Sunday, 27 July 2014

Who shot down MH17: Russia or Ukraine?

 The wreckage of MH17 
and its 298 passengers
WHEN AIR MALAYSIA Flight MH17 was shot down over Ukraine On July 17th, the world was quick to blame it on Russia.

 However as the dust settles down and the  days wear on, evidence is pointing an accusing finger at Ukraine. In short, Ukraine military brought down the plane. Pointing an accusing finger at Russia is sheer propaganda, analysts say.

BUK 312:  The Smoking Gun? please note
the Ukrainian registration
 First there is evidence that the Ukrainian Air force was intensely attacking rebel’s positions in eastern Ukraine just at the time the passenger plane was overflying Ukrainian air space. In fact a rebel commander has confirmed that there was intense fighting in the region at that point in time.

"They knew that this BUK existed; that the BUK was heading  for Snezhnoye," he said, referring to a village 10 km (six miles) west of the crash site. "They knew that it would be deployed there, and provoked the use of this BUK by starting an air strike on a target they didn’t need, that their planes hadn’t touched for a week."

"And that day, they were intensively flying, and exactly at the moment of the shooting, at the moment the civilian plane flew overhead, they launched air strikes. Even if there was a BUK, and even if the BUK was used, Ukraine did everything to ensure that a civilian aircraft was shot down," said Alexander Khodakovsky, in an interview with Reuters. Khodakovsky is the commander of the so-called Vostok battalion - or eastern battalion.

 The interview with Khodakovsky is full of contradictions, innuendos and suppositions, which leave room for doubt. 

These notwithstanding however, all agree that the plane was brought down by a SAM 11 missile. In Russia, it is called a BUK-M. The level of sophistication of the Missile’s technology raises doubts regarding the ease of access by rebels: According to Wikipedia, a BUK has four components; an acquisition radar component, the command and control component; launcher Component and the logistics component.  
It describes the functions of each component as follows:

·         The acquisition radar component (several variants have differing capabilities) allows the system to identify, track and target selected targets.
  • The command component is intended to discern "friendly" military aircraft from foes (IFF), prioritize multiple targets, and pass radar targeting information to the missile launchers.
  • The missile launcher component can carry a variety of missiles and may be able to engage more than one target simultaneously. This, essentially, is the gun.
  • The logistics component carries additional (reload) missiles and provides other supplies and parts for the system and the operators.
 Given the complexity of the system questions arise: do the rebels in eastern Ukraine have access to this technology? From where? These components are independent vehicles working in Unison and therefore quite expensive for a bunch of rebels. Could the rebels afford it? Can Russia afford such generosity as to equip rebels with missile systems? Assuming they owned such a system, why did the rebel shoot a harmless civilian aircraft since the system can identify, track and target?

What did the separatists stand to gain from shooting a foreign civilian plane? Zilch analysts say.  How about the government of Ukraine? It stood to lose a lot too. However, mistakes do happen in the heat of war. And in this case, a ghastly one happened. Since Ukraine in whose territory the plane came down was the first suspect, she was under pressure to explain the crash.

They quickly pointed fingers at Russia, then began to target the separatist rebels in the same area. However, Ukraine and its allies in the West could not produce a smoking gun to back their accusations against Russia. One had to be found quickly.

Ukraine led the search for a smoking gun and unwittingly indicted herself and she continues to indict her conduct. On July 19th, the Ukraine security Service-SBU- published pictures allegedly showing a BUK- surface-to-air missile system being withdrawn from the Ukraine. They claimed it was headed for Russia.

Bloggers immediately pounced. The system, they said was a Ukrainian asset.  The picture was shot on March 8th, said the bloggers, when Ukrainian government published the same pictures saying its armed forces  was concentrating air defense systems close to Russian Border. The air defense system then comprised of eleven BUK missile launchers, among them, one identified as No 312.

That Missile system   no 312 was also presented by the Ukraine government as the Smoking gun needed to proof Russia’s culpability. Nay said the bloggers, among them, the respected Global Economic Analysis: URL The missile system being transported on a heavy truck was photographed in March in a town called Yasinovataya, north of Donetsk. The city is 120KM from the Russian border and 80Km from the crush site.

Another piece of “evidence “ that the blogger shredded was the  exact location where the picture was taken. A billboard on the foreground was use to identify the location as "Krasnoarmeisk City, Dnepropetrovskaya Street #34", deep in Ukraine government held territory  The bloggers also questioned the allegation that the BUK was being transported to Russia. They argue that a BUK comprises of four vehicles, yet the one being transported on heavy truck is only one, basically the gun. What happened to the other components? Verdict: The gun was being transferred within Ukraine.

Further, they argued, the Picture was shot in winter since people were in heavy clothing. However, flight MH17 was flying in summer. But in the cacophony of accusations and rebutals, no one has told us what is the significance of BUK 312. Did it bring down flight MH17? Where is the gun now?

The infamous BUK312 where is it?
Given the strong rebuttal of the evidence provided by SBU, and the un refuted claims that the Ukrainian armed forces were engaged in an intense fighting with the rebels in that region at the time MH17 came down, also given the lack of evidence that the rebels have access to BUK systems, verdict is: Ukrainian government forces, willfully or by error, shot down flight MH17 killing 298 people.

AS if to support the bloggers’ verdict, Ukraine has intensified war against the rebels around the site where flight MH17, forcing international investigators to call a visit to the site. The intensified violence came just a day after the Rebels allowed and promised to protect the international investigators at the site.

 The Government knows very well that the fighting will compromise the crush site. A fact acknowledged by the international investigators and the separatist who accuse ukraine of being “in a hurry to hide evidence that it shot down the plane.”

The .Ukrainian government has to do a better job providing credible evidence to the contrary. Here foreigners, especially the West, have to tread carefully lest they be caught in an embarrassing imbroglio.

Wednesday, 23 July 2014

Low interest rate regime in Kenya sets in

INTEREST RATES IN KENYA have turned South following the introduction of the Kenya Banks reference rate (KBRR). This is seen as the onset of a low lending rates regime in the country. KBRR is the weighted average of the Central Bank Rate and the two month the average weighted 91-T-bill rate. The T-Bill rate has served as the benchmark interest rate for many years. However, its declines have not resulted in relief for borrowers.

 The KBRR has done just that, stripped banks of the power to fix their base lending rates. And being a flexible rate determined by the Central Bank of Kenya, the regime of low interest rates has set in. Before KBRR, which came into force on July 8th, the base lending rate which was determined by individual banks was above ten per cent pushing  the actual lending rate, in  some instances, was as high as 22 per cent.

 Now that era is gone and the days of huge profits by the banking industry will soon recede into a distant memory. The KBRR was set at 9.13 per cent and will remain in force until January. This means that the base lending rate for all banks will be 9.13 per cent and a mark- up. Therefore the new formula is KBRR+k where k is the mark-up. Following its introduction, lending rates have retreated from 22 per cent to about 15 per cent. This rate will remain in force until January 2015 when a new KBRR will be announced.

Standard Chartered, the first bank to adopt the new rates has pegged long-term mortgage rate at 9.13 +1.77 per cent. For individual borrowers, the rate was pegged at KBRR+5.77per cent bringing the maximum actual lending rate to 14.9 per cent.  Analysts expect a stampede to lower interest rates in the coming weeks.
Apart from lowering their rates, Banks are also required to reveal the components of costing of the rate. This will enable customers to compare the lending rate of various banks before they take out a loan. This empowers the customer to negotiate a lower borrowing rate.

Further since the rate will be reviewed every six months and one of its determinants is running average of the 91-day T bill rate, then further declines are expected. The rate is the government borrowing rate.  The government, being the largest borrower is keen to limit its forays into the local financial market. It has just borrowed some US$ 2 billion via a sovereign bond is looking at issuing other sovereign bonds to finance its development programme.

The law of demand and supply dictates that prices are lowered when supply increases. With the government out of the local credit market, the quantity of credit will increase leading to lower lending rates. The 91-T bill rate now stands at 9.273 per cent but can decline rapidly subject to low demand. At one time in the last decade the rate shrunk to as low as 1.5 per cent. If this rate shrinks, it will pull down the lending rates even if the CB rate remains at 8.5 percent.

 Another tool that can be used to drive down interest rates is the cash Ratio. This is a percentage of bank deposits that have to be deposited with the central Bank. When it is high, banks suffer a credit squeeze and since it does not earn any interest, the cost of the idle money is passed on to the borrower. In the late 1990s and early 2000s, this ration was as high as 12 per cent. It now stands at 8.30 per cent. The government has used this tool to ease credit squeeze by lowering it to as low 4 per cent in 2007/8.  It can be lowered again in order to lower lending rates.

Customer behavior will also push down the lending rates. Since the rate changes every six months, the expectation of a lower rate six months down the road could motivate some customer to withhold their demand for credit for six-months if the expectation is of a lower price.
 In the new environment, analysts say, the banking industry has to get used lending more at lower margins. In fact, experts say, lower lending rates are not a death sentence for banks. It 

Wednesday, 16 July 2014

How soon KQ's direct flights to US?

A prototype of terminal 1A
 BY THE LOOK OF THINGS, Kenya-Airways could be allowed direct flights to the US soon. The negotiations to allow KQ direct flights to the US have been going on for a long time. However, now it seems to be a matter of when, not if, the authority will be granted. There is speculation that it could come sometimes in 2015.

 A flurry of goings-on point at this direction. The completion of Jomo Kenyatta International Airport's unit 4, now renamed Terminal 1-A is one of them. The terminal will begin partial operations later this week.

Concomitant with this, the US government has donated bomb-detecting equipment to the airport. Kenyans have already been trained in the use of the 20 Desktop Explosive Trace Detectors.

The donation was an addition to the already advanced security features at the new terminal which addresses security concerns of the US government. The American security agents will monitor the security features of the terminal for the next three months.

The end of the Monitoring period will coincide with the completion of the terminal, making it fully operational.

The security features include separation of arriving and departing passengers. In the two-story Terminal 1-A, arrivals will use the second floor while departures will use the first floor. 

The separation will be enforced by use of bold signage directing arriving, departing and transiting passengers to their respective floors to ensure all passengers get to their destination on time, says a KAA internal document.

KQ: How soon direct flights to US?
The Kenya Airport Authority’s handbook 2011-2012, says that the separation will involve building an additional floor in all four termini at the airport so that arriving passengers will be using their own floor separate from departing passengers. It will also include the construction of an airside corridor separating arriving and departing passengers.

 The new terminal will serve an additional 2.5 million passengers a year, bringing the total capacity of terminal one to 9 million passengers a year.
Apart from security features, the home airline, Kenya Airways is also gearing up for eventual authorization to fly directly to the US. It has acquired a fleet of long-haul aircraft including the luxury Boeing Dreamliner. There is a huge Kenyan population in the US market.  Lack of direct flights hampers exports of Kenya produce to the US.
The terminal is slated to serve international departures and arrivals only.

An extended apron from terminal 1-A to cargo village will increase its capacity to load eight wide-bodied aircraft simultaneously. Currently, the cargo village can load only three such aircraft. JKIA is the cargo hub of Africa handling some 30 million tons of Cargo a year.

 Nairobi has become the financial, manufacturing, medical, educational and diplomatic hub in the east and central Africa region. These factors put lots of pressure on the Airport to also modernize and become the aviation hub of Africa.

JKIA is also home base for Kenya Airways, one of the most successful airlines in Africa, and 46 other international and domestic airlines that fly to more than 100 destinations. It is the natural aviation hub of Africa.

Also read

Monday, 7 July 2014

Kenya's GDP to shoot to $53bn on rebase

THE KENYAN GDP is 20.6 per cent above the current level, Economists estimate. This calls for a rebasing of the national wealth accounts from 2001 to a more recent year.  The government will consequently rebase the GDP to 2009 from 2001. The exercise, that began last month will end in September

 According to the central Bank of Kenya, at the end of 2013, the GDP stood at US$43 billion. 20.6 per cent of that would be US$8.9 billion. This means Kenya’s GDP is unofficially US$52 billion.  This level or higher will be confirmed at the end of the rebasing exercise later this year.

Rebasing of the national account series (which includes the GDP) is the process of replacing an old base year with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared.

Rebasing is meant to reflect recent developments in the economy and expand the basket of consumer goods to reflect changing tastes and preferences. Consequently, countries rebase their economy once in a decade although the UN recommends that rebasing be done every five years.

In the Kenyan case recent developments since 2001 can be discerned at the telecommunications and transport sector for instance. In 2001 there hardly 500,000 telephone lines in this country. Now, there are 31 million telephone lines with such additional services as Mobile Money transfer and data communication. In 2001 internet communication was through cyber cafes and was expensive. To date internet is available on the majority of handsets.

Bottled water was a preserve of tourists in Kenya in 2001. Now it is available even at the village shops. The financial sector has witnessed massive growth over the past nine years. Many other products have also entered the market justifying a rebasing the GDP.

Concomitant with the elevation of GDP will be the rise in per Capita income which will see the country move deeper into the middle economy level. Even before the rebasing, Kenya’s GDP per capita has already entered the lower rungs of the middle income level. It now stands at US$1034.

 According to the World Bank, the entry level to the middle income class is $1025. The rebase will catapult GDP per capita to US$1244.

Another benefit of the rebasing is the decline in Kenya’s debt to GDP ratio from nearly 50 per cent of GDP to 42 per cent. This could assuage critics’ fear that the country faces the risk of defaulting on its debts.

The country has enjoyed relative robust growth for much of the 2003-2013 decade. According to the World Bank’s data, Kenya‘s GDP per capita grew 248 per cent between 2000 and 2012 rising from US$399 in 2000 to $991 in 2012. In 2014, the economy has crossed the middle income threshold, say experts.

 In east Africa, GDP per capita in Kenya grew 207 per cent in the eight years to 2012. This was way higher than Tanzania and Uganda where GDP capita has grown by 160 and 165 per cent respectively.  

Even then Tanzania’s GDP per capita is still higher than Uganda’s although the latter posted a larger increase than the former. Tanzania’s per capita is expected to have reached $625 last year while Uganda is following closely at $615.

The Kenyan economy is relatively diversified and resilient. It has weathered a lot of storms. These include the Post- election violence that hit the country in 2007/08 that left the economy on its knees.  

The violence was  followed by a string of external shocks that slowed Kenya’s economic performance. These include the Oil shock of 2008 which at one point rose to $150 per barrel and the financial crisis in the West and a severe drought in 2010/11.

 Despite this unholy alliance, the economy has trudged along posting a 2.7 per cent growth in 2009, which peaked at 5.8 at 2010 before retreating to 4.4 per cent in 2011.  It edged up to 4.6 per cent in 2012 as fears of the political violence due to elections in 2012, held back economic activity. 
  Please Note: Kenya's GDP now stands at US$75nbillion as at December 31/12/2017