DEVELOPMENTS The Federal Reserve’s strategy to mitigate the effects of the global financial crisis in the U.S. has had three essential elements: smooth the edges of the economic downturn by increasing the Fed’s regulatory influence, provide bailout packages to struggling financial institutions, and keep interest rates low to stimulate investment. Three years prior, Lebanon’s banking system faced its own impending financial crisis, during the July 2006 war. Unlike the Fed, the Lebanese Central Bank (BDL) limited itself to monitoring markets and buying up Lebanese currency to maintain its value without direct intervention in the market. And this limited monitoring system worked, thanks in large part to the self-organizing behavior of the Lebanese banking sector. Private banks placed a $500 cap on personal withdrawals and overseas transfers which later was relaxed, according to Dureid Saad, a branch manager of BankMed, a prominent Lebanese bank. Fear that the dollar note supply would dry up because of Lebanon’s frozen air, sea, and land commercial transportation systems created a self-imposed regulatory system that limited withdrawals and transfers of Lebanese Pounds during the war. As the Fed continues to re-tool its strategies for combating future financial crises, is there anything it can learn from how Lebanon handled its 2006 financial crisis?
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DEVELOPMENTS The disintegration of the Soviet Union (USSR) in the early 1990s led to statehood for a number of countries in Europe, Central Asia and the Caucasus. This reconfiguration of territorial and institutional boundaries was a difficult process, which left many Russians outside their own country and in Russia itself with a lingering desire to reclaim areas of influence and reassert its great power status. While some of the newly formed post-Soviet countries have made significant progress in terms of state-building over the past two decades, others continue to suffer the Soviet legacy of poor governance, economic stagnation, poverty, and intractable conflict. In Georgia, the existence of unresolved disputes in the break-away territories of South Ossetia and Abkhazia undermine stability and led to brief but significant war last year. In early August 2008 Georgia launched a military strike on South Ossetia in response to separatist attacks by South Ossetian forces. This in turn led to the military occupation of Georgia by Russian forces, arguably to protect the ethnically-Russian people of South Ossetia and Abkhazia. During the month-long fighting, significant destruction of Georgian villages took place, well documented human rights violations were committed by all sides, and over 192,000 people were displaced from Georgian enclaves in South Ossetia. Mediation by the French through the European Union Presidency led to a ceasefire in September 2008, but Russia continues to violate the terms of the agreement and undermine regional stability through efforts to curtail the United Nations and Organization for Security and Cooperation in Europe (OSCE) missions in Georgia. Today, sporadic violence continues and the possibility of renewed conflict with significant destabilizing effects is very real.
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 DEVELOPMENTS Recent controversy in Indonesia’s national government vis a vis plans in Aceh Province to enact a law that would stone adulterers to death has pushed the topic of Islamic law, known as sharia, into the national arena and elevated religious tensions. Under Indonesia’s regime of decentralization, local governments have freedom to enact regional laws. The Aceh case indicates, however, a burgeoning effort by fundamentalist Muslim groups to define the direction of national policy. Already the only province in Indonesia operating under Sharia law, Aceh’s new legal provisions would also institute corporal punishment for pre-marital sex, alcohol consumption, rape, pedophilia, and homosexuality, in addition to existing enforcements concerning mandatory prayer, gambling, dress codes, and alms. The plans have prompted outcries from national government officials, women’s rights groups, and international human rights agencies and raised concerns over gender equality and the treatment of non-Muslims within the province. The sharia debate is increasingly significant against the background of Indonesia’s recent national elections and the Marriott/Ritz-Carlton bombings that occurred in the capital one week later, killing at least nine. Strong support for President Susilo Bambang Yudhoyono (who popularly known by the acronym SBY), a Muslim moderate who was reelected to a second 5-year term on July 8th, came from 32 of the nation’s 33 diverse provinces. Significantly, the three primary candidates for President had secular tendencies and exit polls conducted by the Indonesia Survey Institute indicated that voters ignored issues of race, religion, and ethnicity. In this light, it’s not difficult to believe that sectarian divisions no longer matter as the tide of public opinion moves against extremism. Yet, consider that Nadhalatul Ulama and Muhammadiyah - the two largest Muslim groups in the world’s largest Muslim country - supported Jusuf Kalla and that SBY is thought by many to pander to the fundamentalist Prosperous Justice Party. The number of private Islamic schools has quadrupled over the last few years and students from pro-sharia groups rioted in Aceh’s capital on September 15th. Such events indicate a growing public role for Islam in recent years that may be helping fuel a division between Islamic factions at the provincial level and the views of a more moderate population. What then does this mean for Indonesia’s hard-earned reputation for moderation in Islam?
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DEVELOPMENTS Africa boasts an abundance of natural resources like oil, coltan, timber, precious metals, and diamonds. Although these resources offer opportunities for economic development, they have motivated civil and cross-border conflicts, thus earning the title of “blood diamonds” or “conflict diamonds.” When one thinks of jewelry and the four pillars that determine a jewel’s worth, any jeweler will tell you they are: cut, color, clarity, and carat. However, recent shifts in consumer behavior and subsequently the commercial industry suggest that one more “c” may fast become the fifth pillar– conscience. What impact can rising interest in corporate social responsibility have on conflict in Africa?
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Ethnic and Sectarian Challenges - September 2009
