India’s decision to not only rely on local manufacturing but also multiply the scale to meet global demands stands to gain extensively from multilateral support

We are moving from ‘Make in India’ to ‘Make for the world’. But as every nation is already on the brink with the pandemic, we are faced with the critical question of the existence of globalisation as we know it. Countries are looking to bring supply chains back home as a measure to increase economic resilience. At this point, India’s position on self-reliance does not steer away from multilateralism, rather embraces it. India holds a strategic position to counteract the conservative and unilateral mood pervasive in the global political economy. Its position as a fast-growing Asian power enables it to implement more equitable global rules that can protect economic interests of other developing nations as well. At the recently-concluded 19th Darbari Seth Memorial Lecture by TERI, External Affairs Minister Dr S Jaishankar reiterated that as India enters the United Nations Security Council (UNSC) as an elected member in 2021, and joins the troika of the G20 at almost the same time, “there could be no better opportunity to work with all those who recognise the benefits of multilateralism.” At the same event, António Guterres, Secretary General of the UN, emphasised on the necessity of taking climate risks into account in all financial and policy decisions and furthering collective action.

Some experts have argued that a retreat from the multilateral trade order is likely to widen inequalities between countries, virtually disable economies of scale thereby making everything more expensive, limit free mobility of goods and services, thereby affecting employment and intensify geo-political tensions, making it difficult for an already fragile global economy to recover. As more countries shift away from this era of globalisation, it is crucial to prepare for what takes its place. In this flailing global discourse, we explore the value that multilateral institutions (MLIs) and developmental banks stand to add, especially for developing countries like ours. In this context, we discuss three vital roles MLIs play.

Mobilisers of finance: One branch of MLIs comprises Multilateral Developmental Banks (MDBs), which help mobilise finance globally, particularly in fragile States and lower and upper middle-income countries. In the new world order that countries are expected to enter in the post-COVID scenario, the role of MDBs is crucial from three vantage points. First, fast-emerging economies like India can enable transformative action by achieving economies of scale. The extent and potential of scalability of new research in India and other developing countries is very large. This has been evident in wide adoption of technological innovation in vital sectors such as clean energy, low carbon alternatives and even models of large-scale financing. In order to tap into this potential, adequate finance must be mobilised to spur investment required to achieve scale. Public finance is argued to be one such driver of investment in upcoming sectors. However, such finance is often already stretched thin to be able to wholly mobilise financial resources in newer avenues such as hydrogen and wind and hydro-power among others. In the past, MDB financing has enabled an irreversible transition to favourable technologies and means of production. This source of financing will be all the more crucial as countries start looking to internalise supply chains. Second, catalysing private finance. Investments by MDBs reduce risk perception, create conducive environment for private investment and lead to a lower cost of financing for newer sectors. In addition to these financial gains, the presence of an MDB also reduces policy risk, lack of credibility and minimises the problem of contract enforcement. This in turn helps mobilise further private interest. Investment in renewables in India gained significantly from investment by MDBs. In 2018, MDBs reported mobilisation of over $69 billion of private finance in low and middle-income countries.

Third, enhancing institutional capacity. MDBs help strengthen developmental policy to bring about institutional reforms in key sectors. Such measures are essential in building capacity and increasing the scale of reach. For example, financial assistance during the pandemic has been crucial in such capacity building in a variety of sectors ranging from health to Small and Medium Enterprises (SMEs). As economies recover, MDB financing will be vital in reviving key productivity.

Tackling global externalities: One of the fundamental purposes of the inception of MLIs has been to overcome market failures. Climate change is the biggest market failure that we are currently witnessing. MLIs have been instrumental in bringing together policymakers to take collective action to safeguard against this externality by enabling structural transformations that bring about more sustainable economies. Institutions such as the UN Framework Convention on Climate Change (UNFCCC), Intergovernmental Panel on Climate Change (IPCC), Green Climate Fund (GCF), Adaptation Fund (AF) and other global bodies play the critical role of mobilising technical resources, knowledge and expertise from across the world into the poorest and vulnerable regions. Even if the global order transitions into that of more conservative and closed economies, climate change will remain an externality necessitating collective solutions. In such a scenario, support by MLIs will be vital for local civil societies to carry out research and evidence building.

This is essential for three critical activities. First, continued ground-level research on adapting to climate change. Second, dissemination of new research, which can be further scaled by multilateral support. And third, increased community-based action to build resilience which can support long-term sustainable solutions. Climate-related disasters and the associated chronic challenges that the world is likely to face require the same urgency as when dealing with the acute health impacts of COVID-19. This necessitates countries, the private sector and civil societies to engage collectively. MLIs can help achieve this with efficacy.

Global coalitions between governments and the private sector: Inter-national multilateral agreements play an important role in achieving both global climate and sustainable development goals. They play an important role in nudging national policies to combat climate change and spurring sub-national and non-State actors to action as well. This was evident in the 2019 UN Climate Summit, where major industries pledged to reducing emissions. Several Indian industry front-runners were also part of the ‘Industry Transition Track’ led jointly by the Indian Government and Sweden. Multilateral agreements play a crucial role in building new alliances and coalitions as highlighted by the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure. Such coalitions are effective on both domestic and international platforms. On a domestic scale, these ensure a coordination of action across developmental policy and climate action. At the international level, it would help in ensuring a continuum in real climate action. They can support coalitions between governments to develop favourable ecosystems which further enable non-State action.

It is evident that countries are moving towards more unilateral policy frameworks. This has raised concerns if the widespread conservative sentiment on international policy and the precarious global supply chain could mean a reversal of what the Bretton Woods Agreement sought to achieve in 1944.  One of the most pressing global problems — climate-related disasters — does not impact countries and institutions in silos. These impending and ongoing crises require urgent attention and action. Countries, private sector and civil societies, therefore, must engage collectively. MLIs, by their design and purpose, can help achieve this effectively.

In this context MLIs can support three interlinked activities: Mobilisation of finance, streamlined action towards tackling the biggest global externality and engagement of State and non-State actors to further climate action. These will hold immense importance even as countries choose to move into more unilateral and autarkist policies. Enabling large-scale finance to minimise carbon lock-in, creating conducive market conditions for green investments and building resilience through enhanced adaptation can be achieved with the support of dedicated MLIs. Their unique structure allows them to disseminate knowledge, technical and financial resources from developed countries for the benefit of emerging economies and vulnerable communities. India’s decision to not only rely on local manufacturing but also multiply the scale to meet global demands stands to gain extensively from multilateral support.

(Mangotra is Associate Director, Earth Sciences and Climate Change Division and Ritu Ahuja is Research Associate, Centre for Global Environment Research, TERI)

With COVID-19 infecting millions worldwide, China is faced with an unprecedented global backlash that could destabilize its reign as the factory of choice for the world. Its neighbor India has felt a chance and is keen to make inroads into a vacuum that China expects will vacate sooner rather than later. In a recent interview, Transport Minister Nitin Gadkari said that China’s weakening global position is a “blessing in disguise” for India to draw further investment. Uttar Pradesh‘s northern province, which has a population of Brazil’s size, is now developing an economic task force to lure businesses willing to leave China. India is also planning a pool of land twice Luxembourg‘s size to sell companies that want to move production out of China, approaching 1,000 American multinationals, Bloomberg said. “This outreach has been an ongoing operation,” Deepak Bagla, Invest India chief executive, the BBC‘s national investment promotion agency, told the government. “For many of those firms, Covid would only accelerate the cycle of de-risking from China.”

The U.S.-India Business Council (USIBC), an influential advocacy organization seeking to improve investment flows between India and the U.S., has said India has stepped up its pitch considerably. “We see India prioritizing efforts to draw supply chains, both at the central and state levels of government,” Nisha Biswal, USIBC President and former US Department of State Assistant Secretary for South and Central Asia, told the BBC. “Companies that already have some manufacturing in India could be earlier movers in the reduction of output in Chinese plants and the rise in demand in India.” But we are still at an assessment stage and it is unlikely that decisions will be taken in haste, she said. In an environment where global balance sheets are fractured, it’s easier said than done to relocate entire supply chains. “Because of the pandemic, many of these companies face severe cash and capital constraints, and will therefore be very cautious before making swift moves,” said independent economist Rupa Subramanya.

According to Rahul Jacob, a long- time China watcher and former head of the Hong Kong Financial Times office, the Indian government setting up land banks is a step in the right direction, but it is unlikely that large corporations will move their operations only because land is made available. “Production lines and supply chains are much more complex than most people tend to realize, and tearing them apart overnight is very hard,” he said. “China offers integrated infrastructure such as large ports and highways, high-quality labor and sophisticated logistics, all of which are critical factors in meeting the stringent deadlines operated by international companies.” India matches the integrated capacities of China’s infrastructure? For large multinationals, another reason India may not be the obvious option is because it is not well integrated with major global supply chains.

Last year, after seven years of negotiation, Delhi pulled out of a key multilateral trade deal with 12 other Asian nations, collectively known as the Global Comprehensive Economic Partnership ( RCEP). Such decisions make it difficult for Indian exporters to benefit from tariff-free access to the destination markets or offer their trading partners reciprocity. “Why would I make something I would like to sell to Singapore in India? Institutionally connecting in trade agreements is as important as offering competitive prices,” Parag Khanna, author of The Future is Asian, told the BBC. He believes that regional integration is especially important, as global trade continues to adopt the “sale where you make” paradigm in which businesses are called “near-source” rather than out-source manufacturing, and bring it closer to demand. The unpredictable relationship between India and foreign direct investment (FDI) and inconsistent regulation is also something that continues to worry global firms.

The fear is that India has used the pandemic to build protectionist walls around itself, from banning e-commerce companies from selling non-essential items and tweaking FDI rules to disallow easier flows of capital from neighboring countries. In a recent address to the country, Indian Premier Narendra Modi made his rallying cry “to be vocal for the local.” Moreover, new policy plans have increased rates for international companies that bid for Indian contracts. “The more that India can strengthen regulatory stability, the better its chances of persuading more global companies to create hubs in India,” Mr. Biswal says. And who else, If not India? Vietnam, Bangladesh, South Korea and Taiwan tend to be favorites to benefit from the backlash against China as things stand. According to Mr. Jacob, the latter two at the “high-tech end of the spectrum” and Vietnam and Bangladesh at the bottom have blamed China for not doing enough to stop coronavirus spread. Owing to rising labor and environmental costs, multinationals started transferring production from China to these countries almost a decade ago.

The slow migration has only gathered speed in recent years as trade tensions between the US and China has increased. U.S. imports of goods from Vietnam have increased by more than 50 per cent since June 2018, a month before the trade war started, and those from Taiwan by 30 per cent, according to South China Morning Post newspaper estimates. India is seen as losing out because it failed to establish conditions that would allow multinationals not only to supply the local market, but also to use the country as a production base for exporting to the world. Several states have started to make moves in recent weeks to address some concerns about the ease of doing business-among them making contentious changes to the archaic labor laws of India, put in place to reduce exploitation. For example, the states of Uttar Pradesh and Madhya Pradesh have abolished substantial labor protections that exempt factories from even maintaining basic standards such as cleanliness, ventilation, lighting, and toilets. The aim is to improve the environment of investment and to attract global capital. Yet these decisions may be harmful and harm rather than support, says Mr. Jacob: “” International companies would be very wary about this. They have strict codes of conduct on labor, environment and safety standards for suppliers.”

A turning point was the collapse of the garment factory Rana Plaza in Bangladesh in 2013 which supplied retailers including Walmart. He cautions that it forced Bangladesh to dramatically upgrade factory infrastructure and protection in order to win further investment. “India must follow better standards. These are whiteboard ideas drafted by bureaucrats on Powerpoint that are completely divorced from the reality of global trade.” Yet with the US considering punitive measures against China, Japan charging its companies to move out of the country and UK lawmakers coming under pressure to rethink their decision to enable the Chinese telecoms giant Huawei to play a part in building the country’s new 5 G data network, the global anti-China sentiment is growing. The time is ripe for India to pursue broad-based structural reforms and use these dramatic geopolitical changes to change its worldwide trading relationship.

Ahuti Singh is assistant professor in department of economics in DAV, Banaras hindu university

Challenged by Turkey’s ‘neo-Ottomanism’, Saudi Arabia is trying to revive King Faisal’s reformist ideas. The goal, as before, is the leadership of the Sunni world

In 1924, a year after declaring Turkey a republic and becoming its President, the former commander in the army of the shrinking Ottoman Empire, and a hero of World War-I, Mustafa Kemal Pasha, abolished the centuries-old office of the caliphate and drove the last Ottoman Caliph into exile.

With this act, not only did Kemal launch his ambitious republican and secularisation project in Turkey, but he also triggered a race between Muslim leaders and monarchs to become recognised as the new leaders of the Muslim world.

Various Muslim groups around the world had agitated against European powers, who were at war with the Ottomans during World War-I. But after the defeat of the Ottomans, many Muslim political leaders and intellectuals hailed Kemal’s coming into power and saw him as a modern redeemer of Islam.

The British historian, E Kedourie, in a 1963 essay for the Journal of the Royal Asiatic Society of Great Britain, writes that Kemal was conscious of the fact that the idea of the caliphate was deeply embedded in the minds of Muslims. According to Kedourie, at one point, Kemal actually wanted to name himself as the new Caliph. But since this would have contradicted and complicated his secularisation and republican project, he didn’t.

However, Kedourie adds that Kemal then offered a much-weakened version of the caliphate to Shaikh Ahmad al-Sanusi, an Arab head of a Sufi order, as long as he would remain outside Turkey.

This suggests that, despite launching an aggressive project to secularise Turkey, Kemal was still interested in retaining the country’s role as the “spiritual and political leader of the Muslim world.” But after the abolition of the Ottoman caliphate, two contenders rushed in to claim the title. King Fuad of Egypt (that was still being ruled by the British) and the Wahabi Arab tribal leader, Ibn Saud, who, with the help of the British, had conquered former Ottoman territories in what would become Saudi Arabia in 1932. In 1926, Fuad organised an international Muslim conference in Cairo. It was not attended by Saud. Weeks later, Saud held a similar conference in Mecca. Turkey did not attend any of the two events and neither did the Shia-majority Iran.

In 1947, a much smaller player emerged in this race. It called itself Pakistan. It was founded in August 1947 by Muhammad Ali Jinnah’s Muslim League. The party’s roots lay in an evolving idea which emerged in the 19th century. It took a modernist approach to understanding Islam. This then progressed as a Muslim nationalism, which was remoulded as Pakistani nationalism. According to the French political scientist, Christophe Jaffrelot, this approach relegated Islamic rituals to the private sphere and brought into public space Islam as a political-cultural identity marker.

Inspired by the writings of Muslim reformers such as Sir Syed Ahmad Khan and the poet and philosopher Muhammad Iqbal, Jinnah and his party imagined a sovereign Muslim-majority country untainted by, what Iqbal had lamented, tribalism inherent in Arabian polities. Iqbal pleaded for a faith understood and articulated according to the needs of modern times.

Jinnah and his colleagues needed to greatly trim the pan-Islamic aspects of Muslim nationalism to root it more in the realities of South-Asian Muslims.

But this did not deter Pakistan’s first Prime Minister, Liaquat Ali Khan, from declaring that Pakistan was a lot more than just another Muslim country. According to M Razvi, in the 1981 issue of the Journal of Pakistan Institute of International Affairs, Pakistan held a World Muslim Conference in 1951 in Karachi. During the event, Liaquat highlighted the importance of retaining pan-Islamic ideas.

This did not please Saudi Arabia, which suspected that Pakistan was trying to undermine the kingdom’s (self-appointed) role as the leader of the post-Colonial Muslim world. But this role was dramatically snatched away by Gamal Abdel Nasser, the Egyptian President who came to power through a coup in 1952. Charismatic and articulate, Nasser was hailed as a hero by Muslims around the world when, in 1956, he managed to keep at bay an attack by British and Israeli forces on Egypt.

With his displays of Arab socialism and a modernity suited to the needs of the evolving Muslim polities, Nasser mocked Saudi Arabia of being retrogressive and rigid. For a decade after 1956, Nasser’s Egypt was the undisputed leader of the Muslim world, inspiring large numbers of Muslims in Arab and non-Arab regions alike.

Stung by Nasser’s status in this context, and also by his criticism of Saudi Arabia, the Saudi monarch King Faisal (who came to the throne in 1964) unfolded a hectic modernisation process in Saudi Arabia. However, Nasser’s mystique and influence began to rapidly recede when Egyptian and Syrian forces were decimated by their Israeli counterparts in 1967.

In 1970, Nasser passed away, and Saudi Arabia once again rushed in to pick up the status of the leader of the Muslim world. A windfall of profits made during (and because of) the 1973 oil crisis enhanced the influence of what became known as the “petro-dollar.” And Saudi Arabia had the most.

Faisal cleverly used these to subdue (and win over) Nasser’s successor Anwar Sadat. Faisal was also aware of the ambitions of Pakistani Prime Minister ZA Bhutto, who fancied himself as a champion of the modern Muslim world. But since Pakistan had lost a war in 1971 and its economy was weak, Faisal brought Pakistan fully into the ever-expanding Saudi orbit.

By the 1980s, flush with petro-dollars and with a surge in the popularity of “political Islam” in Muslim countries, Saudi political and religious influence witnessed a manifold increase. It was only challenged by the radical Shia theocracy in Iran. Both countries fought a brutal war of influence through sectarian proxies in countries such as Pakistan and Lebanon.

However, in the new century, events such as the Arab Spring, the fall of dictatorships in Libya, Iraq and Tunisia, civil wars in Afghanistan, Somalia, Syria and Yemen, the emergence of multiple violent anti-State Islamist outfits in most Muslim countries, along with the retreat of the US and the rise of China, began to make various Muslim countries reconsider their strategic priorities and even reinvent their ideological character to strike new alliances. Turkey, which had dropped out of the game of Muslim leadership decades ago, entered the fray again and is trying to lure non-Arab Muslim regions to break away from the Saudi orbit. It is an orbit that had already begun to decay.

This is one reason why the new Saudi monarchs are trying to revive King Faisal’s initial reformist ideas. Whereas the conservative aspect of Saudi ideology was castigated by Nasser’s Egypt in the past, this time it is being challenged by Erdogan’s “neo-Ottomanism”, which is critical of Saudi Arabia for squandering the influence it had enjoyed for decades as the leader of the Muslim world.

Turkey sees itself as a more natural candidate for this role. This title once again is up for grabs.

(Courtesy: Dawn)

The US President’s attack on Kamala Harris, calling her ‘nasty,’ ‘mean’ and ‘liar,’ indicates just how worried he is about his chances of winning a re-election

A text message announcing presidential candidate Joe Biden’s choice of White House running mate had only just pinged on his supporters’ phones when US President Donald Trump fired off his first tweet attacking her.

The form that message took — a slickly produced video describing her as a “phony” and creature of the “radical Left” — perhaps indicates just how worried the President is about his chances of winning re-election now that Senator Kamala Harris has joined the Democratic ticket.

If successful in November, the 55-year-old former prosecutor from California would become the first Black woman to serve as Vice-President of the US and would be well-positioned to step up to the presidency itself four years later.

Trump himself has made much of Harris’s status as a “transition” candidate — at 77, Biden is widely expected to serve only one term if successful. Her “ambition” for the role is said to have been a reason he delayed announcing his choice of running mate, with advisers warning she may be too focussed on the next presidential race to serve him loyally as the Vice-President.

If it sounds like an episode of Veep, the popular HBO show starring Julia Louis-Dreyfus as the Vice-President, the 2020 presidential race is certainly no comedy.

Harris’ entry into the race has electrified many women and members of a Black community discouraged by the choice of yet another White man as the Democrats’ presidential candidate just as female reproductive rights are under attack and the country is riven by racial strife following the death of George Floyd. Her ethnicity and gender were undoubtedly motivations for Biden’s selection — he had been urged to opt for a Black candidate following the race riots of late spring and had already promised to choose a woman.

She also becomes the first person of Indian extraction to run for the high office. Born in Oakland, California, Harris’ parents had emigrated to the States from British colonies, 16,000 miles apart, within a year of each other in the early 1960s.

Her mother was a breast cancer surgeon from the Indian city of Chennai, while her father was an economics professor who grew up in Jamaica. Named after a Hindu goddess, Kamala grew up attending both a temple and a Black Baptist church. As a child, she was part of the busing programme designed to desegregate schools — a history she used with devastating effect against Biden, who had opposed busing during their primary debates (Harris also initially sought the presidential nomination, dropping out of the contest after failing to attract big money donors).

As a former presidential hopeful herself, Harris entered the Democratic race on Martin Luther King day, carefully timed to highlight the historic nature of her candidacy. It was also a nod to Shirley Chisholm, the first Black woman elected to Congress, who became the first Black woman to seek the Democratic nomination for president 47 years ago that week. When she announced her bid for the Democratic nomination, Harris said she felt a “responsibility to stand up and fight for the best of who we are” and regain America’s “moral authority” in the world.

Despite showing early promise with strong debate performances, her campaign failed to catch fire and she quit the race in early December as money dried up and her poll numbers plummeted.

Her inability to connect with voters in the Democratic primary race remains a concern for some Democrats, as does the lingering idea that she might not be completely loyal to Biden because of a heated confrontation the two politicians had as rivals competing for the Democratic nomination.

Members of Biden’s inner circle have expressed reservations about the incident during an early Democratic primary debate, when Harris criticised Biden’s past opposition to the policy of busing, which saw children of different races bussed to schools as a way of breaking down segregated education.

As a prosecutor in San Francisco in the 1980s and 1990s, Harris gained a reputation for harsh justice, leading to, some have said, an unfair increase in the incarceration rate for young Black men. She rose to become California Attorney-General in 2011 and was elected to the Senate in 2016. Her background may well blunt Trump’s attempts to claim the mantle of the “law and order candidate.” More generally, her poise and persuasiveness make some Republicans nervous.

In his more candid moments, Trump has admitted to a grudging respect for Harris, publicly advising Biden that she would be the best pick. When the candidate followed the President’s advice, however, it was time for Trump to unleash his characteristically colourful invective.

In a press conference, hours after she was announced, the President began trying out a few familiar attack lines — similar to those misogynistic ones he used against Hillary Clinton — describing Harris several times as “nasty” as well as “mean,” “horrible,” “disrespectful” and a “liar.”

But while the Republicans will now do their best to portray her as a Left-winger, Harris is more mainstream than other senior Democrats such as Elizabeth Warren and Bernie Sanders, her politics broadly in line with those of Biden.

She gained a reputation during her presidential run as a strong debater, leading political observers to lick their lips at the prospect of a head-to-head between her and current Vice-President Mike Pence, a steely conservative.

Harris married fellow lawyer Douglas Emhoff in 2014 and is step mother to his two grown-up children, Cole and Ella, who call her “Momala.” She has spoken of her deep love for the children and friendship with their mother, describing the “modern family” as “almost a little too functional.”

So far, the family has kept out of the limelight but that may change as Senator Harris joins the battle for the presidency, in what is expected to be the most fiercely-fought contest for the White House in modern history.

Writer: Rosa Prince; Courtesy: The Pioneer

(Courtesy: The Telegraph)

Kamala Harris is the third woman to stand for Vice-President of the US. Can she do better than the earlier two?

Kamala Harris’ selection as the running mate of Democratic presidential candidate Joe Biden is a momentous one. She is just the third woman to stand for Vice-President of the United States after Geraldine Ferrero in 1984 and Sarah Palin in 2008 but the first woman of colour to do so. This, four years after Donald Trump unexpectedly defeated Hillary Clinton, the first female US presidential candidate for the White House. In India, too, Harris’ nomination is being celebrated since her mother was a Tamilian. Yet, it’s not her origin but what she represents that might just tilt the scales. Biden has been less than charismatic and Harris’ activism and focussed campaigns on the Afro-American cause give the Democrats a sales pitch to fall back upon, that of upholding civil rights. Not new really, but tested enough. And likely to find some resonance when race relations have taken centrestage following the killing of George Floyd by a White officer. Besides, the Black community has been the worst affected by Trump’s selective pandemic management. In all issues, be it of race, gender, healthcare and law enforcement, Harris has maintained a centrist record. But her drive has helped her push walls so far. Which is why Trump made his discomfort very much visible by calling her “extraordinarily nasty.” He also accused her of being “the meanest, most horrible” of all US Senators.

With the US extremely fractured today, Harris possibly stands the best chance ever of having a woman occupy one of the top offices. That said, everyone expected Hillary Clinton to win in a landslide in 2016 and we all saw what happened. With Biden’s mental acuity being questioned by many and Trump mobilising the Republican base, it would be fatal for the Democrats to take things for granted, particularly in some crucial battleground states which Trump snatched unexpectedly. While Harris was brought up single-handedly by her mother, after her parents divorced when she was five, and her father, the Jamaican-born economist Donald Harris, did extensive work in India, she identifies herself as a “Black” woman to build her political capital. Despite several in the Indian community urging her to recognise her heritage, she has consistently sought to downplay it. Incidentally, she is distantly related to India’s External Affairs Minister S Jaishankar. So while many in the Indian diaspora will celebrate her nomination, her politics is more often than not at variance with Indian interests. Indeed, she is as guilty as several other politicians of making some major policy flip-flops over the years. But with global geopolitics undergoing a sea change over the past few years and with China increasingly asserting itself, her views on India might change as well.

(Courtesy: The Pioneer)

The new Cold War between the US and China will not be anything like the old one

During the Korean War in the early 1950s, the US came extremely close to dropping a nuclear weapon on China. In fact, had the then American President, Harry Truman, not fired General Douglas MacArthur, the maverick would have left north-east Asia in a decade-long nuclear winter. But America did not nuke China. Instead, ever since the Sino-Soviet split in the late 1960s, the US has worked towards economically empowering the Middle Kingdom in an attempt to weaken the hold of communism. As such, the Communist Party of China (CPC) is “communist” in name only, overseeing a capitalist empire, thanks to the US and its preferential trade agreements, all of which helped it nurture ambitions of a global conquest. With China now challenging the US, it appears that much like the Taliban, the US has nurtured another monster, the CPC.

However, unlike the Taliban, this monster is one that America will have to fight sooner or later. The CPC might be antagonising all its neighbours, particularly with its latest scrap with India, but the US knows that it will have to tame the dragon. America’s move to shut down the Chinese consulate in Houston, alleging that it is a spying centre, is drastic and will escalate the already deteriorating ties between the two. Houston is the nerve centre of the US’ space programme and with America making its intentions clear about returning to the Moon and going to Mars, China is keen to keep a hawk’s eye. Of course, China ordered the closure of the US consulate in the south-western city of Chengdu as a result but the US’ crackdown on China — not only on the trade front but particularly on spying as well as militarily — is almost certain to pass on to the next administration even if Democrat Joe Biden wins the November 2020 presidential race. Much of this is China’s own doing. Its President Xi Jinping’s supreme arrogance has led to previously neutral nations like India moving into the US sphere. There is no doubt that Xi wants to make China a global power but the world today is much clearer about his country’s intentions. India cannot cop out of this fight. It has to stand up for itself and readily back the US.

(Courtesy: The Pioneer)

Even before the Covid 19 catastrophe, the USA was doing everything economically possible to lose its multiple battles to the Chinese. Its dollar hegemony was getting steadily eroded as segments of trade were steadily moving out to multiple other currencies. President Trump was succeeding in antagonizing most global leaders, he was under attack at home, his trade war with China had hurt economic growth for most economies, and his domestic ratings were dropping. What made emperor Xi Jinping decide that 2020 was the year that he dethroned the USA and establish the RMB as the new reserve currency is the world?

Let’s see if some forecasts of economic parameters for 2019 and 2030 by a few American think-tanks make sense. They projected that in Purchasing Power parity terms, in 2019 the Chinese GDP was already larger than the USA’s GDP and by 2030 it could be up-to 70% larger. As a share of Global output China would grow to 32% from 20% currently, as opposed to the USA declining from 16% to 10%. In terms of Global Market Capitalisation the Chinese would grow to 25% from 5% in 2019, whilst the USA would decline from 40% to 18%. China’s share of global exports would rise to 18% from 12% whilst the USA would be static at 8%. The above forecasts were supported by massive Chinese investments in Education in the fields of Mathematics, Science, Technology, Medicine and rapidly improving the quality of education. The number of STEM students would outnumber the USA by a factor of five times. Chinese ranking in Fintech is number 1, Wearables , Virtual Reality, Education Tech, Autonomous Driving is 2, and in Artificial Intelligence they are a close third behind the USA and UK. 34% of the world’s unicorns are Chinese as opposed to 47% for the USA, but in terms of market capitalization they were on par.

Starting with the 1980’s the Chinese had successfully got the world’s manufacturing supply chain to relocate to China, and were truly the “factory of the world”. From a pure labour arbitrage offering, they created world class infrastructure (Cities, Roads, Ports, Airports) to support it. The top 2500 corporates outside China all had a business presence in China. This aggressive export led growth model allowed the Chinese to radically improve per capita income, and in the process also create a massive domestic consumption engine. A 40% domestic savings rate supported the huge developments that happened on their Eastern Seaboard. Till 2012 the Chinese government was sitting on Foreign Exchange Reserves of close to $5 Trillion. Over time Chinese labour had become a very skilled workforce, moved up the value chain and was no longer cheap. China now imported/consumed 45-50% of virtually every commodity in the world even though more than half of it was re-exported.

Chinese leaders till 2012 had made the country keep a low profile , hiding their strengths, whilst they relentlessly gained market share from the world. Asian growth engines Japan and South Korea had also felt compelled to move/make tangible manufacturing investments in China. The Chinese had mastered the skill of acquiring the world’s IPR ‘s by any means-true implementers of Chanakya-Niti(sama, dama, danda, bheda). Their Chinese Communist Party(CCP) command and control structure had also silently expanded their Foreign Ministry with requisite resources to create a Public Relations repository in every major country, to manage the national discourse on any prickly subject in their favour. This three decade profile started changing with Xi Jinping’s ascension to Chairmanship in 2012.

The Chinese strategists now started believing that the Middle Kingdom deserved to rule the world. They changed the nomenclature of the 21 st. century being an Asian century to a Chinese century. They mapped that post 2008 Global Financial Institutions were weakened, substantially dysfunctional and lacking leadership. They unleashed a project of achieving complete Chinese dominance in the manpower of every multilateral agency and United Nations body in the world. Chinese students were encouraged to study overseas and many persuaded to join these organizations, and as so many FBI investigations are now showing made instruments of Government policy.

The collapse of the USSR in the 1990’s and the profligacy of the US financial sector in 2008 had left a leadership vacuum in many areas. Xi Jinping moved rapidly to occupy the vacancies. China needed to secure its supply chain as it neither produced adequate food for its population, nor was endowed with  manufacturing or energy raw materials. Chinese leadership wanted to avoid supply side shocks and created strategies to acquire assets surreptitiously. They moved rapidly to fund every country and project that the World Bank or rest of the world would not find viable. The Chinese wanted to eventually acquire the underlying asset and default was hence a preferred option for them. This juggernaut covered 150 countries and nearly $5 Trillion in loans/investments. The new Chairman had successfully
over-invested the Chinese USD reserves, and left his country very vulnerable. They desperately needed their Dollar engine( Foreign Direct Investment, Foreign Portfolio Investment, and Foreign Currency Loans) to keep firing quickly to recoup their position, or alternately fast track their long term vision to get global trade out of the dollar and into the RMB.

Unluckily for the Chinese two things changed the landscape in 2017. President Trump had won the US election and was a wildcard that the Chinese read wrongly. Secondly the world economy started topping out, and growth started stalling. The Chinese engine was not designed to handle economic contraction. Fault-lines in the domestic economy led by huge non performing loans in domestic State Owned Enterprises. Ghost cities started appearing, as domestic demand stalled, whilst domestic real estate started going belly-up. The country was overbuilt and no more infrastructure spending was needed. Trump started the trade war and insisted that the Chinese reduce the Trade surpluses. President Xi erred massively in not giving Trump a cheap victory, and getting the Americans riled.

American strategists had clearly war-games that the days of the USD hegemony were numbered, and if their political dominance was to be extended, a war with China was not an option, the only question was timing. By a strange coincidence the two technology hardware giants USA and China were tangibly dependent on Taiwan for their Semiconductor underbelly. Taiwan has a dominant share in the Semiconductor foundries globally, and both the USA and China are dependent on them. The Americans had anticipated this and a JV with the Taiwanese would go operational in Arizona in 2023. Till then any military threat to Taiwan would be an attack on their technology dominance, an intolerable thought for them. Democrat Presidents had soft-pedaled on the One China policy, and the Chinese had succeeded in getting away with their wish-lists. The Americans had celebrated access to a large consumption market, but landed up creating a rival.

The Chinese People’s Liberation Army(PLA) in manpower terms is the largest standing armed force on the globe. The PLA and CCP moved fast to upgrade weapon systems, stealing blueprints and buying where they could not .Theoretically they are a lethal strike force. However the navy is their Achilles heel, and they lack best in class aircraft carriers and submarines. This limits their ability to protect their interests spanning 150 countries.75% of Chinese oil still moves in tankers through the narrow Malacca Straits. To reach the Arabian sea by land they invested in a bankrupt Pakistan by constructing the CPEC which links Xinjiang to Gwadar Port and is a dedicated economic corridor. They also engaged east European and European countries to construct the Belt and Road Initiative (BRI) for creating dedicated freight corridors to 50 European cities. In the process they have de-risked their trade supply routes, but their oil buy routes lie exposed.

The nightmare for China achieving dominance is that Indian land illegally occupied by Pakistan is being used by CPEC and India reacquiring POK by use of military power could render their $66 Billion investment in Pakistan useless, blocking oil supply. The Chinese realized that economic sanctions against Iran had crippled the proud country, that it had 15% of the world’s oil, needed investments, and so decided to bust sanctions on Iran imposed by the United Nations (they were party to imposing them). China and Iran signed a 25 year Trade and Military alliance in June 2020. China has bet on the USA exiting Afghanistan in 2020, and by using the Pakistani’s to install a puppet regime in Afghanistan, they could take a pipeline from Iran to Xinjiang. In turn the Chinese have to pump in the equivalent of $400 Billion into Iran’s development, which they can crank their RMB economy to deliver. Where does that leave the Pakistani’s?

In the interim President Xi got the CCP to appoint him as the leader for life and emerged as an emperor. The CCP decided that by its 100th anniversary in 2021, they would stamp themselves as “numero uno” in the world. A few pinpricks remained. Taiwan and Hong-kong as independent democracies were an eyesore, and raised aspirations of good life in mainland Chinese youth. They had to be acquired by coercion or force at the earliest. The South China sea had $4 Trillion of supply chain that transited the route. China laid claims to territories/islands of all its neighbours and started constructing artificial islands as missile bases. They started bullying and humiliating Australia since 70% of Australian mining exports were bought by China. Singularly none of the Asian countries could take on China, but many could exact a heavy toll if it came to conflict. The Chinese flirted with conflict with all their neighbours using “wearing down” tactics.

The success of this gambit hinged on the continuity of their trade with the USA, heavily skewed in their favour. President Trump not getting an early trade war win, upped the ante, imposing a $250 Billion annual hit on China. Chinese perhaps felt that US corporations would not listen to their government and continue business as usual. They floated a trial balloon by abrogating the agreement with Hong Kong which would have lapsed in 2047, and suppressing protests with brute force. Then they ostensibly colluded/ manipulated the WHO and unleashed the Covid 19 pandemic on the world infecting every country on the planet. This collapsed world economies and has created a very strong anti-China sentiment.

It has resulted in fast tracking the creation of the Quad, an alliance of the USA, Japan, Australia and India to take on the Chinese. UK, France and Israel are openly in support of the Quad, whilst Vietnam, Myanmar, Philippines, Indonesia ,Taiwan and South Korea have alerted their armed forces for battle readiness. In the Chinese camp are North Korea, Pakistan, Iran and Turkey with anti-India squeaks emerging from Nepal, Bangladesh and SriLanka.

With China designated as world enemy number 1, even Joe Biden has ratcheted up the anti-China rhetoric, lest President Trump steal the thunder and a potentially lost election by a war with China before November this year. The Indian and Chinese armies are facing off across 3400 Km. border, and a tense peace prevails currently. The Middle East has so far stayed quiet, but by default will have to choose sides as a Shia Iran and a Sunni Pakistan and Turkey side with the Chinese. It is an uneasy time for the Saudi’s and the UAE. It is ironic that the OIC and its 54 member countries including the” Turkish caliphate” maintain a studied silence on China incarcerating nearly 3 million Uyghur muslims in Xinjiang, and possibly Chinese money silences their conscience when no Uyghur child can have the name Mohammed(as per media reports).

The Koreans however had seen this coming two years earlier and Samsung had moved an $18 Billion annual capacity out of China to Vietnam. Japan has incentivized its corporations to exit China totally. India has banned Chinese Telecom equipment and Apps with immediate effect. There is a very strong anti-Chinese imports movement starting in India, and may set an example for the world to follow. China’s partners in BRI and in Africa are resenting the usurious conditions in their loan agreements. The Americans are shutting off access to their Capital markets to the Chinese, and cancellation of the Hong Kong treaty will kill the USD supply route to China. The Chinese Balance of payments is negative for the last few months, and days of surpluses are now a memory. They still need to buy food and oil and commodities.

Even nature seems to have conspired to ruin Emperor Xi’s timing. China is being ravaged by the worst ever floods in the last 100 years with 29 of its provinces impacted, and the survival of the showpiece Three Gorges Dam under threat from heavy rain which could affect nearly 400 Million people as downstream cities including Shanghai could be impacted. Scams like fake Gold collateral has shaken China’s $5 Trillion Shadow banking industry as the Kingold default is by a powerful former CCP member. It also puts a question mark on the credibility of China’s domestic gold production which is part of its National Reserves, as to how much of it is gold plated copper. Will anyone in the world now ever trust a Chinese certification of gold. This scandal has seriously damaged China’s plans of having a partial gold backed alternate currency to replace the dollar.

The silent spectator in the entire game is Russia. They are happy selling their weapon systems to China, India and Turkey. In the EU, the Germans have broken ranks with France and chosen to placate the Chinese. They have removed Taiwan’s flag from their website and refused to criticize Chinese action in Hong Kong, leaving a non-state flag of Palestine intact .It is ironic that this once proud industrial giant is now subservient to a regime with ambitions very similar to Hitler. Early days but it signals the cracks in the EU, and are its days as a common market nearing a close?

The world now sits on a powder keg in the midst of the Covid crisis. Funnily it is China’s 150 debtor countries (especially Pakistan) that must be praying for a fall and dismemberment of their Lender, for them to escape losing their sovereignty which they have so negligently mortgaged. President Trump and Emperor Xi now have gone too far for either of them to back-down without losing their crowns. For Trump it’s just an election, but the world knows what happens to deposed Chinese dictators. The South Asian countries all want Tibet to regain its independence after being annexed by the Chinese in 1950 so that they all get their fresh water security back.

The Chinese till the last four years maintained an inscrutable long term game plan in every sphere and slowly and steadily acquired a position of dominance. It is inexplicable that with chips falling in their favour by default, why did they have to speed up the time table. The USA was busy scoring self goals, and vacating its global presence, and in five years would have handed the Chinese global dominance on a platter. Thus the trigger to the timeline was not a global prod, but very compelling domestic reasons. China’s banking regulator has advised domestic banks to be prepared for sharp rises in bad loans once the Covid moratorium period is over. It has guided banks to conserve capital by not paying dividends and bonuses. Three Chinese banks have collapsed in the last three years, and 15% of the Financial sector is supposedly past a high risk stage. Tax revenues have grown under 5%, and budget deficits exceed 11%. In the Hebei province (population 70 Million) bank depositors cannot withdraw their own money
without genuine reasons to prevent a run on the banks. The season of discontent for 1.4 Billion Chinese has arrived.

China created the BRI to use the surplus capacity in its construction materials and equipment sector, and to keep Chinese labour occupied. Experts estimate that this project needs another $ 5Trillion over the next five years to complete it. The money given to 150 countries cannot be recalled. The Hong Kong door may be closed by the Americans if push comes to shove. The FDI and FPI flows post Covid may flow outwards. China’s $10 Trillion foreign debt is realistically supported by $2 Trillion of reserves. With Balance of Trade going negative, even diehard Chinese supporters are a highly nervous lot. If China’s trading partners do not agree to settlements denominated in the RMB, a run on the currency is highly possible.

The dilemma for the Xi led CCP is what do they tell their domestic audience. In the age of the internet, you can censor but not hide. News spreads like wildfire with every citizen carrying smart-phones. Do the Chinese need to beat the war-drums to transfer the blame for their miscalculations. The world scenario is evolving every week, and 2020 threatened to be a very long year indeed.

Sanjit Paul Singh (Managing Partner S&S associates)

It is time for the people to question the Government, especially KP Oli, for turning a blind eye to Chinese high-handedness

The recent border issues raised by Nepal show structural deficiencies in building trust and willingness to keep relations with India healthy. The self-centred politicisation of centuries-old peaceful ties exposes the darker side of Nepalese Prime Minister KP Oli. He has not only derailed the prospects of peace and cooperation between Nepal and India, but his hollow projection of nationalism, solely based on anti-India manoeuvring, exhibits his short-sightedness to serve vested interests in the political and diplomatic space of Nepal. This includes his growing closeness and frequent interactions with China.

On the other hand, Nepal’s ruling Communist Party (NCP) has intensified its demand for Oli’s resignation for failing to contain COVID-19, derailing the economy, endangering the right to freedom, including that of the Press, and accusing India of conspiring against him politically. Amid all this, Oli can be seen misusing his power to influence the office of the President in unilaterally issuing ordinances to ease the process of splitting a party to protect his position as Prime Minister in case his party splits.

Although the Standing Committee of the NCP has lashed out at Oli for misusing his power and accusing India, Oli has turned a deaf ear to such calls and is openly entertaining Chinese assertiveness in the domestic and foreign affairs of Nepal. If reports in the Nepalese media are to be believed, it is Oli’s arrogance that has driven his pro-China campaign, at the cost of destroying friendly ties with India. While Oli’s new-found love for China is a challenge to India, a pro-active and meddling Beijing is a bigger concern for Nepal itself.

Even though China has penetrated the Nepalese political space, Oli is not paying heed since recent moves by the Chinese Ambassador in Nepal are aimed to protect his interests. Ambassador Hou Yanqi has been meeting with the members of the NCP to keep Oli in office. Her direct meetings with the Prime Minister are cherry on the cake for China. However, Yanqi attracted criticism after she held a one-on-one meeting with the President of Nepal on June 5, a day before the Standing Committee of the NCP was to decide on Oli’s fate. While the agenda of the meeting was not revealed, it is clear that China wishes Oli to continue as the Prime Minister.

On his part, Oli is hell-bent on bringing a Chinese-style one-party rule in Nepal. Members of the Communist Party of China were invited to provide training to the Central Committee members of the NCP before its second convention was to begin in Kathmandu on February 15. At the convention, NCP allegedly passed a resolution to amend the Constitution to make Nepal a “People’s Democracy” from the existing “People’s multi-party Democracy.” In case, the NCP pushes to remove the word “multi-party” from the Constitution, it will further lead the country towards a one-party rule.

This pro-China inclination may be considered an independent sovereign act of a country. But allowing Chinese intervention in the political affairs of Nepal is dangerous. While the high-handedness of Yanqi is not a hidden fact, pumping of Chinese funds through the Madan Bhandari Foundation, named after a late Communist leader seen as a source of Oli’s political aspirations, needs to be seen.

It was  Yanqi who had convinced Oli and his administration to sign a extradition treaty during Xi Jinping’s visit to Nepal last October. While the treaty was not signed due to internal opposition, Oli gifted a Treaty on Mutual Legal Assistance in Criminal Matters on the lines of the extradition treaty to China. The treaty has not only jeopardised the fate of 13,000 Tibetans living in Nepal but Kathmandu has also risked violating the pact with the UNHCR to protect the rights of Tibetan refugees.

The frequent meetings between the Chinese officials and officers of the Nepal Army give a clear understanding of the Chinese mindset in Nepal for two reasons. One, the army has always been looked upon as the most stable institution in Nepal. No matter the political party in power, a stable relationship with the army will prove beneficiary for Chinese interests in Nepal. Two, in the last three years, the security cooperation between China and Nepal has moved from minimal to an advanced level. To promote ties in the security sector, China and Nepal have continued to strengthen cooperation through the exchange of visits of security personnel, joint exercises and training, disaster prevention and reduction, personnel training and supply of arms and ammunition to the Nepalese army.

Also, the Chinese business community in Nepal has been defying domestic laws of the host country, but local political support has kept it safe. Thamel, a tourist spot in the heart of Kathmandu known for lavish restaurants and hostels, has a complete area allegedly owned by the Chinese. They are known to lease properties from Nepali owners on a maximum bid and run these hotels and restaurants with all-Chinese staff, who allegedly visit Nepal on tourist visas. Similar cases of fraud have come into the public sphere where Chinese-run hotels in Nepal accept payments through the China-owned WeChat app. Meaning, the Chinese tourists do not make cash transactions in local currency or on local online payment platforms. Therefore, revenue contribution by the Chinese tourists has negative implications for the Nepalese tourism industry.

In December 2019, 122 Chinese nationals were arrested by the Nepal Police for their involvement in cybercrimes and bank frauds. Later, these criminals were deported at the request of the Chinese Government and to provide an explanation to the media, the police claimed that it had failed to frame charges against them. China is known to have little respect for the laws of other countries but local support from the Prime Minister’s office is indeed a sell-off. It is believed that Oli had personally attempted to avoid embarrassing China by deporting these criminals. In February, the editor of a leading English daily in Nepal was also forced to resign after the newspaper ran an op-ed on the Coronavirus and questioned the Chinese Government’s intentions in hiding its spread.

For years, leaders in Nepal have propagated a neutral position between India and China, knowing the importance of both the neighbours in trade, transit and security. They have also understood the geographical compulsions of a landlocked Nepal, but with his hollow acts of ultra-nationalism, Oli has merely served his personal aspirations.

In reality, a Chinese-style political system in Nepal will be a curse on Nepal’s long fight for democracy, where thousands had sacrificed their lives. Nepal has examples of Chinese debt-traps in Sri Lanka and Africa and brain-washing in Pakistan. Therefore, it is time for the people to question the Government, especially Oli, for turning a blind eye to Chinese high-handedness.

(Writer: Rishi Gupta; Courtesy: The Pioneer)