to question their actions. They made Gaza off-limits to westerners but Al Jazeera had two reporters Ayman Mohyeldin and Sherine Tadros inside the Strip who got their message of the devastation out on television, the website and Twitter. Al Jazeera also urged the people of Gaza to give their online “views from the ground”. Their Twitter live updates were a compelling real time unveiling of suffering that was otherwise unheard in the western media.

Al Jazeera used Ushahidi to integrate mobile, email and alerts for crowdsourced crisis mapping and provided Google maps mashed up with up-to-date bombing information. The site also enabled creative commons video footage which was used creatively by artists, activists and educators alike. Minty said that telling the truth was hard, but not telling it is even harder. His team give Al Jazeera the tools to make it just a little easier.

While Minty is doing great things in Asia, Jude Mathurine is determined Africa will not be left behind in the digital revolution. The theme of Mathurine’s presentation was that the future of journalism in that continent is firmly tied up to mobile social networks and its enormous array of tools.

The question for Africa is how many people will be able to access the tools. Although 15 percent of the world’s people live there, Africa has just four percent of the world’s Internet users. The continent is handicapped by huge income disparities, education issues, poor bandwidth and bad regulation. In South Africa the black and poor are digitally disenfranchised and online social media is biased towards the white and wealthy. Journalists suffer just as badly as the general population and have little by way of media education or exposure. Media organisations are staid and hierarchical and do not engage audiences.

Yet Mathurine says Africa will not be left out of the global village of social networks. He sees hope in the fact the social network sites such as Facebook, Youtube and Blogger are among the most popular sites in many African countries. Critically, this trend is further exacerbated on mobile services. “The revolution will be mobilised,” says Mathurine. In the last six years world mobile growth has outstripped landlines by a factor of over a hundred to one. By 2007 Africa had almost 200 million mobiles compared fewer than 30 million fixed phones. Mobile users are transforming the continent using SMS (and reconnecting the millions elsewhere of the African Diaspora).

Mobile growth is fastest among the young and are taking to the social networks in greatest numbers. Online tools such as Kabissa and Zoopy are changing the political landscape too as Africa looks to local and cheap solutions to get around its many problems. People can buy mobile handsets using open source operating systems with camera and recording capability for just $15 and the Internet backbone is slowly increasing around the continent. But SMS remains the killer app and sets the agenda often bypassing media censorship in the process. Young people and social media are Africa’s great hope for a truly democratic continent, concluded Mathurine. And mobile technology will be far more important than desktop access.

Friday, November 13, 2009

Media140: Jay Rosen’s Ten Commandments

The keynote speaker on Friday’s session of Sydney’s Media140 was New York University’s Internet doyen Jay Rosen. The 53-year-old journalism professor appeared to his Sydney audience via a Skype hook-up from New York and his speech was a direct challenge from the Big Apple to Big Media. It took the form of an Internet Ten Commandments (all 140 characters or less) both from his own published views and the views of fellow travellers. Rosen is not Moses come down from the mountain but his points were a useful and digestable template for approaching the new media landscape. (photo by Neerav Bhatt)

#1 “Audience atomisation has been overcome”.
Rosen's first point is that media power is now widely dispersed. Rosen wrote about atomisation at his own Press Think blog in January this year drawing on work by Daniel Hallin. Journalists used to be able to define who and what was in the news conversation by virtue of their privileged place in the system. Audiences were atomised as they only talked to the media not to each other. But now there are many alternative networks and voices questioning the media’s right to define agendas. The sphere of legitimate controversy is expanding in both directions at the expense of consensus on one side and what was defined as deviance on the other. People are going around journalists for the news they want, overcoming the atomisation in the process.

#2 “Open systems don’t work like closed systems”.
Here Rosen is asking journalists and bloggers to accept each other's strengths. Again he wrote about this at Press Think in September 2008. Closed systems like the corporate press don’t operate the same way as open ones like free blogs. Closed systems bring editorial oversight and the authority of a respected brand while open ones crowdsource information and are easy to use. What both systems should have is trust and ethics.

#3 “The sources go direct”.
This point is from Dave Winer in May. Sources are a crucial part of the news, says Winer. They will continue to have things to say, even if there is no longer a big media there to listen. Sources already act as quasi-journalists so it is not too great a leap of logic to suggest they will either tell the news themselves or go tell a blogger. Nature abhors a vacuum, Winer is saying, and journalists will not be missed if they disappear.

#4 “When the people formerly known as the audience use the press tools they have to inform one another— that’s citizen journalism”.
This was Rosen in July 2008. It follows on from #3. Citizen, or open source, journalism occurs organically whenever anyone publishes news or information.

#5 “There’s no such thing as information overload, there’s only filter failure”.
This is a quote from fellow NYU professor Clay Shirky from December last year. Shirky is saying the problem is not with the vast amount of information available to us all. This superabundance is beyond the capability of any one person to fathom and we are all regularly confronted with too much information. What we do is filter the flow to make sense of the world. That means a patient process of continuous learning and unlearning. “If the twenty-year-olds aren’t complaining about information overload, it probably isn’t the problem we think it is,” says Shirky.

#6 “Do what you do best and link to the rest.”
This is the famous February 2007 dictum of Google economy advocate Jeff Jarvis. Jarvis’s message is a plea for specialisation: stop trying to become the media of record, and instead concentrate on what you are good at. You can still point to everything else thanks to the remarkable power of the hyperlink.

#7 "Half my advertising is wasted, I just don't know which half."
Unlike the first six recent quotes, this one is almost a century old. Rosen attributes it to Philadelphia businessman John Wanamaker (1838-1922). Wanamaker was talking about the eternal business quandary about whether to market products or brands. The problem has not gone away a hundred years later but perhaps it would be solved with a more integrated view of return on investment.

#8 “‘Here’s where we’re coming from’ is more likely to be trusted than ‘the View from Nowhere’”.
Not exactly a quote but wisdom distilled from an ironically anonymous July blog post at The post is summarised in the title “transparency is the new objectivity”. The claim of objectivity always hides biases. There may be nothing wrong with those biases but the audience should know about them in order to make an informed decision. The net benefit is twofold: trust, and a more nuanced understanding of the issue as presented by the author.

#9 “The hybrid forms will be the strongest forms”.
Rosen’s post from June 2008 is evolutionary praise for mongrel media. Adaptability is required to flourish in an era of two-way and many-to-many communication. New forms will emerge using the best of closed and open systems (see #2). They will most likely be pro-am using a distributed reporting model.

#10 “My readers know more than I do.”
This is a well-known 2003 quote from blogger and journalist Dan Gillmor. In many respects, this is a statement of the obvious. Yet it is one often forgotten - particularly by knowledgeable journalists who may know more about their issue than any other single person. It is in the journalists' interest to co-opt this knowledge otherwise they will be sidelined (see #3 and #4). Gillmor sees it an opportunity not a threat and a necessary adaptation for survival (see #9).

Rosen signed off with the instruction “you gotta grok it before you can rock it”. Sci-fi writer Robert Heinlein coined the word grok to describe the collective influence the observer and the observed have on each other. In this case it means intuitively establishing a rapport with the tools and the times in order to master them. “Be the media” appeared to be Rosen’s parting advice to the people formerly known as his Sydney audience.

Thursday, November 12, 2009

Media140: Twitter and the Iranian election

A new study of Twitter in the Iranian elections has found that that the use of the social network was greatly exaggerated inside the country. British writer Charles Leadbeater and his team found there were less than 20,000 twitterers with an Iranian address and many of these included foreigners who changed their location to “Tehran” in sympathy with the protesters. The report also found only one third of Iranians have internet access skewed towards the younger and urban opposition supporters. According to Valleywag such a tiny proportion of Iranians on Twitter means any stories about a new movement based on the social network are meaningless.

Yet it is also true to say the 2009 Iranian election was one of the most important moments for Twitter in its short life. NYU Professor Clay Shirky called it “the big one” and the first revolution catapulted onto a global stage and transformed by social media. Leadbeater’s findings appear to dispute the transformation part of Shirky’s statement but the global impact is accurate enough. The US State Department deemed it to be so important, it twisted Twitter’s arm to delay a critical network upgrade in June so it wouldn’t cut daytime services to Iranian disputing the election result.

Introducing the third panel of the media140 conference in Sydney last Thursday, ABC’s Fran Kelly called the election a “watershed moment” for social media. The session was entitled “social media lessons from the Iranian uprising” and featured ABC’s Mark Colvin, Al Jazeera’s head of social media Riyaad Minty, UTS lecturer Tony Maniaty, SBS News Director Paul Cutler and University of Wollongong’s Dr Jason Wilson.

Mark Colvin kicked off the discussion. Colvin was an ABC foreign correspondent and in Iran at the time of the original Islamic Revolution 30 years ago. He said the slogans on the street “Marg Bar Amrika” (Death to America) have now been changed to “Marh Bar Diktator” (Death to the dictator) as protesters turned against their own government.

Colvin said Iran’s so-called Twitter revolution began abroad. Americans angry will the lack of coverage of unfolding events after the disputed election began posting comments using the hashtag #cnnfail. The 24 hour broadcaster had pushed out the official Iranian line that Mahmoud Ahmadinejad had won the election but failed to report on the disputed fairness of the ballot. Iranian authorities expelled the reporters of other broadcasters, such as the BBC for daring to cover the growing unrest on the streets of Tehran. Colvin said that cnnfail became a symbol for what was wrong with old media and Twitter began to take centre stage as people sought out alternative sources of information.

There were a lot of people purporting to give eye-witness accounts. Colvin used his knowledge of Iranian and journalistic nous to verify what was trustworthy and what wasn’t. In Australia and elsewhere he quickly became acknowledged as an expert on the topic. However, he acknowledges “Twitter didn’t really achieve much at all inside Iran.” The Social media buzz gave the protesters a sense that their protest was worth persisting with but it also helped spread rumours, false pictures and inflated protest tallies. Colvin said the revolution was defeated but there were two unexpected benefits: it made the people of Iran human in western eyes and it helped Iranians see that they were not alone. “The pretence [of religious rule] has been stripped away, and part of what did that was created by Twitter, social media, and the world wide web,” he concluded.

Jason Wilson also believes the revolution said more about Twitter than it did about Iran. Wilson said it was amazing to watch how people in Australia and elsewhere discussed the issue and invested emotionally in it, through the medium of Twitter. Wilson said it was an “intense” experience unlike any other he had witnessed in the web2.0 world. But focusing on Twitter alone underestimates the influence of the Iranian blogosphere, he noted. Wilson said the blogs were a crucial space for dissent and debate and responsible for getting the protesters out on the street. Facebook groups and old fashioned word-of-mouth also played a big role.

The Iranian experience also showed some of the potential flaws of Twitter. It was all too easy, said Wilson, to retweet something rather than check out its accuracy. The hype around Twitter also disguises the fact that its effect in Iran was overstated and its user base exclusive. Ahmadinejad’s rural and poor constituency (as subsequently confirmed by Leadbeater et al) are “the last people who are likely to fish up on Twitter” and therefore without a voice in the west. “We need to be reflexive about the nature of [Twitter’s] networks when we think about this platform as a source of information” Wilson concluded.

Tuesday, November 10, 2009

Media140: Julie Posetti’s Revolution

ABC RN Breakfast presenter Fran Kelly kicked off the second session on Day 1 of Sydney Media140 on the provocative theme of “death or salvation of professional journalism”. Kelly’s panel included fellow Radio National presenter Robyn Williams, Fairfax Digital editor-in-chief Mike Van Niekerk, Crikey editor Jonathan Green and Crikey media writer Margaret Simons. But Kelly’s first guest, and the subject of this post, was the conference’s indefatigable editorial editor Julie Posetti. (photo by Derek Barry)

Posetti is a journalist and academic based in Canberra with over 20 years experience in the media industry in radio, print and online. Posetti is an avid Twitterer and has been engaged in eight months of active research into how journalists use the tool. Posetti’s theme was It’s a revolution not a war. The name took its cue from earlier speaker Mark Scott’s recent “end of empire” speech aimed at the legacy media barons such as Rupert Murdoch.

Posetti’s argument was there are three crises confronting journalism at the moment: dealing with the effects of new technology, the failure of the economical model and a loss of public trust. She said that the latter crisis is not getting the attention it deserves among all the clutter of the first two crises. Yet it is not difficult to see why the industry might not want to talk about it. News is becoming increasingly tabloid, trashy and truthier as it seeks ever wider audiences lured by the lowest common denominator. Editors and proprietors know that people love hearing about scandals and outrage, and they will bring it to them if it means having to manufacture them.

But as Posetti notes, there is a nasty side effect to the sensationalism used to sell such news: loss of reputation. Journalists pay the price as much as the media they serve in this interest. The professional consistently ranks low in most trust surveys of occupations. They gradually transform from guardians of the fourth estate into lackeys of corporate media giants prepared to stop at nothing to get their grubby story. Meanwhile the major issues of the day are either incorrectly reported or under-reported or both.

Posetti says that journalists should wake up to this danger. Social media is enabling many new practictioners and many more who fact-check others. If journalists didn’t engage with these new players, they would lack credibility in online communities. Posetti said such credibility was crucial to sustaining what ever model exists when the first two crises are solved.

This means that we need to pay as much attention to the public good function, if not more, than either to the death of newspapers or the lack of profits online. To do this, argues Posetti, journalists must endure with their most sacred functions: “shining a light in dark places; speaking truth to power and doing so without fear or favour, but with a commitment to accuracy, truth & fairness.”

This means having a wider definition what constitutes news reporting and the ditching of the over-blown notion of objectivity. The social age has blurred the line between journalists and citizens. This is particularly true in Twitter with its open discussions and crowd-sourcing of information between all manner of professional and amateur media players. Some of this will be serious, some will be playful (witness how tonight’s #pwnednudierun played out across television, Twitter and Youtube). But whatever it is, it is something to embrace not fear or resist. “It’s vital to accept that this is a revolution, not a war,” said Posetti. “A time for transformation, revitalisation [and] reinvention.”

Monday, November 09, 2009

Media140 and Mark Scott

I’ve just finished watching ABC boss Mark Scott display his fine sense of humour for the second time in four days. Tonight I watched his flagship ABC1 channel where Scott was justifiably praising the wonderful Andrew Olle lecture given by Chaser executive producer Julian Morrow. Scott said Morrow and the Chaser team were the reason why the ABC legal team had quadrupled in size. He said Morrow was the reason for his grey hair and letters he gets from Gerard Henderson and also suggested that Morrow could afford a Lachlan Murdoch-like $23 million Sydney mansion if he was prepared to rely on his ABC salary for a thousand years. (photo of Mark Scott at Media140 by Neerav Bhatt)

The self-deprecating wit hides a very sharp brain of a man who is now probably the second most important media player in Australia (behind Lachlan’s Dad). He acknowledged Morrow's important points about primary and secondary audiences and how the ABC should react to them. He also endorsed Morrow's points about the importance of new media. The head of Australia’s foremost public broadcaster has used a number of key speeches to throw his weight behind the new media revolution and he was in zealot mode again on home turf at Ultimo on Thursday when he made the keynote speech for day 1 of Media140 Sydney. Scott’s introduction to Twitter is typical of many people’s experience (including my own) with an initial period of scepticism, followed by silence and then eventual acceptance. Scott said he signed up in late 2007 and followed just one person: Ana Marie Cox (the American political blogger who founded Wonkette).

Scott said he quickly became “bored and confused” and his interest in the tool faded away. He quoted co-founder Biz Stone's statement that "if there were two or three sentences I'd use to describe Twitter, one of them would be 'I don't know'". It wasn’t until February 2009 that he re-engaged with Twitter and “came to understand it”. Scott’s epiphany was due to the Victorian Bushfires emergency. As the scale of the devastation started to emerge on Black Saturday, the ABC local radio station 774 Melbourne’s twitter hashtag became an increasingly vital hub of information using the hashtag #bushfires. Scott praised ABC staffer Wolf Cocklin (@wolfcat) who manned the Twitter feed for three days solid passing information to and from the broadcaster, the CFA, the police and members of the public.

Inspired by WolfCat, Scott returned to Twitter and quickly became enamoured of its possibilities. But while he joked about his assiduous management of the number of his followers, he said Twitter was just a technology and it was communication that counted. He reminded the audience of the famous Henry David Thoreau quote: “We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate.”

But Scott did have important things to communicate in his speech. He used the occasion to announce two new ABC online initiatives. Firstly he was commissioning 50 digital media producers help local communities to create their own content and secondly was the launch of “ABC widgets” to allow people run broadcaster news feed content from their own blogs and social media pages. As Margaret Simons noted, the issue will be whether commercial media organisations selling ads would also be allowed to use the widgets.

Scott also provided a set of four guidelines for ABC staff using social networks. These were 1) do not mix professional and personal conduct in ways likely to bring the ABC into disrepute 2) do not undermine work effectiveness 3) do not imply ABC endorse personal views and 4) do not disclose confidential information. The guidelines are straightforward and encourage journalists to engage with social media rather than be afraid of them.

With Murdoch-led paywalls on their way, it is crucial that ABC journalists have the right tools available to them to provide a useful free-to-net alternative for those unable (or unwilling) to afford to buy their news. As the Reuters Institute for the Study of Journalism notes, social media, blogs and user-generated content are not replacing journalism, but they are creating an important extra layer of information and opinion. Most people are still happy to rely on mainstream news organisations to sort fact from fiction and provide a filtered view. But these people are increasingly engaged by this information, particularly when recommended by friends or other trusted sources. With Mark Scott at the helm, it appears the ABC are well placed to become leaders in this new exciting field.

Sunday, November 08, 2009

Initial Thoughts on Media140: Memories of blogging

I’m just back from a Sydney two-day Media140 “news in the age of social media” conference. Due to Internet access issues and the vagaries of battery life, I didn’t get the chance to blog about it in Sydney. The conference generated a lot of discussion and argument (particularly between journalists and “new media” advocates) and I’ll add my take over the next few days. However, I wanted to begin with a comparison that struck me.

It seemed to me that the battles that dominated the backchannels this week reminded me of similar warfare waged two years ago. In September 2007 I attended the first (and to my knowledge, still only,) Australian Blogging Conference in Brisbane. Much of that conference focused on blogs and political reportage. Bloggers and academics lined up on one side of the argument describing how blogs were a crucial part of the public sphere. On the other side professional journalists reminded them that blogging was a practice as well as a platform and their craft skills were still needed to provide proper context to whatever information being made public.

The journalists had good reasons for their turf minding – they feared their role as sense-makers was about to be seriously diminished. Though the GFC was then unheard of, the media industry was already in crisis by 2007. As more and more people abandoned traditional media in favour of more disparate (and sometimes desperate) news sources online, it was becoming increasingly harder to harvest eyeballs for advertisers in sufficient quantities to justify the news expense of big media. That day in Brisbane, the argument raged back and forth over whether blogs would save journalism or walk all over its corpse.

With two years hindsight, it is obvious that blogging will do neither. The platform will continue as a popular venue of long-form thoughts for produsers, some of whom will be professional, some others amateur and more may be a mix of the two. All will likely continue to irk each other. But as the technology has matured, so has the argument. As blogging evolved, much of the heat went out of the battle. While a few journalists remain hostile, most are now either bloggers themselves or else see the blogs less as a threat than part of their arsenal of sources.

That hasn’t meant the journalists’ problems have gone away. On the contrary, journalists are move than ever under threat from corporate shareholder pressure to cut costs and demand thinner news rooms. The blogs are still eating away at audience along the long tail. Now more tools under the rubbery banner of “social media” are further muddying the waters. But thanks to the link economy, blogs and the social networks possibly bring as much traffic to old news sites as they take away.

Of the social networks it is Twitter that is causing the most professional angst. Twitter was a toddler at the time of the 2007 blogging conference and barely merited a mention. But its real time news function would prove irresistible and the subsequent explosion of growth and influence has pushed it to the centre of the argument. Ande Gregson coined the concept of media140 to launch a global discussion on what news in the social age means. I enjoyed the conference and the diverse set of speakers but the name riffing off Twitter’s character limit meant that the impact of Facebook (now 325 million users) did not get the attention it deserves.

What did come out was the same battle between new and old media proponents. The early adopters and academics showed how Twitter was changing the news landscape. The journalists asserted their right to provide an ethical, informed and contextualised take on the news in the new platform.

I suspect the outcome will be similar to the 2007 arguments. The (former) audience will be atomised into dialogues of the deaf and there will be less control and mediation. But journalists will prosper if they engage with Twitter, and carefully curate the data while showing a human and ethical face. Twitter, like the blogs, or Facebook, won’t hasten the demise of traditional media. As the wonderful fake Twitter account @BigHarto (based on News Ltd boss John Hartigan) pointed out late Friday afternoon: "In closing, I'd just like to remind #media140 participants that the future of journalism is whatever I fucking say it is." This may just be art resembling postmodernism. But it is also a reminder that real media power will not be tossed away lightly.