The NewsHour with Jim Lehrer

GWEN IFILL: Good evening. I'm Gwen Ifill. Jim Lehrer is on vacation. On the NewsHour tonight, a summary of today's news; reaction to new rules on medical privacy; political problems for Pakistan's General Musharraf; and a conversation with "New York Times" columnist Tom Friedman about his recent trip to India and Sri Lanka.

NEWS SUMMARY

GWEN IFILL: U.S. Airways received permission today to continue business as usual, under bankruptcy protection. A federal judge in Alexandria, Virginia, granted it. The sixth largest American carrier filed for chapter 11 protection late last night. The CEO said he expected no flights to be cut. Based in Arlington, Virginia, U.S. Airways is the first major airline to declare bankruptcy since September 11. On Wall Street today, airline shares were lower across the board on the U.S. Airways news. Overall, stocks were mixed. The Dow Jones Industrial Average closed down 56 points at 8688, but the NASDAQ was up .72 to close at 1306. A top Iraqi official today rejected demands for more United Nations weapons inspections. On Arab "al-Jazeera" Television, the Iraqi minister of information said UN inspectors had "finished" the job before they left four years ago. He called U.S. charges that Iraq still has weapons of mass destruction a "lie." In Washington, a State Department spokesman had this reaction.

PHILIP REEKER: The issue is not inspections per se, but verified disarmament Iraq needs to disarm. It's what Saddam Hussein and his regime agreed to do at the end of the Gulf War. Those agreements were codified in UN Security Council resolutions. We need to make sure that Iraq has no weapons of mass destruction or ballistic long-range missiles. That's what is required by the UN Security Council resolutions and that's what we expect to see done.

GWEN IFILL: On Saturday, President Bush called Iraq an enemy until proven otherwise. He said he had no timetable deciding whether to use if the force to topple Saddam Hussein. The president of Zimbabwe said today he would not tolerate whites defying his orders to leave their farms. Under his redistribution policy, their land is to be handed over to black settlers. We have a report from Tim Ewart of Independent Television News. (crowd ululating)

TIM EWART: Robert Mugabe used his address at the funeral of a former cabinet minister to warn white farmers that new laws ordering them to quit would be enforced. He said they were the descendants of colonialist oppressors.

PRESIDENT ROBERT MUGABE: We say here on this national shrine that the game is up and it is time for them to go where they belong.

TIM EWART: Farmer Bruce Gemmel and his son Duncan are among those refusing to move out. Mr. Gemmel's 4,000 acres have been idle for a year, shut down by the president's supporters.

BRUCE GEMMEL, Farmer: As soon as we start plowing or preparing or anything like that, then, you know, the threats come in and we have to get off. Millions of dollars worth of investment here, just doing... going to be doing nothing. One crazy old man.

TIM EWART: But Mr. Mugabe's message today was clear: He will not back down. Around 1,600 farmers-- 60%-- are still sticking it out and risking the anger of the president and the militants who back him. So far, there's been no violence, but recent history in Zimbabwe has taught that that could soon change.

GWEN IFILL: The land seizure program has sharply cut food production, and left thousands of black farm workers without jobs. A U.S. State Department spokesman today called President Mugabe's eviction demands "reckless" and "reprehensible." A former army bioweapons researcher is denying any involvement in last fall's lethal anthrax attacks. Investigators consider Dr. Steven Hatfill a "person of interest" in the case, but not, they said, a suspect. On Sunday, Hatfill accused the FBI of leaking defamatory information about him, and harassing his friends and family. Today, Hatfill's spokesman kept up the denials in an ABC interview.

PAT CLAWSON, Steven Hatfill Spokesman: I think the FBI Should take a look at anybody who they think might have involvement in this crime at all. But Steve Hatfill is the only one who has been publicly named by anyone as being a so-called person of interest. And as far as I'm aware, there is no evidence whatsoever that he has had any involvement in this.

GWEN IFILL: On Sunday, Hatfill's lawyer said he'll file a complaint about the FBI with the Justice Department. An FBI spokesman said any allegations of mishandling evidence would be investigated thoroughly. The former CEO of ImClone Systems pleaded not guilty today to insider trading and other charges. Federal prosecutors in New York alleged Samuel Waksal told family members to sell their stock in the company after he learned its new cancer drug had been rejected by the Food and Drug Administration. Outside court, Waksal defended himself and his company.

SAMUEL WAKSAL: I founded ImClone in order to discover new drugs that meet the unmet needs of society. ImClone, itself is a strong solid company whose scientists and other employees have devoted themselves to achieving a noble goal. ImClone will grow, prosper and continue its very important work

GWEN IFILL: Investigators were also looking into whether Waksal advised businesswoman Martha Stewart to dump nearly 4,000 shares of her ImClone stock. Stewart has denied any wrongdoing. That's it for the News Summary tonight. Now it's on to medical privacy; Pakistan's beleaguered president; and Tom Friedman's Journal.

FOCUS MEDICAL PRIVACY

GWEN IFILL: After years of debate, the bush administration has now announced new rules governing the privacy of medical records. The regulations, which take effect next spring, prevent the disclosure of medical information to employers without the patient's consent, and they allow patients to review their records and correct mistakes. But some provisions have already stirred controversy. Health care providers would not have to obtain a patient's written consent to share information with hospitals or insurers. And although pharmacists would not be able to sell health information to a third party, they still could be paid to recommend drugs to their clients. To examine the pros and cons of these new rules, we're joined by Janlori Goldman, director of the Health Privacy Project at Georgetown University; and Alan Mertz, executive vice president of the Health Care Leadership Council, an advocacy group for the health care industry.

Mr. Mertz, what did you see good in what the president has recommended?

ALAN MERTZ: Gwen, we think these recommendations give the patients what they want and what they expect. We think they expect their medical information can and will be used by there doctor, their hospital, their pharmacist to provide them with treatment. For instance, if you go in to present your prescription to your pharmacy, you expect that information to be used to fill your prescription. But they want to be asked before their information, their private medical information is used for other purposes, things that aren't connected with their treatment or payment of their bills -- things like marketing or information given to a banker making a loan or an employer who might be making an employment decision or people generally using information for other purposes. We think the regulation addresses that and we would actually ask them to give their permission to use information or disclose it for those other purposes, other than the legitimate purposes of using information in health care -- whether it's by doctors or hospitals or others. And the regulation does provide -- the first time it draws a circle around treatment and payment and other health quality uses of information. And if information is disclosed outside of that circle, there are penalties that will be imposed. And we think that is a very reasonable, workable rule that will keep that balance and keep the quality of health care.

GWEN IFILL: Ms. Goldman, is there anything these regulations don't accomplish?

JANLORI GOLDMAN: Well, I think the regulation is workable for the health care industry but it could have done a lot more to protect patient privacy. The Bush Administration eliminated the consent requirements that had been issued a number of years ago under President Clinton, and they have now made it easier to share medical information for marketing purposes. In fact, a chain drugstore can be paid by a drug company to share medical information without telling people that that's what's happening and without giving them any chance to limit the uses of their medical records for marketing purposes. So, unfortunately, it really doesn't draw such a tight circle around medical records. And I think both doctors and patients have really lost control over some of the key sensitive medical information that should have been kept within the health care context and is now going to be shared for many other purposes.

GWEN IFILL: Since the health care industry and the privacy advocates both believe this is something that is long overdue in a general sense even though you may disagree with the details, what took so long for this to happen, Mr. Mertz?

ALAN MERTZ: Well, first of all, I want to say that we are privacy advocates, we represent institutions like the Mayo Clinic and doctors and others. And we actually think that there is a workable compromise on this consent requirement; that unfortunately the rules of the old prior consent requirement could have really disrupted health care in fact for people trying to pick up a prescription for a relative or get a prescription renewed or a doctor to refer them to another specialist or maybe a hospital to schedule surgery the next day, that the earlier versions of the regulations might have actually disrupted care for patients and would have compromised health care. So it did take some time to make some of the adjustments in the regulations so here workable for patients.

JANLORI GOLDMAN: You know, people sign forms every day when they go to the doctor, when they pick up prescriptions or enroll in a health plan, they sign tons of forms and most of them are meaningless; they don't read them and they just sign. This was an opportunity that the Bush Administration really missed by eliminating the consent requirement because here was a form that could have been meaningful to the patients where they could have been asked how they want their information used and under what circumstances and it would have given an opportunity for doctors and patients to have a conversation about confidentiality concerns that the patients might have had that they may not raise now.

GWEN IFILL: If you're a patient lying there feeling pretty poorly in bed and someone gives you a paper to sign and asks you to sign away or to guarantee your privacy, isn't that just one more piece of paper?

JANLORI GOLDMAN: It is one more piece of paper but I'd like to think it would be a little more meaningful than the waivers people sign now where they sign I agree my information will be used for any purpose under any circumstances. That's what we sign now when we go to the doctor. I think of this form similar to the consent form that people sign before they have an operation or before they engage in a risky procedure or go into any kind of research, it informs them about the risks; it tells them what can happen. They still have to sign it but hopefully it opens their eyes and educates them and it gives them an opportunity to ask their doctor questions and that's what this consent form should have done and now I'm concerned that people will be afraid to seek care, they ll be worried about how their medical information could be used against them and they may continue to withdraw from participation in their own health care. They might not even seek treatment.

ALAN MERTZ: I want to comment on that.

GWEN IFILL: I'll let you do that. I wanted her to complete her thought. What is wrong with what she was saying?

ALAN MERTZ: Well, actually I think the Administration actually strengthened the consent requirements of the regulation because now it does for the first time require that when you go to see your doctor or go into the hospital, that you are given a complete notice of what your rights are, how the information can and cannot be used. And they are to get an acknowledgment from you that you received that notice. The other misconception is that this doesn't require the patient s permission to use their information. In fact, for the first time, information, if it were to ever be disclosed for anything other than treatment or paying your claims, if it were to be sent to a newspaper or to your neighbor or for marketing products, it does require your permission before those activities can be done. But what they didn't want to do was restrict the flow of information between you and your pharmacist, you and your doctor.

GWEN IFILL: If I'm someone who is calling my doctor and saying would you phone me in a prescription please, do these regulations make that harder to do or does it affect it at all?

ALAN MERTZ: Well, it absolutely keeps that from being disrupted. Under the previous version of the regulation, the doctor would have called in the prescription to the pharmacy to refill the prescription, the pharmacist would have said before you can have this prescription filled for your elderly mother, your elderly mother is going to have to travel, come into the pharmacy, read a nine-page notice, sign it before we can even fill the prescription. And that was the disruption that the administration was trying to avoid so the patients could have their prescriptions filled and other treatment activities fulfilled.

GWEN IFILL: You both alluded to the idea of marketing and protecting people from having personal information used for marketing purposes. There was a widely reported case in Florida not long ago in which a Walgreen s Department Store worked with the manufacturer for Prozac to send free samples to people based on the fact that they had had prescriptions filled at their department stores. Is there anything in these new regulations which would stop that from happening?

JANLORI GOLDMAN: Nothing. In fact, what s really terrifying to most people is that Walgreen s was making a available to the drug companies a list of people diagnosed who have been diagnosed with depression and people who had been receiving antidepressants, and so when people had prescriptions filled at the drugstore, they didn't expect that a drug company could then come in, pay the chain drugstore to share that information and make it available so they could target market them. Marketing in the drug industry is a huge business right now and in fact it is one of the biggest expenditures in the health care field but most people don't have any idea that if they receive a letter from a chain drugstore, maybe it's really being paid for by a drug company. So what the Clinton regulation would have required the chain drugstore to inform people if that mailing had been paid for by a drug company and give them the chance to say I don't want to get it. It is different than if they had gotten that communication from their doctor or if their doctor had said I want to recommend a different treatment or maybe switch drugs.

GWEN IFILL: In your reading of the 400 pages of these documents, do you have a different interpretation.

ALAN MERTZ: It was a long weekend reading the regulations. The regulations make it very clear that a pharmaceutical company absolutely may not buy a list of patients and a provider, a pharmacist, a hospital, a doctor; they are absolutely forbidden from giving lists of identifiable information and selling it to a pharmaceutical company. That's prohibited without the specific prior authorization of the patient. And we very much support that rule. Let me talk just for a second though. There are some activities in President Clinton's version of the rule that got inadvertently swept up in something called marketing. For instance, my own parents might be on a Coumadin, a blood thinner or heart medication. Their pharmacy may realize that they didn't come in to get their refill or they might be taking another drug that in combination with that, they ve noticed, oh, they bought a prescription that if they take those two drugs together, it could be life threatening. This allows the pharmacy just the pharmacy -- to send a notice to that person to remind them that they have a refill that might be necessary for them to take the lifesaving medicine. The information does not

JANLORI GOLDMAN: Wouldn't people prefer to hear from their doctor? Wouldn't people prefer to hear from their doctor that they should refill their prescription? Maybe the person stopped taking that drug. Maybe they shouldn t be refilling their prescription. Maybe that's not really the communication they should be getting. And I think it is a fine legal point to suggest that just because the chain drugstore can't sell the information to the drug company, the drug company can pay the chain drugstore to send them material.

ALAN MERTZ: First of all this erects a wall between the pharmacy, the health care provider and the pharmaceutical-- there can be no exchange of information. It is not going there. I believe that when a doctor-- we want to make sure the doctor can communicate with the patient about maybe there's a new drug that has come along better than the one they were taking. They want to be contacted. That happened to my own mother with her medicine for osteoporosis. So we want to make sure that those communications about health-related products can continue or about a drug interaction that's about to happen.

GWEN IFILL: Let me ask to you flip-flop on the privacy issue, which is there was a case in Iowa where the body of a dead baby was found and they were trying to identify this baby. And in order to do that, what authorities did was they went to all the hospitals and clinics in the area and asked for them to give up the information of anyone who had tested positive for pregnancy within a certain time window to try to identify the mother of this infant. Now was that a violation of privacy that these rules would do anything to control?

JANLORI GOLDMAN: Well in fact Planned Parenthood has resisted that subpoena from law enforcement in Iowa because they say this pregnant woman could have lived anywhere and their records are extremely confidential and if it is going to keep people from going in to get care and toe go to the doctor and to get reproductive services, that is going to be a major problem.

GWEN IFILL: Does it stop investigators from getting to the bottom of a crime?

JANLORI GOLDMAN: Absolutely not. In fact, the regulation does allow law enforcement to get access to medical records but with some rules in place and with some standards in place.

ALAN MERTZ: This is one area where -- there are many areas in the regulation where we agree. And this is one actually where we were pushing for much tougher restrictions where law enforcement personnel could get ahold of medical information. We agree with Janlori on that.

GWEN IFILL: Okay. One final question, which is if you absolutely positively don't want any of your information made public to anyone, you want to pay all of your doctors cash money so it is not communicated to your insurance company, any of that, is it possible to do that under these laws?

ALAN MERTZ: Yes, it is. In fact you could self-pay. Even if you don't pay for it yourself, the regulations do allow, if you want to put a restriction on who your information goes to or who it is released to, the regulations allow to you sit down with your doctor or your pharmacist and say I don't want this particular person to get my record.

JANLORI GOLDMAN: You know, HHS says if people don't like what their pharmacies are doing, if people don t like how their privacy is being protected, they can just go elsewhere. And I think that's a terrible answer for the American public. Privacy should be built into the health care system and people should haven't to choose between their privacy and getting good care.

GWEN IFILL: Okay. Janlori Goldman and Alan Mertz, thank you both for joining us.

ALAN MERTZ: Thank you.

JANLORI GOLDMAN: Thank you.

FOCUS THE GENERAL S DILEMMA

GWEN IFILL: Now, the first in a series of reports on the situation in India, Pakistan, and the disputed region of Kashmir. We begin with Pakistan and the growing opposition to President Musharraf. Special correspondent Simon Marks has our report. (Chanting)

SIMON MARKS: These are difficult days for President Pervez Musharraf of Pakistan. He faces more opposition in Islamabad than ever before, just three years after he seized power in a bloodless coup, and less than a year after he became a pivotal U.S. ally in the war against terror. It is opposition that is not afraid to voice itself publicly. At this, the first in a series of national rallies, the Alliance for the Restoration of Democracy, an umbrella group of opposition parties, demanded that the President step down. It is opposition that poses a sudden problem for President Musharraf who, while since the attacks of September 11, quickly turned his country from an Islamic patron of the Taliban government in neighboring Afghanistan, into one of the architects of its destruction.

PRESIDENT PEREZ MUSHARRAF: Pakistan has a firm position of principle in the international battle against terrorism. We reject terrorism in all its forms and manifestations anywhere in the world. We will continue to fulfill our responsibilities flowing from our commitments.

SIMON MARKS: And it is opposition that threatens to undercut U.S. policy in Pakistan, policy that is now heavily invested in the personality of the country's leader and his continued stewardship at the helm in Islamabad.

PRESIDENT GEORGE W. BUSH: President Musharraf is a leader with great courage and vision. And his nation is a key partner in the global coalition against terror. Pakistan's continuing support of "Operation: Enduring Freedom" has been critical to our success so far in toppling the Taliban and routing out the al-Qaida network.

SIMON MARKS: You can find opposition to President Musharraf almost anywhere in Pakistan today, even at a roadside barber shop in the middle of the nation's capital.

TARIQ DAAS (Translated): Before Musharraf came to power, people trusted him, but now, after three years of his rule, no one trusts him any longer.

MOHAMMED AHMED: For the people and by the people, why Musharraf is in politics? What is his role? He is talking about democracy and even he don't know the ABC s of democracy.

SIMON MARKS: Do you think more and more people are beginning to feel like you feel?

MOHAMMED AHMED: I think the people who are jobless, the people who are illiterate, the people who are poor, the people who are searching for food, the people who have no shelter, they are totally against Musharraf's policies.

SIMON MARKS: The general who ousted the country's elected prime minister in October, 1999, maintains that he enjoys public support and even a mandate to govern Pakistan. In a referendum this past May, 97% of the votes cast supported his call for a further five years as President. His opponents insist the ballot was rigged. Now President Musharraf has called fresh elections this October to choose a new parliament. He is also seeking public support for a package of constitutional amendments that he says will encourage real democracy to emerge here. ( Music playing ) Last month he told a national television audience that he wants to make the post of prime minister the most powerful in the nation, not the post of President that he occupies.

PRESIDENT PERVEZ MUSHARRAF: Give power, prime minister of Pakistan. (Translated:) I am not power hungry. I do not want power, but I want to give strength to the government. I will transfer all executive powers to the prime minister after the October election.

SIMON MARKS: But democracy activists say general Musharraf is power hungry and seeks to disbar many veteran politicians from public service. While the President's image graces the campaign posters of parliamentary candidates loyal to him, a number of leading Pakistani politicians find themselves suddenly prevented from running for office.

GOHAR AYOUB KHAN: I can't-- I'm disqualified.

SIMON MARKS: This man is a leading member of the Pakistani opposition, but he never graduated from college, and general Musharraf says only college graduates should be allowed to run for election.

GOHAR AYOUB KHAN: I was speaker of the national assembly conducting the business and making rules of procedure, and leader of the opposition of Pakistan, and today-- like the founder of Pakistan, who will not be allowed to contest-- I am not allowed to contest.

SIMON MARKS: Neither would the country's two most popular politicians, former Prime Ministers Nawaz Sharif and Benazir Bhutto. Both live in exile overseas and run the risk of immediate arrest on criminal charges if they return to Pakistan. On many of the editorial pages, the President's proposals are getting the thumbs down. Mohammed Ziauddin edits the influential national daily, "Dawn."

MOHAMMED ZIAUDDIN: If you go to what the men proposed, and the kind of referendum he had in the month of April, one comes to the conclusion that he does not want to give power. He wants to keep all the power even after an elected parliament is put in place.

SIMON MARKS: That, according to many observers here, may be difficult. They argue that free and fair elections would deliver a parliament full of the President's opponents. General Musharraf doesn't just face opposition from those political forces here seeking a return to democracy, he's also under fire from a variety of other causes from figures who don't seek political liberalism for Pakistan, but who still don't like what he has been doing here. ( Music playing) In this deeply Islamic country, the general now finds himself opposed by a significant body of Muslim opinion. Earlier this year, he ordered the country's 10,000 religious schools, the madrassahs, to undergo voluntary registration and regulation. The U.S. is concerned that these schools, with their intense-- sometimes exclusive-- focus on the study of the Koran, are producing a generation of Pakistanis ill-equipped to deal with the modern, secular world. The clerics who run the madrassahs were outraged by the President's demands, and today these schools are a haven of anti-Musharraf criticism.

RASHID KHAZI: It is just because of the American pressure. America is, in fact, pressurizing the government of Pakistan unnecessarily, and the government of Pakistan, you know, they have bowed and surrendered before the American pressure.

SIMON MARKS: Rashid Khazi runs the Jamia Faridia Madrassah in Islamabad, one of the country's largest. He says the school teaches a broad curriculum that includes math, science, and English. He argues that by taking on the madrassahs, President Musharraf has bitten off more than he can chew.

RASHID KHAZI: In my opinion, it's unwise of him that he has opened many fronts. At the same time, maybe he has some pressure or whatever. He might have his own logic behind that, but it's true that he is stepping in a lot of trouble.

SIMON MARKS: Trouble, too, from other elements that find Pakistan's new relationship with the United States beyond the pale. Hamid Goul is a former head of Pakistan's all-powerful ISI, the Intraservices Intelligence Agencies. He's credited with training the anti-soviet Mujahaddin forces in Afghanistan that went on to become the Taliban and he is witheringly critical of the U.S. war against them and the ongoing U.S. military presence in Pakistan aimed at hunting down members of al-Qaida.

HAMID GUL: 95% of the people of Pakistan, according to CNN surveys, hate America now because of what America has done and what America is doing: The FBI milling around, midnight knocks at doors, and under the pretext of hunting for al-Qaida, they are doing all source of things. They are hurting Pakistan's national pride, our sovereignty, our dignity or whatever we have-- and we haven't got anything in return.

SIMON MARKS: Not even sufficient economic assistance, says General Goul, who accuses the U.S. Of failing to help alleviate poverty in this deeply impoverished nation. He points to Pakistan's textile industry as an example. It's the backbone of the country's economy, accounting for 30% of exports, yet trade barriers still prevent Pakistan from shipping fabrics to the United States, despite the assistance the country has given Washington over the past year. Critics accuse General Musharraf of giving the Bush Administration everything that it wants and getting nothing in return.

HAMID GUL: It is good for them to have a person that enjoys all the authority, he has control over the army, he has control over the parliament, and he sits on top of the National Security Council. That is with one man. So concentration of power in one hand, it is not Pakistani nation's desire, it is not their needs, it is the need of somebody else. That is, precisely, America.

SIMON MARKS: With opposition to his rule growing and a handful of flops to assassinate him foiled, President Musharraf faces a difficult period between now and the October elections. Some voices here say the United States should prepare itself for a day when a different leader is in charge in Pakistan.

GOHAR AYOUG KHAN: Politically, he will survive. All military generals who help us do, in turn, survive because the political mechanism is not there for their removal. But it's a large country with 140 million people. We can't peg our stakes and destiny to one man. There are thousands and thousands better than maybe General Musharraf to take the mantle, et cetera. It's just that the West is now dealing with him. There may be dozens and dozens more better.

SIMON MARKS: Reporter: On the outskirts of Islamabad, there's a memorial lionizing Pakistan's 1998 nuclear tests. For now, none of President Musharraf's detractors expect anyone else to be controlling the country's nuclear arsenal anytime soon, but they warn that the United States should brace itself for eventual political change in Pakistan, a country that has already shown its former Taliban allies in Afghanistan that it can switch direction rapidly, and with very little warning.

GWEN IFILL: Today, a group of the President's supporters formed an alliance to compete against his detractors in the October elections.

Still to come on the NewsHour tonight, Tom Friedman s Journal.

SERIES TOM S JOURNAL

GWEN IFILL: Next, "Tom s Journal," our occasional series of conversations with "New York Times" columnist Thomas Friedman on his overseas reporting trips. Ray Suarez has tonight's conversation.

RAY SUAREZ: This trip took Tom Friedman to the island nation of Sri Lanka and the Indian cities of Bangalore and New Delhi.

Tom, let's start in Sri Lanka. When it made the American newscasts or newspaper pages at all, it was usually a story of a terrible terrorism problem or a long civil war. Is that still the headline today?

THOMAS FRIEDMAN: Well, it s not. That s actually the good news, Ray. We forget that suicide terrorism which began in the Middle East, was actually perfected in Sri Lanka by the Tamil Tiger separatist movement trying for a Tamil country in Sri Lanka. When I say perfected it, they really perfected it. They killed about 1,500 people through suicide terrorism. They actually filmed many of their suicide killings, including the killing of Rajiv Gandhi; their sort of cult leader, Mr. Brabakaran, would have dinner the night before suicides with his bombers, and they really made this a devastating, devastating tool of warfare. Fortunately though, last December they agreed on a cease-fire and things have calmed down there enormously. It's still just a cease-fire. There is no peace yet. There is no final peace yet. Everyone is quite nervous. There is an air of optimism, an air that something is over. The mandate of heaven has been taken away from the gunmen and from the government army and people really want this thing over.

RAY SUAREZ: How did they break the cycle? There would be a spateof these terror killings or an advance by the guerrilla army, then a counteroffensive by the national army, the state army of Sri Lanka and went back and forth like that for many years. What made them finally --

THOMAS FRIEDMAN: Many things. Part of it was just a sheer stalemate. The government recognized the only way to stop suicide bombings is if the Tamil Tigers did it themselves. They had no military means to do it. How do you stop people who want to kill themselves? We have the same problem in the Middle East. And the Tamils realized they could not even hold their ethnic capital, Joffna in Northeast Sri Lanka. So there was clearly a stalemate on the ground. One of the biggest things that happened was 9/11. Basically, the combination of September 11 and the whole delegitimatization globally of this idea of suicide bombing and at the same time the fact that the United States, India, Australia and Canada had named the Tamil tigers as a terrorist group, and that's something that really alienated the Tamil Diaspora in India, in North America, and in Europe, which had been the main funders of the Tigers. These are middle class entrepreneurial professional people. They said wait a minute, if that's what this movement is about, we are going to take a step back here, which they did. They withdrew the funding. And that really forced the Tigers to the negotiating table.

RAY SUAREZ: Next you went on to Bangalore -- and Bangalore, again, not a place on a lot of Americans radar screens but maybe we should speak of it in the same breath as we do San Jose.

THOMAS FRIEDMAN: Well, we are a lot more connected to Bangalore than people realize. If you lose your luggage on British Air or Swissair, the person who answers the phone to track it down is in Bangalore. If you have got a problem with your Dell computer, the person on the other end of the phone you re talking to is an Indian in Bangalore. Bangalore is India's Silicon Valley. And it s a remarkable place. I mean, you know, I have kind of Friedman s rule of motor scooters, and that is when you go to a developing country and you see a lot of motorcycles around, that's like the best sign possible, because what it is a sign of is kind of young, lower middle class people who have left the countryside, come to the city and found jobs. And they found jobs enough to give up the bicycle and buy a motor scooter. And Bangalore is full of motor scooters. The city produces about 40,000 young tech grads every year from different engineering and computer schools, all of whom get absorbed in this Silicon Valley there that is really providing the research and the backroom capability for a lot of American corporations from Bangalore, from the campuses of companies called Wipro and Infosys and Mindtree, they're actually running the inventory, the accounts receivable, the payroll, a lot of the human resources for big American companies.

RAY SUAREZ: Like?

THOMAS FRIEDMAN: Like GE, GE Capital, like the Hong Kong Shanghai Bank, like Sony, like Reebok, like American Express. And you go to their campuses, I mean you go to the Infosys campus, you walk in, and the first thing you see is a little par 3 hole. Then you see beautiful manicured lawns, a food court with TGI Fridays and Domino's Pizza, an incredible exercise hall and building after building. And they literally point out that's the GE back room over there, that s American Express s backroom over there. You have 300 people working these buildings; they work on 24-hour cycles. And they're now the backroom of these companies. So the old days when we thought of India as maybe what they call doing software coolies, writing very, sort of basic software code, they are gradually moving up the food chain to really appropriate using their minds, all of the backroom functions of major American companies, leaving the American companies, the front end, to focus on marketing and sort of primary design, you know close to their marketplace. But even now you've got Indian companies sending people from India now to the American company to even, you know, take up more and more of that business. But what that means is that the intimacy with which we are integrated with India and India with us is far, far greater than ever before.

RAY SUAREZ: But this new thing must have been under threat during the time when the State Department was saying to Americans, well maybe you shouldn't go to India, at the time when our newspapers were full of, as the bible says, war and rumors of war.

THOMAS FRIEDMAN: It's true. I was out with some Indian industrialists one afternoon and the first thing they said to me-- I got kind of bombarded from this the minute I walked into Bangalore was -- what exactly was the U.S. Government, the State Department and the U.S. Embassy and New Delhi up to when they issued a travel warning on May 31, warning, you know, Americans, basically to get out of India because a war with Pakistan was likely? There wasn't going to be a war here. Nuclear war? Why, are you crazy, man, as one Indian business said to me. We're talking about nuclear weapons! Are you crazy? When you're down in Bangalore, you do get this sense there that nuclear war was actually quite far away. Nevertheless, they really got, I would say, an introduction, and most importantly, the aging Indian Hindu national leaders in New Delhi, I think, got an introduction that they really-- of something they didn't really grasp fully before and that is just how intimately India is connected to the United States and the world and that just the rumor of war can have a huge impact on the Indian economy. One thing that struck me when I was there, Ray, I was staying at a big tourist hotel in Bangalore and in New Delhi -- no tourists around at all. I believe I was the only American in the Imperial Hotel when I was there in New Delhi. So just the rumor of war has had a huge impact on the Indian economy, and that s why ever since that State Department travel warning, if you notice, the Indian government has zipped it up. There is no more talk about nukes, no more talk about war. And, in fairness to the Indians, this is a problem for them, because there is a real asymmetry between India and Pakistan. India has this really high-tech economy now I mean at the far end. It also has a huge low tech agricultural-- 70% of Indians, let s remember, still live in the countryside in villages but at the cutting edge, it has got this high-tech economy connected to the world. It s a country that really is hard wired basically to take advantage educationally, culturally, in terms of democracy and secularism, really to take advantage of the 21st century. But it has got a neighbor that's really been failing at modernization, failing at democracy. And they are very vulnerable to Pakistan now because any threat of war from Pakistan can really create real problems and havoc for India.

RAY SUAREZ: Well, you know, when you travel to Silicon Valley, they talk about what people in Washington, like they are really far away and on a different planet. When you went from Bangalore to New Delhi, was there a similar kind of shift?

THOMAS FRIEDMAN: Absolutely. You getto New Delhi and you do again feel like you're in the capital, you're away from the entrepreneurial heartbeat of the country. And everyone is really just focused on Pakistan, and the gentleman who you just had a segment on, President Musharraf of India. And what always strikes me when I'm in New Delhi is that Indians talk about Musharraf exactly the way Israelis talk about Yasser Arafat. It is kind of you can't possibly trust this guy. You know, don't you realize he is a terrorist, et cetera, et cetera. I'm sure-- listen, this is a country whose parliament, let us not forget, was attacked you know -- by pro-Pakistani militants just this last year. So even paranoids have enemies and India has real enemies here that they have to and legitimately worry about. But you do feel in New Delhi that people have been talking to themselves there a lot there. There is an obsession with Pakistan that strikes me as a little bit out of order in that India is such a big country

RAY SUAREZ: But New Delhi is a lot closer than Bangalore.

THOMAS FRIEDMAN: Absolutely no question -- it is closer but it always strikes me about India that it could and should-- it's got a lot to be proud of. It's managed to maintain a democracy in this teeming multiethnic, multilingual society for lo these 50 odd years and it is really actually very impressive. One of the things that strikes me is that the Indians should be more self-confident than they are, more self-confident vis- -vis Pakistan -- more self-confident vis- -vis the United States. There is a lot of worry about the U.S.-India relationship. You really feel when you re there, Ray, talking to people, how young this relationship is, how during all the years of the Cold War, we were really alienated from each other when in fact our two countries have an enormous amount in common I mean, you know, basically multiethnic, multiracial democracies built around a high degree of federalism and Lord knows we have differences as well but we have a lot in common with India today.

RAY SUAREZ: Multiethnic, multiracial democracy but at the same time there were religious riots in India over the past year between Muslims and Hindus. The government of Atal Vajpayee, a Hindu nationalist government, has moved more toward the tendency with the elevation of Lau Krishna Avani to more influence within the government. Aren't there sort of competing forces for India's attention that way?

THOMAS FRIEDMAN: Definitely. But let's look what happened. There were riots between Hindus and Muslims in Gujarat earlier this year in February. 60 odd Hindus were killed, maybe 600,000 to a thousand Muslims. It was terrible, pogrom really instigated by the Hindu nationalists in Gujarat. What happened? What happened? Nothing happened. That violence not only did not spread around Gujarat, it didn't spread anywhere else in India. I think that's a very, very positive sign. And that's a sign that people in the rest of India not only are their cultural ties that's still bind Hindus and Muslims in villages. There has been a lot of mixing of faiths and whatnot. But most importantly, it's about democracy, that's about free markets, that s about people with something better to do.

RAY SUAREZ: Tom Friedman, thanks for coming by.

THOMAS FRIEDMAN: A pleasure, thank you.

RECAP

GWEN IFILL: Again, the major developments of the day. A federal judge gave USAirways permission to continue business as usual under bankruptcy protection. A top Iraqi official rejected demands for more United Nations weapons inspections. And the president of Zimbabwe said he wouldnot tolerate whites defying his orders to leave their farms. We'll see you online, and again here tomorrow evening. I'm Gwen Ifill. Thank you, and good night.