Sunday, July 18, 2010

Deutsche CEO: West's Levies on Banks May Lift Asia's Role

Deutsche CEO: West's Levies on Banks May Lift Asia's Role. By ALISON TUDOR And PETER STEIN
WSJ, Jul 18, 2010

HONG KONG — Asia's already rising importance as a profit center for financial services could gain more momentum as governments in the U.S. and Europe levy new taxes on global banking profits, according to Deutsche Bank AG Chief Executive Josef Ackermann.

"The relative importance of Asia will even increase" as a result of regulatory moves against banks in the West, Dr. Ackermann said in an interview with The Wall Street Journal. "Asian countries would be well advised not to copy levies which are so popular in many other parts of the world."

The German bank's chief , who has become a prominent voice for bank interests in the wake of the financial crisis and heads the global lobby group Institute of International Finance, was in Hong Kong to attend the listing ceremony Friday for Agricultural Bank of China Ltd.

The levies cumulatively could translate into a substantial hit for lenders with branches in many countries, such as Deutsche Bank, which generates about three-quarters of its revenue outside of its home market, Dr. Ackermann said. Instead, he called for a home bias to the levies because the country of domicile was the one called on most to help out in the banking crisis.

Emerging markets could even take advantage of the backlash against banks in the West to grab market share in financial services, he said. "A lot of governments are determined, including the Chinese, to build up financial hubs at a time when other countries are more skeptical about the financial sector," he said, noting that Turkey and Russia are making similar advances.

Dr. Ackermann also warned that the war for talent in Asia is causing a bubble in bankers' compensation that is detrimental to the industry, even as he hired another rainmaker to keep business flowing.

Late Sunday, Deutsche Bank named Henry Cai its corporate-finance chairman for Asia as well as head of its corporate and investment bank in China. Mr. Cai is known as one of China's most consistent deal makers and is well-connected with the business and political elites in Beijing. He resigned from UBS AG in recent weeks as investment-banking chairman for Asia. It isn't known how much he will be making at Deutsche Bank.

Other senior banking executives in Asia complain that increasing competition for talent in the region is leading to excessive pay packages for bankers working in such areas as mergers and acquisitions and initial public offerings. Compensation, a key cost for banks, can cause serious problems for management when one division's or one region's pay is out of kilter with the rest. The buzz over bankers' pay in Asia comes at a time when governments in the U.S. and Europe are seeking to curb excesses that in recent years contributed to the worst financial crisis since the Great Depression.

"If the industry pushes compensation levels up by just poaching people from each other, in the long term it is not a sustainable model and not good for the culture of banks in the region," Dr. Ackermann said.

To combat this problem, Deutsche Bank has started recruiting more Asian graduates with the aim of steeping them in the bank's culture and later returning them to the region to run its businesses.

"It's not a short-term solution. It may take up to five years to see the first successes, but that is what we are working on," said Dr. Ackermann, who was also in Asia to give a speech at an International Monetary Fund conference in South Korea.

Like other banks weighing the prospects of the global economy, Deutsche Bank has made boosting its operations in Asia a top priority. "Europe's slow economic growth and the very competitive environment in the U.S. means Asia is a very attractive market, so it would be unwise not to do everything we can to be part of the market," Dr. Ackermann said.

The German bank is targeting four billion euros ($5.17 billion) in annual revenue from the Asian-Pacific region excluding Japan by next year, about double the amount it generated from the region in 2008.

Deutsche Bank already has a strong foothold, with operations in 17 Asian countries and over 17,000 employees.

Local regulators restrict foreign banks in ways that allow them to earn only about a third of their potential revenues, according to a recent report by consultancy McKinsey & Co., so the banks need to be careful not to compete in the same niches, such as high-profile underwriting deals in financial centers like Hong Kong. Deutsche Bank says only about 5% of its revenue in Asia comes from "public" deals such as initial public offerings.

One such deal that Deutsche Bank was involved in was the IPO for AgBank, which began trading Friday in Hong Kong. Clients like AgBank and Industrial & Commercial Bank of China Ltd., which Deutsche Bank also helped take public four years ago, are potential competitors as their business grows in scope and sophistication.

"I have no doubt [China's banks] want to first strengthen their domestic operations by moving towards more fee income then expand internationally gradually," Dr. Ackermann said. "We will also be confronted with stronger competitors coming from China."

Somali Militant Group Built Training Camps, al Qaeda Links

Somali Militant Group Built Training Camps, al Qaeda Links. By WILL CONNORS in Kampala, Uganda, SIOBHAN GORMAN in Washington, D.C., and SARAH CHILDRESS
WSJ, Jul 17, 2010

The terror group behind last weekend's deadly Uganda blasts recruited a local man to coordinate the attacks and received funds from al Qaeda, say investigators, as it extends its reach beyond lawless Somalia.

Al Shabaab, the Somalia-based group that has claimed responsibility for July 11's triple suicide blasts that killed 76 people in Uganda's capital, Kampala, has in recent months built up Pakistan-style terror training camps. One top leader, Sheikh Muktar Robow, has helped to transform the group from a local insurgency into a global jihadist organization modeled on, and swearing allegiance to, al Qaeda.

That picture of the group, and its development under Mr. Robow, emerged from interviews with Ugandan, Kenyan and U.S. investigators; current and former U.S. intelligence officials; and Somalis, including a member of the militant group.

A U.S. intelligence official said information gleaned from militant communications shows links between al Shabaab and al Qaeda leaders in Pakistan and Yemen. U.S. officials also see evidence of overlap in training and membership and say their working assumption is that al Shabaab has several hundred core members, similar to the numbers in al Qaeda in Pakistan and in al Qaeda's Yemeni outpost.

Intelligence officials say they believe al Qaeda is using the Somali group as a symbiotic host body, allowing its operatives access to other African countries. "As much as we're looking at al Shabaab, they are riding on the back of a more experienced player," said Col. Herbert Mbonye, the director of counterterrorism for Uganda's military intelligence body.

That relationship has raised red flags at U.S. intelligence agencies. In the past 18 months, militant training camps have emerged in Somalia similar to those that developed in Pakistan's tribal areas, a U.S. intelligence official said. Intelligence officials are now following about two dozen individuals from the U.S. and other Western countries who may have been affiliated with al Shabaab, or gone through these camps.

"It's quite an alarming story," the U.S. intelligence official said.

Al Shabaab's relationship with al Qaeda appears to have been cultivated in part by Mr. Robow, a top commander. Also known as Abu Mansur, he is among the U.S. government's most wanted terrorists.

Mr. Robow offered a warning of sorts ahead of Sunday's blasts, which hit a restaurant and a sports club where people had gathered to watch the final match of the World Cup. Speaking during a public address at Friday prayers earlier this month, Mr. Robow called for attacks against countries that had sent some 6,000 troops under African Union auspices to support the Somali government's offensive against al Shabaab. "We tell the Muslim youths and Mujahedeen, wherever they are in the Muslim world, to attack, explode and burn the embassies of Burundi and Uganda," Mr. Robow said, according to local media reports.

Mr. Robow grew up in southern Mogadishu as a devoted student of the Quran, according to public speeches he has made. He studied law at the University of Khartoum in Sudan, and then returned to Mogadishu to teach Arabic for several years. He is about 40, U.S. officials believe, based on a birth date on an Eritrean passport he used.

In 2000, Mr. Robow traveled to Afghanistan to train with the Taliban and al Qaeda, which used the strife-torn South Asian country to plot the Sept. 11 attacks in the U.S. In Afghanistan, Mr. Robow learned to fight, fire a sniper rifle and conceal roadside bombs, an al Shabaab official in Somalia said. He stayed less than a year, leaving before U.S.-led forces swept into Afghanistan.

Back in Somalia, Mr. Robow became a member of the Union of Islamic Courts, which aimed to establish strict Shariah law in the country, which had been largely lawless for a decade. The group came to power in 2006. Mr. Robow helped to establish an Islamist government and founded al Shabaab, a youth brigade that would serve as the union's armed wing.

The Islamist government soon collapsed. Al Shabaab endured. Mr. Robow, a skilled orator, became an al Shabaab spokesman and eventually deputy commander.

Al Shabaab, which controls vast territory in Somalia, has been engaged in a running battle with Somalia's transitional federal government. The group has pinned the government to a strip of the capital, Mogadishu, and largely prevented officials and parliament from meeting.

Beyond his ambition to overthrow Somalia's government, Mr. Robow has advocated linking the group's ambitions to global jihad. Through media interviews and in videos posted online, he sought to attract fighters in Afghanistan, Chechnya and Iraq, largely because foreign recruits could replenish al Shabaab's ranks and aid its finances. In a 2008 interview, he lamented that there "are not enough non-Somali brothers."

The same year, the U.S. Treasury Department declared al Shabaab a terrorist group and named Mr. Robow its "spiritual leader." Mr. Robow later released a statement saying the group was "honored" to be included on the list but expressed disappointment al Shabaab wasn't ranked higher.

Senior U.S. administration officials said some foreign fighters who answered Mr. Robow's calls—some of whom have "close links" with al Qaeda—came with experience, funding and the agenda of establishing Somalia as a base from which to attack Western targets.

The foreigners also brought new tactics. Roadside bombs and suicide blasts, once unheard-of in Somalia, are now part of al Shabaab's armory. The group's commanders have banned dancing, mustaches and, most recently, watching World Cup games on television. Fighters punish offenders with floggings or public amputations.

On Wednesday, armed al Shabaab fighters drove through towns in southern Somalia, blaring a warning to residents through megaphones mounted on their vehicles, according to witnesses contacted by telephone. "You must collaborate with [us] and allow your sons to fight the enemy of Allah," Abu Maryama, a senior al Shabaab official told crowds in the southwestern town of Baidoa. "If you pay no heed to this …you will be considered as another enemy and face punishment."

Harsh retribution and indiscriminate deaths have sapped public support for the group, and created rifts within it. Mr. Robow has been caught between those who want to focus the insurgency in Somali—and retain a measure of popular support— and the global jihadists who don't care about local backing, according the al Shabaab colleague. Mr. Robow, a Somali who has long opposed foreign intervention in his country, may not be considered radical enough for the new agenda, according to a recent report by the International Crisis Group, a Brussels based think tank.In the Uganda attack, the group's two factions apparently found middle ground.

The blasts have presented U.S. officials with a quandary. They see a need to step up support and involvement in the region, but they haven't determined the best course. "Violence always breeds urgency," the U.S. intelligence official said. "The question is: What [to do]?" The U.S. has been tracking al Shabaab and al Qaeda in Somalia for years, officials say. The Central Intelligence Agency works with military special forces units to collect intelligence and pinpoint targets, a former senior intelligence official said. The U.S. also works closely with the Ethiopian and Kenyan governments on counterterrorism operations.

Those efforts have grown in recent years as U.S. officials discovered as many as 20 Americans from Minnesota making their way to Somalia, including one who was determined to have been among five suicide bombers in an October 2008 attack in northern Somalia.

The intelligence-gathering paid off last year when U.S. Special Forces killed Saleh Ali Saleh Nabhan, a top operative linked to both al Qaeda and al Shabaab who was believed to be linked to 1998 U.S. Embassy bombings in Kenya and Tanzania.

But U.S. Special Forces units and intelligence officials have been grappling with a broader response to the growing terror threat from Somalia. Calling in airstrikes could fuel retaliatory measures against a weak Somali government. It could also stir up anti-U.S. sentiment that would advance the group's agenda, said the U.S. intelligence official.

"If you strike a camp, it makes you feel good, but what do you do the next day?" the official said. "You don't effectively eliminate the threat."

On Thursday, an al Shabaab leader underscored that point, delivering a message on the radio in Mogadishu congratulating what he called the Martyr Saleh Nabhan Brigade for the Kampala attacks.

Intelligence agencies have warned about al Shabaab's growing ambition to attack other countries—particularly Ethiopia, Djibouti and Kenya—as well as the West, the U.S. intelligence official said.U.S. intelligence hadn't picked up many direct threats against Uganda, but there has been a general concern about attacks targeting countries that supply troops to A.U. forces.

Investigators in Uganda say they are questioning a Ugandan man, Ali Isa Ssenkumba, who they say has confessed to helping plan the attacks.

Mr. Ssenkumba, who is in his late thirties and hails from a farming community outside Kampala, told investigators he was recruited by Somali men who persuaded him that he could have success in business in Somalia, according to a Ugandan military official close to the investigation.

Posing as a businessman, Mr. Ssenkumba made frequent trips to Somalia, where he attended an al Shabaab training camp, the Ugandan official said. Mr. Ssenkumba told investigators many other Ugandans are at al Shabaab's Somalia training facilities.

This person says Mr. Ssenkumba become familiar with guards at the borders between Uganda and Sudan and Uganda and Kenya, and received money and coordinated logistics for roughly two dozen al Shabaab members in Uganda who are suspected of plotting the triple suicide blast. Mr. Ssenkumba said, and investigators say they separately determined, that the attack was partially funded by informal money transfers from al Qaeda in Afghanistan.

Police in Kenya said they arrested Mr. Ssenkumba last week, before the attack, and handed him over to Ugandan investigators Tuesday, after the bombings.

According to Nicholas Kamwende, the commanding officer of Kenya's anti-terrorism police unit, Mr. Ssenkumba walked up to an immigration officer on the Kenya-Somalia border some time before the Kampala attacks and turned himself in.

"He said he didn't want to stay any longer with al Shabaab, that he wanted to go home," Mr. Kamwende said. "We didn't have anything to hold him on and we thought the Ugandans would be in a better position to exploit what he knew."

Mr. Ssenkumba wasn't made available to comment and it wasn't immediately apparent whether he was represented by a lawyer. Neither Mr. Kamwende nor Ugandan officials would say whether Mr. Ssenkumba provided information before the impending attack. Ugandan officials say Mr. Ssenkumba didn't turn himself in voluntarily.

—Nicholas Baryio in Kampala and Keith Johnson in Washington contributed to this article.