Mum shouldn’t have been the word

Mum shouldn’t have been the word

Source: By SEEMA MUSTAFA: The Free Press Journal

U K Prime Minister David Cameron inadvertently forced India to take a declared position on the US proposal to invade Syria, limited or otherwise.

After a long bout of silence, New Delhi was shocked on the eve of general elections, to find that the British government had listed it as one of the countries supporting the US military action against Syria. It had been listed by the British government as one of the countries supporting US military action.

The mandarins controlling foreign policy realised that the silence, made even more fashionable by Prime Minister Manmohan Singh, was not working to India’s advantage and fielded the MEA spokesperson to clarify that the government was certainly not supporting the proposed limited strike on Syria. A very delayed and subdued reaction, at a time when the non- aligned world had expected big country India to come out in support of rights and justice. And yet another example of the mealy mouthed approach that has come to define Indian foreign policy, where old friends have been discarded, but new friends still not really found, except for the US and Israel who continue to cast a heavy shadow on most Indian foreign policy and even defence responses.

The injustice of US strategy for Syria can escape only the most hardened and blinkered governments. Russia’s Vladimir Putin is a fine example these days of a sovereign country that will not allow unilateral will to be imposed on weaker nations, whereby military might becomes the sole criterion, with rights, laws, international covenants, and indeed the United Nations itself being wilfully flouted. China is supporting Russia, and one would have expected India to take the lead in raising a voice against the unilateral military action that has already turned West Asia into a cesspool of chaos and conflict, instead of this self- imposed silence that really did translate as support for the US President Barack Obama.

From being a player and a country well- respected in West Asia, India is now seen by even the so- called friendly regimes of Saudi Arabia and Qatar, and of course the Arab League, as a supporter of US imperialism and Israeli Zionism. Syria, Iraq, Iran, Lebanon, Egypt (once a very close friend) and of course the hapless Palestinians, have all raised quiet diplomatic fingers against the Indian silence, that in the current scenario favours American unilateralism. From a reliable friend, India has reduced its role to that of a bystander, unreliable when the US pressure escalates from a nudge to a push as happened in the case of Iran.

For years, New Delhi blocked overtures from Iran to join the Iran- Pakistan- India gas pipeline that would dramatically increase our energy resources, citing security reasons at one point, and price on the other. It had no hesitation, however, in joining the US- backed Turkmenistan- Afghanistan- Pakistan- India pipeline that would go through even more ‘ insecure’ territory, and thus be a non- starter from the word go. Iranian ministers and officials continued trying to convince India to avail of their country’s tremendous energy resources, but with no luck, as Prime Minister Singh made it clear down the line that he did not want the US to be offended.

Now that growth has dropped, the rupee has crashed, and the price of oil and gas is being reviewed and increased within weeks at a time, it was ironic to hear Petroleum Minister Veerappa Moily speak of increasing energy cooperation with Iran.

This was a sign of his desperation, but clearly he has been directed to keep his mouth shut, and hunker down, instead of trying to ease the situation by taking up the old Iranian offers. There seems to have been no discussion, or even an attempt to understand the fallout of US interventions in West Asia on India. A country that is obsessed with terrorism, to a point of arresting innocents as terrorists, does not seem to realise that the US backing of extremists in Syria will have an impact on India and South Asia.

The well- armed extremists, now being led by the al Qaeda, who are currently engaged in fighting the Assad regime, will turn their attention to other countries and causes later. And given the fact that the al Qaeda and the Pakistan terror groups and the Taliban all have close links and shared cadres, India will most certainly be amongst those who will feel the heat. But somehow our mandarins are trained not to think so far ahead, and confine their strategic wanderings to Afghanistan, Pakistan and at the outer limit, China at best.

Apart from this very ‘ practical’ facet that feeds into New Delhi’s “ pragmatic” foreign policy, India has in the past years lost ground in the world outside the US- influenced bloc. Geopolitical positioning around the Syrian conflict had given clear indication of a US decline, with its unilateral position being for the first time really challenged by other countries, including European nations. There were murmurings, but barely audible, when the US invaded Iraq. These became a little louder, but barely so, when the American troops and NATO allies bombarded Libya. But this time around, even the NATO coalition is breaking, with the Cameron government unable to go along with its larger ally because of a “no” from the British people and their Parliament.

Except for France, all other NATO member nations are facing pressure from their people, with even hardnosed Germany unable to support Obama in his continuing misadventures in West Asia. India was thus expected to take a position even earlier and it is sad that the response has come really as a ‘ denial’ to UK’s mistake.

Silence has been misconstrued, and given the fact that elections are imminent, the Congress Party clearly felt that it could not continue to hide under ambiguity. The US is on the decline. It has become the ‘most hated nation’ in most parts of the world, and governments responsive to their people will find it difficult to continue supporting Washington on all and every issue. Russia under Putin is asserting itself. China is not very keen to cross swords at this stage of its expansion, but has made it apparent that it will not hesitate if required to pick a side.

And given the continuing cooperation between Moscow and Beijing, it is not difficult to guess where its ‘ pick’ will lie. Even ‘ puppy’ Britain cannot move for fear of alienating its vocal and assertive people, with West Asia leading the anger against the Americans. Old friend Pakistan has turned against the US completely, with Afghanistan without the Karzai government, constituting hostile territory as well.

Even a so- called limited strike on Syria will open yet another Pandora’s box in the region, with consequences that will strike at the heart of US plans for the region and the world. The government of India thus needs to open her windows and doors, and air out policy in the gush of fresh air and thought.

Courtesy: http://www.ksgindia.com/study-material/today-s-editorial/9124-12-sept-2013.html

The BRICs party is over

The BRICs party is over

Source: By Anders Aslund: The Financial Express

After a decade of infatuation, investors have suddenly turned their backs on emerging markets. In the BRIC countries—Brazil, Russia, India and China—growth rates have quickly fallen and current-account balances have deteriorated. The surprise is not that the romance is over but that it could have lasted for so long.

From 2000 to 2008 the world went through one of the greatest commodity and credit booms of all times. Goldman Sachs preached that the BRICs were unstoppable (e.g. Wilson and Purushothaman, 2003).

However, Genesis warns that after seven years of plenty, “seven years of famine will come and the famine will ravage the land”. Genesis appears to have described the combined commodity and credit cycle, from which the Brazil, Russia, India and China have benefited more than their due.

Claudio Borio explained the nature of the financial cycle. Late Russian Prime minister Yegor Gaidar showed how the commodity cycle impacted the Soviet leadership. During the oil boom in the 1970s, it was caught by hubris and neglected economic reforms. When the declining commodity prices hit in the 1980s, the Soviet leaders were incompetent, uninformed and unprepared, because they had faced too few problems for too long.

The boom was prolonged for half a decade by quantitative easing in mature economies, flooding them with cheap financing. During their years of plenty, the BRICs did not have to make hard choices. Today, their entrenched elites seem neither inclined to nor able to do so. Their lives have been too good.

Now all these booms are over: Brazil and Russia have been hit by the levelling out of commodity prices, which are widely expected to decline for several years; those two countries may also be caught in the ‘middle-income’ trap, that Barry Eichengreen, Donghyun Park, and Kwanho Shin warned of in a seminal paper. They found that countries tend to experience a sharp growth slowdown when gross domestic product per capita reaches about $17,000, which is the current level of Russia and Brazil.

Large reserves

Brazil, Russia, India and China have accumulated large foreign reserves, but they are not likely to help them. Russia is a case in point. In 1998, it ran out of reserves and had to cut enterprises subsidies sharply, which levelled the playing field and was a major factor behind the fast Russian economic recovery. In 2008-09, by contrast, the Central Bank of Russia spent $200 billion of its ample reserves. Essentially these funds went to inefficient state and oligarchic enterprises, which crowded out better smaller companies. Thus, the reserves contributed to the decline in Russia’s growth rate.

The BRIC countries did not take advantage of the good years to improve the underlying state of their economic systems. China’s banks are overleveraged, and India suffers from most economic ailments. Its inflation is too high, and its budget deficit, public debt and current-account deficit are too large.

Because of their outstanding dynamism, the BRIC countries felt little need for reforms. Their governance is mediocre at best, reflecting substantial corruption and poor business environments. Transparency International ranks 176 countries on its corruption perception index. Brazil ranks 69, China 80, India 94, and Russia 133.

The World Bank compiles its ease of doing business index for 185 countries and the BRICs do even worse by this measure, with China ranking 91, Russia 112, Brazil 130 and India 132. Russia has set the long-term goal of rising 100 steps but so far has done little to accomplish it. Characteristically, China is lobbying the World Bank to abolish this index. The surprise is that countries with such poor governance were able to grow so fast for so long.

One can see the hubris of the boom in the construction of white elephants. Hosting international mega sporting events tells it all. In 2008 Beijing beat all prior Olympic Games with an expenditure of $40 billion. Russia is expending $51 billion on the 2014 Sochi Winter Olympics, compared with $6 billion spent on Vancouver’s in 2010.

India organised the Common -wealth Games catastrophically poorly in 2010, which aroused great popular derision. Brazil’s recent protests were, in part, about the cost of the 2014 football World Cup and 2016 Olympics.

When it comes to vital infrastructure investment, however, Brazil, India and Russia invest too little, leading to multiple bottlenecks. Russia has not expanded its paved road network since 1994. Only in 2018 is a highway finally expected to connect Moscow to St Petersburg—and merely because it will be Russia’s turn hosting the World Cup. China, by contrast, over-invests in infrastructure.

Reinforced belief in state capitalism

Worse, the current BRIC thinking goes in the wrong direction. All have large state sectors and are relatively protectionist. Because of their recent economic successes and the West’s financial crisis, their policymakers increasingly see state capitalism as the solution, and private enterprise and free markets as problems. In Russia and Brazil especially, influential circles call for a greater role of the state, although the corrupt state is their key problem.

Last month Igor Rudensky, the United Russia parliamentarian who chairs the state Duma’s committee on economic policy, even stated that “the leading role and the commanding heights in the economy should belong to state corporations… We have to preserve all the positive from [the Soviet] historical experience”. Back to the future!

Even if the BRIC political leaders were to face up to reality their giant state corporations rule the roost. They hold an iron grip over energy, transport and banking. Regardless of official government policies they can extract cheap financing from the government and monopoly rents from the weaker private actors in the economy.

But Brazil, Russia, India and China do not rule the world. Because of them the West has played down the role of the WTO instead seeking regional trade agreements among like-minded countries such as the Transatlantic Trade and Investment Partnership between the US and Europe and the Trans-Pacific Partnership with most states (but China) around the Pacific Rim.

The BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.

Courtsey: http://www.ksgindia.com/study-material/today-s-editorial/9078-09-sept-2013.html